REG - Metals Exploration - Final Results for the Year Ended 31 December 2023
23/05/2024 07:00
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RNS Number : 5524P Metals Exploration PLC 23 May 2024
23 May 2024
METALS EXPLORATION PLC
Final Results for the Year Ended 31 December 2023
Metals Exploration plc (AIM: MTL) (the "Company" or the "Group"), a gold producer in the Philippines, announces its final audited results for the year ended 31 December 2023.
The financial information set out in this announcement does not comprise the
Group's statutory accounts for the years ended 31 December 2023 or 31 December
2022. The financial information has been extracted from the statutory accounts
of the Group and the Company for the years ended 31 December 2023 and 31
December 2022. The auditors reported on those accounts; the 31 December 2023
and 31 December 2022 reports were unqualified and did not contain a reference
to any matters to which the auditors drew attention by way of emphasis without
qualifying their report and did not contain a statement under either Section
498 (2) or Section 498 (3) of the Companies Act 2006. The statutory accounts
for the year ended 31 December 2022 have been delivered to the Registrar of
Companies, whereas those for the year ended 31 December 2023 will be delivered
to the Registrar of Companies following the Company's annual general meeting.
To access a full version of the 2023 annual report, please go to the Company
website investor centre webpage.
ABOUT METALS EXPLORATION
Philippine gold producer
Metals Exploration plc ("Metals Exploration", "MTL", the "Company", or the
"Group") is a Philippines focused gold producer operating the Runruno gold
mine 250 kilometres north of Manila in the mineral rich Nueva Viscaya
province, on Luzon island.
Group vision & mission statement
The Group's vision is to be the most admired gold producer in the Philippines.
Our mission is to enhance the lives of our people and local communities
through the responsible management of our natural resources, to build a
multi-project business and to deliver performance that stakeholders can be
proud of.
Well-defined values embedded into the business processes and structures along
with consistent leadership actions and behaviours provide the foundation for
corporate culture and its subsequent success. As a responsible mining company,
we ensure that our Company's core values reverberate across all aspects of our
business and represent the way we do business.
PRODUCTION AND FINANCIAL HIGHLIGHTS
FY2023 FY2022 % CHANGE
GOLD PRODUCTION (ounces)
85,194 oz 72,537 oz Up 17.5%
AVERAGE GOLD RECOVERY (% of head grade)
88.7% 85.7% Up 3.5%
LOST TIME INJURIES
NIL NIL Nil - no lost time injuries
SALES REVENUE (US$ MILLIONS)
$166.7 $124.4 Up 34.0%
OPERATING PROFIT (US$ MILLIONS)
$29.2 $23.8 Up 22.7%
PROFIT BEFORE TAX (US$ MILLIONS)
$119.6 $8.7 Up 13.7times
Adjusted EBITDA (US$ MILLIONS)
(EBITDA less impairments)
$82.6 $44.9 Up 84.0%
FREE CASH GENERATED FROM OPERATIONS (US$ MILLIONS)
$74.6 $38.2 Up 95.3%
NET DEBT (US$ MILLIONS)
$23.6 $81.1 Down 70.9%
TOTAL DEBT REPAYMENTS (US$ MILLIONS)
$64.8 $33.8 Up 91.7%
TOTAL GOVERNMENT TAXES & FEES (US$ MILLIONS)
$18.2 $13.9 Up 30.9%
TOTAL COMMUNITY PROGRAMME EXPENDITURE (US$ MILLIONS)
$1.4 $1.3* Up 7.7%
* restated to remove expenditure related to pre-2022 year commitments
CHAIRMAN'S REPORT
Dear Shareholder,
I am pleased to be joining Metals Exploration at what is an exciting milestone
in the Company's growth trajectory.
2023 proved a defining year for the business with an array of new records
broken at its Runruno project, including record annual gold revenues of US$167
million directly on the back of a record production of 85,194 ounces. This, we
are proud to relate, exceeded the upper revised production guidance for the
year.
I am also very pleased to report to shareholders that for the year ended 31
December 2023, your Company made a profit before interest, tax, depreciation
and amortisation (EBITDA) of US$180.3 million (2022: US$43.7 million) and an
EBITDA adjusted for impairment charges/reversals of US$82.6 million (2022:
US$44.9 million).
This outstanding achievement is a testament to the recent corporate turnaround
implemented by management following the new leadership appointments in 2019
and the subsequent hard work and dedication of the entire workforce in the
Philippines. These strong results have culminated in an entire deleveraging of
the balance sheet transferring value from lenders to equity shareholders.
Shareholders will undoubtedly be pleased to know we are now essentially debt
free, a pivotal moment for Company: for the first time in Metals Exploration
history, we can talk meaningfully about growth. With only three/four years of
life-of-mine left on the Runruno project, Metals Exploration has turned its
attention to ensuring the longevity of the business and continued value
creation for you, our shareholders. Future cash flow will be directed to
investing in growth opportunities, initially in the Philippines beyond our
Runruno project.
This is already well underway with our recent proposed acquisition of 72.5% of
the issued share capital of Yamang Mineral Corporation, and 100% of the issued
share capital of Yamang Corporation Pte Ltd, which includes the "Abra
Project". The project comprises an exploration licence over an area of 16,200
hectares in the Abra region, approximately 200km north of MTL's existing
operations in Runruno. The acquisition, subject to lender and shareholder
approval, will provide exploration potential, with the initial exploration
programme to focus on the Lacub and Manikbel areas.
This growth strategy is yet another illustration of the exceptional turnaround
strategy so clearly evident in the 2023 year-end financial performance.
In the short space of time I have been at Metals Exploration, I have been
impressed by the operations and the 'Metals Exploration' way of working. The
Company has, under the guidance of CEO Darren Bowden, not only nurtured a
robust social licence to operate but also built a respected brand in the
Philippines.
Having visited the Runruno site for the first-time last month, I can
personally attest to the fact this change has reverberated across the Company
in its entirety, having a profound effect at each level. This is a case study
in the making and has progressed the Company dramatically, from
underperforming to exceeding its own revised production guidance in just a few
years.
Metals Exploration has been successfully operating in the Philippines for the
past 15 years. Naturally, the Company is proud to have developed and
maintained strong relationships amongst all our stakeholders, from the central
Government down to the local communities. Our position as a successful and ESG
complaint operator is decidedly advantageous as we embark on our strategy to
acquire more assets in the Philippines, and potentially the wider region, and
to mirror the success we have realised with our Runruno project.
Throughout our record-breaking performance this year, Metals Exploration is
proud to have maintained an exemplary operational and environmental track
record. Metals Exploration continues to be active in promoting responsible
mining practices, combined with numerous environmental protection and
enhancement programmes. These are in addition to our Community & Social
Development programme, which continues to focus on health, education, capacity
building and enterprise development.
The Company's strong sustainability performance has been recognised by the
Philippine Government Awards: Metals Exploration was honoured to receive the
Presidential Mineral Industry Environmental Award (PMIEA) in the Surface
Mining Operation Category for the second year in a row in 2023, the highest
government mining award attainable in the Philippines. We also received 3(rd)
Runner-up for the Best Mining Forest Contest in the Metallic Category, an
acknowledgement of the team's diligent efforts to uphold the highest
environmental standards. These awards are a particularly notable achievement
as an indication of support from local communities and government agencies. In
the ASEAN Mineral Awards 2023, the Company was pleased to place as the 1(st)
Runner-up in recognition of outstanding best practices in Sustainable Mineral
Development (Mineral Mining - Metallic). ESG and the communities that we work
in remain at the forefront of everything that we do at Metals Exploration.
Looking ahead to FY2024, my first month at Metals Exploration has given me
every confidence that our production guidance of 74,000-80,000 ounces is well
within reach. The continuing strong cash flow from operations at Runruno,
without any ongoing debt repayments, will catalyse the Company's
transformative growth period, providing us with opportunities to deliver
significant shareholder value as well as looking at organic growth and M&A
opportunities.
I am excited to continue nurturing the stakeholder relationships in the
Philippines that serve as a cornerstone for the next chapter in the Company's
trajectory, and, importantly, working diligently to continue the work begun by
the accomplished team I have joined.
Nick von Schirnding
Independent Non-Executive Chairman
22 May 2024
CHIEF EXECUTIVE OFFICER'S REPORT
The Group is pleased to report on what was a stellar year with record gold
production, record gold sale revenue and record operating and net profits for
the year. Pleasingly, the Group closed out the year with gold production
exceeding its published, and re-stated, gold production guidance for the year.
With the Group's robust business fundamentals providing a strong platform from
which to grow, we go into 2024 focused on opportunities to transform the Group
into a multi-project company.
Most importantly, the Group continues to create a net-positive impact for its
stakeholders and local communities. Our environmental, sustainability and
social programmes continue to be of a very high standard, ensuring the Company
continues to be accountable, transparent, and responsible in its corporate
purpose.
SAFETY AND HEALTH
Safety remains at the core of the Group's business. During the year there were
no material safety and health incidents throughout all Group operations. A
safe working culture is actively promoted by a dedicated occupational safety
and health department and is embraced across the Group and by all departments.
All staff recognise their individual responsibilities for their own safety and
the safety of others.
Evidence of adhering to these values is the excellent safety record that the
Group's employees and contractors have achieved. As at the date of this report
the Group has achieved in excess of 22.7 million man-hours with no lost time
incidents occurring since the last lost time incident in December 2016. This
is a remarkable achievement for an operation of this nature, and all employees
and contractors are to be congratulated on this outstanding record.
FINANCIAL YEAR 2023 ("FY2023") OVERVIEW
Operational profit was US$29.2 million (FY2022: US$23.8 million) following
record gold production for FY2023 of 85,194 ounces, being significantly higher
than FY2022's production of 72,537 ounces. The gold production was achieved
with average gold recovery improving to 88.7% from 85.7% in FY2022. The
all-in-sustaining-cost ('AISC') for FY2023 was US$1,126 per ounce (FY2022:
US$1,235 per ounce), which was slightly above the lower FY2023 AISC guidance
of US$1,120 per ounce.
During FY2023 the gold price remained strong resulting in an average sales
price of US$1,944 per ounce (FY2022: US$1,797 per ounce). Total sales for
FY2023 were US$166.7 million (FY2022: US$124.4 million).
During FY2023 the cash generated from operations was US$74.6 million (FY2022:
US$38.2 million). This enabled the Group to make US$64.8 million in debt
interest/principal repayments during FY2023 (FY2022: US$33.8 million).
Management's operational focus during FY2023 was to consolidate plant
performance improvements and operational reliability. Mill throughput was
maintained above nameplate design levels, while numerous modifications and
equipment upgrades throughout the process circuit have improved general
performance and reliability of the plant.
GROUP DEBT
In October 2020 the Group completed a debt restructuring with Runruno Holdings
Limited and D & A Holdings Limited (together the "RHL Group") and MTL
(Luxembourg) S.à r.l. ("MTL Lux"). In the period to November 2022 the Group
made regular monthly senior loan repayments such that, except for a nominal
US$2,586, the senior debt was fully repaid. This nominal amount had been left
unpaid to ensure various securities remained in place until the mezzanine
loans were elevated to the status of secured borrowings (the "Elevation"). The
Elevation process required completion of complex and multi-country
documentation and the registration of new security arrangements in numerous
jurisdictions. Although the necessary material documentation was agreed by all
parties it has not been executed due to a dispute in relation to the
applicable rate of interest applying to, and hence, the quantum of the
remaining mezzanine debt.
The October 2020 debt restructuring agreements envisaged the interest rate
applicable to the mezzanine debt being reduced from 15% pa to 7% pa once the
senior debt is repaid and the elevation of the mezzanine debt to "new" senior
debt is complete. The Company's position was that the intent of the October
2020 debt restructure was that the interest rate applicable to the mezzanine
debt should have reduced from 15% pa to 7% pa in November 2022.
The Company's position was that the final payment due to the lenders under the
Company's mezzanine debt facilities was made on 25 March 2024, on the basis of
the lower interest rate of 7% (as opposed to 15%) applying from 3 November
2022, which the Company believed should apply under such facilities.
The Company's minority 29.3% mezzanine debt lenders, the RHL Group, disputed
that the interest rate applicable to their portion of the mezzanine debt
reduced from 15% to 7% from 3 November 2022. Further, the RHL Group claimed
that several events of default have occurred under the Group's senior and
mezzanine facilities, such that the relevant default interest rate (being a
total of 12% under the senior debt facility and 20% under the mezzanine debt
facilities) should apply with effect from 5 October 2023. The Company disputed
these allegations.
In light of the RHL Group's position in respect of the application of 15%
interest to its loans under the mezzanine facilities, MTL Lux. (holding 70.7%
of the mezzanine debt), contrary to historical assurances otherwise, sought to
receive this interest rate on its own loans to the Company. MTL Lux has
formally recorded that it does not believe penalty interest should apply.
After a detailed consideration of the Company's legal position in this matter,
and associated issues such as the cost of an ongoing dispute with the
Company's two largest shareholders, the Company has attempted to resolve this
matter by making a payment, in May 2024, of approximately 50% of the total
quantum currently under dispute.
However, as this dispute has not been fully resolved, the Company has, at 31
December 2023, created a provision for possible increased interest of US$2.6
million, being the remaining difference between 15% per annum and 7% per annum
on the mezzanine loans for the period 3 November 2022 to 31 December 2023.
The Company continues to negotiate with MTL Lux and the RHL Group on this
matter.
RUNRUNO MINE
Mining Operations
Total material moved during FY2023 was above budget at 12.4Mt (million tonnes)
(FY2022: 13.7Mt).
Mining operations during FY2023 were concentrated in Stages 3 and 4. In-pit
backfilling, which will reduce closure and environmental restoration costs
upon the eventual closure of the mine, continues in Stages 1 and 2, with
resultant reduced haulage times.
During FY2023, a drill programme was undertaken with the aim of discovering
additional economic resources outside of the current mine plan pit-shell,
especially to the north, east and west of the current Stage 5 pit design. The
objective was to discover new economically mineable ounces that would increase
the Runruno life of mine ("LOM"). The area drilled encountered evidence of
significant mining having been conducted by the illegal small-scale miners
that delayed the Group's access to these areas. Unfortunately, no material new
resources were discovered from this drill programme.
All relevant permits for operations remain in place for the Runruno mine.
Gold Reserve Statement
As the resource extension drilling was not successful there has been no
calculation of an updated ore reserve statement.
The most recent gold reserve statement was issued in February 2022, based on
data as at 1 August 2021, as follows:
Table 1 - Ore Reserve estimate - published in February 2022
Reserve Ore Gold
Category Mt g/t Moz
Proved - - -
Probable 9.94 1.35 0.43
Total 9.94 1.35 0.43
Inferred resources included in LOM model pit
Inferred material 0.69 1.11 0.02
Using a Surpac block model, the Group modelled an internal estimation of the
subsequent depletion of ore due to mining that has occurred since the above
model was calculated (the period 1 August 2021 to 31 December 2023). The
estimated resource depletion and the resulting depleted reserve statement
(note that these calculations have not been independently verified) as at 31
December 2023 are:
Table 2 - Ore depletion estimate
Reserve Ore Gold
Category Mt g/t Moz
Estimated ore mined from August 2021 to December 2023
4.80 1.35 0.21
Table 3 - December 2023 Depleted Ore Reserve estimate
Reserve Ore Gold
Category Mt g/t Moz
Proved - - -
Probable 5.14 1.35 0.22
Total 5.14 1.35 0.22
Inferred resources included in LOM model pit
Inferred material 0.50 1.00 0.02
Process Plant
Plant performance in FY2023 continued to show improvement in gold recovery
from both the flotation and BIOX® circuits. During FY2023, the Group achieved
an overall gold recovery of 88.7%, an improvement upon FY2022 which was 85.7%.
Total gold produced in FY2023 was 85,194 ounces compared to 72,537 ounces in
FY2022.
During FY2023, further upgrades to the process plant return water and BIOX®
tank cooling systems were undertaken, improving plant availability and
throughput rates. This upgrade also improved the ability to control BIOX®
temperatures with further marginal production gains in BIOX® anticipated.
These modifications combined with a largely uninterrupted supply of power
during FY2023 resulted in a stable operating environment leading to the record
average gold recoveries achieved over the year.
Unplanned downtime during FY2023 resulted mainly from tails line failures and
repairs to the SAG mill girth gear, conveyor belts and return water line.
Overall unplanned downtime has reduced through the Group's programme of
proactive maintenance.
Notwithstanding the above, the process plant operated above design throughput
with the following points of note:
· The crushing and grinding circuit operated above design throughput,
achieving a utilisation rate of 91.8% (FY2022: 86.5%) and processing 2.10Mt of
ore (FY2022: 2.07Mt);
· The gravity circuit achieved a recovery of 28.5% (FY2022: 27.9%);
· Fine-tuning of the flotation circuit resulted in incremental
increases in recovery to 93% (FY22: 91%);
· The CIL circuit achieved an overall CIL recovery of 91.6% (FY2022:
89.9%);
· A major upgrade to the cooling water circuit was completed providing
greater control of temperatures in the BIOX®; improving sulphur oxidation to
76.1% (FY2022: 67.5%); and
· The other plant circuits and ancillary systems all operated
adequately.
Residual Storage Impoundment (RSI)
The Group's tailings products are delivered to a residual storage impoundment
(RSI) structure. This structure has been designed and is being constructed to
international standards that relate to water storage dams. The standard to
which the RSI is being constructed far exceeds international standards that
apply to traditional mining tailings dam structures.
The final scheduled lift to the RSI has been completed, with construction of
the in-rock final spill-way underway. This final in-rock spillway will ensure
the RSI has the capacity to cope with a 'Probable Maximum Flood' event.
The RSI remains in compliance with local guidelines and local development
requirements, although it has not reached the final design stage of being
capable of successfully coping with a 'Probable Maximum Flood' event. The
in-rock final spillway is expected to be completed in Q1 2025.
The performance of the RSI is continuously monitored by independent
international consulting engineers.
Government Industry Awards
During Q4 2023, the Group was awarded the following Philippine Government
awards:
· Presidential Mineral Industry Environmental Award (PMIEA) in the
Surface Mining Operation Category 2023, awarded for the second year in a row.
· 3(rd) Runner-up, Best Mining Forest Contest - Metallic Category 2023.
· Ronald Wayan, Safety Officer, was the winner on the Best Safety
Inspector (Surface Award).
In addition, the Group was selected to represent the Philippines at the third
ASEAN Mineral Awards. At these awards the Group was awarded:
· 1(st) Runner-up in recognition of outstanding best practices in
Sustainable Mineral Development (Mineral Mining - Metallic).
· 2(nd) Runner-up in recognition of outstanding best practices in
Sustainable Mineral Development (Mineral Processing - Metallic).
These awards are given to mining companies in recognition of outstanding
levels of dedication, initiatives and innovations in the pursuit of excellence
in environmental protection, health & safety management and
social/community development. Winning the Presidential award is the highest
Government mining award attainable in the Philippines.
NEW PROJECTS
As noted in our 2022 Annual Report, it was the Gorup's strategy to investigate
acquiring other mining opportunities in the Philippines. A number of
Philippines located projects have been reviewed and in January 2024 the
Company announced an initial acquisition of the Abra project, subject to
lender and shareholder approval, has been made. Other Philippines located
projects continue to be assessed for suitability.
Abra
In January 2024 the Company agreed to acquire a controlling interest in the
YMC group, subject to lender and shareholder approval. The YMC group holds an
extensive exploration tenement in the Abra region of Luzon, Philippines. The
purchase price is US$1.6 million (offset by approximately US$1.1 million cash
held by the YMC group) and the issue of options to subscribe for up to 41
million new ordinary shares of £0.0001 each in the capital of the Company.
The Abra tenement covers 16,200 hectares on Luzon, Philippines, approximately
200km north of the Company's Runruno mine, in the Cordillera region, which is
a prolific gold belt in the Philippines, with proven mineral endowment, having
produced over 40Moz of gold historically.
OUTLOOK
Annual production guidance for FY2024 for the Runruno mine has been set at
74,000 - 80,000 ounces at an AISC of between US$1,175 - US$1,275 per ounce.
FY2024 operations are expected to maintain the general operational results
produced during FY2023, such that free cash flow is maintained from a stable
consistent level of mining and gold production.
The Group's positive operational cash-flows in Q1 2024 have been utilised to
finalise, subject to resolving the interest rate matter, the full repayment of
the Group's external debt. Free cash flow for the remainder of 2024 will be
accumulated and applied to accelerate exploration of new projects and/or to
acquire addition exploration and development opportunities, initially focused
on the Philippines and potentially the wider region.
Darren Bowden, Chief Executive Officer
22 May 2024
Competent Persons' Statement
The information contained in this report that relates to the Gold Reserves
Estimate, issued in February 2022, was compiled by Paola Tuyor of Metals
Exploration and reviewed and verified by Grant Walker of Xenith Consulting.
Mr Walker is a Member of The Australasian Institute of Mining and Metallurgy
and is a Competent Person as defined by the JORC Code, 2012 Edition, having
five years' experience that is relevant to the style of mineralisation and
type of deposit described in the Report.
Mr Darren Bowden, a director of the Company, a Member of the Australasian
Institute of Mining and Metallurgy and who has been involved in the mining
industry for more than 25 years, has compiled, read and approved the technical
disclosure in this regulatory announcement in accordance with the AIM Rules -
Note for Mining and Oil & Gas Companies.
Forward Looking Statements
Certain statements relating to the estimated or expected future production,
operating results, cash flows and costs and financial condition of Metals
Exploration plc and the Group, planned work at the Company's projects and the
expected results of such work contained herein are forward-looking statements
which are based on current expectations, estimates and projections about the
potential returns of the Group, industry and markets in which the Group
operates in, the Directors' beliefs and assumptions made by the Directors.
Forward-looking statements are statements that are not historical facts and
are generally, but not always, identified by words such as the following:
"expects", "plans", "anticipates", "forecasts", "believes", "intends",
"estimates", "projects", "assumes", "potential" or variations of such words
and similar expressions. Forward-looking statements also include reference to
events or conditions that will, would, may, could or should occur. Information
concerning exploration results and mineral reserve and resource estimates may
also be deemed to be forward-looking statements, as it constitutes a
prediction of what might be found to be present when a project is actually
developed.
These statements are not guarantees of future performance or the ability to
identify and consummate investments and involve certain risks, uncertainties
and assumptions that are difficult to predict, qualify or quantify. Among the
factors that could cause actual results or projections to differ materially
include, without limitation: uncertainties related to raising sufficient
financing to fund the planned work in a timely manner and on acceptable terms;
changes in planned work resulting from logistical, technical or other factors;
the possibility that results of work will not fulfil projections/expectations
and realise the perceived potential of the Company's projects; uncertainties
involved in the interpretation of drilling results and other tests and the
estimation of gold reserves and resources; risk of accidents, equipment
breakdowns and labour disputes or other unanticipated difficulties or
interruptions; the possibility of environmental issues at the Company's
projects; the possibility of cost overruns or unanticipated expenses in work
programs; the need to obtain permits and comply with environmental laws and
regulations and other government requirements; fluctuations in the price of
gold and other risks and uncertainties.
The Company expressly disclaims any obligation or undertaking to disseminate
any updates or revisions to any forward looking statements contained herein to
reflect any change in the Group's expectations with regard thereto or any
change in events, conditions or circumstances on which any such statements are
based unless required to do so by applicable law or the AIM Rules.
AUDIT COMMITTEE REPORT
Dear Shareholders,
I am pleased to report to you on behalf of the Audit Committee.
Since April 2021, the Audit Committee has been comprised of only non-lender
appointed, non-executive directors, which has consolidated the Group's
commitment to improved corporate governance.
The Group's established financial reporting structures have continued to
perform effectively in the year, and the Committee has continued to oversee
the proper maintenance of these structures. The Group's robust framework of
internal controls facilitated a smooth external audit process, helping to
ensure the integrity of the 2023 Annual Report.
