Source - RNS
RNS Number : 2063H
KEFI Minerals plc
06 June 2017
 

                                                                                                                             

   6 June 2017

 

KEFI Minerals plc

("KEFI" or the "Company")

 

FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2016

 

KEFI Minerals (AIM: KEFI), the gold exploration and development company with projects in the Kingdom of Saudi Arabia and the Federal Democratic Republic of Ethiopia, announces its final results for the year ended 31 December 2016.

 

2016 HIGHLIGHTS

 

The robust economics of KEFI's two development projects are demonstrated in the following table:

 



Tulu Kapi

Jibal Qutman

Project Stage


Funding

PEA

Gold Production

Ounces p.a.

115,000

30,000

All-in Sustaining Costs ("AISC")

US$/oz

777

600

Operating Margin

US$/oz

473

650

Net Operating Cash Flow

US$ million p.a.

55

19

Operating Margin

%

38%

52%

Initial Life-of-Mine Production

Ounces

980,000

139,000

Initial Capital Payback

Years

3

2

Initial Capital

US$ million

160

30

Notes:

The above parameters are based on a gold price of US$1,250/oz.

AISC is per the World Gold Council Standard. The AISC includes each project's operating costs, Government royalties and sustaining capital but excludes financing costs and income taxes.

Tulu Kapi's gold production and net operating cash flow are for the first eight years of gold production.

Tulu Kapi's initial capital cost of US$160 million is based on the 2017 Definitive Feasibility Study Update ("2017 DFS Update"), reduced for contractually deferred payments and increased for non-Tulu Kapi costs during construction.

"PEA" means the Preliminary Economic Assessment completed by KEFI and announced on 8th March 2016.

 

The above metrics demonstrate:

·   The AISC/oz place both projects in the bottom cost quartile of existing gold producers

·   Strong operating margins above AISC provide substantial annual cash flows

·   Both projects can comfortably debt-fund the majority of the development capital required

·   Both projects rapidly repay the development capital

 

Tulu Kapi, Ethiopia

During 2016, KEFI concentrated on progressing the Tulu Kapi gold project ("Tulu Kapi"), Ethiopia's first modern mine, and on upgrading its gold and copper exploration portfolio in the highly prospective Arabian-Nubian Shield ("ANS"). KEFI is targeting to commence development of Tulu Kapi in 2017 and open-pit gold production in 2019.

 

·   Government of Ethiopia formally committed to invest US$20 million for equity in Tulu Kapi and, post-period, signed the Shareholder Agreement and other requisite documentation

·   Project team refined the development plan and detailed mine plan, resulting in more robust metrics by incorporating feedback made by contractors, financiers, and partners to the 2015 Definitive Feasibility Study ("2015 DFS"), and, post period, all refinements to the 2015 DFS were incorporated into the 2017 Definitive Feasibility Study Update ("2017 DFS Update") in preparation for financing

·   Assessing three financing proposals built around contractors experienced in African mining following tightening of mining debt-finance sector and concerns of financiers regarding Ethiopian State of Emergency

·   The projected open-pit cash flows indicate that the net cash build-up (after currently indicated financing costs) in the first three production years is US$65 million to US$265 million for the gold price range of US$1,100/oz to US$1,900/oz which prevailed during the past seven years. Significant value also expected from the contemplated underground mine beneath the Tulu Kapi open pit within extensions of the same ore body.

·   Completed Preliminary Economic Assessment ("PEA") confirming robust economics for the development of the underground mine - initial potential to increase production to >150,000 p.a. over four years whilst drilling to expand underground resources which are open in several directions.

·   Post period, community resettlement programme was triggered paving the way to project development

·   Post period, historical court claim pre-dating KEFI's ownership of Tulu Kapi was reduced from US$12 million to c. US$600,000 which KEFI has appealed to the Supreme Court to eliminate altogether.

 

Gold & Minerals Ltd Joint Venture ("G&M"), Saudi Arabia

·   Surface-sampling and geophysical studies identified large precious and base metals targets at Hawiah

·   Strategic overhaul of licence applications undertaken by G&M across the whole of Saudi Arabia

·   Post period, Mining Licence Application for proposed heap-leach gold mine at Jibal Qutman lodged with Saudi government for continuing discussion and review

·   KEFI expects the authorities in Saudi Arabia to deregulate the minerals exploration sector in 2017 from which the Company is well-positioned to benefit

 

Corporate

·   Completed several equity placings, raising a total of £5.6 million (before expenses) 

·   In preparation for Tulu Kapi development, Mr John Leach Finance Director became a fulltime executive and Mr Mark Wellesley-Wood, an experienced African mining operator, joined the Board as a Non-Executive Director assuming the role of Deputy Chairman

·   Post period, completed £5.62 million fundraising (before expenses)

 

 

Harry Anagnostaras-Adams, Executive Chairman of KEFI Minerals, said:

"During 2016, we concentrated on progressing Tulu Kapi, Ethiopia's first modern mine, and on upgrading our exploration portfolio in the highly-prospective Arabian-Nubian Shield supported by our strong partners in Ethiopia and Saudi Arabia. With the Ethiopian State of Emergency, conventional finance proposals were stalled in 2016 so we successfully responded by focusing our efforts on alternative financiers familiar with Africa, especially Ethiopia, and particularly on proposals designed around African-experienced gold project contractors. As a result, we are now assessing three proposals. At the same time, operational activities continued uninterrupted and we now have a development-ready mine, once the funding package is finalised. We look forward to commencing development in 2017 and open-pit gold production in 2019.

 

"This year we also strengthened our pipeline of ANS growth projects to complement our Tulu Kapi open-pit gold mine, including the Tulu Kapi underground mine and satellite deposits; our oxide gold mine at Jibal Qutman in Saudi Arabia; a large VHMS base metal target at Hawiah in Saudi Arabia; and further exploration prospects in the Arabian-Nubian Shield. With the robust economics of our key development projects, including the ability to payback initial capital within three years - and strong pipeline, we have a well-positioned foundation, great growth prospects and are confident of delivering shareholder value."

 

Market Abuse Regulation (MAR) Disclosure

 

Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.

 

 

ENQUIRIES

 

KEFI Minerals plc


Harry Anagnostaras-Adams (Executive Chairman)

+357 99457843

John Leach (Finance Director)

 

+357 99208130

SP Angel Corporate Finance LLP (Nominated Adviser)


Ewan Leggat, Jeff Keating

+44 20 3470 0470



Brandon Hill Capital Ltd (Joint Broker)


Oliver Stansfield, Alex Walker, Jonathan Evans

+44 20 7936 5200



RFC Ambrian Ltd (Joint Broker)

Jonathan Williams

 

Beaufort Securities Ltd (Joint Broker)

+44 20 3440 6817

Elliot Hance

+44 20 7382 8300



Luther Pendragon Ltd (Financial PR)


Harry Chathli, Claire Norbury, Ana Ribeiro

+44 20 7618 9100

 

Further information can be viewed on KEFI's website at www.kefi-minerals.com 

 

NOTES TO EDITOR

KEFI Minerals plc is the operator of two advanced gold development projects within the highly prospective Arabian-Nubian Shield, with attributable Mineral Resources (JORC 2012) of 1.93Moz gold (100% of Tulu Kapi's 1.72Moz gold in Ethiopia and 40% of Jibal Qutman's 0.73Moz gold in Saudi Arabia) plus significant resource growth potential. KEFI targets that production at these projects generates cash flows for further exploration and expansion as warranted, recoupment of development costs and, when appropriate, dividends to shareholders.

 

 



 

Operational Review

 

The Company's assets provide a healthy platform to deliver shareholder value by developing profitable mines in Ethiopia and Saudi Arabia.

 

KEFI Minerals made substantial progress during 2016 towards becoming a gold producer in one of the world's great under-developed minerals provinces - the Arabian-Nubian Shield.

 

The Company's Tulu Kapi Gold Project in Ethiopia remains the primary focus. KEFI has continued to work with the Government of Ethiopia, industry experts and project contractors over the past year in order to ensure that construction can commence as soon as funding is in place.

 

Initial open-pit gold production from Tulu Kapi is projected at 115,000 ounces per annum at a low All-in Sustaining Cost of less than US$800/oz. Tulu Kapi's Ore Reserves of 1.0 million ounces and Mineral Resources of 1.7 million ounces have significant upside potential. 