Aims of the Audit Committee
The overall aim of the Audit Committee is to assist the Board in discharging
its duties regarding the financial statements, to ensure that a robust
framework of accounting policies is in place and enacted, and to oversee the
maintenance of proper internal financial controls and risk management. The
Committee monitors the integrity of the Financial Statements of the Interim
and Annual Reports and formal announcements relating to the Group's financial
performance, including advising the Board that the Annual Report taken as a
whole is fair, balanced and understandable.
The Committee reviews significant financial reporting issues, key judgements
and accounting policies and disclosures in financial reports, reviews the
effectiveness of the Group's internal control procedures and risk management
systems and considers how the Group's internal audit requirements shall be
satisfied, making recommendations to the Board. It reviews the independent
auditor's audit strategy and implementation plan and its findings in relation
to the Annual Report and Interim Financial Statements. It monitors the
relationship with the Group's independent auditor including the consideration
of audit fees and independence.
Membership and attendance
The Audit Committee consisted of myself, Andrew Chubb, as the Chair, together
with two other Non-Executive Directors, David Cather and Tim Livesey, until
September 2023 when Mr Cather resigned as a director of the Company. On 18
March 2024, Mr von Schirnding was appointed as the third committee member in
replacement of Mr Cather.
The Committee aims to meet at least three times each year. The external audit
team and the Chief Financial Officer are invited to attend meetings of the
Committee, and I am satisfied that we were presented with papers of good
quality, and in a timely manner. Attendances at committee meetings during the
year were:
Audit committee member/qualifications Eligible to attend Attended
Andrew Chubb (B.Law (Hons)) - Chair 4 4
Tim Livesey (B.Sc (Hons) Geology) 4 4
David Cather (B.Sc (Hons) Mining) (resigned 18 September 2023)
3 3
Nick von Schirnding (B.A-LLPB)
(appointed 18 March 2024) - -
The external auditors, for the relevant periods they acted in that role,
attended all committee meetings held during the year.
Key responsibilities
The main responsibilities of the Audit Committee are contained within its
terms of reference that have been approved by the Board and are available on
our website. The terms of reference and the key responsibilities of the Audit
Committee are set out below:
· Maintain the integrity of the annual and interim financial
statements of the Company and review any significant reporting matters they
contain;
· Review the Annual Report and Accounts and other financial
reports;
· Maintain the accuracy and fairness of the Company's financial
statements, including through ensuring compliance with applicable accounting
standards and the AIM Rules;
· Review the adequacy and effectiveness of the Company's
internal control environment and risk management systems;
· Review the adequacy and effectiveness of the Company's
Whistleblowing policies;
· To consider the need for, and to oversee, internal audit
activities; and
· Oversee the relationship with, and the remuneration of, the
external auditor, reviewing their performance and advising the Board members
on their appointment.
Activities of the Audit Committee during the year
On behalf of the Board, the Audit Committee has closely monitored the
maintenance of internal controls and risk management during the year. Key
financial risks are reported during each Audit Committee meeting, including
developments and progress made towards mitigating these risks.
The Committee received regular reports from the Chief Financial Officer
throughout the year and was satisfied with the effectiveness of internal
controls and risk mitigation. The Committee also received and considered
reports from the external auditor, PKF Littlejohn LLC ("PKF"), and prior to
their resignation from CLA Evelyn Partners Limited ("EP"), which included
control findings relevant to their audit.
Significant reporting matters
The Audit Committee has reviewed management's assessment of critical
accounting judgements and key sources of estimating uncertainty disclosed in
note 2.
As part of the review, the Committee considered whether:
· There are any material or sensitive omissions from the
Annual Report narrative;
· The Annual Report narrative is a true and balanced
reflection of events and performance in the year;
· There is consistency throughout the Annual Report and
Financial Statements; and
· There is a clear explanation of key performance indicators,
their link to performance and strategy and equal prominence of statutory
performance measures.
The Committee is satisfied that management have considered these matters
appropriately and that a reasonable conclusion has been reached, and
appropriate disclosure made, based on the information available to the Group.
The Committee is not aware of any significant failings or weaknesses in the
Company's existing system of internal controls. The Committee has determined
that an internal audit function is not an appropriate mechanism for the
Company in the context of the Company's current level of complexity of its
operations.
Going concern
The Directors consider the continuing strong operating and financial
performance of the Group provides ample evidence that there currently is no
material uncertainty surrounding the Company and the Group's ability to
continue as a going concern.
Accordingly, the Company and Group financial statements are prepared on a
going concern basis. Further detail regarding the reasoning behind this
conclusion can be found in the Directors' Report on page 32.
External audit
The Audit Committee considers various matters when reviewing the appointment
of an external auditor including their performance in conducting the audit and
its scope, terms of engagement including remuneration and their independence
and objectivity. Details of auditor's fees are included in the notes to the
financial statements.
Since the Company's incorporation CLA Evelyn Partners Limited ("EP") (formerly
Smith & Williamson) had acted as the Group and Company auditor. During
this period, EP had also provided corporate tax services. After considering
primarily the length of time EP had served as audit partners, as well as the
potential for possible independence issues relating to additional services, it
was mutually agreed with EP that they should be replaced as Group and Company
auditor.
On 1 December 2023, following a thorough tender process run by the Audit
Committee and the CFO, PKF Littlejohn LLC were appointed as Group and Company
auditor.
The Audit Committee has confirmed it is satisfied with PKF's industry
experience, knowledge of the Company and its effectiveness as external
auditor. PKF does not provide any non-audit services to the Group or the
Company. As such the Audit Committee has recommended the reappointment of PKF
to the Board. There will be a resolution to this effect at the forthcoming
annual general meeting.
The year ahead
The Audit Committee remains focussed on ensuring that the robust framework of
internal controls and risk management currently in place throughout the Group
is maintained. Financial risk management will continue to be closely
monitored, and any potential risks mitigated where appropriate.
The Audit Committee will also continue its close dialogue with the Company's
external auditors, highlighting any emerging financial risks or matters facing
the Company throughout the coming year and ensuring that the Company's
financial reporting mechanisms continue to be constantly updated in line with
best practice and subjected to scrutiny and challenge.
Andrew Chubb, Chair of the Audit Committee
22 May 2024
REMUNERATION COMMITTEE REPORT
Dear Shareholders,
It is my pleasure to report to you on behalf of the Remuneration Committee.
As part of the Group's commitment to improved corporate governance, only
non-lender, appointed non-executive directors have been members of the
Remuneration Committee since April 2021.
Throughout 2023 the Committee has continued to focus on aligning reward with
performance and providing incentives, such that the Company's remuneration
framework best facilitated an environment that delivered the swift repayment
of the Group's external debt. This allowed the Group to focus on strategic
opportunities to grow the Group's activities. Certain covenants within the
Group's debt documents require lender approvals of any equity incentive
schemes and the Committee's efforts in seeking a lender approved acceptable
long-term incentive programme continue.
Aims of the Remuneration Committee
The Committee's overall aim is to align employee remuneration with the
successful delivery of long-term shareholder value. Our core principles that
enable us to achieve this goal are:
1. To offer competitive remuneration to executive management that attracts,
retains and motivates highly skilled individuals;
2. To align remuneration packages with performance-related metrics that mirror
our short and long-term business strategies; and,
3. To encourage accountability in the workplace and link reward with success.
The Group currently operates the following remuneration framework:
· Annual salary and associated benefits; and
· Discretionary bonuses that are granted following the
Committee's assessment of performance against certain key business indicators.
Membership and attendance
The Remuneration Committee consisted of myself, Tim Livesey, as the Chair,
together with two other Non-Executive Directors, David Cather and Andrew
Chubb, until September 2023 when Mr Cather resigned as a director of the
Company. On 18 March 2024, Mr von Schirnding was appointed as the third
committee member in replacement of Mr Cather.
The Committee aims to meet at least two times each year. Attendances at
Committee meetings during the year were:
Remuneration committee member Eligible to attend Attended
Tim Livesey - Chair 3 3
Andrew Chubb 3 3
David Cather (resigned 18 September 2023) 2 2
Nick von Schirnding (appointed 18 March 2024) - -
No Director is involved in any decisions relating to their own remuneration.
None of the Committee has any personal financial interest, conflicts of
interests arising from cross-directorships, or day-to-day involvement in
running the business.
Terms of reference
The terms of reference of the Remuneration Committee, that have been approved
by the Board and are available on our website, are set out below:
· Determine and propose to the Board the Company's overall
remuneration policy and monitor the efficacy of the policy on an ongoing
basis;
· Determine and propose to the Board the remuneration of the
Executive Directors and senior management;
· Determine the objectives and headline targets for any
performance-related bonus or incentive schemes;
· Monitor, review and approve the remuneration framework for
other senior employees; and,
· Review and approve any termination payment, such that these
are appropriate for both the individual and the Company.
Executive remuneration package and service contracts
There was no change to the CEO's base remuneration and no material changes to
other executive remuneration packages during the year. The Group's
remuneration framework includes payment of an annual salary and short term
bonus. At present there is no long-term incentive programme in place.
Executives are provided with life assurance cover equivalent to two times
their base salary (capped at £500,000). There are no pension/superannuation
schemes in place for executives or non-executive directors. Termination of
executive contracts are subject to a three month notice period or an in lieu
base salary termination payment.
Management Incentive Programme ("MIP") - 2023 Performance
The CEO and other senior executives are eligible to participate in a MIP. The
MIP awards an annual short-term bonus based on performance achieved against
pre-determined key performance indicators ("KPIs"). Given the Group priority
on being cash generative to reduce external debt, the KPIs are focused on
operations and productivity performance.
The following table details the KPIs adopted by the Committee in its
assessment of the Group's performance and the quantum of the MIP bonus, which
were applied to FY2023.
Standard target weighting
Performance indicator 2023 Rating 2023 Performance
Zero LTIs recorded; TRIFR < 0.95, no material FTAA/RSI/Environmental
incidents
Environmental/Safety/Health and compliance 25% Exceptional
Free cash generated before debt principal/interest/fees Maximum target achieved Free cash generated 245% of budget.
35%
Maximum target achieved Average gold recovery 106.4% of budget
Gold Recovery v budget 25%
Award target threshold achieved
Total Expenditure v budget 5% Actual spend 103% of budget
Maximum target achieved Actual mined material 110.4% of budget
Total Material Movements v budget 5%
Maximum target achieved
Mill Throughput v plant design 5% Actual throughput 120.2% of design
Glossary:
KPI - Key performance indicator; LTI - Lost time injury; TRIFR - Total
reportable injury frequency rate
FTAA - Financial and Technical Assistance Agreement; RSI - Residual storage
impoundment
Of the total MIP bonus, 15% is satisfied by an issue of new Ordinary Shares,
at an issue price equal to the 30-day VWAP market value prior to the date the
MIP bonus is approved by the Board (subject to shareholder approval).
Shareholders will be asked, at a shareholder meeting, to approve the future
issue of 3,785,447 new Ordinary Shares to executives as part of the 2023 MIP
bonus award. In June 2023, following the 2023 AGM, 7,147,850 new Ordinary
Shares were issued to management as part of the 2022 MIP award.
Non-executive director remuneration
All non-executive directors are appointed under a letter of engagement that
sets out the terms, responsibilities and remuneration attaching to their
appointment. The remuneration of lender nominated non-executive directors is
governed by the terms of a revolving credit facility and relationship
agreements between the Company and the two major shareholders. The
remuneration of non-lender nominated non-executive directors is determined by
the full board.
Director remuneration
The Directors' remuneration for the year was as follows:
Fees/salary Short-term performance bonus Share- based payments Total
Year ended 31 December 2023 US$ US$
US$ US$
Darren Bowden(1) 805,610 (-) - 805,610
Executive director/CEO
Steven Smith(2) 70,117 - - 70,117
Interim Chairman & Non-executive director
Tim Livesey 84,764 - 20,947 105,710
Independent non-executive director
Andrew Chubb 62,326 - 5,210 67,537
Non-executive director
Guy Walker 73,545 - - 73,545
Non-executive director
David Cather(1) 70,117 - 5,210 74,297
Independent Chairman (resigned 18 September 2023)
1,166,478 - 31,368 1,197,846
Total
Fees/salary Short-term performance bonus Share based payments
Year ended 31 December 2022 US$ US$ Total
US$ US$
Darren Bowden(1) 805,610 -(3) - 805,610(3)
Executive director/CEO
David Cather(1) 92,024 - 28,469 120,493
Independent Chairman
Tim Livesey 40,240 - 36,081 76,321
Independent non-executive director (appointed 5 May 2022)
Andrew Chubb 61,349 - 28,469 89,818
Non-executive director
Guy Walker 65,030 - - 65,030
Non-executive director
Steven Smith(2) 61,349 - - 61,349
Non-executive director
Jeremy Wrathall 21,109 - 8,982 30,091
Independent non-executive director (resigned 5 May 2022)
1,146,711 - 102,001 1,248,712
Total
Notes:
¹ Includes consulting fees paid to private consulting companies.
(2) Fees paid in accordance with a Services Agreement between the Company and
MTL (Luxembourg) Sarl.
(3) Restated to eliminate 2022 year-end bonus accruals were cancelled during
FY2023.
No element of the Directors' remuneration (other than the share options and
shares issued as part of the MIP bonus as noted above) is currently related to
the Company's future share price.
Director interests in shares and options
No directors own any shares in the Company apart from Mr Bowden who owns
8,257,355 Ordinary Shares.
Directors' beneficial interests in unissued ordinary shares granted by the
Company under share options as at FY2023 year-end are as follows:
Director Option expiry date Option exercise price Issued during year Vested at year end Options held at year end
Andrew Chubb Nominal share value - 6,600,000 6,600,000
Non-executive director On or before
28 October 2024
Tim Livesey(1) Nominal share value - 4,400,000 6,600,000
Independent non-executive director On or before
17 June 2025
Vesting/exercise conditions
Provided the option-holder remains a director of the Company,
1 the remaining 2,200,000 options will vest on 17 June 2024.
The relevant Non-Executive Directors' independence is not considered to be
compromised due to holding these options as the level of share options are
deemed to be sufficiently immaterial.
The year ahead/Long-term incentive programme
Under the Group's debt finance agreements material changes to the Group's
remuneration policies and the level of executive and senior management
remuneration requires the approval of the Group's two lenders in accordance
with the various loan agreements.
It is hoped that a resolution to approve a long-term incentive programme, that
has the support of the Company's lenders and major shareholders, will soon be
proposed for shareholder approval at a Company general meeting.
Other than the introduction of a long-term incentive programme for executives
and senior management, it is not proposed to make any change to remuneration
policy.
Tim Livesey, Chair of the Remuneration Committee
22 May 2024
SUSTAINABILITY REPORT
In accordance with Philippine Government requirements, the Group issues a
biennial in-depth sustainability report. Shareholders are recommended to
access the most recent biennial sustainability report, titled 'Charting a
Legacy', issued in May 2024, covering the 2022 and 2023 calendar years, which
is available on the Company website at www.metalsexploration.com
(http://www.metalsexploration.com) /esg.
The report is prepared in accordance with the Global Reporting Initiative
(GRI) Standards and provides stakeholders with a transparent account and
comprehensive information on our sustainability performance and governance and
climate-risk related disclosures.
RISK MANAGEMENT
The Group's Code of Conduct enumerates its ethics. Operational procedural
standards, aligned with legal requirements, have been established for all
activities we undertake. Operations are certified with ISO 14001:2015
compliance and the Group is a member of the Chamber of Mines of the
Philippines "Towards Sustainable Mining" initiative. The reporting of any
infractions, particularly on safety concerns and potential environmental
non-compliance, is participatory and cuts across all employees regardless of
position.
COMMUNITY AND SOCIAL DEVELOPMENT
As part of our commitment to enriching the lives of local communities, the
Group allocates 1.5% of direct mining and processing costs to be applied in
its Social Development and Management Program ("SDMP"). Through the SDMP the
Group partners with local communities to identify and implement impactful
socio-economic programmes that drive sustainable development in our host and
neighbouring areas. Implementation of the SDMP passes through a series of
community consultations to identify appropriate socio-economic programmes. The
Group's SDMP programmes are focused on:
· Health;
· Education;
· Capacity building;
· Community development and empowerment;
· Enterprise development, improvement and networking;
· Infrastructure development; and
· Preservation and respect of socio-cultural values.
Total community programme expenditure for FY2023 was US$1.4 million, up from
US$1.3 million for FY2022 programmes. The reach of the programmes extends to
assist the residents of the Barangay of Runruno and surrounding Barangays, the
Municipality of Quezon and the Province of Nueva Vizcaya.
The Community Relations Department, the community interface arm of the Group,
maintains strong partnerships with various national agencies and local
governments from Barangay to Provincial level. They are primarily engaged in
managing the implementation of identified and prioritised projects within the
mandated SDMP and other programmes under them as a component of the Group's
commitment to its Corporate Social Responsibility ("CSR").
SAFETY AND HEALTH
A safety and health programme is created each year to establish a robust
foundation for the implementation of measures that prioritise the well-being
and protection of workers. This ensures that workers are provided with a just,
safe, and humane working environment. It is updated annually to ensure that
the programme remains up-to-date and sufficiently addresses the evolving
hazards and risks of the operations.
There were no material safety and health incidents throughout the project
site. A safe working culture is actively promoted by a dedicated occupational
safety and health department. To date the operation has accumulated in excess
of 22.7 million man-hours with no lost time incidents.
HUMAN CAPITAL
Employees are the lifeblood of our operations. Without their dedication to
exemplary performance, and a work ethic that aligns with the values of our
Company, the growth and development that the Group has achieved through the
years will not be attained. It is therefore crucial for our Company to invest
in our people to be able to power the business and continue operations, as
well as support them in their journey towards a rewarding career and
achievement of success that ripples through their lives and their communities.
Our policy is to recruit and retain the most talented and high-performing
people who share the Group's commitment to sustainable development. Great care
is taken in every step of the employment process with an emphasis on equality,
diversity, work-place safety and employee welfare.
ENVIRONMENT
The Group is active in promoting and implementing "responsible mining"
practices. It is a leader in the Philippine mining industry in its
environmental and environmental rehabilitation practices, having received
numerous government/industry awards in this area over a number of years. The
Group implements innovative technologies to enhance the efficiency and
effectiveness of existing programmes across all operational facets, including
our environment-related projects. Use of technologies like low-cost
hydroseeding technology combined with a zero waste initiative, and maintaining
a tree nursery and a clonal tree nursery research facility, are essential for
the sustainability of our environmental restoration efforts.
WASTE MANAGEMENT
Safe management of tailings and other waste products are crucial to the safety
of our communities and longevity of our operations. All tailings are sent to
the residual storage impoundment facility (RSI) which has been constructed to
international standards applicable to water storage dams, which are much
higher than international standards applicable to mining tailings.
While the Group has a strong waste management record to date, it understands
the risks associated with tailings management are a particular concern to our
stakeholders and the Group is determined to maintain high levels of safe
tailings management.
REFORESTATION AND REHABILITATION
The Group acts positively to reduce the potential environmental impacts of its
operations. It undertakes this obligation through immediate and continuous
rehabilitation activities, by the re-greening of disturbed areas, the
establishment of protection forests and the provision of habitat for wildlife
within the FTAA area.
These programmes demonstrably improve the environment within and surrounding
the Group's operations and are designed for beautification, stabilisation and
to off-set green-house gas emissions and the impacts of the Group's
operations. Through its various programmes, the Group has been responsible for
planting over 2 million endemic and cash crop trees.
A total of 5.21 hectares within the FTAA area were rehabilitated during FY2023
(FY2022: 7.17 hectares) to bring the total area rehabilitated since
commencement of mining to 49.34 hectares.
In addition, the Group participates in the National Forest Programme and the
National Greening Programme. During FY2023, the Group was responsible for a
further 195 hectares of reforestation (FY2022: 241 hectares).
As a manifestation of our unwavering and exemplary commitment, the Group has
received the Presidential Mineral Industry Environmental Award (PMIEA) in the
Surface Mining Operation Category for the second year in a row.
WATER MANAGEMENT
Mining activities require a large and constant supply of water, and the Group
recognises that access to safe water is a fundamental right for local
communities.
The Group operates a dynamic water management programme to avoid possible
impacts on the downstream water quantity, quality and aquatic environment. The
ASTER technology contained in the final segment of the process plant destroys
all cyanide species from tailings before the tailings are pumped into the RSI.
Th Group aims to reduce its monthly average water consumption by at least 1%
per annum.
ANTI-SLAVERY AND HUMAN TRAFFICKING
Our anti-slavery policy reflects our commitment to acting ethically and with
integrity in all our business relationships and to implementing and enforcing
effective systems and controls to ensure slavery and human trafficking are not
taking place anywhere in our supply chains. Our Company abides by various
legislation and frameworks, including the UK Modern Slavery Act 2015, the
Philippine Anti-discrimination Act of 2011, Republic Act 7877, the Philippine
Anti-Sexual Harassment Act of 1995, and the United Nations Guiding Principles
on Business and Human Rights.
CLIMATE CHANGE REPORTING
The Group recognises its social responsibility to align its efforts to
contribute to global climate change goals and targets including net-zero
emissions by 2050. Policies to minimise the Group's greenhouse gas emissions
("GHG"), are followed, as far as economically practicable.
Task Force on Climate-related Financial Disclosures
The Group is committed to managing the impact of its operations on the planet
and the impact of climate change on its operations, particularly to ensure
continued operational and financial resilience in a changing world and
marketplace. The Group understands the importance of these matters to its
investors, partners, and regulatory authorities and as required by the Listing
Rules, has adopted the Task Force on Climate-related Financial Disclosure's
framework for communicating climate related financial risks.
This is the first year the Group has published a report in line with the TCFD
Recommendations and the Group has endeavoured to make disclosures consistent
with the TCFD recommended disclosures taking into consideration the short
remaining mine life at the Runruno mine and the size and complexity of the
Group as a whole. The Group will continue to develop and enhance its
infrastructure, strategies, structures, resources and tools to manage the
risks and opportunities presented by climate change.
TCFD PILLAR - Governance
Board Oversight
The Group recognises the threats and impacts posed by climate change. As a
responsible mining company, the Group recognises its crucial role in the
transition to a low-carbon economy. The Group aims to align our efforts to
contribute to global climate goals and targets. One of the ambitious goals of
the Company is to become the first carbon neutral mining operator in the
Philippines.
Management Oversight
Management is involved in identifying and evaluating risks that may affect the
operations. These risks are constantly assessed to prevent potential
environmental, economic and sociocultural impacts to our stakeholders. Within
the Group's operations the use of renewable energy is supported by purchasing
our power from a hydroelectric power company. In addition, the Group has
adopted methods and technologies that increase the efficiency of its
operations without causing significant harm to the environment. The Group
initiates efforts to include stakeholders in its programs and initiatives in
mitigating and addressing the impacts of climate change.
TCFD PILLAR - Strategy
Identified climate-related risks and opportunities
The identified key climate-related threats include increased risk of potential
emergencies such as earthquakes, floods, typhoons and dam failures. In
response to these identified threats, the Group has developed an emergency
control plan (ECP) to ensure preparedness for these potential emergency
situations. The ECP is shared with local communities to facilitate a planned
effective and timely response, aiming to mitigate threats and minimise
consequences to life, environment, and property.
Impact of climate-related risks and opportunities on strategy and planning
The Group continues to investigate opportunities to reduce its GHG emissions
while seeking to minimise the potential effects of longer-term risk to power
sources from potential climate-related risks.
Resilience of strategy
Management has incorporated climate scenarios into the Group's strategic
operational planning and review process. The Board encourages senior
management to assess principal and emerging climate-related risks on a regular
basis. Any changes in risks identified are to be reported to and discussed at
Board level and incorporated into the strategy and planning of the Group.