 

At the Company's Jibal Qutman Gold Project in Saudi Arabia, the Mining Licence Application for the planned heap-leach operation has been lodged with the Saudi Government for continuing discussion and review.

 

Development-Ready Gold Mine - Tulu Kapi

This high-value, low-capex asset is now poised for development when the funding package is finalised. Whilst KEFI's finance team has been preparing the funding package, the project development team has continued to work with the Company's selected contractors in order to further optimise Tulu Kapi's detailed development and operating plans.

 

Feedback on the 2015 DFS from project contractors, financiers and partners was incorporated into an improved mine plan in early 2016. All refinements to the 2015 DFS were, in May 2017, incorporated into the 2017 DFS Update in preparation for financing. This reflects, among other things, the fixed price, lump-sum processing plant construction contract with Lycopodium and a warranted ore processing rate of 1.5-1.7 million tonnes per annum.

 

KEFI bases the finance structure on the numbers and schedules in the 2017 DFS Update, which includes only the planned open pit. However, the Company will target a quicker construction schedule and 10% higher annual throughput compared with the contractually warranted estimates used for debt-structuring. KEFI's financial targets for the open-pit project include:

 

·     Gold production of 120,000 ounces per annum for eight of the initially planned ten years;

·     At a flat average gold price of US$1,200-1400/oz for all ten years of gold production (2019-2028):

All-in Sustaining Costs of less than US$800/oz (excluding financing charges);

After-tax, unleveraged IRR of 25%-36%;

After-tax, unleveraged NPV (8% discount rate) of US$98-184 million at start of construction;

After-tax, unleveraged NPV (8% discount rate) of US$272-375 million at start of production in 2019;

Annual net operating cash flows of US$56-78 million p.a. for the first eight years of production, and

Payback of 3 years.

 

As a result of KEFI's overhaul of all aspects of the project due diligence and planning, the project has soundly-based, robust economics and significant growth potential beyond the existing open-pit Ore Reserve estimate of 15.4 million tonnes at 2.12g/t gold, containing 1.05 million ounces.

 

The projected open-pit cash flows indicate that the net cash build-up (after financing costs) in the first three production years is US$65 million to US$265 million for a gold price range of US$1,100/oz to US$1,900/oz. Significant value is also expected from the contemplated underground mine.

 

Strong Support from Ethiopian Government for Tulu Kapi Development

The Tulu Kapi Gold Project ranks high as a national priority within Ethiopia's Growth and Transformation Plan and KEFI is delighted to have the strong support of the community in addition to the support from the Government at all levels.

 

Responsible mine development is a high priority for KEFI and the Ethiopian Government. KEFI welcomes the Government's constructive attitude that encourages us to bring Tulu Kapi into production as rapidly as prudently possible whilst ensuring compliance with all relevant governance and quality standards.

 

The restrictions imposed by the State of Emergency declared by the Ethiopian Government in October 2016 have now mostly been lifted. KEFI's operational activities have continued as normal during this time and appropriate security precautions have been built into project planning.

 

After consultations with KEFI, the Government of Ethiopia has triggered the community resettlement programmes, which began with property surveys and host-land preparations and also incorporate livelihood restoration programmes.

 

Notably in May 2017, the Government of Ethiopia further demonstrated its strong support by executing the detailed formal documentation for its committed equity capital contribution of approximately US$20 million to Tulu Kapi's development. This investment will increase the Government's share of the project from a 5% free-carried interest to circa 25%, depending on the final financing structure.

 

Further Potential at Tulu Kapi

In parallel with working towards open-pit gold production, KEFI has already evaluated the potential for developing an underground mine beneath the Tulu Kapi open pit. A Preliminary Economic Assessment completed in early 2016 indicated robust economics for an underground mine. Based on 2014 Mineral Resources, the addition of an underground mine has the potential to increase total (open pit and underground) gold production to more than 150,000 ounces per annum over four years. The orebody remains open and further potential will be added.

 

The Government has encouraged KEFI to plan an ambitious exploration programme in the district around Tulu Kapi and elsewhere in Ethiopia. Targets have been identified for both satellite gold deposits and stand-alone development projects. Tulu Kapi is intended to become a central ore processing centre for additional deposits to be developed in the district.

 

Oxide Gold Project - Jibal Qutman

In Saudi Arabia, the first priority for the Company's G&M Joint Venture is to develop an open-pit, heap-leach ("HL") gold operation, using a staged development approach predicated on a low-capex start-up to be expanded in modular stages as additional mineralisation is delineated. The potential cash flow from HL oxide gold production is an opportunity to fund:

·     construction of a carbon-in-leach ("CIL") plant to process the deeper sulphide ore profitably; and

·     exploration in Saudi Arabia to create a strong Saudi mining company for the long term.

 

Following on-site meetings with regulators in March 2017, the Mining Licence Application for the Jibal Qutman HL gold development was lodged with the Saudi Government for continuing discussion and review.

 

At Hawiah, G&M has identified a huge target for precious and base metals based on the surface-sampling of a six-kilometre long gossan (oxidised mineralisation exposed on the surface) and the results of the geophysical surveys of the ground beneath the gossan.

 

KEFI's Saudi venture is a strategic long-term priority and the Company is confident of having established an early-entrant position in what will emerge as a world-class minerals province. During the past year, G&M overhauled its portfolio of licence applications by discarding some and adding others. The next key step is for G&M to review the new Saudi mining industry regulations and policies that are expected to be published soon. KEFI will then proceed with Jibal Qutman soon after the planned Tulu Kapi development and also expand exploration activities as results warrant.

 

Financing Review

 

Equity Funding

KEFI has, to date, financed its activities through periodic capital raisings and contributions by partners.

 

The Company completed several equity placings during 2016, raising a total of £5.6 million (before expenses).

 

In March 2017, shareholders approved a £5.62 million fundraising comprised of:

£0.60 million placing of equity by Brandon Hill Capital;

£0.40 million subscription by certain of the Directors, employees and Lycopodium; and

£4.62 million subscription by Lanstead Capital.

 

Following the completion of the March 2017 fundraising and associated consolidation of the Company's capital on a 17-for-1 basis, KEFI had a total of 332.7 million Ordinary Shares on issue.

 

A key aspect of the March 2017 fundraising is that £3.93 million of the £4.62 million subscription by Lanstead is subject to a Sharing Agreement that allows KEFI to benefit financially from positive share price performance, whilst limiting the financial downside risk from a negative share price performance.

 

The number of Ordinary Shares issued to Lanstead under the Sharing Agreement is fixed at 82.4 million Ordinary Shares. However, the amount from Lanstead due to KEFI under the Sharing Agreement is adjustable upwards or downwards at each of the 18 monthly settlements that commenced in May 2017. The Lanstead Sharing Agreement underpins the Company's expenditure for 2017 and is focused on an increasing share price being beneficial to both Lanstead and KEFI shareholders.

 

Partnering the Government in Ethiopia and ARTAR in Saudi Arabia

In May 2017, KEFI Minerals (Ethiopia) Limited ("KME") and the Federal Democratic Republic of Ethiopia signed the Shareholders' Agreement and other foundation documentation for the incorporation, ownership and operation of Tulu Kapi Gold Mines Share Company Limited ("TKM"), which will result in TKM owning 100% of Tulu Kapi. The exploration projects outside the Tulu Kapi Mining Lease area are not part of TKM and remain 100% owned by KEFI.

 

In the Kingdom of Saudi Arabia KEFI conducts all its activities through Gold and Minerals Co. Limited, its joint venture company with Abdul Rahman Saad Al Rashid and Sons Limited ("ARTAR"). KEFI is operator with a 40% interest and ARTAR has 60%. KEFI is fortunate to have such a strong Saudi group as a partner and G&M has assembled a large and prospective portfolio of exploration licences and applications. Having made a discovery at Jibal Qutman, the joint venture looks forward to development and expansion in the minerals sector, which the Saudi Government has made a national strategic priority.

 

Tulu Kapi Development Funding

The Tulu Kapi funding process is ongoing with several potential financiers who are comfortable investing in Ethiopia.