TCFD Pillar - Risk Management
Processes for identifying and assessing climate-related risks
The Company's Risk Management Plan is designed to identify, assess and
mitigate risks to minimise and control any potential impacts.
Processes for managing climate-related risks
The Board and Senior management co-ordinate the Group's analysis and planning
of the effects of climate change on our business. The Board regularly
discusses the impact of any risks identified through the organisation. The
mitigation of GHG emissions and identification of climate related risks has
been integrated into our corporate policy, project and procurement evaluation
criteria to ensure it is consistently applied and managed. The Group
continuously monitors and reports key performance indications relating to
environmental matters.
Process for integrating climate-related risks into the overall risk management
New or evolving climate change risks identified by both senior and local
management are reported to and discussed at Board level and incorporated into
the strategy, planning and climate policy of the Group. Where possible, plans
to mitigate the effect of climate change on our operations and our local
communities will be integrated into the Group's environmental management and
social and labour plans.
TCFD Pillar - Metrics and Targets
Metrics used by the Group
The Group annually sets targets to move forward towards its net-zero ambition.
Targets are set for the reduction of water, diesel, and electricity
consumption, and waste generation. Further, a target to increase reforestation
and restoration is also set.
Greenhouse Gas Emissions
The Group is committed to measuring and reporting our scope 1 and 2 greenhouse
gas emissions as noted below. Scope 3 emissions are not currently measured
given the size and life of Group's mine.
Targets used by the Group
The Group has only the single Philippine located operation, with a remaining
life of mine of approximately three/four years. In the short term, the Group's
continues to evaluate areas where GHG emissions can be further reduced. Once
the Group has identified the scope of further potential reductions, their
time, capital cost and practicability of implementation, as short-term targets
for the Group will be assessed.
Over the long term, as part of the Group's business strategy, the Board
continues to evaluate opportunities to diversify its business activities,
which in turn will involve the consideration of climate-related risks.
GREENHOUSE GAS EMISSIONS
Scope 1 GHG emissions from operations refers to direct activities that are
owned or controlled by the Group; primarily emissions from fuel consumed by
haul trucks, other vehicles and stationary plant at the Runruno project.
The calculation of GHG emissions is based on activity data, i.e. monitoring of
fuel consumption rates, fuel composition, etc multiplied by industry produced
conversion factors.
Scope 2 GHG emissions are indirect emissions from the generation of purchased
electricity consumed by operations that are owned or controlled by the Group.
Group Scope 2 emissions have been calculated using Philippine government
recorded supplier-specific emission factors. Within our operations we support
the use of renewable energy by purchasing our electricity from a hydroelectric
company.
These Scope 1 and 2 GHG emissions are regularly reported to the Philippines
mines department.
The Group's total carbon footprint (generated outside of the UK) was measured
as follows:
2023 2022*
CO(2)e Tonnes CO(2)e Tonnes
Scope 1 GHG emissions 21,429 23,668
Scope 2 GHG emissions 74,737 70,309
Operational GHG emissions Total 96,166 93,977
Total CO(2)e Tonnes per Total CO(2)e Tonnes per
ounces gold produces ounces gold produced
Operational GHG Emissions Intensity 1.13 1.30
* restated
ENVIRONMENTAL MONITORING
The Group maintains very high compliance standards and employs industry
leading initiatives to ensure the highest environmental performance. The Group
conducts regular internal comprehensive environmental monitoring to ensure
compliance with its licence provisions, Philippine Regulations and any
appropriate contemporary standards. This monitoring extends to reference sites
outside the immediate operational area. The Government undertakes quarterly
monitoring by an independent, community based Multipartite Monitoring Team;
while an independent third-party consultant group specialising in environment
monitoring services is also engaged to independently monitor the Group's
environmental performance.
LEGAL COMPLIANCE
High compliance standards are practiced across the Group. A large site-based
team is dedicated to managing the high levels of compliance mandated within
the Philippines. The site is regularly audited with upwards of 60 audits,
verifications or reviews of its operations undertaken annually by the various
regulators. The wide range of permits to operate in the Philippines are
secured from more than a dozen Government agencies and regulators.
CORPORATE GOVERNANCE STATEMENT
The Board has chosen to adopt the Quoted Companies Alliance's Corporate
Governance Code for small and mid-size quoted companies (the "QCA Code").
The QCA Code identifies ten principles that focus on the pursuit of medium to
long-term value for shareholders without stifling the entrepreneurial spirit
in which the Company was created. The principles of the QCA Code are embedded
into the Company's internal reporting and governance structures to the extent
expected of a company of Metals Exploration's size, stage of development and
resources.
The Company's governance structures are further governed by the Company's
Articles of Association ("Articles") together with relationship agreements
(the "Relationship Agreements") and a revolving credit facility (the "RCF")
with the Company's two largest shareholders, MTL (Luxembourg) S.à r.l. ("MTL
Lux") and Runruno Holdings Limited ("RHL").
The Relationship Agreements regulate the relationship between the Company and
its two largest shareholders to ensure, amongst other things, that the Company
and its business shall be managed for the benefit of the shareholders of the
Company as a whole. The Relationship Agreements grant each shareholder the
right to appoint one director, for so long as it (together with its successors
or assignees) continues to hold more than 10% of the voting rights of the
Company.
The RCF sets out the remuneration payable to directors nominated by the two
largest shareholders. Further, the RCF requires the prior consent of both
these shareholders (together with its successors or assignees) for the Company
to undertake a number of operational decisions.
The Company's current compliance, or otherwise, with each of the ten
principles of the QCA Code are detailed below.
Principle Disclosure
1 Establish a strategy and business model which promotes long-term value for The Board's strategy and corporate plan is to:
shareholders
- Provide shareholders with capital growth potential, delivered by
developing mineral projects into profitable mines.
- Undertake cost-effective and precise exploration on those targets
considered most likely to deliver future positive shareholder returns.
- Respect the indigenous culture of the exploration and development
areas and to promote social and economic development for the traditional
custodians.
- Manage the inherent value of its mining properties portfolio by
delivering an efficient mining operation.
- Conduct operations in a safe and environmentally responsible manner
to industry best practice standards.
- Offer employment opportunities to those who live in the project
area.
- Reward loyal and dedicated employees who drive the Company's
objectives.
- Consider acquisition opportunities to foster additional long-term
capital growth potential.
This Annual Report sets out key risks and uncertainties that may represent
challenges to the successful execution of the Company's strategy and business
model, and how such risks and uncertainties are managed by the Company. These
risks are set out in the Directors Report and notes 33 and 34 to the financial
statements.
2 Seek to understand and meet shareholder needs and expectations The Company engages openly with its shareholders via announcements made via a
regulatory information service, its corporate website and other social media
platforms and investor webinars. The Board encourages investors to
participate, if possible, at its Annual General Meeting and General Meetings.
The Board believes that the Annual Report and Accounts, and the Interim
Results published at the half-year stage, play an important part in presenting
all shareholders with an assessment of the Company's position and prospects.
The Company's website contains information on the Company's business,
corporate information and specific disclosures required under the AIM Rules
and the QCA Code. Management will also conduct periodic meetings either in
person or electronically to shareholders, private client brokers and
investment analysts.
3 Consider stakeholder and social responsibilities and their implications for The Company's long-term success relies upon good relations with all its
long term-success stakeholder groups, both internal and external. The Board affords highest
priority to ensuring that it maintains a strong understanding of the needs and
expectations of all stakeholders, monitoring feedback from them and considers
such feedback in developing future policy.
The Company undertakes its exploration and mining activities in a manner that
seeks to minimise or eliminate negative environmental impacts and to maximise
positive impacts of an environmental nature.
The Company operates a comprehensive safety and health programme to ensure the
wellness and security of its employees. The control and eventual elimination
of all work-related hazards requires a dedicated team effort involving the
active participation of all employees. A comprehensive safety and health
programme is the primary means for delivering best practices in safety and
health management.
Employment opportunities and regular training are offered for local Filipinos,
while gender diversity policies are actively followed.
Employee involvement is fundamental in recognising and reporting unsafe
conditions and avoiding events that may result in injuries and accidents.
The Company has a dedicated community relations division that is active in
developing and assisting with various community social programs with special
focus on health, education and infrastructure projects.
4 Embed effective risk management, considering both opportunities and threats, The Board is responsible for the Company's system of internal controls and for
throughout the organisation reviewing its effectiveness. The system is designed to manage, rather than
eliminate, the risk of failure to achieve the execution of the Company's
strategic objectives and business model. The Board reviews this internal
reporting on a regular basis.
The Board monitors financial controls through the setting and approval of an
annual budget and a formal delegation of authority matrix combined with the
regular review of key risk areas and monthly management accounts. The
management accounts contain a number of indicators that are designed to reduce
the possibility of misstatement in the financial statements.
Each year, on behalf of the Board, the Audit Committee reviews the
effectiveness of the Company's system of internal controls. This is achieved
primarily via a comprehensive review of risks which cover both financial and
non-financial issues potentially affecting the Company and from discussions
with the external auditor. Details of the key risks, and their management, are
contained in the following Directors' Report and notes 33 and 34 to the
financial statements. The Board is not aware of any significant failings or
weaknesses in the Company's existing system of internal controls.
Operational risk management is the driver for how the Company does business
and dictates requirements to design, plan and adequately respond to internal
and external events. This ensures that proper incident response, and effective
monitoring can be implemented to minimise anticipated risks and reduce harm
and disruption to people, the environment, and the Company's operations.
5 Maintain the Board as a well-functioning, balanced team led by the Chair The purpose of the Board is to ensure that the business is managed for the
long-term benefit of all shareholders, whilst at the same time having regard
for employees, customers, suppliers and our impact on the environment and the
communities in which we operate. The full Board is responsible and accountable
to shareholders for the management and success of the Company and for
providing effective controls to assess and manage the risks that the Company
faces.
The Company's business is directed by the Board and is managed on a day-to-day
basis by the Chief Executive Officer ("CEO"). The Board monitors compliance
with the objectives and policies of the Company through monthly performance
reporting, budget updates and periodic operational reviews. The Board has
formal face-to-face meetings at least twice a year, while restricted agenda
meetings are held on an ad hoc basis when required. Minutes of the meetings of
the Directors are circulated to the Board for approval.
On appointment, Non-Executive Directors commit to set aside sufficient time on
the business of the Company to maintain a full understanding of the business
which will include an annual visit to the Company's operations in the
Philippines.
Board membership and attendance:
Board member/role Meetings eligible to attend Meetings attended
Nick von Schirnding - Independent Non-Executive Chair (appointed 18 March
2024)
- -
Darren Bowden - CEO & Executive Director 6 6
Tim Livesey - Independent Non-Executive Director
3 3
Andrew Chubb - Non-Executive Director 6 6
Steven Smith - Non-Executive Director 6 6
Guy Walker - Non-Executive Director 6 6
David Cather -Independent Non-Executive Chair (resigned 18 September 2023) 3 2
Steven Smith has been nominated to the Board by the substantial shareholder
MTL Lux, while Guy Walker was nominated to the Board by the substantial
shareholder RHL.
The two directors nominated by MTL Lux and RHL are not independent but have
relevant experience from which the Company can benefit. Andrew Chubb is not
independent, as he is a partner of the Company's corporate broker and advises
the Company in this role.
The members of the Board, as a whole, have suitable knowledge of the Company
and expertise to discharge their duties and responsibilities effectively. All
Directors are encouraged to use their independent judgement and to challenge
all matters, whether strategic or operational. Any Director must declare a
conflict of interest in relation to a particular item of business before
commencement of discussion on the topic.
The Board has delegated some of its responsibilities to various Committees,
which operate within specific terms of reference which can be found on the
Company's website. In the event of a proposal to appoint a new Director, each
Director is given the opportunity to meet the candidate prior to any formal
decision being taken. Under the Articles and the RCF, new director
appointments require the approval of the Company's two largest shareholders.
Due to the small size of the Company, no Nomination Committee has been
established.
The Company has established an Audit committee - refer to page 11 for the
Audit Committee Report. In addition, the Company has established a
Remuneration Committee - refer to page 14 for the Remuneration Committee
Report.
In accordance with the Company's Articles, the Relationship Agreements and the
RCF, the Non-Executive Directors nominated by the Company's two largest
shareholders are not required to be re-elected at the Company's Annual General
Meetings. Further, their remuneration and terms and conditions of appointment
are governed by the Relationship Agreements and the RCF.
The remuneration and terms and conditions of appointment of Non-Executive
Directors not nominated by the two largest shareholders are set by the Chair
and the Board and are governed by the Articles.
6 Ensure that between them the directors have the necessary up-to-date The skills and experience of the Board are set out in their biographical
experience, skills and capabilities details on the Company's website. The experience and knowledge of each of the
Directors gives them the ability to constructively challenge strategy and to
scrutinise performance.
MSP Corporate Services Limited, a professional company secretarial services
provider, acts as Company Secretary.
7 Evaluate Board performance based on clear and relevant objectives, seeking The collective performance of the Board is reflected in the success of the
continuous improvement business. Evaluation of the performance of the Board, its Committees and
individual members has historically been implemented on an on-going and ad hoc
basis given the stage of the Company's development. The Company does not
therefore currently comply with Principle 7 in that it has no formal board
evaluation process.
Succession planning is currently the responsibility of the Board as a whole
and the establishment of a Nomination Committee is not considered necessary
due to the current size of the Board.
8 Promote a corporate culture that is based on ethical values and behaviours The Board recognises that its decisions will impact the corporate culture of
the Group as a whole and that this will affect the performance of the
business. The Board is also very conscious that the tone and culture that it
sets will greatly impact all aspects of the Group and the way that employees
behave and operate. The importance of maintaining sound ethical values and
behaviours is crucial to the ability of the Company to successfully achieve
its corporate objectives.
The Company seeks to ensure that responsible business practice is fully
integrated into the management of all its operations and into the culture of
all parts of the Company's business. It believes that the consistent adoption
of responsible business practice is essential for operational excellence,
which in turn is expected to ensure the delivery of its core objectives of,
inter alia, sustained real growth in future profitability.
In addition, employee involvement is recognised as fundamental in recognising
and reporting unsafe conditions and avoiding events that may result in
injuries and accidents, which, in turn, as a mining company, the Board
considers, to be a fundamental part of recognising and establishing ethical
values and behaviours throughout the Company's operations.
9 Maintain Governance structures and processes that are fit for purpose and The Company maintains appropriate governance structures and processes
support good decision making by the Board according to its current size and complexity, and its stage of development and
level of resources.
There is a clear division of responsibility between the Independent
Non-Executive Chairman and the CEO. The Chairman is responsible for running
the business of the Board and for ensuring appropriate strategic focus and
direction. In addition, the Chairman is responsible for the implementation and
practice of sound corporate governance.
The CEO is responsible for proposing the strategic focus to the Board,
implementing it once it has been approved and overseeing the management of the
Company's operations.
The role of Non-Executive Directors includes questioning and challenging the
CEO and assisting where possible in developing strategic proposals; reviewing
and commenting on the integrity of the Company's financial reporting systems
and the information they provide; recommending appropriate standards of
corporate governance; reviewing internal control systems; ensuring that risk
management systems are robust; and reviewing corporate performance and
ensuring that performance is appropriately reported to shareholders.
Notwithstanding the above, the RCF requires certain operational matters to be
pre-approved by the Group's two largest shareholders. These lending covenants
are exceptions to compliance with Principle 9 that are expected to continue
until the termination of the RCF.
10 Communicate how the Company is governed and is performing by maintaining a The Company recognises that meaningful engagement with its shareholders is
dialogue with shareholders and other relevant stakeholders integral to the continued success of the Group. The Company engages with its
shareholders through meetings, webinars, presentations and roadshows when
appropriate.
The Board believes that the Annual Report and Accounts, and the Interim
Results published at the half-year stage, play an important part in presenting
all shareholders with an assessment of the Company's position and prospects.
All regulatory announcements are published on the Company's website. The
Annual General Meeting and General Meetings are an opportunity for
shareholders to discuss the Company's business with the Directors.
The Board is supported by the Audit and Remuneration Committees, each of which
has access to such information, resources and advice that it deems necessary,
at the Company's cost, to enable the committees to discharge their duties as
are set out in the Terms of Reference of each committee.
Further the Board is supported in its dialogue with shareholders by its
corporate broker and an investor relations consultancy group.
Steven Smith has been nominated to the Board by the substantial shareholder
MTL Lux, while Guy Walker was nominated to the Board by the substantial
shareholder RHL.
The two directors nominated by MTL Lux and RHL are not independent but have
relevant experience from which the Company can benefit. Andrew Chubb is not
independent, as he is a partner of the Company's corporate broker and advises
the Company in this role.
The members of the Board, as a whole, have suitable knowledge of the Company
and expertise to discharge their duties and responsibilities effectively. All
Directors are encouraged to use their independent judgement and to challenge
all matters, whether strategic or operational. Any Director must declare a
conflict of interest in relation to a particular item of business before
commencement of discussion on the topic.
The Board has delegated some of its responsibilities to various Committees,
which operate within specific terms of reference which can be found on the
Company's website. In the event of a proposal to appoint a new Director, each
Director is given the opportunity to meet the candidate prior to any formal
decision being taken. Under the Articles and the RCF, new director
appointments require the approval of the Company's two largest shareholders.
Due to the small size of the Company, no Nomination Committee has been
established.
The Company has established an Audit committee - refer to page 11 for the
Audit Committee Report. In addition, the Company has established a
Remuneration Committee - refer to page 14 for the Remuneration Committee
Report.
In accordance with the Company's Articles, the Relationship Agreements and the
RCF, the Non-Executive Directors nominated by the Company's two largest
shareholders are not required to be re-elected at the Company's Annual General
Meetings. Further, their remuneration and terms and conditions of appointment
are governed by the Relationship Agreements and the RCF.
The remuneration and terms and conditions of appointment of Non-Executive
Directors not nominated by the two largest shareholders are set by the Chair
and the Board and are governed by the Articles.
6
Ensure that between them the directors have the necessary up-to-date
experience, skills and capabilities
The skills and experience of the Board are set out in their biographical
details on the Company's website. The experience and knowledge of each of the
Directors gives them the ability to constructively challenge strategy and to
scrutinise performance.
MSP Corporate Services Limited, a professional company secretarial services
provider, acts as Company Secretary.
7
Evaluate Board performance based on clear and relevant objectives, seeking
continuous improvement
The collective performance of the Board is reflected in the success of the
business. Evaluation of the performance of the Board, its Committees and
individual members has historically been implemented on an on-going and ad hoc
basis given the stage of the Company's development. The Company does not
therefore currently comply with Principle 7 in that it has no formal board
evaluation process.
Succession planning is currently the responsibility of the Board as a whole
and the establishment of a Nomination Committee is not considered necessary
due to the current size of the Board.
8
Promote a corporate culture that is based on ethical values and behaviours
The Board recognises that its decisions will impact the corporate culture of
the Group as a whole and that this will affect the performance of the
business. The Board is also very conscious that the tone and culture that it
sets will greatly impact all aspects of the Group and the way that employees
behave and operate. The importance of maintaining sound ethical values and
behaviours is crucial to the ability of the Company to successfully achieve
its corporate objectives.
The Company seeks to ensure that responsible business practice is fully
integrated into the management of all its operations and into the culture of
all parts of the Company's business. It believes that the consistent adoption
of responsible business practice is essential for operational excellence,
which in turn is expected to ensure the delivery of its core objectives of,
inter alia, sustained real growth in future profitability.
In addition, employee involvement is recognised as fundamental in recognising
and reporting unsafe conditions and avoiding events that may result in
injuries and accidents, which, in turn, as a mining company, the Board
considers, to be a fundamental part of recognising and establishing ethical
values and behaviours throughout the Company's operations.
9
Maintain Governance structures and processes that are fit for purpose and
support good decision making by the Board
The Company maintains appropriate governance structures and processes
according to its current size and complexity, and its stage of development and
level of resources.
There is a clear division of responsibility between the Independent
Non-Executive Chairman and the CEO. The Chairman is responsible for running
the business of the Board and for ensuring appropriate strategic focus and
direction. In addition, the Chairman is responsible for the implementation and
practice of sound corporate governance.
The CEO is responsible for proposing the strategic focus to the Board,
implementing it once it has been approved and overseeing the management of the
Company's operations.
The role of Non-Executive Directors includes questioning and challenging the
CEO and assisting where possible in developing strategic proposals; reviewing
and commenting on the integrity of the Company's financial reporting systems
and the information they provide; recommending appropriate standards of
corporate governance; reviewing internal control systems; ensuring that risk
management systems are robust; and reviewing corporate performance and
ensuring that performance is appropriately reported to shareholders.
Notwithstanding the above, the RCF requires certain operational matters to be
pre-approved by the Group's two largest shareholders. These lending covenants
are exceptions to compliance with Principle 9 that are expected to continue
until the termination of the RCF.
10
Communicate how the Company is governed and is performing by maintaining a
dialogue with shareholders and other relevant stakeholders
The Company recognises that meaningful engagement with its shareholders is
integral to the continued success of the Group. The Company engages with its
shareholders through meetings, webinars, presentations and roadshows when
appropriate.
The Board believes that the Annual Report and Accounts, and the Interim
Results published at the half-year stage, play an important part in presenting
all shareholders with an assessment of the Company's position and prospects.
All regulatory announcements are published on the Company's website. The
Annual General Meeting and General Meetings are an opportunity for
shareholders to discuss the Company's business with the Directors.
The Board is supported by the Audit and Remuneration Committees, each of which
has access to such information, resources and advice that it deems necessary,
at the Company's cost, to enable the committees to discharge their duties as
are set out in the Terms of Reference of each committee.
Further the Board is supported in its dialogue with shareholders by its
corporate broker and an investor relations consultancy group.
DIRECTORS' REPORT
The Directors present their Annual Report together with the audited financial
statements of Metals Exploration plc (the "Company") and its subsidiary
undertakings (the "Group"), for the year ended 31 December 2023.
PRINCIPAL ACTIVITIES
The principal activity of the Group is to identify, acquire, explore and
develop mining and processing projects, mining companies, businesses or
opportunities with particular emphasis on precious and base metals mining
opportunities in the Philippines.
The Company was incorporated on 8 April 2004 under the Companies Act 1985 (now
Companies Act 2006) and is registered in England and Wales with registered
number 05098945. The Company was admitted to trading on AIM in October 2004.
The principal activity of the Company is that of a holding company for its
subsidiary undertakings, which are set out in note 14 of the financial
statements.
FINANCIAL RESULTS
For the year ended 31 December 2023 the profit before tax of the Group for the
year was US$119.6 million (2022: US$8.7 million). This result included a net
impairment of assets reversal of US$97.7 million (2022: impairment expense of
US$1.2 million).
DIVIDENDS
The Directors do not recommend the payment of a dividend for the year ended 31
December 2023 (2022: US$nil).
BUSINESS REVIEW AND FUTURE DEVELOPMENTS
A review of the current and future development of the Group's business is
given in the Chairman's Statement on page 3 and the Chief Executive Officer's
Report on page 5.
NOMINATED ADVISER & CORPORATE BROKER
The Company's nominated adviser is Strand Hanson Limited. The Company's
corporate broker is Hannam & Partners ("H&P Advisory Limited").
AUDITOR
PKF Littlejohn LLP were appointed as auditor of the Company on 1 December
2023, in accordance with Section 485 of the Companies Act 2006 following the
resignation of CLA Evelyn Partners Limited. It is proposed that PKF Littlejohn
LLP be re-appointed as auditor of the Company at the Company's forthcoming
Annual General Meeting.