 

The foundations of risk management for funding Tulu Kapi include that all short-term (up to five years) debt servicing commitments are met even if the price of gold drops to and stays at c. US$900/oz whilst longer-term (5-10 years) commitments are acceptable as long as they are covered by a flat price of c. US$1,000/oz. It is notable that the lowest gold price in the past seven years is c. US$1,100/oz and the highest c. US$1,900/oz.

 

Since acquiring the project, KEFI has continually refined and reduced project capital requirements and rendered more reliable production plans. Before adding financing charges and costs of other KEFI activities, the current estimate of total KEFI group requirement for Tulu Kapi development capital is c. US$160 million, which has been approximately halved from the previous owner's estimate.

 

KEFI's progress on project financing was delayed during 2016 as a result of the tightening of the mining debt-finance sector generally and the declaration of the Ethiopian State of Emergency, which had the effect of depressing the interest of financiers unfamiliar with Ethiopia. The Company responded by elevating its focus onto alternative financiers familiar with Africa and especially Ethiopia and, in particular, to design financing proposals with African-experienced gold project contractors. KEFI now has three financing proposals built around alternative project contracting syndicates, and has prioritised the funding structure designed around the preferred contractors selected in 2016 - Ausdrill for mining and Lycopodium for processing. 

 

As a result of recent progress, along with potential financiers, the Government and contractors, KEFI has intensified preparations for development to commence this year. The syndication brings with it the complexities of multiple jurisdictions and "paving the way" in Ethiopia for which this is the first internationally-financed major mining project finance transaction. Nevertheless, all syndicate members are working to the common objective of starting production in 2019.

 

Outlook

 

KEFI's initiatives on both sides of the Red Sea reflect the Company's conviction that the ANS has world-class prospectivity overseen by governments that have made the mining sector a strategic priority. KEFI is very fortunate to have a +1,000 km2 portfolio of exploration properties at various stages within the highly prospective ANS - and this portfolio will grow.

 

The Company has established a solid platform with world-class partners in each jurisdiction and has, with industry-leading contractors, developed a counter-cyclical opportunity to establish successful mining operations in the region. KEFI's approach has been to place its development strategy into the hands of a team of seasoned operators with a proven record of start-up successes in Africa. This team has transformed Tulu Kapi from an uneconomic project into one that is now being evaluated by financiers as a robust, fully-permitted project with significant upside potential for shareholders.

 

The Board is confident of the Company's strategy and asset base. KEFI has the appropriate mix of industry-experienced technical and financial expertise to prudently progress its projects into profitable gold mines. In addition, the Company has an organisational development plan that will see requisite human resources added with recruitment as progress warrants. The Company now has two cornerstone shareholders in Odey Asset Management and Lanstead Capital that support rapid growth companies. Project contractors Ausdrill and Lycopodium are also shareholders as is the Board of Directors.

 

KEFI Minerals is positioned to become the operator of two gold development projects in the highly-prospective ANS. The Company has achieved this progress with a small team around whom the full operating team will be built in conjunction with the project contractors, both of whom have over 20 years of mine building experience in Africa. The Company is well supported by a number of high calibre, quality specialist advisers also selected for their pre-eminence in start-ups of this nature.

 

As a result, the calm and improving situation in Ethiopia, combined with the range of financing scenarios being considered by the Company, make the Board confident that the Tulu Kapi Gold Project can proceed to development in 2017.


Consolidated statement of comprehensive income

Year ended 31 December

(All amounts in GBP thousands unless otherwise stated)

 

 

 










Notes


Year Ended

31.12.16

£'000


Year Ended

31.12.15

£'000








Revenue




-


-

Exploration costs




(125)


(4)

Gross loss




(125)


(4)

Administrative expenses




(2,190)


(1,720)

Vat refund




2,512


-

Share-based payments


17


(445)


(378)

Share of loss from jointly controlled entity


19


(726)


(735)

Operating loss


6


(974)


(2,837)

Foreign exchange loss




(123)


(50)

Finance costs


8


(136)


(319)

Loss before tax




(1,233)


(3,206)

Tax


9


-


-

Loss for the year




(1,233)


(3,206)








Other comprehensive income:







Exchange differences on translating foreign operations




200


56

 

Total comprehensive loss for the year




 

(1,033)


 

(3,150)















Basic and fully diluted loss per share (pence)


10


(0.037)


(0.20)

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

 

Statements of financial position                                                                                      

31 December

(All amounts in GBP thousands unless otherwise stated)

 



The


The


The


The


Group

Company

Group

Company

Notes

2016

2016

2015

2015

ASSETS









Non‑current assets









Property, plant and equipment

11

61


6


81


3

Intangible assets

12

13,992


3,939


11,845


1,078

Fixed asset investments

13.1

-


4,598


-


4,598

Investments in jointly controlled entities

13.2

-


181


-


181



14,053


8,724


11,926


5,860

Current assets









Available for sale financial assets

14

95


-


92


8

Trade and other receivables

15

3,056


8,069


358


7,710

Cash and cash equivalents

16

410


400


562


393



3,561


8,469


1,012


8,111

Total assets


17,614


17,193


12,938


13,971

 

EQUITY AND LIABILITIES









Equity attributable to owners of the Company









Share capital

17

3,883


3,883


2,623


2,623

Deferred Shares

17

12,436


12,436


12,436


12,436

Share premium

17

16,279


16,279


12,347


12,347

Share options reserve

17

1,474


1,474


1,212


1,212

Foreign exchange reserve


170


-


(30)


-

Accumulated losses


(18,695)


(18,496)


(17,645)


(15,623)

Total equity


15,547


15,576


10,943


12,995

Current liabilities









Trade and other payables

20

2,067


1,617


1,995


976



2,067


1,617


1,995


976

Total liabilities


2,067


1,617


1,995


976

Total equity and liabilities


17,614


17,193


12,938


13,971

 

The accompanying notes are an integral part of these consolidated financial statements.

The Company has taken advantage of the exemption conferred by section 408 of Companies Act 2006 from presenting its own statement of comprehensive income.  Loss after taxation amounting to £3.1 million (2015: £2.5 million) has been included in the financial statements of the parent company.

On the 5 June 2017, the Board of Directors of KEFI Minerals PLC authorised these financial statements for issue.

 

 

Harry Anagnostaras-Adams

Executive Director-Chairman

Company Number: 05976748

 

Consolidated statement of changes in equity

Year ended 31 December 2016

(All amounts in GBP thousands unless otherwise stated)

 

 


Attributable to the owners of the Company

 


Share
capital

Deferred

shares

Share premium

Share

options reserve

Foreign

exchange reserve

Accumulated

 losses

Total

















At 1 January 2015

12,352

-

8,433

848

(86)

(14,389)

7,158

Loss for the year

-

-

-

-

-

(3,206)

(3,206)

Other comprehensive income

-

-

-

-

56

-

56

Total Comprehensive Income

-

-

-

-

56

(3,206)

(3,150)

Recognition of share based payments

-

-

-

378

-

-

378

Cancellation of options

-

-

-

(14)

-

14

-

Issue of share capital

2,707

-

4,293

-

-

-

7,000

Restructuring of share capital

(12,436)

12,436

-

-

-

-

-

Share issue costs

-

-

(379)

-

-

(64)

(443)

At 31 December 2015

2,623

12,436

12,347

1,212

(30)

(17,645)

10,943









Loss for the year

-

-

-

-

-

(1,233)

(1,233)

Other comprehensive income

-

-

-

-

200

-

200

Total Comprehensive Income

-

-

-

-

200

(1,233)

(1,033)

Recognition of share based payments

-

-

-

445

-

-

445

Cancellation of options

-

-

-

(183)

-

183

-

Issue of share capital

1,260

-

4,296

-

-

-

5,556

Share issue costs

-

-

(364)

-

-

-

(364)

At 31 December 2016

3,883

12,436

16,279

1,474

170

(18,695)

15,547


The following describes the nature and purpose of each reserve within owner's equity:

Reserve                                                 Description and purpose

Share capital                                           amount subscribed for ordinary share capital at nominal value

Deferred shares                                 on 16 June 2015, under the restructuring of share capital, ordinary shares of 1p each in the capital of the Company were sub-divided into one new ordinary share of 0.1p and one deferred share of 0.9p

Share premium                                        amount subscribed for share capital in excess of nominal value, net of issue costs

Share options reserve                            reserve for share options granted but not exercised or lapsed

Foreign exchange reserve                     cumulative foreign exchange net gains and losses recognized on consolidation

Accumulated losses                           cumulative net gains and losses recognized in the statement of comprehensive income, excluding foreign exchange gains within other comprehensive income

Non-controlling interest (NCI) the portion of equity ownership in a subsidiary not attributable to the parent company

 

The accompanying notes are an integral part of these consolidated financial statements.