DIRECTORS & DIRECTORS' INTERESTS
The Directors of the Company during the year and since the year end were:
Nick Von Schirnding (Independent Non-Executive Chairman),
appointed 18 March 2024
Darren Bowden (Chief Executive Officer and Executive
Director)
Andrew Chubb (Non-Executive Director)
Tim Livesey (Independent Non-Executive
Director)
Steven Smith (Non-Executive Director)
Guy Walker (Non-Executive Director)
David Cather (Independent Chairman and
Non-Executive Director), resigned 18 September 2023
Refer to the Remuneration Report for details of Directors' beneficial
interests in unissued ordinary shares granted by the Company under share
options.
ARRANGEMENTS TO PURCHASE SHARES OR DEBENTURES
There was no issue of securities to directors during FY2023, however, during
FY2022, the Company issued:
· 6,600,000 options to acquire new ordinary shares to Mr Livesey. These
options are subject to vesting conditions as noted in the Remuneration Report.
· 8,257,335 new ordinary shares to Mr Bowden in lieu of a cash payment
of a portion of his management incentive bonus award.
Apart from outstanding share options, a full summary of which is disclosed in
the Remuneration Report, there are no other arrangements entered into to
enable the Directors of the Company to acquire benefits by means of the
acquisition of shares in, or debentures of, the Company or any other body
corporate.
DIRECTORS' INTEREST IN CONTRACTS OF SIGNIFICANCE
No contract of significance to which the Company, or any of its subsidiary
companies was a party and in which a Director of the Company had a material
interest, whether directly or indirectly, subsisted at the end of the
financial year or at any time during the year; other than:
· Steven Smith is a 10% shareholder in MTL Guernsey Limited ("MTLG"),
which has a nominal amount still owing to it under the Senior Debt Facility.
· Andrew Chubb is a partner of Hannam & Partners, the Company's
broker and financial adviser.
PRINCIPAL RISKS AND UNCERTAINTIES FACING THE GROUP
The Board of Directors review the principal risks and uncertainties facing the
Group on an ongoing and regular basis. Assessments are made as to how to
manage these and mitigate as much risk as possible through various controls.
Many of these risks and uncertainties are common to all mining projects. The
principal risks and uncertainties facing the Group are identified as follows:
Market risk
The profitability of the Group's projects is impacted by the risks associated
with the gold market. Profitability can be affected by factors beyond the
Group's control, such as a prolonged decline in world gold prices. The Group
regularly tracks gold prices and regularly refines its models on financial
profitability in order to have available for the Board at all times, a current
view on the future financial viability of its active projects. The Group has
attempted to mitigate this risk by entering into limited hedge arrangements in
relation to future gold prices. Refer note 20.
The Group is exposed to currency risks in its operations; particularly in
relation to Philippine domestic peso currency exposure from costs associated
with mining and gold recovery. Currency exposures are carefully monitored, and
forward contracts are in place to insure against major adverse currency
movement risk. Refer note 20.
Nature of mining, resource estimation and mineral processing
Mineral resource and reserves estimation provides no assurance that the
potential tonnage and grades will be achieved. The exploration of mineral
rights is speculative in nature and any published results are expressions of
judgement developed using industry tested measuring techniques, none of which
can be relied upon with complete certainty. Each set of published results
builds upon the previous published information and includes any new and
reliable information from systematic drill results, mining, and recovery and
reconciliation activities and is independently verified by qualified persons.
However, this still involves experience, judgement, skill and estimation, all
of which are imprecise, interpretative and open to challenge. The actual
results of mining may differ upwards or downwards from the published reserves
upon which the Group relies in its business projections.
The size of the deposit, its grade, depth and type of orebody, are only some
of the particular attributes which determine the costs and recovery methods
required to be employed. There is also the length of haul to the processing
plant, age and maintenance programmes for plant and equipment, land access,
environmental protection and community relations, capital costs, reclamation
and closure costs and labour and host community relations. The quantities,
costs and assumptions used to identify and interpret these variables can be
modelled to the lowest level of detail possible, but they do not provide
absolute certainty that the expected cost of mining will be achieved.
The metallurgy of the Group's ore requires a complex set of processes to
extract economic levels of gold doré. Maintaining efficient processing
operations requires specialised equipment and consumables, combined with an
experienced and motivated processing team. It is also subject to numerous
factors some of which are within the Group's ability to control, and some that
are external factors outside the control of the Group.
Reserves and life of mine
Based upon the Group's current delineated gold reserves and planned mining
schedule it is predicted that the Runruno project's remaining life of mine is
approximately 3-4 years.
Exploration and development of mineral deposits involve a wide range of
significant risks and require a significant investment over an extended period
of time. These risks are seldom constant with new types invariably arising and
adding to the industry's and Group's challenges.
Exploration success that results in the discovery of new gold resources that
can be developed into new economic gold mineral reserves that in turn can
extend the Runruno project life of mine is not guaranteed.
Mining regulatory risk
Mining investors are exposed to a high level of regulatory risk under the
governing bodies responsible for the Philippine mining sector. There is a wide
array of 'rules and regulations' ("Rules") that govern the regulatory regime
for foreign mining investment in the Philippines and the Rules are created and
enforced by several layers of government and government agencies nationally,
provincially and locally. The Philippines mining industry is subject to
frequent audit and review activity by regulatory agencies.
Failure to receive, extend or amend any Regulatory Approval, or delays in
receiving, extending or amending any Regulatory Approval may adversely affect
the properties, business or operations of the Group including, but not limited
to, increasing the costs of the Group's activities; limiting the Group's
capacity to produce gold; delaying the implementation of any planned changes
to the Group's activities; or requiring the full or partial suspension of the
Group's operations.
The Group has almost 500 approvals, licences and permits to conduct mining,
processing and related activities at its Runruno Gold Project in the
Philippines (collectively "Regulatory Approvals") and is routinely required to
obtain new permits and Regulatory Approvals or to amend, renew or extend its
existing permits and Regulatory Approvals.
As at the date of this Report, neither the Group nor the Runruno project is
subject to any suspension or closure order. The Group has applied for, or is
in the process of, applying for the issue, extension or renewal of a number of
Regulatory Approvals and cannot be certain that they will be issued, extended
or renewed on acceptable terms or within the required timeframes.
Key personnel
The Group's future success is substantially dependent upon the continued
service of senior management, and it's highly skilled and trained personnel at
all levels of management, however the retention of relevant members of staff
cannot be guaranteed. There can be no certainty that the Group can recruit
suitably qualified or skilled employees in a competitive, highly skilled,
specialist industry and it is possible the Group will face periods of varying
lengths of management and skills shortages.
Where key personnel cannot be retained in the medium to long term, the Group's
commercial production could be compromised at various intervals.
Environmental risk
Mining operations are by nature environmentally risky ventures. As a
responsible miner the Group takes its environmental responsibilities very
seriously and is subject to stringent rules and regulations before, during and
after its period of exploration and mining development. Open pit mining is
mining on a large-scale and has the potential to become entangled in
environmental disputes. The Group employs every effort to avoid and mitigate
even the most minor of damage to the environment, but it is aware it will
always be exposed to these risks for as long as it is present at Runruno.
Any breach of its environmental code or obligations to the environment as
dictated in its Financial or Technical Assistance Agreement ("FTAA") or its
Environmental Compliance Certificate may result in a temporary suspension of
operations, fines, and even the possibility of closure of mining operations at
Runruno. The Group is aware there may be further environmental standards
imposed throughout the life of its mining operations which will involve
further costs, time and compromises to be compliant.
Political and country risk
The Philippines is a challenging jurisdiction for foreign mining companies to
succeed. The Mining industry's percentage contribution to the country's GDP
has dropped significantly over the last 30-40 years. Philippine political and
country perceived risk issues have hindered the development of a world class
Philippine mining industry. The Group has no control or influence in these
matters and these risks are a constant.
In an effort to reduce these risks, the Group applied for and was granted a
FTAA, a contract in law with the government. The 1995 Mining Act allows 100%
foreign ownership of mining entities where there is a US$50 million investment
or higher, through the ownership of a FTAA. Mines operating under a FTAA have
recourse for disputes to be arbitrated offshore. Despite opposition to the
1995 Mining Act successive Presidents have supported the framework.
Access to tenement areas
The Group now has full access to all stages of the mining plan, having
finalised the removal of illegal gold miners, and their structures from Stages
3, 4 and 5 of the Runruno mine. No further delays to the Group's mining
schedule are expected due to tenement access issues.
RSI integrity
The Group's tailings waste is directed to a residual storage impoundment
("RSI") facility. The RSI is being constructed to standards applicable to
international water dam construction, which has significantly higher standards
than normal mine tailings facilities. However, the failure of the RSI would be
catastrophic, and as such the continued integrity of this structure is of the
utmost importance.
Third party audits of the design and construction integrity of the RSI are
conducted, and the RSI remains in compliance with local guidelines and local
development requirements. Construction of the final in-rock spillway commenced
in Q1 2023 and is expected to be completed during Q1 2025. This final in-rock
spillway will ensure the RSI has the capacity to cope with a 'Probable Maximum
Flood' event.
The performance of the RSI is continuously monitored by an independent
international consulting group.
GOING CONCERN
The consolidated financial statements of the Group have been prepared on a
going concern basis, which contemplates the continuity of business activities
and the realisation of assets and the settlement of liabilities in the normal
course of business.
Although the Group's current liabilities exceeded its current assets, this is
primarily due to the external borrowings as at 31 December 2023.
The Board of Directors believe that the Runruno mine will continue to operate
successfully and produce positive cash flows ensuring the continuing viability
of the Group and its ability to operate as a going concern, meeting its
commitments as and when they fall due.
As a result, the Directors believe there is no material uncertainty over the
Group's going concern and that it is appropriate that the financial statements
should be prepared on a going concern basis.
KEY PERFORMANCE INDICATORS
The Directors monitor the performance of the Group through the following key
performance indicators:
· Safety - Safety is at the core of the Group's business. The Group
aspires to a world class TRIFR target of <0.95, which was achieved both in
FY2023 and FY2022. Indeed, the focus on safety has been successful with over
22.7 million work-hours being recorded since the last lost-time incident.
Maintaining a safe working environment at all times, for all employees and
contractors, is of paramount importance to the Group. Safety is the lead item
for consideration at all management meetings, with safety briefings and safety
protocol reviews regularly undertaken. Management remains determined to
minimise and where possible eliminate potential safety risks.
· Environment/permit compliance - The Group aims to have no major
environmental/permitting incidents and <3 minor reportable
environmental/permitting incidents per annum. This target was achieved during
both FY2023 and FY2022. Operations are subject to numerous environmental and
permit obligations and regulations. A dedicated department monitors the
Group's performance in this regard. Regular reporting of compliance with these
obligations and regulations is strictly adhered to. The Group is confident of
its satisfaction of the compliance obligations imposed on its operations and
its ability to maintain and renew permits as required.
· Gold recovery - Overall gold recovery measured against budget
reflects the outcome of ongoing technical work undertaken to improve
operational performance. The average gold recovery in FY2023 was 88.7%
(FY2022: 85.7%) surpassing the average gold recovery target. Gold recoveries
are continuously monitored providing detailed information on day-to-day
performance, and for ongoing studies into improving gold recovery even
further.
· Free cash flow - Given the Group's historical high debt level the
amount of free cash flow produced to pay down Group debt has been of paramount
importance; and performance is determined by comparison of actual results
against budget. The cost efficiencies of operations are measured against
budgets and forecasts on a weekly and monthly basis. Detailed annual budgets
are approved by the Board. Free cash generated from operations of US$74.6
million (FY2022: US$38.2 million) exceeded budget.
· Total expenditure - Total operating cost and CAPEX expenditure is
measured against budget on a weekly, monthly and annual basis. Projected costs
are re-forecast at regular intervals. Total operating cost and CAPEX
expenditure, excluding excise tax, for FY2023 of US$87.6 million (FY2022:
US$89.7 million) was slightly in excess of budget.
· Total movement of material - Actual physical mining performance, both
ore and waste, compared to budget is a key driver to ongoing mining
operations. Mine schedules are constantly being reviewed to ensure sufficient
ore is delivered to the process plant on a timely basis at an economic grade.
Actual tonnes mined during the year was 10.4% above budget at 12.4Mt (FY2022:
13.7Mt).
· Mill throughput - Actual tonnes milled of 2.1Mt (FY2022: 2.1Mt)
compared to the 1.75Mt name-plant design of the process plant indicates the
degree of success plant modifications have made on the Group's ability to
increase production rates above original design expectations.
EVENTS AFTER THE BALANCE SHEET DATE
Details of significant events occurring after the balance sheet date are set
out in note 36 to the financial statements.
FINANCIAL RISK MANAGEMENT
Details of the Group's policies with respect to financial risk management are
given in note 34 to the financial statements.
Although monitoring financial risk falls within the terms of reference of the
audit committee, this matter is a standard agenda item at all board meetings.
The Group's finance departments implement policies set by the Board of
Directors.
CORPORATE RESPONSIBILITY AND ENVIRONMENTAL POLICY
The Group's policy is to conduct operations in a safe and environmentally
responsible manner to industry best practice standards, to respect the
indigenous culture of the mining project areas, to promote social and economic
development and to offer employment and training opportunities to those who
live in the mining project areas.
POLITICAL CONTRIBUTIONS AND CHARITABLE CONTRIBUTIONS
During FY2023, the Group did not make any political or charitable
contributions (FY2022: $nil).
ANNUAL GENERAL MEETING
This report and the financial statements will be presented to shareholders for
their approval at the Annual General Meeting ("AGM").
The Company's AGM is expected to be held on 28 June 2024 at the offices of
Armstrong Teasdale LLP in London. The Notice of the AGM will be issued
shortly.
In accordance with the Company's Articles of Association, Messrs von
Schirnding, Bowden, Chubb, and Livesey will retire and will offer themselves
for re-election at the AGM.
SHARE CAPITAL
On 31 December 2023, there were 2,098,144,271 ordinary shares of £0.0001 each
in the capital of the Company in issue.
SIGNIFICANT SHAREHOLDINGS
As at 31 December 2023, the Company is either aware of or has been notified of
the following shareholders who hold disclosable interests of 3% or more of the
nominal value of the Company's ordinary shares:
Significant Shareholders Shares held as of % Shares held as of %
31 December 31 December
2023 2022
MTL (Luxembourg) Sarl¹ 969,532,143 46.6% 970,532,143 46.6%
Runruno Holdings Ltd 393,513,302 18.8% 393,513,302 18.8%
Hargreaves Lansdown³ 109,545,714 5.2% 85,083,121 4.1%
Baker Steel Capital Managers LLP² 99,488,429 4.8% 113,488,429 5.4%
Interactive Investor³ 77,948,910 4.2% 87,747,000 4.2%
¹ MTL (Luxembourg) Sarl's holding includes 1 million shares owned by Ms.
Crompton Candy who is deemed to be acting in concert with MTL Luxembourg.
² Baker Steel Capital Managers LLP acting on behalf of various funds for
which it acts as full discretionary Investment Manager.
³ Acting on behalf of its clients.
BOARD ENGAGEMENT WITH STAKEHOLDERS - SECTION 172 STATEMENT
Section 172 of the Companies Act 2006 requires a Director of a company to act
in the way he or she considers, in good faith, and would be most likely to
promote the success of the company for the benefit of its members as a whole.
In doing this, section 172 requires a Director to have regard, among other
matters, to: the likely consequences of any decision in the long term; the
interests of the company's employees; the need to foster the company's
business relationships with suppliers, customers and others; the impact of the
company's operations on the community and the environment; the desirability of
the company maintaining a reputation for high standards of business conduct;
and the need to act fairly with members of the company.
The Directors use the Board meetings as a mechanism for giving careful
consideration to the factors set out above in discharging their duties under
section 172.
Stakeholder engagement
Key stakeholder groups we engage with are listed below, together with an
explanation of why we focus on them and how we engage them.
Employees
The success of the Group is dependent upon the hard work and dedication of all
our employees. The Board ensures a continuing investment in existing employees
who are supported through professional, technical and on-the-job training
relevant to their functional areas. The Board directs executives and senior
managers to keep staff informed of the progress and development of the Group
on a regular basis through formal and informal operational updates, meetings
and other regular communications. In addition, the Board ensures funds are
provided for regular events to encourage employee participation in local
community initiatives.
The Group strives to create an equal opportunity work environment where
employees can be safe and healthy at all times, while feeling valued and
supported. Employees are encouraged to speak out about anything that impacts
their performance and/or safety.
The Board is conscious of its social obligation to impart skills and knowledge
onto local Philippine employees. Accordingly, over 98% of the Group's
workforce is Philippine. Workforce gender diversity policies are actively
followed with approximately 28% of the workforce being female.
Government Agencies & Local Communities
The Group operates in the highly regulated mining business in the Philippines.
The Board ensures the Company adopts a positive focus on maintaining
productive relations with local communities and all levels of government. As a
result, the Chief Executive Officer and senior managers regularly conduct
consultations with multi-levels of government agencies to ensure that all
regulatory approvals and permits remain in good order. Development of local
community improvement programmes are undertaken with consultation of local
government and community representatives.
Contractors & Suppliers
Our contractors and suppliers are key business partners, and the quality of
goods and services we receive are essential to supporting operations and to
provide the Group with the opportunity to produce positive cash flows.
As directed by the Board, management collaborates and continually works with
our contractors and the full supply chain, sharing best practice and seeking
out synergies to improve performance.
Lenders
For the entire reporting period, the CEO and the CFO, on behalf of the Board,
were in regular contact with its lenders regarding the Group's performance in
an endeavour to manage expectations.
Customers
The Group's business in mining and selling gold doré means it only deals with
a small number of end customers, being refiners of doré and/or gold
concentrate. The Board ensures a close relationship is maintained with senior
personnel at each customer group.
Investors
Investors are considered key stakeholders, and consequently investor relations
are a focus area for Directors. Where possible the Board engages investors on
Group performance following trading updates and results announcements.
DISCLOSURE OF INFORMATION TO THE AUDITORS
The Directors at the date of approval of this Annual Report individually
confirm that:
· so far as the Director is aware, there is no relevant audit
information of which the Group's auditors are unaware; and
· the Director has taken all the steps that he ought to have taken as a
Director in order to make himself aware of any relevant audit information and
to establish that the Group's auditors are aware of that information.
This confirmation is given and should be interpreted in accordance with the
provision of Section 418 of the Companies Act 2006.
Approved by the Board of Directors and signed on behalf of the Board
Darren Bowden, Chief Executive Officer
22 May 2024
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Corporate Governance Report,
Strategic Report, Directors' 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 elected to prepare the
financial statements in accordance with applicable law and in accordance with
UK-adopted international accounting standards. Under Company law the Directors
must not approve the financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the Company and of the
Group and of the profit or loss of the Group for that period. In preparing
these financial statements, the Directors are required to:
· select suitable accounting policies and then apply them consistently;
· make judgments and accounting estimates that are reasonable and
prudent;
· state whether UK-adopted international accounting standards 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 Company and Group 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 the Group and hence
for taking reasonable steps for the prevention and detection of fraud and
other irregularities;
· ensuring that they meet their responsibilities under the AIM Rules;
and
· 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.
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF METALS EXPLORATION PLC
Opinion
We have audited the financial statements of Metals Exploration Plc (the
'parent company') and its subsidiaries (the 'group') for the year ended 31
December 2023 which comprise the Consolidated Statement of Total Comprehensive
Income, the Consolidated and Company Statements of Financial Position, the
Consolidated and Company Statements of Changes in Equity, the Consolidated and
Company Statements of Cash Flows and notes to the financial statements,
including significant accounting policies. The financial reporting framework
that has been applied in their preparation is applicable law and UK-adopted
international accounting standards and as regards the parent company financial
statements, as applied in accordance with the provisions of the Companies Act
2006.
In our opinion:
· the financial statements give a true and fair view of the state of
the group's and of the parent company's affairs as at 31 December 2023 and of
the group's profit for the year then ended;
· the group financial statements have been properly prepared in
accordance with UK-adopted international accounting standards;
· the parent company financial statements have been properly prepared
in accordance with UK-adopted international accounting standards and as
applied in accordance with the provisions of the Companies Act 2006; and
· the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor's responsibilities for the
audit of the financial statements section of our report. We are independent of
the group and parent 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.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors'
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate. Our evaluation of the directors'
assessment of the group's and parent company's ability to continue to adopt
the going concern basis of accounting included:
· Testing the integrity of management's forecast model for a period of
12 months from the date of approval of the financial statements and further,
checking the mathematical accuracy of the model, including challenging the
appropriateness of key assumptions and inputs with reference to empirical data
and external evidence with specific focus on the following key assumptions:
gold price, production, costs, gold grade, recoveries and assessed their
consistency with approved budgets and the mine development plan, as
applicable;
· Comparing budgets to actual figures achieved to assess the
reliability of management's forecasts;
· Evaluating management's sensitivity analysis and performing our own
sensitivity analysis in respect of the key assumptions and inputs underpinning
the forecasts. We assessed the validity of any mitigating actions identified
by management;
· Confirming the terms of all borrowing facilities in place and that
the terms are not breached and reviewing the repayments of loans and ensuring
that they were reflected in the cash flow forecast; and
· Assessing if the going concern disclosures in the financial
statements are appropriate and in accordance with the revised ISA UK 570 going
concern standard.
Based on the work we have performed, we have not identified any material
uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the group's or parent company's
ability to continue as a going concern for a period of at least twelve months
from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to
going concern are described in the relevant sections of this report.
Our application of materiality
The scope of our audit was influenced by our application of materiality. The
quantitative and qualitative thresholds for materiality determine the scope of
our audit and the nature, timing and extent of our audit procedures.
We determined materiality for the group and parent financial statements to be:
Group Parent
$ Basis $ Basis
Overall materiality 1,689,000 1% of revenue 1,654,000 5% of profit before tax
Performance materiality 1,013,400 60% of materiality 992,400 60% of materiality
Triviality 84,450 5% of materiality 82,700 5% of materiality
In determining group materiality, we consider revenue to be the primary
measure used by the shareholders in assessing the performance of the group,
driving profitability within the group and revenue is expected to provide a
more stable measure year on year. The percentage applied to this benchmark
of 1% has been selected to bring into scope all significant classes of
transactions, account balances and disclosures relevant for the shareholders,
and also to ensure that matters that would have a significant impact on the
reported profit were appropriately considered.
In determining parent materiality, we consider profit before tax to be the
primary measure used by the shareholders in assessing the performance of the
company. The parent is generating consultancy revenue from its subsidiaries,
and holds little fixed assets for these reasons. The percentage applied to
this benchmark of 5% has been selected to bring into scope all significant
classes of transactions, account balances and disclosures relevant for the
shareholders, and also to ensure that matters that would have a significant
impact on the reported profit were appropriately considered.
We use performance materiality to reduce to an appropriately low level the
probability that the aggregate of uncorrected and undetected misstatements
exceeds overall materiality. Specifically, we use performance materiality in
determining the scope of our audit and the nature and extent of our testing of
account balances, classes of transactions and disclosures. We set the
performance materiality at 60% of materiality.
In determining performance materiality, we considered the following factors:
· Our knowledge of the group and parent and its environment, including
industry specific trends;
· Significant transactions during the year; and
· The level of judgement required in respect of the key accounting
estimates.
We agreed with the audit committee that we would report all individual audit
differences identified for the group during the course of our audit in excess
of $84,450 ($82,700 for the parent) together with any other audit
misstatements below that threshold that we believe warranted reporting on
qualitative grounds.
We determined materiality for the significant component to be:
$ Basis
Overall materiality 1,500,000 Based on a factor of overall group materiality
Performance materiality 900,000 60% of materiality
Triviality 75,000 5% of materiality
We applied the concept of materiality in planning and performing our audit and
in evaluating the effects of misstatement.
Our approach to the audit
Our audit is risk based and is designed to focus our efforts on the areas at
greatest risk of material misstatement, aspects subject to significant
management judgement as well as greatest complexity, risk and size.
As part of designing our audit, we determined materiality, as above, and
assessed the risk of material misstatement in the financial statements. In
particular, we looked at areas involving significant accounting estimates and
judgement by the directors and considered future events that are inherently
uncertain.
These areas of estimate and judgement included:
· Valuation of property, plant and equipment
· Revenue recognition
· Recoverability of investments in subsidiaries and receivables from
subsidiaries
· Valuation of inventory
· Accuracy and completeness of rehabilitation provision
· Valuation and classification of loan payable
· Accuracy and valuation of retirement benefit obligations
· Accuracy and valuation of shared-based payments
We also addressed the risk of management override of internal controls,
including among other matters consideration of whether there was evidence of
bias that represented a risk of material misstatement due to fraud.
Of the group's 7 components, including the parent company, 2 were considered
material (including parent company - audited by PKF-Littlejohn), financially
significant and subject to full scope audit for group purposes. The remaining
components were not considered material and we performed a limited scope
analytical review together with substantive testing, as appropriate.
A full scope audit was performed for the one significant component in the
Philippines. In establishing our overall approach to the Group audit, we
determined the scope, direction of the audit process, and the type of work
that needed to be undertaken by the component team. We determined the
appropriate level of involvement to enable us to determine that sufficient
audit evidence had been obtained as a basis for our opinion on the Group as a
whole. We carried out a site visit to the Philippines in April 2024 and
performed an on-site file review of the work performed by the component
auditor.
The key audit matters and how these were addressed are outlined below.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those
which had the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Key Audit Matter How our scope addressed this matter
Carrying value and impairment of property, plant and equipment (Valuation)
Our work in this area included:
The group holds a significant balance of tangible non-current assets of $140m · Considering any potential impairment indicators through discussion
which are key to the Group's mining operations. Management assess the with management and the onsite visit to the mine site during the audit
recoverable amounts of these balances on a cash generating unit (CGU) based on fieldwork, as well as reviewing of announcements to the market and board
the value-in use of the Runruno operations using cash flow projections over minutes for evidence of impairment.
the remaining expected life of the mine (LOM) which is ending in 2027 and at
appropriate discounted rates. This is to be used as an impairment indicator in · Obtaining and reviewing management's discounted cash flow model;
the impairment calculations.
· Assessing and reviewing indicators of impairment as per IAS 36;
· Ensuring the basis of preparation of the model is in line with
Given the significant judgements and estimates used by management in applicable accounting standards;
determining the value in use of these assets, there is the risk that the
carrying value is not fully recoverable, taking into consideration all · Assessing the appropriateness of estimates and inputs including ore
applicable factors including current and future mined ore grades, production grade, commodity price, production, operating costs, capital costs, discount
quantities, revenues, direct costs and discount rates, which all feed into the rates, foreign exchange rates; and
value in use calculations
· Ensuring inputs into the model are in line with third party expert's
opinion of total mineral resources.
The disclosure is provided in the financial statements under Note 8.
Other information
The other information comprises the information included in the annual report,
other than the financial statements and our auditor's report thereon. The
directors are responsible for the other information contained within the
annual report. Our opinion on the group and parent company financial
statements does not cover the other information and, except to the extent
otherwise explicitly stated in our report, we do not express any form of
assurance conclusion thereon. Our responsibility is to read the other
information and, in doing so, consider whether the other information is
materially inconsistent with the financial statements or our knowledge
obtained in the course of the audit, or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether this gives rise to a
material misstatement in the financial statements themselves. If, based on the
work we have performed, we conclude that there is a material misstatement of
this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
· the information given in the strategic report and the directors'
report for the financial year for which the financial statements are prepared
is consistent with the financial statements; and
· the strategic report and the directors' report have been prepared in
accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent
company and their environment obtained in the course of the audit, we have not
identified material misstatements in the strategic report or the directors'
report.
We have nothing to report in respect of the following matters in relation to
which the Companies Act 2006 requires us to report to you if, in our opinion:
· adequate accounting records have not been kept 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
As explained more fully in the directors' responsibilities statement, the
directors are responsible for the preparation of the group and 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 financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the group and parent company financial statements, the directors
are responsible for assessing the group and 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 group or the parent company or to
cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below:
· We obtained an understanding of the group and company and the sector
in which it operates to identify laws and regulations that could reasonably be
expected to have a direct effect on the financial statements. We obtained our
understanding in this regard through discussions with management, and our
expertise of the sector.
· We determined the principal laws and regulations relevant to the
company in this regard to be those arising from Companies Act 2006, UK-adopted
international accounting standards, the AIM Rules for Companies, as well as
local laws and regulations in the jurisdiction in which the group and parent
company operate.
· Compliance with laws and regulations at the subsidiary level was
ensured through enquiry of management, communication with component auditors
and correspondence for any instances of non-compliance.
· We designed our audit procedures to ensure the audit team considered
whether there were any indications of non-compliance by the group and parent
company with those laws and regulations. These procedures included, but were
not limited to:
o conducting enquiries of management regarding potential instances of
non-compliance;
o reviewing RNS announcements;
o reviewing legal and professional fees for evidence of any litigation or
claims against the company; and
o reviewing board minutes and other correspondence from management.
· We also identified the risks of material misstatement of the
financial statements due to fraud. We considered, in addition to the
non-rebuttable presumption of a risk of fraud arising from management override
of controls, whether key management judgements could include management bias
in relation:
o Valuation of property, plant and equipment as outlined in the Key audit
matters section above
o Recoverability of investments in subsidiaries and receivables from
subsidiaries
o Valuation of inventory
o Accuracy and completeness of rehabilitation provision
o Accuracy and valuation of retirement benefit obligations
o Accuracy and valuation of shared-based payments
· As in all of our audits, we addressed the risk of fraud arising from
management override of controls by performing audit procedures which included,
but were not limited to: the testing of journals; reviewing accounting
estimates for evidence of bias; and evaluating the business rationale of any
significant transactions that are unusual or outside the normal course of
business.
Because of the inherent limitations of an audit, there is a risk that we will
not detect all irregularities, including those leading to a material
misstatement in the financial statements or non-compliance with regulation.
This risk increases the more that compliance with a law or regulation is
removed from the events and transactions reflected in the financial
statements, as we will be less likely to become aware of instances of
non-compliance. The risk is also greater regarding irregularities occurring
due to fraud rather than error, as fraud involves intentional concealment,
forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council's website at:
www.frc.org.uk/auditorsresponsibilities
(http://www.frc.org.uk/auditorsresponsibilities) . This description forms part
of our auditor's report.
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.
Joseph Archer (Senior Statutory Auditor)
15
Westferry Circus
For and on behalf of PKF Littlejohn LLP
Canary Wharf
Statutory Auditor
London E14 4HD
22 May 2024
CONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
2023 2022
Notes US$ US$
Continuing Operations
Revenue 3 166,682,876 124,410,991
Cost of sales (129,422,805) (91,667,471)
Gross profit 37,260,071 32,743,520
Administrative expenses (8,086,753) (8,924,926)
Operating profit 4 29,173,318 23,818,594
Impairment gain/(loss) 8 97,737,620 (1,202,397)
Net finance and other charges 8 (7,310,461) (13,765,824)
Provision for (loss) on derivatives 20 (29,759) (4,883)
Share based payment expense 27 (31,368) (102,001)
Share of (loss)/profit of associates 15 15,970 (76,854)
Profit before tax 119,555,320 8,666,635
Tax (expense)/benefit 9/10 (306,582) 87,321
Profit for the period attributable to equity holders of the parent 119,248,738 8,753,956
Other comprehensive income:
Items that may be re-classified subsequently to profit or loss:
Exchange differences on translating foreign operations (3,479,370) (247,475)
Items that will not be re-classified subsequently to profit or loss:
Re-measurement of pension liabilities 222,909 (634,652)
Total comprehensive profit for the period attributable to equity holders of 115,992,277 7,871,829
the parent
Cents per share Cents per share
Earnings per share:
Basic cents per share 11 5.70 0.42
Diluted cents per share 11 5.64 0.42
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2023
2023 2022
Notes US$ US$
Non-current assets
Property, plant and equipment 12 140,597,506 81,459,218
Other intangible assets 13 7,664 33,049
Investment in associate companies 15 121,381 105,411
Trade and other receivables 16 16,720,701 8,796,133
157,447,252 90,393,811
Current assets
Inventories 17 18,695,048 21,215,487
Trade and other receivables 19 5,000,515 8,135,100
Cash and cash equivalents 18 339,997 861,069
24,035,560 30,211,656
Non-current liabilities
Loans 23 - (51,983,413)
Trade and other payables 22 (70,850) (1,314,556)
Retirement benefits obligations 21 (2,471,289) (2,463,112)
Deferred tax liabilities 10 (544,697) (574,038)
Provision for mine rehabilitation 24 (4,145,567) (3,764,708)
(7,232,403) (60,099,827)
Current liabilities
Trade and other payables 22 (16,063,666) (12,431,948)
Loans - current portion 23 (23,896,298) (30,001,208)
Derivative liabilities 20 (357,546) (308,725)
(40,317,510) (42,741,881)
Net assets 133,932,899 17,763,759
Equity
Share capital 25 282,783 281,638
Share premium account 25 144,350 -
Acquisition of non-controlling interest reserve (5,107,515) (5,107,515)
Translation reserve 10,941,631 14,421,001
Re-measurement reserve (249,740) (472,649)
Other reserves 27/28 144,351 1,639,920
Profit and loss account 26 127,777,039 7,001,364
133,932,899 17,763,759
Equity attributable to equity holders of the parent
The financial statements were approved by the Board of Directors on 22 May
2024 and were signed on its behalf by:
Darren Bowden, Chief Executive Officer
22 May 2024
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
Share capital Share premium account Acquisition of non-controlling interest reserve Translation reserve Re-measurement reserve Other reserves Profit and loss account Total equity
Note US$ US$ US$ US$ US$ US$ US$ US$
Balance at 1 January 2023 281,638 - (5,107,515) 14,421,001 (472,649) 1,639,920 7,001,364 17,763,759
Exchange differences on translating foreign operations - - - (3,479,370) - - (3,479,370)
-
Change in pension liability - - - - 222,909 - - 222,909
Profit for the year - - - - - - 119,248,738 119,248,738
Total comprehensive income/(loss) for the year - - - (3,479,370) 222,909 - 119,248,738 115,992,277
Share-based payment 27 - - - - - 31,368 - 31,368
Share issue 25 1,145 144,350 - - - - - 145,495
Transfer of other reserve to profit and loss account 28 - - - - - (1,526,937) 1,526,937 -
Balance at 31 December 2023 282,783 144,350 (5,107,515) 10,941,631 (249,740) 144,351 127,777,039 133,932,899
Equity is the aggregate of the following:
· Share capital; being the nominal value of shares issued
· Share premium account; being the excess received over the nominal
value of shares issued less direct issue costs
· Acquisition of non-controlling interest reserve; being the amounts
recognised on acquiring additional equity in a controlled subsidiary
· Translation reserve; being the foreign exchange differences on the
translation of foreign subsidiaries
· Re-measurement reserve: being the cumulative actuarial gains and
losses, return on plan assets and changes in the effect of the asset ceiling
(excluding net interest on defined benefit liability) recognised in other
comprehensive income
· Other reserves: being the cumulative fair value of warrants
associated with certain mezzanine debt facilities and share-based payments
expense. Upon the expiry of the relevant warrants the cumulative fair value of
warrants has been transferred to profit and loss account
· Profit and loss account; being the cumulative profit/(loss)
attributable to equity shareholders
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
Share capital Share premium account Acquisition of non-controlling interest reserve Translation reserve Re-measurement reserve Other reserves Profit and loss account Total equity
Note US$ US$ US$ US$ US$ US$ US$ US$
Balance at 1 January 2022 27,950,217 195,855,125 (5,107,515) 14,668,476 162,003 1,537,919 (225,542,197) 9,524,028
Exchange differences on translating foreign operations - - - (247,475) - - (247,475)
-
Change in pension liability - - - - (634,652) - - (634,652)
Profit for the year - - - - - - 8,753,956 8,753,956
Total comprehensive income/(loss) for the year - - - (247,475) (634,652) - 8,753,956 7,871,829
Share-based payment 27 - - - - - 102,001 - 102,001
Share issue 25 2,136 263,765 - - - - - 265,901
Capital reduction 25 (27,670,715) (196,118,890) - - - - 223,789,605 -
Balance at 31 December 2022 281,638 - (5,107,515) 14,421,001 (472,649) 1,639,920 7,001,364 17,763,759
Equity is the aggregate of the following:
· Share capital; being the nominal value of shares issued
· Share premium account; being the excess received over the nominal
value of shares issued less direct issue costs
· Acquisition of non-controlling interest reserve; being the amounts
recognised on acquiring additional equity in a controlled subsidiary
· Translation reserve; being the foreign exchange differences on the
translation of foreign subsidiaries
· Re-measurement reserve: being the cumulative actuarial gains and
losses, return on plan assets and changes in the effect of the asset ceiling
(excluding net interest on defined benefit liability) recognised in other
comprehensive income
· Other reserves: being the cumulative fair value of warrants
associated with certain mezzanine debt facilities and share-based payments
expense
· Profit and loss account; being the cumulative loss attributable to
equity shareholders
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2023
2023 2022
Notes US$ US$
Net cash generated from operating activities 29 74,561,379 38,189,947
Investing activities
Purchase of property, plant and equipment (10,250,030) (8,227,773)
Net cash (used in) investing activities (10,250,030) (8,227,773)
Financing activities
Repayment of borrowing principal (61,430,747) (31,998,689)
Repayment of borrowing interest (3,369,253) (1,824,311)
Share issue 280 -
30 (64,799,720) (33,823,000)
Net cash (used in) financing activities
Net (decrease) in cash and cash equivalents (488,371) (3,860,826)
Cash and cash equivalents at beginning of year 861,069 4,736,970
Foreign exchange difference (32,701) (15,075)
Cash and cash equivalents at end of year 339,997 861,069
COMPANY BALANCE SHEET
AS AT 31 DECEMBER 2023
2023 2022
Notes US$ US$
Non-current assets
Trade and other receivables 19 101,370,146 70,695,188
Investment in subsidiaries 14 - -
101,370,146
70,695,188
Current assets
Trade and other receivables 19 65,568,651 30,117,793
Cash and cash equivalents 18 51,034 168,614
65,619,685 30,286,407
Non-current liabilities
Loans 23 - (51,983,413)
Trade and other payables 22 (70,850) (143,365)
(70,850) (52,126,778)
Current liabilities
Loans 23 (23,893,712) (30,000,000)
Trade and other payables 22 (4,037,934) (735,836)
Derivative liabilities 20 (357,546) (308,725)
(28,289,192) (31,044,561)
Net assets 138,629,789 17,810,256
Equity
Share capital 25 282,783 281,638
Share premium account 25 144,350 -
Translation reserve (2,354,705) (1,090,923)
Other reserves 27/28 144,351 1,639,920
Profit and loss account 26 140,413,010 16,979,621
Equity attributable to equity holders of the parent 138,629,789 17,810,256
The Company has taken advantage of the exemption provided under section 408 of
Companies Act 2006 not to publish an income statement or a statement of total
comprehensive income. The total comprehensive income for the year ended 31
December 2023 dealt with in the financial statements of the Company was
US$121,906,452 (2022: US$10,232,907).
The financial statements were approved by the Board of Directors on 22 May
2024 and were signed on its behalf by:
Darren Bowden; Chief Executive Officer
22 May 2024
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEARS ENDED 31 DECEMBER 2023 & 31 DECEMBER 2022
Share capital Share premium account Profit and loss account Total equity
Note Translation reserve Other reserves
US$ US$ US$ US$ US$ US$
27,950,217 195,855,125 971,346 1,537,919 (217,042,891) 9,271,716
Balance at1 January 2022
- - (2,062,269) - - (2,062,269)
Exchange differences on translating foreign currencies
Profit for the year - - - - 10,232,907 10,232,907
Total comprehensive income for the year - - (2,062,269) - 10,232,907 8,170,638
Share-based payment 27 - - - 102,001 - 102,001
Shares issue 2,136 263,765 - - - 265,901
Capital reduction 25 (27,670,715) (196,118,890) - - 223,789,605 -
281,638 - (1,090,923) 1,639,920 16,979,621 17,810,256
Balance at 31 December 2022
- - (1,263,782) - - (1,263,782)
Exchange differences on translating foreign currencies
Profit for the year - - - - 121,906,452 121,906,452
Total comprehensive income for the year - - (1,263,782) - 121,906,452 120,642,670
Share-based payment 27 - - - 31,368 - 31,368
Shares issue 1,145 144,350 - - - 145,495
Transfer of other reserve to profit and loss account 28 - - - (1,526,937) 1,526,937 -
282,783 144,350 (2,354,705) 144,351 140,413,010 138,629,789
Balance at 31 December 2023
Equity is the aggregate of the following:
· Share capital; being the nominal value of shares issued
· Share premium account; being the excess received over the nominal
value of shares issued less direct issue costs
· Translation reserve; being the foreign exchange differences
arising on the change of presentational currency and upon on the translation
of foreign currencies
· Other reserves: being the cumulative fair value of warrants
associated with certain mezzanine debt facilities and the share-based payments
expense. Upon the expiry of the relevant warrants the cumulative fair value of
warrants has been transferred to profit and loss account
· Profit and loss account; being the cumulative loss attributable
to equity shareholders
COMPANY CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2023
2023 2022
Notes US$ US$
Net cash (used in) operating activities 29 (112,740) (37,720)
Financing activities
Repayment of borrowing principal 30 (61,430,747) (7,384,358)
Repayment of borrowing interest 30 (3,369,253) (1,215,642)
Advances from subsidiary 64,800,000 8,600,000
Shares issued 280 -
Net cash provided by financing activities 280 -
Net (decrease) in cash and cash equivalents (112,460) (37,720)
Cash and cash equivalents at beginning of year 168,614 199,978
Foreign exchange difference (5,120) 6,356
Cash and cash equivalents at end of year 51,034 168,614
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
1. Accounting policies
The principal accounting policies are summarised below. Except as elsewhere
disclosed, the accounting policies have all been applied consistently
throughout the period covered by these financial statements.
Basis of preparation
The financial information has been prepared on a historical cost basis, except
for derivative financial instruments, which are measured at fair value, and in
accordance with UK-adopted international accounting standards.
For the Group and its subsidiaries, US Dollars is both the functional and
presentational currency. Although the Company's functional currency is pounds
sterling, it uses US Dollars as its presentational currency, to better reflect
the underlying performance of that entity.
Going concern
The consolidated financial statements of the Group have been prepared on a
going concern basis, which contemplates the continuity of business activities
and the realisation of assets and the settlement of liabilities in the normal
course of business.
Although the Group's current liabilities continue to exceed its current
assets, this was primarily due to external debt at 31 December 2023. Further,
the Board of Directors believe that the Runruno mine will continue to operate
successfully and produce positive cash flows ensuring the continuing viability
of the Group and its ability to operate as a going concern, meeting its
commitments as and when they fall due.
As a result, the Directors believe there is no material uncertainty over the
Group's going concern and that it is appropriate that the financial statements
should be prepared on a going concern basis.
Changes in accounting policies and disclosures
The accounting policies and disclosures applied in the preparation of these
financial statements are consistent with the accounting policies and
disclosures applied in the preparation of the prior period financial
statements.
New standards and interpretations
The financial statements have been drawn up on the basis of accounting
standards, interpretations and amendments effective from the beginning of the
accounting period on 1 January 2023. The new standards, interpretations and
amendments effective from 1 January 2023 had no significant impact on the
Group.
There are a number of international accounting standards, amendments to
standards, and interpretations which have been issued that are effective in
future accounting periods and which have not been adopted early. None of these
standards, amendments to standards or interpretations are expected to have a
significant effect on the Group.
Basis of consolidation
The Group's financial statements incorporate the financial statements of the
Company and its subsidiary undertakings for the year ended 31 December 2023. A
subsidiary is an entity controlled, directly or indirectly, by the Group.
Control exists when the Group is exposed, or has rights, to variable returns
from its involvement with the investee and has the ability to affect those
returns through its power over the investee.
The financial statements of the subsidiary companies have been included in the
Group's financial statements from the date of acquisition when control was
passed to the Group using the acquisition method of accounting. The Group
financial statements include the results of the Company and its subsidiaries
as if they were a single reporting entity. On consolidation, intra-Group
transactions and balances are eliminated.
Foreign currency
The financial statements are presented in United States Dollar ("US$"). All
Group revenue, significant expenses and major sources of financing are
transacted in US$. Items included in the financial statements of the Company
are measured using the currency of the primary economic environment in which
the entity operates ("functional currency"). Individual companies in the
Group have different functional currencies,
Transactions in currencies different to the company's functional currency are
recorded at the rates of exchange prevailing on the dates of the transactions.
At each balance sheet date, monetary assets and liabilities that are
denominated in foreign currencies are retranslated at the rates prevailing on
the balance sheet date. Exchange gains and losses on the settlement of
monetary items are recognised in the statement of total comprehensive income.
On consolidation, the assets and liabilities are translated to US Dollars at
the rates prevailing at the balance sheet date. Income and expenses are
translated at the average exchange rates for the period. Exchange differences
are recognised within other comprehensive income in the consolidated statement
of total comprehensive income.
Taxation and deferred tax
Current tax is based on the taxable profit for the period. Taxable profit
differs from net profit as reported in the statement of total comprehensive
income because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are never taxable
or deductible. The Company's liability for current tax is calculated using tax
rates that have been substantively enacted by the balance sheet date.
Deferred tax is recognised on differences between the carrying amounts of
assets and liabilities in the financial statements and the corresponding tax
base used in the computation of taxable profit, and is accounted for using the
balance sheet liability method. Deferred tax liabilities are generally
recognised for all taxable temporary differences and deferred tax assets are
recognised only to the extent it is probable that future taxable profits will
be available against which deductible temporary differences can be utilised.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset realised. Deferred tax is
charged or credited, as applicable, as a taxation debit/credit to the
statement of total comprehensive income, except when it relates to items
charged or credited directly to other comprehensive income in which case, the
deferred tax is recognised in the other comprehensive income section within
the statement of total comprehensive income.
Deferred tax assets and liabilities are offset when the Group has a legally
enforceable right to offset current tax assets and liabilities and the
deferred tax assets and liabilities relate to taxes levied by the same tax
authority, on either the same taxable Group Company or different Group
entities, which intend to settle current tax assets and liabilities on a net
basis, or to realise the assets and settle the liabilities simultaneously, in
each future period in which significant amounts of deferred tax assets or
liabilities are expected to be settled or recovered.
Share-based payments
The Company may enter into equity-settled share-based transactions with its
Directors, employees of its subsidiaries, its contractors or its lenders in
which the counterparty provides services/goods to the Company in exchange for
remuneration in the form of certain equity instruments of the Company. The
equity instruments can comprise of shares, warrants and share options.
The services/goods received by the Company in these share-based transactions
are measured by reference to the fair value of the equity instruments at the
date of grant and are recognised as an expense in the statement of total
comprehensive income with a corresponding increase other reserves in equity.
Inventories
Inventories of finished goods (bullion), gold in circuit and stockpiles of
processed ore are brought to account and stated at the lower of costs and
estimated net realisable value. Cost comprises direct materials, direct labour
and an appropriate proportion of variable and fixed overhead expenditure, the
latter being allocated based on normal operating capacity. Costs are
assigned to ore stockpiles and gold in circuit items of inventory based on
weighted average costs. Net realisable value is the estimated selling price
in the ordinary course of business (excluding derivatives) less the estimated
costs of completion and the estimated costs necessary to make the sale.
Consumables have been valued at cost less an appropriate provision for
obsolescence. Cost is determined on a first-in-first-out basis.