 



 

Company statement of changes in equity

Year ended 31 December 2016

(All amounts in GBP thousands unless otherwise stated)

 

 

 

 

 

 

Share
capital

 

Deferred shares

 

Share premium

Share

options reserve

 

Accumulated losses

 

 

Total








At 1 January 2015

12,352

-

8,433

848

(13,117)

8,516

Comprehensive loss for the year

-

-

-

-

(2,456)

(2,456)

Recognition of share based payments

-

-

-

378

-

378

Cancellation of options

-

-

-

(14)

14

-

Restructuring of share capital

(12,436)

12,436

-

-

-

-

Issue of share capital

2,707

-

4,293

-

-

7,000

Share issue costs

-

-

(379)

-

(64)

(443)

At 31 December 2015

2,623

12,436

12,347

1,212

(15,623)

12,995

Comprehensive loss for the year

-

-

-

-

(3,056)

(3,056)

Recognition of share based payments

-

-

-

445

-

445

Cancellation of options

-

-

-

(183)

183

-

Issue of share capital

1,260

-

4,296

-

-

5,556

Share issue costs

-

-

(364)

-

-

(364)

At 31 December 2016

3,883

12,436

16,279

1,474

(18,496)

15,576

 

 

The following describes the nature and purpose of each reserve within owner's equity:

Reserve                                 Description and purpose

Share capital                           amount subscribed for ordinary share capital at nominal value

Deferred shares                  on 16 June 2015, under the restructuring of share capital, ordinary shares of 1p each in the capital of the Company were sub-divided into one new ordinary share of 0.1p and one deferred share of 0.9p

Share premium                        amount subscribed for share capital in excess of nominal value, net of issue costs

Share options reserve            reserve for share options granted but not exercised or lapsed

Accumulated losses               cumulative net gains and losses recognized in the statement of comprehensive income

 

 

The accompanying notes are an integral part of these consolidated financial statements.



 

Consolidated statement of cash flows

Year ended 31 December 2016

(All amounts in GBP thousands unless otherwise stated)

 

 

 

 


Notes

Year Ended

31.12.16

£'000


Year Ended

31.12.15

£'000

CASH FLOWS FROM OPERATING ACTIVITIES





 

Loss before tax


(1,233)


(3,206)

 

Adjustments for:





 

Depreciation of property, plant and equipment

11

55


90

 

Share based payments

18

281


215

 

Impairment of intangible asset

12

266


-

 

Issue of warrants

17

164


163

 

Share of loss from jointly controlled entity

19

726


735

 

Exchange difference


44


37

 



303


(1,966)

 

Changes in working capital:





 

Trade and other receivables


(2,701)


29

 

Trade and other payables


51


(1,111)

 

Net cash used in operating activities


(2,347)


(3,048)

 






 

CASH FLOWS FROM INVESTING ACTIVITIES





 

Deferred exploration costs


(1,189)


(967)

 

Project evaluation costs


(1,224)


(1,739)

 

Acquisition of property plant and equipment


(35)


(11)

 

Advances to jointly controlled entity


(566)


(790)

 

Proceeds from disposal of available for sale asset


16


-

 

Net cash used in investing activities


(2,998)


(3,507)

 






 

CASH FLOWS FROM FINANCING ACTIVITIES





 

Proceeds from issue of share capital

17

5,556


6,923

 

Issue costs

17

(364)


(443)

 

Net cash from financing activities


5,192


6,480

 






 

Net decrease in cash and cash equivalents


(153)


(75)

 






 

Effect of cash held in foreign currencies


1


(3)

 






 

Cash and cash equivalents:





 

At beginning of the year

16

562


640

 