Intangible assets
Exploration costs
Costs relating to the exploration of precious and base metal properties are
capitalised as intangible assets in the balance sheet once the Group has
obtained the legal right to explore an area.
Capitalised exploration costs are reclassified to tangible assets once
technical feasibility and commercial viability of extracting a mineral
resource are demonstrable. The capitalised exploration costs are tested for
impairment annually.
Where exploration costs have been incurred and capitalised for a specific
tenement and the commercial and technical requirements to demonstrate positive
economic returns using approved mining techniques has not been established,
the Company recognises these costs as an intangible asset and tests these
costs annually for impairment. These costs are considered fully impaired
unless the results of exploration indicate the presence of mineral resources
that have the potential to be defined as an inferred resource in accordance
with industry standards.
Other intangible assets
Intangible assets acquired separately are initially recognised at cost.
Intangible assets acquired as part of a business combination are measured at
their fair value at the date of acquisition. Subsequently, intangible assets
are carried at cost less any accumulated amortisation and impairment losses.
Amortisation charges are recognised in cost of sales. Computer software is
amortised over its expected useful life of 3 years using the straight-line
method. Licences acquired to support mining operations will be amortised over
the expected useful life of the mining operation (or the term of the licence
if shorter) when development is complete and mining commences. Intangible
assets are tested annually for impairment.
Investments
Investments in subsidiaries are recognised at cost less any impairment losses
in the Company accounts.
Equity accounting is applied to investments in associates on a Group basis.
Investments in associates are recognised at the cost of investment as adjusted
for post-acquisition changes in the Group's share of net assets of the
associate. Losses of an associate in excess of the Group's interest in that
associate are recognised only to the extent that the Group has incurred legal
or constructive obligations or made payments on behalf of the associate.
Property, plant and equipment
Property, plant and equipment are initially recognised at cost plus directly
attributable expenses and are subsequently carried at cost less accumulated
depreciation and impairment losses. Property, plant and equipment are
depreciated over their expected useful lives, using the straight-line method.
The classes of depreciable assets, their expected useful lives and their
depreciation methods are:
Buildings & leasehold improvements 10 years
Straight-line
Drilling equipment
5 years Straight-line
Motor vehicles
3-5 years Straight-line
Fixtures, fittings and equipment 3 years
Straight-line
Process plant
applying the units of production over the useful life of the
mine.
Residual Storage Impoundment applying the units
of production over the useful life of the mine.
Mining properties
applying the units of production over the useful life of the mine.
Mining properties costs have arisen entirely because of a reclassification of
the intangible assets deferred exploration costs, mine development costs,
advances to surface occupants, and mining licenses. As of 20 October 2011, the
extraction of gold from the Runruno site was assessed as being both
technically feasible and commercially viable. Further costs since this date
have been capitalised directly to mining properties.
Construction in progress costs are allocated to a property, plant and
equipment tangible asset category, once the relevant asset has been assessed
as being available for use as intended by management. The costs will be
treated as being reclassified and will be depreciated according to the adopted
method of the appropriate asset category.
Provision for mine rehabilitation and decommissioning
Provision is made for close down, restoration and environmental rehabilitation
costs (which include the dismantling and demolition of infrastructure, removal
of residual materials and remediation of disturbed areas) at the end of the
reporting period when the related environmental disturbance occurs, based on
the estimated future costs using information available at the end of the
reporting period. The provision is discounted using a current market-based
pre-tax discount rate and the unwinding of the discount is classified as net
finance and other costs in the statement of total comprehensive income. At
the time of establishing the provision, a corresponding asset is capitalised
and depreciated over future production from the operations to which it
relates.
The provision is reviewed on an annual basis for changes to obligations or
legislation or discount rates that affect change in cost estimates or life of
operations. The cost of the related asset is adjusted for changes in the
provision resulting from changes in the estimated cash flows or discount rate,
and the adjusted cost of the asset is depreciated prospectively.
Where rehabilitation is conducted systematically over the life of the
operation, rather than at the time of closure, provision is made for the
estimated outstanding continuous rehabilitation work at each end of the
reporting period and the cost is charged to the statement of total
comprehensive income.
Revenue recognition
Gold sales
The Group is principally engaged in the business of producing gold. Revenue is
recognised when the Group transfers control of its gold to a customer at the
amount at which payment is expected. Sales revenue represents the gross
proceeds receivable from the customer.
For gold sales, the enforceable contract is each purchase order, which is an
individual, short-term contract, while the performance obligation is the
delivery of the metals.
Recognition of sales revenue for the gold is based on determined metal in
concentrate and the London Bullion Market Association (LBMA) quoted prices,
net of smelting and related charges.
Revenue is recognised when control passes to the customer, which occurs at a
point in time when the metal concentrate is credited to the buyer's account
and provisionally paid by the buyer. Under the terms of offtake agreements
with the customer, the Company issues a provisional invoice for the entire
volume of concentrate loaded to the customer's vessel. A final invoice is made
thereafter upon customer's outturn of concentrates delivered and submission of
their final assay report. Adjustment is accordingly made against the final
invoice with respect to provisional collections received by the Company within
two days to determine amounts still owing from/to customers.
As the enforceable contract for the arrangements is the purchase order, the
transaction price is determined at the date of each sale (i.e., for each
separate contract) and, therefore, there is minimal future variability within
scope of IFRS 15 and no further remaining performance obligations under those
contracts.
Revenue from the immaterial sale of by-products such as silver is accounted
for as a credit to the cost of sales.
Financial instruments
Financial Assets
Financial assets are classified, at initial recognition, as subsequently
measured at amortised cost, fair value through other comprehensive income and
fair value through profit or loss.
Financial assets at amortized cost (debt instruments)
The Company measures financial assets at amortized cost if both of the
following conditions are met:
· The financial asset is held within a business model with the
objective to hold financial assets in order to collect contractual cash flows;
and
· The contractual terms of the financial asset give rise on specified
dates to cash flows that are solely for payments of principal and interest on
the principal amount outstanding.
Financial assets at amortized cost are subsequently measured using the
effective interest (EIR) method and are subject to impairment. Gains and
losses are recognized in the statement of comprehensive income when the asset
is derecognized, modified or impaired.
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial
liabilities at fair value through profit or loss, loans and borrowings,
payables, or as derivatives designated as economic, as appropriate.
All financial liabilities are recognized initially at fair value and, in the
case of loans and borrowings and other financial liabilities, net of directly
attributable transaction costs. The Company's financial liabilities include
payables, loans and borrowings and derivative forward contracts.
Subsequent measurement
Payables
This category pertains to financial liabilities that are not held for trading
or not designated as at fair value through profit or loss upon the inception
of the liability. These include liabilities arising from operations (e.g.,
accounts payable and accrued liabilities).
Payables, which include trade and other payables, are recognised initially at
fair value and are subsequently carried at amortized cost, taking into account
the impact of applying the EIR method of amortization (or accretion) for any
related premium, discount and any directly attributable transaction cost.
Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are
subsequently measured at amortized cost using the EIR method. Gains and losses
are recognized in the profit or loss when the liabilities are derecognized as
well as through the EIR amortization process.
Amortized cost is calculated by taking into account any discount or premium on
acquisition and fees or costs that are an integral part of the EIR. The EIR
amortization is included as finance costs in the statements of total
comprehensive income.
Derecognition
A financial liability is derecognized when the obligation under the liability
is discharged or cancelled or expires. When an existing financial liability
is replaced by another from the same lender on substantially different terms,
or the terms of an existing liability are substantially modified, such an
exchange or modification is treated as the de-recognition of the original
liability and the recognition of a new liability. The difference in the
respective carrying amounts is recognized in the statements of total
comprehensive income.
Derivative assets and liabilities
Derivative financial instruments (e.g. commodity derivatives such as forwards
and options to economically hedge exposure to fluctuations in gold prices and
foreign exchange rates) are initially recognised at fair value on the date on
which a derivative contract is entered into and are subsequently re-measured
at fair value. Derivatives are carried as assets when the fair value is
positive and as liabilities when the fair value is negative.
Derivatives are accounted for at fair value through profit or loss, where any
gains or losses arising from changes in fair value on derivatives are taken
directly to profit or loss for the year. As at 31 December 2023, the
derivative instruments held by the Group were gold price put/call option
contracts and USD:PHP exchange rate forward contracts.
Both the Group and the Company have recognised derivative liabilities arising
from the currency exchange rate forward contracts as at 31 December 2023.
Compound financial instruments
Compound financial instruments comprise both liability and equity components.
At issue date, the fair value of the liability component is estimated by
discounting its future cash flows at an interest rate that would have been
payable on a similar debt instrument without any equity conversion option. The
liability component is accounted for as a financial liability. The difference
between the net issue proceeds and the liability component is the equity
component, and is accounted for as equity.
Any transaction costs associated with the issue of a compound financial
instrument are allocated in proportion to the equity and liability components.
The interest expense on the liability component is calculated by applying the
effective interest rate for the liability component of the instrument. The
difference between the interest expense and the interest payments made are
included in the carrying amount of the liability.
2. Critical accounting judgements and key sources of estimation
uncertainty
The preparation of financial statements in conformity with generally accepted
accounting practice requires management to make estimates, assumptions and
judgements that affect the application of policies, and reported amounts of
assets and liabilities as well as the disclosure of contingent assets and
liabilities at the balance sheet date.
Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances. Actual results may differ
from reported amounts in the financial statements.
The key sources of estimation uncertainty and judgements which have a
significant risk of causing material adjustment to the carrying amounts of
assets and liabilities are:
Judgements
Impairment and impairment reversals of assets
The Group assesses at each reporting date whether there are any indicators
that its assets and cash generating units (CGUs) may be impaired or require
previous impairment provisions to be reversed. Operating and economic
assumptions which could affect the valuation of assets using discounted cash
flow models are regularly reviewed and updated as part of the Group's
monitoring of operational and financial performance and forecasting processes.
Judgement is required in determining the level at which these assessments are
made, be that at the asset or CGU level. Further judgment of whether operating
and economic changes are significant and impact the performance potential of
an asset or CGU is required. These judgements determine whether there is an
indication of impairment or an impairment reversal is required. Assets that
have previously been impaired must be assessed for indicators of both further
impairment and impairment reversal. Such assets are recorded in the
consolidated balance sheet at their recoverable amount at the date of the last
impairment assessment (less annual depreciation/amortisation); therefore a
change in operational plans, assumptions or economic conditions could result
in further impairment or an impairment reversal if an indicator is identified.
Refer note 8.
Estimates
Current v Non-current borrowings
Under the Group's debt arrangements there was no fixed schedule of interest
and principal repayments, with the Group's repayment obligation is limited to
making a minimum quarterly repayment subject to a US$5 million net working
capital buffer.
As a result, the amount of debt principal that could be repaid within 12
months from balance sheet date has been not known with certainty. Thus the
amount of debt principal that is classified as either a current liability
(payable within 12 months), or a non-current liability (payable after 12
months) has been estimated.
In order to estimate the amount of debt principal that will be repaid within
the next 12 months the Group has taken into consideration the previous level
of debt repayments, and forecast minimum debt repayment obligations based upon
predicted future cash flows.
The outcome of these considerations was to estimate that the full outstanding
principal as at 31 December 2023 is a current liability (2023: US30.0 million
debt considered a current liability).
Impairment and impairment reversals of assets
An annual review is made of the carrying amount of an asset which may not be
recoverable, or has previously been subject to an impairment charge. An
asset's carrying value is written down, or conversely written up, to its
estimated recoverable amount (being the higher of the fair value less costs to
sell and value in use). To determine value in use the Group reviews future
operations using the latest life of mine (LOM) model detailing future cash
flows that the Runruno operation is expected to produce. The key assumptions
for these value-in-use calculations are those regarding risk discount rates,
the price of gold, gold recovery levels, plant availability levels, changes in
the resource statements and forecast changes in operational and CAPEX costs,
the availability of economic funding and the ability to renew its mining
permit(s).
The net present value of these expected future cash flows is used to determine
if an impairment, or impairment reversal, is required.
The year ended 31 December 2023 review of the net present value of expected
future cash flows resulted in an impairment charge reversal being raised
against its mining properties, plant and equipment.
Recovery of intercompany receivable accounts
Receivables due from group companies are assessed under the expected credit
losses model. In each case, the most appropriate assessment is for the Company
to consider the output from the impairment tests and value-in-use calculations
carried out in respect of the Group's mining properties, plant and equipment
assets.
In both the years ended 31 December 2022 and 2023 the Company booked a partial
reversal of previous impairments made against its loans receivable from its
subsidiaries. These impairment reversals recognise the improved trading
outcomes of operating subsidiaries such that it is estimated that the Company
will receive a larger than previously estimated recovery of loans made to
subsidiaries. The timing of the repayment of these loans is unknown hence the
split between current and non-current receivables continues to be estimated.
Determination of mineral resources and ore reserves
The determination of mineral resources and ore reserves impacts the accounting
for asset carrying values, depreciation and amortisation rates, deferred
stripping costs and provisions for pensions and for decommissioning and
restoration.
There are numerous uncertainties inherent in estimating mineral resources and
ore reserves and assumptions that are valid at the time of estimation may
change significantly when new information becomes available. These estimates
are based upon the mineral resources and ore reserves estimate publicised in
February 2022, adjusted for mining depletion since that calculation was
performed.
Changes in the forecast prices of commodities, exchange rates, production
costs or recovery rates may change the economic status of reserves and may,
ultimately, result in the reserves being restated which may impact asset
carrying values, depreciation and amortisation rates, deferred stripping costs
and relevant provisions.
Estimating gold-in-circuit and gold stockpile inventories
Gold-in-circuit is measured by the Company's metallurgists based on the gold
grade/recovery across different structures of the process plant. Stockpiles
are measured by estimating the number of tonnes added and removed from the
stockpile, the number of contained concentrates in dry metric tonnes is based
on assay data, and the estimated recovery percentage is based on the expected
processing outcomes. Stockpile tonnages are verified by periodic surveys.
Refer to note 17.
Although regular assay data is collected and production recoveries closely
monitored these estimates that are valid at the time of estimation may be
significantly different to the final gold recovered once processing of the
gold inventories is completed.
Application of FTAA and liability for certain taxes
The Company's Philippine operating subsidiary, FCF Minerals Corporation
("FCF"), operates the Runruno mine in accordance with the terms of a Financial
and Technical Assistance Agreement ("FTAA") with the Philippine government.
Under the terms of the FTAA, FCF was exempt from numerous taxes including
corporate income tax, VAT, stamp duty and import duty, for a period (defined
as the 'Recovery Period') designed to assist FCF to recover its initial
investment in establishing the Runruno mine. The FTAA defined the Recovery
Period as the earlier of 5 years from commencement of commercial production
(ending in July 2022) or the date upon which FCF recovered its initial
investments. FCF had not fully recovered its investment in establishing
commercial operations at Runruno by July 2022.
In accordance with the provisions of the FTAA, FCF has sought to have the
Recovery Period extended. A formal application to extend the Recovery Period
beyond July 2022, to enable FCF to recover its investment, was lodged in
December 2021, on the basis that FCF has not recovered its initial investment
in establishing the Runruno commercial operation.
In considering this matter numerous meetings have been held with the relevant
Philippine government department (the "MGB") to seek a satisfactory outcome
without the need for a formal extension to the Recovery Period to be granted.
Although this matter has not been finalised at the time of this report, FCF
believes these discussions will yield an outcome that is acceptable to FCF
without the need for a formal Recovery Period extension.
These financial statements are based on the current expected outcome of these
discussions with the MGB.
Recovery of VAT and other duties
Non-current receivables include amounts the Group believe it is entitled to
recover from the Philippine government in respect of past paid VAT and import
duties. FCF is pursuing reimbursement of some of these past payments through
court actions, however, to date these actions have been unsuccessful.
Post year-end FCF received advice that its VAT refund submission for the
September 2021 quarter has been accepted. VAT submissions lodged since then
are also expected to be awarded. As a result, no further impairment of this
non-current receivable beyond payments of VAT made to the end of the June 2021
quarter are considered necessary.
Provision for environmental rehabilitation and decommissioning costs
The amount recognised as a provision represents management's best estimate of
the consideration required to complete the necessary restoration and
rehabilitation activity at the end of the LOM in line with the mine closure
program agreed with the Philippine Government. These estimates are inherently
uncertain and could materially change over time. There is judgement in the
input assumptions used in determining the estimated rehabilitation and
decommissioning provision. Inputs used that require estimating include:
• closure costs, which are determined in accordance with regulatory
requirements,
• inflation rate, which has been adjusted for a long-term view,
• risk-free rate, which is compounded annually and linked to the
life-of-mine,
• the rate at which the progressive back-fill rehabilitation is
undertaken,
• whether the final construction of the RSI facility is completed
during normal operations, and
• life-of-mine and related Mineral Resources and Mineral Reserves.
Refer to note 24.
Provision for Pensions
The Group makes provision for an unfunded, non-contributory defined benefit
retirement plan covering substantially all regular employees who have rendered
at least six months of continuous service. Benefits are dependent on the years
of service and the respective employee's compensation. The valuation of the
retirement plan obligation is estimated using the projected unit credit
actuarial cost method, and calculated by an independent qualified consulting
group. The principal estimates used in determining the defined benefit
retirement plan obligations are listed in note 21.
3. Revenue
2023 2022
US$ US$
Sale of gold doré 165,612,180 122,339,602
Sale of gold concentrate 1,070,696 2,071,389
166,682,876 124,410,991
All gold doré sales are made to a single refinery customer with 95% of sales
proceeds received within 3-5 days of the gold doré having been shipped from
the Runruno operation. Gold concentrate is sold with 50% received upon export
and the balance received following further assaying and final processing.
4. Operating profit for the year is stated after charging:
2023 2022
US$ US$
Depreciation of property, plant and equipment (note 12) 51,492,601 22,458,340
Amortisation (note 13) 25,385 37,066
Foreign exchange (gains)/losses (2,642,249) 907,786
Staff costs (note 7) 12,154,186 11,650,711
Auditors remuneration (note 5) 234,282 199,385
5. Auditor's remuneration
2023 2022
US$ US$
Fees payable to the Group and Company's auditor for the audit of the Group and 167,134 -
Company's accounts
11,447 155,153
Current auditor*
Previous auditor**
Fees payable to the previous auditor for other services** 13,660 6,748
Fees payable to the previous auditor for taxation compliance services** 42,042 37,484
234,282 199,385
* accrued PKF Littlejohn 2023 Group and Company audit fees
** fees paid to CLA Evelyn Partners Limited who served as the Group's external
auditor until December 2023
6. Segmental analysis
Operating segments have been identified based on the Group's internal
reporting to the Chief Operating Decision Maker ('CODM'). The CODM has been
determined to be the Board of Directors as it is primarily responsible for the
allocation of resources to segments and the assessment of performance of the
segments. The primary segments have been identified into three geographic
areas of the UK, Philippines and Singapore. The CODM uses 'profit/(loss)
before tax', 'cash & cash equivalents' and 'total liabilities' as the key
measures of the segments' results and these measures reflect the segments'
underlying performance for the period under evaluation.
The segment results for the year ended 31 December 2023 and 2022 and the
reconciliation of the segment measures to the respective statutory items in
the consolidated financial information are as follows:
Year ended 31 December 2023 UK Philippines Singapore Total
US$ US$ US$ US$
Segment results
Sales revenue - 166,682,876 - 166,682,876
Group operating (loss)/profit (1,809,503) 30,967,209 15,612 29,173,318
Other income & charges (61,127) - (61,127)
Impairment reversal 97,737,620 97,737,620
Finance costs (5,834,144) (1,476,317) - (7,310,461)
Share of profits of associates - 15,970 - 15,970
(Loss)/profit before tax (7,704,774) 127,244,482 (15,612) 119,555,320
Segment assets
Segment tangibles & intangibles - 140,605,170 - 140,605,170
Segment receivables & inventories 192,001 40,224,263 - 40,416,264
Segment cash 49,074 280,105 10,818 339,997
Equity-accounted investees - 121,381 - 121,381
Total segment assets 241,075 181,230,919 10,818 181,482,812
Segment liabilities
Segment loans (23,893,712) (2,586) - (23,896,298)
Segment trade & other payables (3,814,786) (12,314,872) (4,858) (16,134,516)
Segment provisions and retirement benefits obligations - (6,616,856) - (6,616,856)
Segment derivative liabilities (357,546) - - (357,546)
Segment deferred tax - (544,697) - (544,697)
Total segment liabilities (28,066,044) (19,479,011) (4,858) (47,549,913)
(27,824,969) 161,751,908 5,960 133,932,899
Total segment net (liabilities)/assets
Segment other information
Income tax (expense) - (306,582) - (306,582)
Amortisation of intangible assets - (25,385) - (25,385)
Depreciation of property, plant and equipment - (51,492,601) - (51,492,601)
Additions to property, plant and equipment - 10,630,889 - 10,630,889
Segment net assets are analysed net of intercompany transactions.
The results of each segment have been prepared using accounting policies
consistent with those of the Group as a whole.
Year ended 31 December 2022 UK Philippines Singapore Total
US$ US$ US$ US$
Segment results
Sales revenue - 124,410,991 - 124,410,991
Group operating (loss)/profit (2,300,314) 26,133,439 (14,531) 23,818,594
Other income & charges (106,884) (1,198,896) (3,501) (1,309,281)
Finance costs (12,656,148) (1,100,766) (8,910) (13,765,824)
Loss on sale of assets - - - -
Share of profits of associates - (76,854) - (76,854)
(Loss)/profit before tax (15,063,346) 23,756,923 (26,942) 8,666,635
Segment assets
Segment tangibles & intangibles - 81,492,266 - 81,492,266
Segment receivables & inventories 116,103 38,030,618 - 38,146,721
Segment cash 168,614 684,932 7,523 861,069
Equity-accounted investees - 105,411 - 105,411
Total segment assets 284,717 120,313,227 7,523 120,605,467
Segment liabilities
Segment loans (81,983,413) (1,208) - (81,984,621)
Segment trade & other payables (759,566) (12,982,094) (4,844) (13,746,504)
Segment provisions and retirement benefits obligations - (6,227,820) - (6,227,820)
Segment derivative liabilities (308,725) - - (308,725)
Segment deferred tax - (574,038) - (574,038)
Total segment liabilities (83,051,704) (19,785,160) (4,844) (102,841,708)
(82,766,987) 100,528,067 2,679 17,763,759
Total segment net (liabilities)/assets
Segment other information
Income tax benefit - 87,321 - 87,321
Amortisation of intangible assets - (37,066) - (37,066)
Depreciation of property, plant and equipment - (22,458,340) - (22,458,340)
Additions to property, plant and equipment - 8,227,773 - 8,227,773
7. Staff numbers and costs - Group
2023 2022
The average number of persons, including Directors, was: Number Number
Administration 22 22
Development & operations 764 769
786 791
2023 2022
Staff costs of the above persons were: US$ US$
Wages and salaries 11,317,760 10,934,593
Social security costs 497,361 435,616
Retirement and pension costs 339,065 280,502
12,154,186 11,650,711
Directors' emoluments: 2023 Restated 2022
US$ US$
Directors
D Bowden(1) 805,610 805,610(2)
A Chubb 67,537 89,818
T Livesey(1) 105,710 76,321
S Smith(3) 70,117 61,349
G Walker 73,545 65,030
D Cather(1) 75,327 120,493
J Wrathall - 30,091
1,197,846 1,248,712
Refer to the Remuneration Report on pages 14-18 that includes details of the
components of Directors' emoluments and forms part of these financial
statements. The Directors are considered to be the key management personnel.
(1) Includes consulting fees paid to private consulting companies.
(2) Restated to eliminate performance bonus accruals that were cancelled
during the year.
(3) Fees in relation to S Smith were paid to his appointee, MTL Luxembourg
Sarl in accordance with a Relationship Agreement dated 23 October 2020.
Share options held by Directors:
As at 31 December 2023, the following share options, held by directors, were
outstanding:
Date of grant Exercise price Expiry date Number of Options Issued during year Options lapsed/director resignation during year Number of Options
31 December 2022 31 December 2023
28 October 2022 £0.0001 28 October 2024 13,200,000 - (6,600,000) 6,600,000
17 June 2023 £0.0001 17 June 2025 6,600,000 - - 6,600,000
8. Other charges and income applied against profit and loss
8(a). Impairment reversal and impairment charge - Group
The FY2023 impairment reversal of US$97.8 million consists of:
· PPE - US$100.0 million impairment reversal (2022: US$nil),
· Receivables - US$0.9 million impairment expense (2022: US$0.9
million),
· Exploration expenditure - $0.4 million impairment reversal (2022:
US$nil), and
· Inventory - US$1.7 million impairment charge (2022: US$0.3 million).
Property, plant and equipment (PPE)
Under IAS 36 - Impairment of Assets, each asset that forms a cash generating
unit (CGU) should be tested at least annually for impairment. The Group
considers that the entire Runruno project (encompassing capitalised property,
plant and equipment, mining licence costs, deferred exploration expenditure
and the provision for mine rehabilitation and decommissioning) comprises a
single cash generating unit as all stages of the project are interdependent in
terms of generating cash flow and do not have the capacity to generate
separate and distinct cash flow streams. Accordingly, the annual recoverable
value assessment made in accordance with IAS 36 is made on a whole of project
basis.
The Group assesses the recoverable amount of the Runruno project CGU based on
the value in use of the Runruno operations using cash flow projections over
the remaining expected LOM and at appropriate discount rates. Based on
assumptions current as at 31 December 2023 the Group reviewed its recent
operational performance and its future expectations based on the current
planned mining schedule to estimate the recoverable amount the Runruno project
could deliver.
The recoverable amount estimates were based on the following key assumptions
and source information:
· gold resources to be mined based on current estimated reserves and
resources and LOM mining schedule, adjusted for forecast mine and grade
dilution;
· estimated average gold recoveries forecast to be achieved over the
remaining LOM based on average gold recoveries achieved to date;
· estimated ongoing capital expenditure required for the remaining LOM;
· estimated operating and administration costs for the remaining LOM
including an inflation factor;
· future gold revenues based upon gold prices received for the past 12
months and the industry consensus gold price predictions as at December 2023;
· future gold revenues calculated for the remaining LOM of 3-4 years;
and
· risk discount rate of 13.3% (2022: 14.5%).
For the year ended December 2023 the estimated recoverable value of the
Runruno project calculated in accordance with IAS 36 exceeded the book value
of the Group's property, plant and equipment (PPE), less the provision for
mine rehabilitation and decommissioning. Accordingly, an impairment reversal
charge of US$100 million to the Group's PPE book value has been made during FY
2023.
For the year ended December 2022 the estimated recoverable value of the
Runruno project calculated in accordance with IAS 36 approximated the current
book value of the Group's property, plant and equipment (PPE), less the
provision for mine rehabilitation and decommissioning. Accordingly, there was
no requirement to book either an impairment charge or an impairment reversal
in relation to the Group's PPE book values FY2022.
Receivables due
Impairment charges have been raised against trade and other receivables due,
both within and after one year, in relation to VAT on importations and other
goods and services. Under the fiscal terms incorporated into the FTAA, the
Group considers that some of these taxes and duties are recoverable, however,
the Group continues to have little success in securing appropriate refunds of
these taxes up to the period ended 30 June 2021. However, since year-end the
Group has received confirmation that the September 2021 quarter Philippine VAT
claim has been accepted. Thus, an annual impairment charge was raised during
the year in relation to all VAT paid up to 30 June 2021. (Refer note 16 -
trade and other receivables due after one year; note 19 - trade and other
receivables due within one year). In addition, an impairment charge has been
raised against advances made to associates.
The total impairment charges raised against VAT receivables was US$0.9 million
(2022: US$1.2 million).
8(b). Impairment charge and impairment reversal - Company
Receivables due
To a large extent the Runruno project has been funded by loans from the parent
Company and these together with the Company's investment in its subsidiaries
and associates is represented by the value of the Runruno project CGU.
Previously the value of the Runruno project CGU resulted in these loans and
investments being fully impaired.
Repayment of these loans and recovery of the investments is dependent upon the
Runruno project producing sufficient cash surpluses. Subsequent reviews of the
future estimated cash flows that the Runruno project may produce have
estimated that the Company's subsidiaries should be able to repay a
significant portion of these past parent company advances. During FY2023 the
subsidiary loan receivable was reduced by US$64.8 million by repayments to the
parent company.
The Company's estimates that its operations will produce future cash flows of
an order that will enable the majority of the parent company loans to be
repaid. As a result, the Company has booked an impairment reversal in FY2023
of US$127.4 million (based on the US$64.8 million repaid during FY2023 and
estimated future cash flow generated) (2022: US$22.5 million) of receivables
due from subsidiaries.
The FY2023 impairment reversal has resulted in the total impairment of
receivables due from subsidiaries reducing to US$18.1 million from US$154.0
million in FY2022.
8(c). Net finance costs and other income
2023 2022
US$ US$
Exchange gain/(loss) 3,421,672 (267,179)
Interest income 374 1,389
Loan interest and fees (10,732,507) (13,434,936)
Warrant amortisation expense - (187,159)
Realised gain on derivatives - 122,060
Finance costs and other income (7,310,461) (13,765,825)
9. Taxation
The taxation (benefit)/expense comprises the following
2023 2022
US$ US$
Current year corporation tax payable 410,227 54,382
Current year deferred tax (benefit) (103,645) (141,703)
Total tax expense/(benefit) for the year 306,582 (87,321)
The total tax expense/(benefit) for the year can be reconciled to profit for
the year as follows:
Profit before tax 119,555,320 8,666,635
Tax on profit at UK corporation tax rate of 19% (2022: 19%) 22,715,511 1,646,661
Effects of:
Overseas (expenses) not taxable (7,575) (964,072)
Differing tax rates in different jurisdictions 7,854,159 1,121,461
Tax losses (utilised)/carried over not previously recognised (4,239,995) (3,574,474)
Non-taxable and non-allowable items (22,784,539) 1,683,182
Short-term timing differences (3,230,979) (79)
Total taxation expense/(benefit) for the year 306,582 (87,321)
10. Deferred tax liability and asset
Tax Liability Tax Asset
2023 2022 2023 2022
US$ US$ US$ US$
Undepleted asset retirement obligation 338,754 442,400 - -
Capitalised expenses 131,638 131,638 - -
Other short term timing differences 74,303 - - -
544,695 574,038 - -
The differences between the deferred tax expense through the Consolidated
Statement of Total Comprehensive Income and the deferred tax liability on the
Consolidated Balance Sheet has occurred from translation differences arising
on consolidation. Liabilities are translated using the closing foreign
exchange rate prevailing at 31 December 2023 whereas the foreign currency
composition of the statement of total comprehensive income is translated using
the average rate for the whole of the year.
Deferred tax asset
For the year ended 31 December 2023 the Group has net unused tax losses of
US$64.4 million (2022: US$90.7 million) available for offset against future
profits. However, due to the restricted ability to apply UK losses against
Group income and the profit sharing terms of the FTAA, the deferred asset has
not been recognised on the Consolidated Balance Sheet due to uncertainty over
its future reversal.
For the year ended 31 December 2023 the Group has net unused tax losses
available for offset against future profits as follows:
2023 2022
US$ US$
UK 64,419,462 59,025,482
Philippines - 31,722,235
Group unused tax losses available 64,419,462 90,747,718
11. Earnings per share
2023 2022
US$ US$
Earnings
Net profit attributable to equity shareholders for the purpose of basic and
diluted earnings per share
119,248,738 8,753,956
Number of shares
Weighted average number of ordinary shares for the purpose of
basic earnings per share
2,092,720,603 2,080,759,193
Number of dilutive shares under warrant/option 19,800,000 16,181,534
Weighted average number of ordinary shares for the purpose of 2,112,520,603 2,096,940,727
diluted earnings per share
Earnings per share
Cents per share Cents per share
Basic earnings 5.70 0.42
Diluted earnings 5.64 0.42
The earnings per share was calculated on the basis of net profit attributable
to equity shareholders divided by the weighted average number of ordinary
shares.
12. Property, plant and equipment - Group
Motor vehicles Office furniture & equipment Buildings & leasehold improvements Drilling, mining & milling equipment Construction in progress (CIP) Residual Storage Impoundment Mining properties Total
Process plant (RSI)
US$ US$ US$ US$ US$ US$ US$ US$ US$
Cost
As at 1 January 2022 1,330,810 1,596,960 4,157,855 27,660,373 3,370,500 116,093,546 32,486,689 139,746,097 326,442,830
Additions 308,595 55,532 - 2,055,021 2,515,225 1,512,193 - 1,781,207 8,227,773
Change in mine closure obligation estimate - - - - - - - (251,619) (251,619)
As at 31 December 2022 1,639,405 1,652,492 4,157,855 29,715,394 5,885,725 117,605,739 32,486,689 141,275,685 334,418,984
Additions 171,429 - 11,506 3,341,583 4,632,862 1,018,440 406,096 1,048,973 10,630,889
Re-classification - - - - (6,674,810) - 6,674,810 - -
As at 31 December 2023 1,810,834 1,652,492 4,169,361 33,056,977 3,843,777 118,624,179 39,567,595 142,324,658 345,049,873
Impairment
As at 1 January 2022 - - - - - (34,738,122) - (115,261,878) (150,000,000)
31 December 2022 - - - - - (34,738,122) - (115,261,878) (150,000,000)
Reversal (refer note 8(a)) - - - - - 34,738,122 - 65,261,878 100,000,000
As at 31 December 2023 - - - - - - - (50,000,000) (50,000,000)
Motor vehicles Office furniture & equipment Buildings & leasehold improvements Drilling, mining & milling equipment Construction in progress (CIP) Residual Storage Impoundment Mining properties Total
Process plant (RSI)
US$ US$ US$ US$ US$ US$ US$ US$ US$
Depreciation
As at 1 January 2022 (995,252) (1,559,204) (2,426,581) (15,555,474) - (34,666,219) (11,673,234) (13,625,462) (80,501,426)
Charge for the period (141,315) (41,804) (432,132) (3,736,939) - (10,557,600) (4,650,804) (2,897,746) (22,458,340)
As at 31 December 2022 (1,136,567) (1,601,008) (2,858,713) (19,292,413) - (45,223,819) (16,324,038) (16,523,208) (102,959,766)
Charge for the period (193,827) (26,532) (423,380) (4,278,287) - (20,852,988) (6,257,812) (19,459,774) (51,492,601)
As at 31 December 2023 (1,330,394) (1,627,540) (3,282,093) (23,570,700) - (66,076,807) (22,581,850) (35,982,982) (154,452,367)
Net book value
As at 31 December 2023 480,440 24,952 887,268 9,486,277 3,843,777 52,547,372 16,985,745 52,547,372 140,597,506
As at 31 December 2022 502,838 51,484 1,299,142 10,422,981 5,885,725 37,643,798 16,162,651 9,490,600 81,459,218
Refer note 8(a) for impairment charge/reversal consideration of these assets.
The Group's lenders hold fixed and floating security charges over the Group's
property, plant and equipment.
13. Other intangible assets
Group Exploration
expenses Software Total
US$ US$ US$
Cost
As at 1 January 2022 418,804 707,388 1,126,192
Additions - - -
As at 31 December 2022 418,804 707,388 1,126,192
Additions 631,019 - 631,019
Written off in period (1,049,823) - (1,049,823)
As at 31 December 2023 - 707,388 707,388
Amortisation and impairment
As at 1 January 2022 (418,804) (637,273) (1,056,077)
Charge for the period - (37,066) (37,066)
Impairment charge for the period
As at 31 December 2022 (418,804) (674,339) (1,093,143)
Written off in period 418,804 - 418,804
Impairment charge for the period - (25,385) (25,385)
As at 31 December 2023 - (699,724) (699,724)
Net Book Value
As at 31 December 2023 - 7,664 7,664
As at 31 December 2022 - 33,049 33,049
14. Investments in subsidiaries - Company
2023 2022
US$ US$
Cost 8,783,629 8,783,629
Impairment brought forward (8,783,629) (8,783,629)
- -
The Group subsidiaries are:
Company Country of incorporation Percentage holding Nature of business
Metals Exploration Pte Singapore 100% Holding and investment company
FCF Minerals Corporation Philippines 100% FTAA licensee, holder of mining rights and gold production
MTL Philippines Philippines 100% To hold exploration rights
Faratuk Exploration and Mining Corporation Philippines 100% To hold mining rights
Metals Exploration Pte Ltd is a direct subsidiary of Metals Exploration plc,
while FCF Minerals Corporation, MTL Philippines, Inc. and Faratuk Exploration
and Mining Corporation are direct subsidiaries of Metals Exploration Pte Ltd.
Metals Exploration plc ROHQ established in the Philippines, is an overseas
branch of the Company and therefore its results are reported together with the
Company's.
The principal place of business of the subsidiary companies listed above is
the same as their country of registration.
15 Investments in associates - Group
2023 2022
US$ US$
At 1 January 105,411 182,265
Share of profits/(losses) of associates 15,970 (76,854)
At 31 December 121,381 105,411
Domicile Assets Liabilities P&L reserves Sales Gains/(losses) Ownership of
US$ US$ at 31 Dec 2023 US$ US$ ordinary shares
Associate company US$ on issue
%
Philippines 2,645,310 2,345,010 300,300 89,949 47,028 39.99%
Cupati Holdings Corporation
Woggle Corporation Philippines 163,981 314,771 (150,790) - (7,103) 39.99%
The investments in associates are held indirectly by Metals Exploration Plc
through its investment in Metals Exploration Pte Ltd.
16. Trade and other receivables due after one year - Group
2023 2022
US$ US$
Other receivables 16,720,701 8,796,133
16,720,701 8,796,133
Other receivables include VAT/import duties on importations and other goods
and services. Notwithstanding that until July 2022 the Group operated under an
exemption from these paying taxes, the Group has had little success in
recovering these past paid government imposts. A total accumulated impairment
charge of US$7.42 million has been recognised against these receivables (2022:
US$6.54 million).
17. Inventories - Group
2023 2022
US$ US$
Gold doré on hand 1,850,797 2,841,219
Gold in circuit 1,249,891 1,431,828
Gold in ore stockpiles 4,578,999 5,651,224
Consumable inventories 13,265,361 11,841,216
Provision for obsolete consumable inventories (2,250,000) (550,000)
18,695,048 21,215,487
Gold inventories are recorded at the lower of cost and net realisable value.
During the year ended 31 December 2023, consumable inventories recognised as
an expense in cost of sales was US$31.04 million (2022: US$30.86 million).
18. Cash and cash equivalents
Group 2023 2022
US$ US$
Cash on hand 8,193 8,736
Current accounts 331,804 852,333
339,997 861,069
Company 2023 2022
US$ US$
Current accounts 51,034 168,614
51,034 168,614
The Directors consider that the carrying amount of these assets is a
reasonable approximation of their fair value. The credit risk on liquid funds
is limited because the counter-parties are banks with a high credit rating.
19. Trade and other receivables
Group - Due within one year 2023 2022
US$ US$
Receivables from gold sales 3,039,560 5,808,604
Other receivables 1,737,431 2,130,624
Prepayments 223,524 195,872
5,000,515 8,135,100
95% of receivables from gold doré sales are received within 3-5 days of the
gold doré having been shipped from the Runruno operation. The Group's trade
receivables are derived through sales of gold doré to a sole refinery
customer whose credit quality is assessed by considering the customers
financial position, past performance and other factors. The Group also sells
small amounts of gold concentrate to other refiners. Terms of trade for these
sales are 50% upon export with the balance received following further assaying
and final processing. Within 5 days of year end, the Group had collected 95%
(2022: 95%) of the trade receivables outstanding as at 31 December 2023. The
Group believes the credit risk is limited as the customers pay within a short
period of time and no provision for impairment of receivables has been made
(2022: Nil).
Company - Due after one year 2023 2022
US$ US$
Receivables from subsidiaries 101,370,146 70,695,188
101,370,146 70,695,188
Company - Due within one year 2023 2022
US$ US$
Receivables from subsidiaries 65,376,650 30,000,000
Other receivables 101,695 59,285
Prepayments 90,306 58,508
65,568,651 30,117,793
A provision for impairment of receivables from subsidiaries was raised in 2018
using an expected credit loss model. The expected credit loss was estimated on
the basis that recovery of amounts from the subsidiaries is uncertain. An
impairment reversal of the 2018 impairment in FY2023, incorporating both the
US$64.8 million of repayments made during 2023 plus the expected future
additional payments generated from future cash flows, of US$127.4 million
(2022: US$22.5 million reversal) was booked. Refer to note 8(b).
The split between current and non-current receivables from subsidiaries has
been estimated based upon the expected loan repayments to be made to the
parent company by the subsidiaries during FY2024.
.
20 Derivative instruments
Gold option contracts
The Group adopts a gold price hedge policy to protect the Group from a
significant drop in the gold price. It does this by entering into zero cost
gold price collar contracts that consist of buying put options, offset by
selling call options.
During FY2023 hedge contract price protection covered 36,000 ounces of gold
production. These contracts settled at no profit or loss to the Group.
During FY2022 hedge contract price protection covered 30,000 ounces of gold
production. In October 2022 the Group realised a US$122,060 profit from
exercising a gold price put option. All other FY2022 contracts settled at no
profit or loss to the Group.
As at 31 December 2023, the Group had outstanding hedge contract price
protection in place over 34,500 ounces of gold production; with put options
ranging from US$1,745 to US$1,850 offset by sold call options ranging from
US$2,053 - US$2,435 per ounce (FY2022: 9,000 ounces with put options at
US$1,700 offset by sold call options ranging from US$2,310 - US$2,314 per
ounce).
Philippine Peso forward contracts
The Group incurs significant costs in Philippine Peso and acquires forward
USD:Peso exchange contracts as insurance against adverse foreign exchange
movements.
The Group has the following forward contracts to purchase Philippine Peso at
year-end:
Amount PHP:USD
US$ Average FOREX rate
Year ended 31 December 2023
31 March 2024 settlements 6,000,000 54.26
30 June 2024 settlements 4,500,000 53.10
30 September 2024 settlements 6,000,000 55.00
31 December 2024 settlements 6,000,000 54.40
22,500,000 54.26
Year ended 31 December 2022
31 March 2023 settlements 4,000,000 53.65
30 June 2023 settlements 5,000,000 54.10
30 September 2023 settlements 6,500,000 54.51
31 December 2023 settlements 4,000,000 56.45
19,500,000 54.63
The Group and the Company have recognised a current liability as at 31
December 2023 of US$0.4 million (2022: US$0.3 million) being the change in the
fair value of the forward contract value based on the same USD:PHP exchange
rate.
21. Retirement benefits obligations - Group
The Group has an unfunded, non-contributory defined benefit retirement plan
covering substantially all regular employees who have rendered at least six
months of continuous service. Benefits are dependent on the years of service
and the respective employee's compensation. The valuation of the retirement
plan obligation is determined using the projected unit credit actuarial cost
method. There was no planned termination, curtailment or settlement in either
2023 or 2022.
The relevant Philippine regulatory framework, RA 7641, known as the
'Retirement Pay Law', requires a provision for retirement pay to qualified
private sector employees in the absence of any retirement benefits under any
collective bargaining and other agreements being not less than those provided
under the law.
The amounts of retirement benefits costs recognised in the statements of
comprehensive income are determined as follows:
2023 2022
US$ US$
Current service costs 348,957 280,502
Interest costs 136,307 83,747
485,264 364,249
The amounts were distributed as follows:
2023 2022
US$ US$
Cost of sales 333,782 267,391
Administration costs 15,175 13,111
Interest costs 136,307 83,747
485,264 364,249
Changes in the present value of the unfunded retirement benefits liability are
determined as follows:
2023 2022
US$ US$
Balance at beginning of year 2,463,112 1,871,641
Current service costs 348,957 280,502
Interest costs 136,307 83,747
Benefits paid (179,876) (51,263)
Actuarial loss/(gain) due to:
Changes in financial assumptions 13,924 (74,702)
Experience adjustments (311,135) 353,187
Balance at year end 2,471,289 2,463,112
The principal assumptions used in determining the defined benefit retirement
plan obligations are as follows:
2023 2022
Discount rate 5.99% 6.25%
Salary increase rate 2.00% 2.00%
Expected remaining working lives of employees 2 years 3 years
14% at age 18 decreasing to 0% at age 60 14% at age 18 decreasing to 0% at age 60
Turnover rate
2017 Philippine Intercompany Mortality Table 2017 Philippine Intercompany Mortality Table
Mortality rate
1952 Disability Study, Period 2, Benefit 5 1952 Disability Study, Period 2, Benefit 5
Disability rate
The sensitivity analyses below has been determined based on reasonably
possible changes of each significant assumption on the defined benefits
retirement liability as at the end of the reporting period, assuming all other
assumptions were held constant:
Increase/ 2023 2022
(decrease) US$ US$
Discount rates +1% 2,241,045 2,205,151
-1% 2,346,926 2,335,846
Salary pay increases +1% 2,360,103 2,349,494
Shown below is the maturity analysis of the undiscounted benefit payments:
2023 2022
US$ US$
Less than one year 24,205 206,615
More than one year to five years 3,355,886 3,807,253
3,380,094 4,013,868
22. Trade and other payables
Due within one year
Group 2023 2022
US$ US$
Trade payables 8,864,315 8,712,487
Other payables 1,083,842 756,254
Other tax and social security payable 222,174 147,613
Accruals 2,413,573 2,481,382
Provisions 3,479,762 334,212
16,063,666 12,431,948
Company 2023 2022
US$ US$
Trade payables 282,873 206,960
Other tax and social security payable 116,622 -
Accruals 158,677 194,664
Provisions 3,479,762 334,212
4,037,934 735,836
Due after one year
Group 2023 2022
US$ US$
Trade payables -performance bonus accruals - 1,243,706
Amount owing to associate 70,850 70,850
70,850 1,314,556
Company 2023 2022
US$ US$
Trade payables -performance bonus accruals - 72,515
Amount owing to associate 70,850 70,850
70,850 143,365
Trade payables comprise amounts outstanding for trade purchases and on-going
costs, and together with other payables and accruals are measured at amortised
cost. FY2023 provisions relate to the potential extra mezzanine loan interest
and associated legal fees.
23. Loans
In May 2014 the Group entered into a loan with two foreign international
resource banks for US$83 million in project finance (the "Facility
Agreement"). In January 2020 the Facility Agreement was acquired by companies
associated with the Company's Mezzanine Lenders (the "New Lenders").
In October 2020 the Group completed a debt restructuring with the New Lenders,
whereby the Group no longer had an obligation to meet any fixed interest and
principal repayment schedule (the "New Senior Debt"). In the period to
November 2022 the Group made regular monthly senior loan repayments such that,
except for a nominal US$2,586, the New Senior Debt has been fully repaid. This
nominal amount has been left unpaid to ensure various securities remained in
place until the mezzanine loans were elevated to the status of secured
borrowings (the "Elevation").
In the period 2015-2018, the Company entered into numerous facility agreements
with its Mezzanine Lenders. The purpose of these advances was for working
capital requirements of the Company and to enable completion of the Runruno
project.
In October 2020 under the debt restructuring the various original mezzanine
facilities were consolidated into two new facilities (the "New Mezzanine
Facilities") and a £100,000 revolving credit facility. In November 2022,
notwithstanding the nominal New Senior Debt outstanding all Lenders agreed
that the Company could commence to repay the Mezzanine Debt.
The Elevation process requires completion of complex and multi-country
documentation and the registration of new security arrangements in numerous
jurisdictions. Although the necessary material documentation had been agreed
by all parties, they were not executed due to a dispute in relation to the
applicable rate of interest applying to, and hence, the quantum of the
remaining Mezzanine Debt. The October 2020 debt restructuring agreements
envisaged the interest rate applicable to the Mezzanine Debt being reduced
from 15% to 7% once the Senior Debt is repaid and the elevation of the
Mezzanine Debt to "new" Senior Debt is complete.
The Company's position was that the final payment due to the lenders under the
Company's mezzanine debt facilities was made on 25 March 2024, on the basis of
the lower interest rate of 7% (as opposed to 15%) applying from 3 November
2022, which the Company believed should apply under such facilities.
The Company's minority 29.3% mezzanine debt lenders, Runruno Holdings Limited
and D & A Holdings Limited (together the "RHL Group"), disputed that the
interest rate applicable to their portion of the mezzanine debt reduced from
15% to 7% from 3 November 2022. Further, the RHL Group claimed that several
events of default have occurred under the Group's senior and mezzanine
facilities, such that the relevant default interest rate (being a total of 12%
under the senior debt facility and 20% under the mezzanine debt facilities)
should apply with effect from 5 October 2023. The Company disputed these
allegations.
In light of the RHL Group's position in respect of the application of 15%
interest to its loans under the mezzanine facilities, MTL (Luxembourg) S.à
r.l. (holding 70.7% of the mezzanine debt) ("MTL Lux"), contrary to historical
assurances otherwise, sought to receive this interest rate on its own loans to
the Company in accordance with inter-creditor agreements between the two
lenders Company. MTL Lux has formally recorded that it does not believe
penalty interest should apply.
After a detailed consideration of the Company's legal position in this matter,
and associated issues such as the cost of an ongoing dispute with the
Company's two largest shareholders the Company has attempted to resolve this
matter by making a payment, in May 2024, of approximately 50% of the total
quantum currently in dispute.
However, as this dispute has not been fully resolved, the Company has, at 31
December 2023, created a provision for possible increased interest of US$2.6
million being the remaining difference between 15% per annum and 7% per annum
on the Mezzanine Debt for the period 3 November 2022 to 31 December 2023.
The Company continues to negotiate with MTL Lux and the RHL Group on this
matter.
As at 31 December 2023 the Group's outstanding loan position was:
Group 2023 2022
US$ US$
Senior Lenders loans due within one year 2,586 1,208
Mezzanine Lenders loans due within one year* 23,893,712 30,000,000
Total loans due within one year 23,896,298 30,001,208
Mezzanine Lenders loans due after one year* - 51,983,413
Total loans due after one year - 51,983,413
Company
As at 31 December 2023 the Company loan position was:
2023 2022
US$ US$
Mezzanine Lenders loans due within one year* 23,893,712 30,000,000
Mezzanine Lenders loans due after one year* - 51,983,413
Total loans due after one year - 51,983,413
* Given the Group is not subject to a fixed repayment schedule, in accordance
with the new debt facilities, there has been no certainty to what amount of
debt will be repaid within one year from balance date. Thus, the determination
of what debt is deemed current and what is deemed non-current is subject to
estimation. Refer to Note 2 for further discussion of this estimation.
24. Provision for mine rehabilitation and decommissioning
2023 2022
US$ US$
At 1 January 3,764,708 4,015,050
Unwinding of discount and effect of change in estimate 380,859 (250,342)
At 31 December 4,145,567 3,764,708
The Group makes provision for the future cost of rehabilitation of the process
plant on a discounted basis. Provision for mine rehabilitation and
decommissioning represents the present value of future rehabilitation and
decommissioning costs. These provisions have been created based on the Group's
internal estimates, updated on a periodic basis. These estimated costs were
reviewed in December 2023 and include labour, equipment hire, consumables and
transportation for disposal, with the provision being unwound for inflation
and interest charges for FY2023. Assumptions, based on the current economic
environment, have been made which management believes are a reasonable basis
upon which to estimate the future liability. However, actual costs will
ultimately depend upon future market prices for the necessary works required
which will reflect market conditions at the relevant time. Furthermore, the
timing of the rehabilitation and expenditure of other costs is likely to
depend on when the mine ceases to produce at economically viable rates, and
the timing that the event for which the other provisions provided for will
occur.
25. Called up share capital and share premium
The 17 June 2022 AGM approved a capital reorganisation which consisted of both
a capital sub-division and a capital reduction. The objective of this was to
(i) enable the Company to issue shares in future at an issue price which
significantly exceeds their nominal value; and (ii) to create distributable
reserves which would provide the Company with certain flexibility in relation
to future distributions of profits to shareholders.
The capital sub-division effected a change in the nominal value of ordinary
shares. This was achieved by dividing the existing ordinary shares of £0.01
nominal value into one New Ordinary Share, with a nominal value of £0.0001
and one Deferred Share with a nominal value of £0.0099 each. The Deferred
Shares had limited rights as set out in the new Articles of the Company
adopted at the FY2022 AGM. The capital reduction element was to cancel, for no
consideration, the deferred shares and share premium account by way of
creating a reserve to be offset against profit and loss. This capital
reduction was completed in July 2022.
In June 2023, the Company issued 7,147,850 new New Ordinary Shares in lieu of
a cash bonus to management. In December 2023, following the exercise of
options, the Company issued 2,200,000 new New Ordinary Shares. The issued
capital of the Company as at 31 December 2023 is shown below:
December 2023 December 2022 December 2023 December 2022
Number of shares Number of shares US$ US$
Ordinary shares of £0.01 par value
Opening balance - 2,071,334,586 - 27,950,217
Sub-division - (2,071,334,586) - (27,950,217)
Closing balance - - - -
New Ordinary shares of £0.0001 par value
Opening balance 2,088,796,421 - 281,638 -
Sub-division - 2,071,334,586 - 279,502
Shares issue 9,347,850 17,461,835 1,145 2,136
Closing balance 2,098,144,271 2,088,796,421 282,783 281,638
Deferred Shares of £0.0099 par value
Opening balance - - - -
Sub-division - 2,071,334,586 - 27,670,715
Capital reduction - (2,071,334,586) - (27,670,715)
Closing balance - - - -
Total share capital 282,783 27,950,217
Share premium
Opening balance - 195,855,125
Shares issue 144,350 263,765
Capital reduction - (196,118,890)
Closing balance 144,350 -
Share rights
New Ordinary Shares confer the right to vote and to participate in dividends,
capital, and other distributions including on winding up. New Ordinary Shares
are not redeemable.
26. Profit and loss
A component of the capital reduction completed in July 2022 (refer note 25),
the credit arising from the cancellation of the deferred share capital and
share premium, was applied against the profit and loss account. In FY2023 the
warrant fair value reserve was transferred from other reserves to profit and
loss following the expiry of the relevant warrants.
The movement in the profit and loss account is shown below.
2023 2022
US$ US$
Group 7,001,364 (225,542,197)
Opening balance
Profit for the year 119,248,738 8,753,956
Transfer from other reserves 1,526,937 -
Capital reduction credit - 223,789,605
At 31 December 127,777,039 7,001,364
Company
Opening balance 16,979,621 (217,042,891)
Profit for the year 121,906,452 10,232,907
Transfer from other reserves 1,526,937 -
Capital reduction credit - 223,789,605
At 31 December 140,413,010 16,979,621
27. Share-based payments
Directors' share options
No share options were issued during FY2023. During the 2022 financial year the
Company issued 6,600,000 options, exercisable at nominal par value, on or
before 17 June 2025.
FY2021 tranche 2023 2022
Number of options Number of options
Options on issue at 1 January 15,400,000 19,800,000
Options exercised (2,200,000) -
Options lapsed - (4,400,000)
Options on issue at 31 December 13,200,000 15,400,000
Options that have vested as at 31 December 13,200,000 11,000,000
FY2022 tranche
Opening balance 6,600,000 -
Options issued - 6,600,000
Options on issue at 31 December 6,600,000 6,600,000
Options that have vested as at 31 December 4,400,000 2,200,000
These options are subject to the following vesting conditions:
· Provided the option holder remains a director then, one third vest
upon issue, one third vest on the first anniversary of issue and one third
vest upon the second anniversary of issue;
· The FY2021 issued options hurdle of the Company's 30 day volume
weighted average price of each Company share traded on AIM exceeding £0.0215
during the life of the option has been satisfied; and
· The FY2022 issued options hurdle of the Company's 30 day volume
weighted average price of each Company share traded on AIM exceeding £0.0165
during the life of the option has been satisfied.
The share-based payment expense, based upon a fair value measurement of the
options, recognised in FY2023 was US$31,368 (2022: US$102,001).
The fair value measurement of the FY2021 options, using a Black-Scholes option
valuation model, was £0.0046 per option, based upon the following:
· Share price at the date of the change of exercise price of £0.0115,
· Option exercise price of £0.0001,
· Estimated share volatility of 105%,
· Option life of 3 years,
· Nil dividends during the life of the options,
· Risk-free interest rate of 2.3%,
· Discount to factor the market price exercise hurdle - 60%.
The fair value measurement, using a Black-Scholes option valuation model, of
the FY2022 options was £0.0076 per option, based upon the following:
· A share price at the date of option issue of £0.0115,
· An option exercise price of £0.0001,
· Estimated share volatility of 105%,
· Option life of 3 years,
· Nil dividends during the life of the options,
· Risk-free interest rate of 2.3%,
· Discount to factor the market price exercise hurdle - 33%
28. Compound financial instruments
Warrants
During the year ended 31 December 2017, two tranches of warrants were issued
by the Company in conjunction with securing a past mezzanine funding package.
Tranche 1 Tranche 2
Exercise Price £0.055 £0.070
Expiry Date 31 December 2023 31 December 2023
Number of warrants 75,000,000 25,000,000
These warrants lapsed during FY2023 and the cumulative fair value of these
warrants was transferred from other reserves to the profit and loss account.
There were no warrants issued in FY2023 or FY2022.
29. Net cash provided by/(used in) operating activities
Group 2023 2022
US$ US$
Profit before tax 119,555,320 8,666,635
Depreciation and amortisation 51,492,601 22,495,406
Provisions 29,759 31,744
Impairment (reversal)/charge (97,318,816) 1,202,397
Share of losses/(profits) of associates (15,970) 76,854
Share based payment expense 31,368 102,001
Shares issued in lieu of cash bonus 145,215 265,900
Finance expenses 10,732,133 13,571,116
Foreign exchange (gain)/loss (2,642,249) 267,178
(Increase)/decrease in receivables (10,048,701) 274,629
Decrease/(Increase) in inventories 820,441 (3,997,602)
Increase/(Decrease) in payables 2,061,476 (4,766,311)
Net cash provided by operating activities 74,561,379 38,189,947
Company 2023 2022
US$ US$
Profit before tax 121,906,452 10,287,290
Impairment (reversal) (127,385,827) (23,111,571)
Provisions 29,759 4,883
Share based expense 31,368 102,001
Shares issued in lieu of cash bonus 145,215 265,900
Finance expenses 10,433,567 12,098,383
Foreign exchange (gain)/loss (4,599,498) 323,016
(increase)/decrease in receivables (3,606,499) 6,984,924
Increase/(Decrease) in payables 2,932,723 (6,992,546)
Net cash used in operating activities (112,740) (37,720)
30. Reconciliation of liabilities from financing activities
1 January 2023 Non-cash movements 31 December 2023
Group Cash flow
US$ US$ US$ US$
Loans (current) 30,001,208 (12,816,587) 6,711,677 23,896,298
Loans (non-current) 51,983,413 (51,983,413) - -
81,984,621 (64,800,000) 6,711,677 23,896,298
1 January 2023 Non-cash movements 31 December 2023
Company Cash flow
US$ US$ US$ US$
Loans (current) 30,000,000 (12,816,587) 6,710299 23,893,712
Loans (non-current) 51,983,413 (51,983,413) - -
81,983,413 64,800,000 6,710299 23,893,712
31. Capital commitments
As at 31 December 2023 the Group had US$nil outstanding capital commitments
(2022: US$nil).
32. Related party transactions
Only members of the Board of Directors of Metals Exploration plc are deemed to
be key management personnel. The Board has responsibility for planning,
controlling and directing the activities of the Group. Key management
compensation is disclosed in the Remuneration Committee report, note 7,
Directors' emoluments section and note 27, Share-based payments. At period end
the following amounts were due in relation to Directors' emoluments:
Amounts owing to Directors 2023 Restated 2022
US$ US$
D Bowden(1) - -(2)
D Cather(1) - 2,556
G Walker 5,194 5,112
(1) Includes consulting fees due to private consulting company.
(2) Restated to eliminate performance bonus accruals that were subsequently
cancelled.
Fees in relation to corporate broking and research services were paid to
Hannam & Partners, of which Non-Executive Director Mr A Chubb is a
partner. In FY2023, the total fees paid to Hannam & Partners were
US$70,000 (2022: US$70,000).
Refer to note 23 for loans payable to related parties.
During the year, the Company received US$64,800,000 in loan repayments from a
subsidiary. At the year end, the Company had loans due by its subsidiaries
totaling US$171 million (2022: US$243 million). As at 31 December 2023 these
loan amounts owed by subsidiaries were impaired to a net recoverable amount of
US$155 million (2022: US$100 million). (Refer note 8(b)).
At the year end, the Group owed US$70,850 (2022: US$780,850) to its associates
and the Group was owed US$2.27 million (2022: US$2.29 million) from its
associates. This amount owing has been fully written off.
33. Financial instruments
The Group's financial instruments comprise cash and cash equivalents,
borrowings, derivative gold price and currency contracts, and items such as
trade payables and trade receivables which arise directly from its operations.
The main purpose of these financial instruments is to provide finance for the
Group's operations.
The carrying values of financial assets at the year-end are as follows:
Trade and other receivables
Group Cash and cash equivalents
Total
US$ US$ US$
As at 31 December 2023 339,997 5,861,738 6,201,735
As at 31 December 2022 861,069 9,000,103 9,861,172
Company
As at 31 December 2023 51,034 166,837,102 166,888,136
As at 31 December 2022 168,614 100,812,981 100,981,595
Cash and cash equivalents and trade and other receivables are held at
amortised cost.
The carrying values of financial liabilities at the year-end are as follows:
Accruals and other payables
Group Trade payables Derivative liabilities
Loans Total
US$ US$ US$ US$ US$
As at 31 December 2023 8,864,315 7,048,027 357,546 23,896,298 40,166,186
As at 31 December 2022 8,712,487 3,571,848 308,725 81,984,621 94,577,681
Company
As at 31 December 2023 282,873 3,709,289 357,546 23,893,712 28,243,420
As at 31 December 2022 206,960 672,241 308,725 81,983,413 83,171,339
Trade payables, accruals and other payables and loans are held at amortised
cost.
The Group's operations expose it to a variety of financial risks including
liquidity risk, foreign currency exchange rate risk, commodity price risk and
credit risk. The policies set by the Board of Directors are implemented by the
Group's finance departments and senior management.
Liquidity risk
The Group actively monitors its cash resources to ensure it has sufficient
available funds for operations and planned expansions. The Group has been cash
flow positive in both FY2022 and FY2023 and surplus funds are being applied,
in the main, to reduce the Group's borrowings.
The contractual maturities of the financial liabilities at the year-end are as
follows:
Group
Trade and other payables Derivative liabilities Loans* Total*
US$ US$ US$ US$
As at 31 December 2023
1 - 6 months 16,063,666 211,804 23,896,298 40,171,768
6 - 12 months - 145,742 - 145,742
1 - 2 years - - - -
2 - 5 years 70,850 - - 70,850
Total contractual cash flows 16,134,516 357,546 23,896,298 40,388,360
As at 31 December 2022 US$ US$ US$ US$
1 - 6 months 10,969,779 261,632 15,001,208 26,232,619
6 - 12 months - 47,093 15,000,000 15,047,093
1 - 2 years 1,243,706 - 32,000,000 33,243,706
2 - 5 years 70,850 - 19,983,413 20,054,263
Total contractual cash flows 12,284,335 308,725 81,984,621 94,577,681
Company Trade and other payables Loans* Total*
Derivative liabilities
US$ US$ US$ US$
As at 31 December 2023
1 - 6 months 4,037,934 211,804 23,893,712 28,143,450
6 - 12 months - 145,742 - 145,742
1 - 2 years - - - -
2 - 5 years 70,850 - - 70,850
Total contractual cash flows 4,108,784 357,546 23,893,712 28,360,042
As at 31 December 2022
1 - 6 months 735,836 261,632 15,000,000 15,997,468
6 - 12 months - 47,093 15,000,000 15,047,093
1 - 2 years 72,515 - 32,000,000 32,072,515
2 - 5 years 70,850 - 19,983,413 20,054,263
Total contractual cash flows 879,201 308,725 81,983,413 83,171,339
* The Group and Company's contractual future loan interest is presently not
capable of being calculated given the flexible debt repayment arrangements.
As set out in more detail within note 23, there is no agreement on the
interest rate applicable to a portion of the New Mezzanine Debt. Depending on
the resolution of this matter, the average interest rate applicable to the
Group outstanding loans as at 31 December 2023 is either 9.3% or 7%
(2022:13.1%), and the Company's average interest rate as at 31 December 2023
is either 9.3% or 7% (2022: 15.0%).
Credit risk
Credit risk is the risk of financial loss to the Group or Company if the
counterparty to a financial instrument fails to meet its contractual
obligations. The Group and Company are exposed to credit risk attributable to
its cash balances; however, this risk is limited because the counterparties
are large international banks.
The Group is exposed to credit risk for trade receivables due from third
parties. This risk is limited because the counterparties to the gold sales are
internationally recognised substantial organisations. Further, the Group
receives significant payment for the gold upon the presentation of
transportation documents. Based on the above, the Group considers the expected
credit loss to be immaterial and no provision for expected credit loss has
been required (2022: US$nil).
Other receivables include VAT on importations and other goods and services
paid by the Group, notwithstanding the Group was exempt, under the terms of
its FTAA, from these imposts until July 2022. An impairment charge has been
raised on the basis that the Group does not expect to recover these amounts
paid prior to July 2021. As at 31 December 2023 an accumulated impairment
charge of US$7.4 million has been recognised. All VAT paid for the period up
to 30 June 2021, except US$1.4 million the being subject of a specific court
action, has been impaired as at 31 December 2023 (2022: All VAT paid for the
period up to 31 December 2020, except US$1.4 million being the subject of a
specific court action).
The Company is exposed to credit risk to the extent that amounts owed by its
subsidiaries and associates may not be recoverable in the future. An
impairment reversal has been raised in relation amounts owed by its
subsidiaries to partly reverse a 2018 expected credit loss.
The maximum exposure to credit risk at the year-end is best represented by the
carrying amounts of trade and other receivables, and cash and cash
equivalents.
Market risk and sensitivity analysis
Commodity price risk
The market price of gold is one of the most significant factors in determining
the profitability of the Group's operations. The price of gold is subject to
volatile price movements over short periods of time and is affected by
numerous industry and macro-economic factors that are beyond the Group's
control. In 2023 the gold price ranged from US$1,810 to US$2,079 per ounce,
and the Group received an average gold selling price of US$1,944 per ounce
(2022: US$1,797 per ounce).
The Group has adopted a policy to implement a gold price hedge strategy over
no more than 50% of annual production by entering into zero cost gold price
collars. Refer to note 20 for the Group's December 2023 financial instruments
with exposure to gold prices.
The impact of a 10% increase/decrease in the Group's average gold sale price
achieved during the financial year would have resulted in the Group's profit
before tax being decreased/increased by US$16.7 million (2022: US$12.4
million). The impact is expressed on the assumption that the market price
changes by 10% with all other variables held constant.
Interest rate risk
The Group has interest bearing assets comprising cash and cash equivalents
which earn interest at a variable rate. Interest income is not material to the
Group.
The Group has fixed interest-bearing liabilities and the impact on the
reported profit for the year is an interest expense of US$9,216,477 (2022:
US$12,562,110).
Foreign currency exchange rate risk
The Group and Company are exposed to foreign currency exchange rate risk
having cashflows predominantly in US Dollars, Philippine Pesos and Pounds
Sterling. The Group monitors exchange rates actively and converts funds raised
to other currencies when deemed appropriate in order to meet expected future
foreign currency commitments.
The Group's major currency risk is the USD:PHP exchange rate. During 2023, the
Group converted US$80.6 million into Philippine Peso (2022: US$70.6 million).
A 10% increase/decrease in the US Dollar during the year, with all other
variables held constant, would have resulted in the profit before tax being
US$7.3 million higher or US$9.0 million lower (2022: US$6.4 million higher or
US$7.8 million lower).
As at 31 December 2023 the Group had Philippine Pesos denominated assets and
liabilities including cash of US$188,000 and current liabilities of
US$8,824,000 (2022: cash of US$38,000 and current liabilities of
US$10,772,000). The currency risk exposure from these assets and liabilities
is covered by the Philippine currency forward contracts in place as at 31
December 2023.
Refer to note 20 for details of the Group's hedging instruments to protect
against currency risk.
34. Capital risk management
The Group's objectives when managing capital are to safeguard the Group's
ability to continue as a going concern, to provide returns for shareholders
and maintain an optimal capital structure to reduce the cost of capital.
The capital structure of the Group consists of net debt, which includes
borrowings (note 23), cash and cash equivalents (note 18) and equity (note
25).
The Group is not subject to any externally imposed capital requirements.
35. Contingent liabilities
The Group has no contingent liabilities identified as at 31 December 2023
(2022: US$nil).
36. Post balance sheet events
There has not been any matter or circumstance that has arisen after balance
date that has significantly affected, or may significantly affect, the
operations of the Group, the results of those operations, or the state of
affairs of the Group in future financial periods, other than:
· the Group has made interest and principal debt repayments of US$24
million against its mezzanine debt.
· In January 2024, the Company, subject to lender and shareholder
approval, agreed to acquire a controlling interest in the YMC group. The YMC
group hold an extensive exploration tenement in the Abra region of Luzon,
Philippines. The purchase price is US$1.6 million (offset by approximately
US$1.1 million cash held by the YMC group) and the issue of options to
subscribe for up to 41 million new ordinary shares of £0.0001 each in the
capital of the Company. Shareholder approval of this transaction will be
sought at the forthcoming AGM.
37. Ultimate controlling parties
As part of the October 2020 debt restructuring, the Company entered into a
Revolving Credit Facility (RCF) under which the Company is obligated to seek
prior approval from both the original mezzanine lenders, MTL Luxembourg SARL
(MTL Lux) and Runruno Holdings Limited (RHL), for a number of operational
matters. If these prior approvals are not properly sought the RCF deems an
'event of default' to have occurred. In this situation all outstanding debt
becomes due and payable, and MTL Lux and RHL become entitled to a
penalty/termination payment of £2 million each. The RCF operates for 10 years
after the full repayment of the existing Group debt unless otherwise
terminated by the Company by payment of the £2 million termination penalty to
both MTL Lux and RHL. In March 2022, RHL assigned its interests in the major
mezzanine facility to D & A Holdings Limited (an associated company
controlled by the same entity at the time of assignment).
The Company's two largest shareholders are MTL Lux, which owns 46.6% of the
Company, and RHL, which owns 18.8% of the Company. Under a bilateral agreement
between these two shareholders, each is required to vote with the other, if
one shareholder votes against any resolution at the Company's general
meetings. Thus, through the operation of the bilateral agreement RHL, although
only the minor of the two larger shareholders, can bring about a negative vote
against any resolution at the Company's general meetings. If either party
violates the bilateral agreement the other party is entitled to a substantial
penalty payment from the party violating the bilateral agreement.
Although the Company has no ultimate controlling party, as a result of all the
above, both MTL Lux and RHL are both considered parties holding significant
influence equivalent to that of an ultimate controlling party.
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