At end of the year

16

410


562

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

 



 

Company statement of cash flows

Year ended 31 December 2016

(All amounts in GBP thousands unless otherwise stated)

 

 


Notes

Year Ended



Year Ended



31.12.16



31.12.15



£'000



£'000

CASH FLOWS FROM OPERATING ACTIVITIES






Loss before tax


(3,056

)


(2,456)

Adjustments for:






Share based payments

18

281



215

Issue of warrants

17

164



163

Impairment of loan to subsidiary


64



28

Impairment of amount receivable from jointly controlled entity


494



720

Exchange difference


1



74



(2,052)



(1,256)

Changes in working capital:






Trade and other receivables


37



45

Trade and other payables


641



20

Net cash used in operating activities


(1,374)



(1,191)







CASH FLOW FROM INVESTING ACTIVITIES






Acquisition of property plant and equipment


(3)



(1)

Project evaluation costs


(2,861)



(587)

Advances to jointly controlled entity


(566)



(790)

Proceeds from disposal of available for sale asset


16



-

Loan to subsidiary


(397)



(4,125)

Net cash used in investing activities


(3,811)



(5,503)







CASH FLOWS FROM FINANCING ACTIVITIES






Proceeds from issue of share capital

17

5,556



6,923

Issue costs

17

(364)



(443)

Net cash from financing activities


5,192



6,480







Net increase/(decrease) in cash and cash equivalents


7



(214)







Cash and cash equivalents:






At beginning of the year

16

393



607

At end of the year

16

400



393

 

 

The accompanying notes are an integral part of these consolidated financial statements.



Notes to the consolidated financial statements

Year ended 31 December 2016

(All amounts in GBP thousands unless otherwise stated)

 

 

1. Incorporation and principal activities

Country of incorporation

KEFI Minerals PLC (the "Company") was incorporated in United Kingdom as a public limited company on 24 October 2006. Its registered office is at 27/28, Eastcastle Street, London W1W 8DH.

The Company has taken advantage of the exemption in section 408 of the Companies Act 2006 not to present its individual statement of comprehensive income and related notes that form a part of these financial statements.

Principal activities

The principal activities of the Group for the year were:

·      To explore for mineral deposits of precious and base metals and other minerals that appear capable of commercial exploitation, including topographical, geological, geochemical and geophysical studies and exploratory drilling.

·      To evaluate mineral deposits determining the technical feasibility and commercial viability of development, including the determination of the volume and grade of the deposit, examination of extraction methods, infrastructure requirements and market and finance studies.

·      To develop mineral deposits and market the metals produced.

 

2. Accounting policies

The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied throughout both periods presented in these financial statements unless otherwise stated.

Basis of preparation and consolidation

The Company and the consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.  They comprise the accounts of KEFI Minerals PLC and all its subsidiaries made up to 31 December 2016.  The Company and the consolidated financial statements have been prepared under the historical cost convention, except for the revaluation of certain financial instruments.

Going concern

The Directors have formed a judgment at the time of approving the financial statements that there is a reasonable expectation that the Company and Group will be able to secure adequate resources to continue in operational existence for the foreseeable future.

The financial information has been prepared on the going concern basis, the validity of which depends principally on securing funding to develop the Tulu Kapi mine project as an economically viable mineral deposit, and the availability of subsequent funding to extract the resource, or alternatively the availability of funding to extend the Company's and Group's exploration activities. 

These conditions indicate the existence of a material uncertainty which may cast significant doubt about the Company and Group's ability to continue as a going concern.  The financial statements do not include the adjustments that would result if the Company and Group were unable to continue as a going concern.

Functional and presentational currency

Items included in the Group's financial statements are measured using the currency of the primary economic environment in which the entity operates ("the functional currency") which for the Company is British Pounds (GBP). The financial statements are presented in British Pounds (GBP).



 

Notes to the consolidated financial statements (continued)

Year ended 31 December 2016

 

 

2. Accounting policies (continued)

Foreign currency translation

 

(1)   Foreign currency translation

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transactions. Gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognized in profit or loss in the statement of comprehensive income.

(2)   Foreign operations

On consolidation, the assets and liabilities of the consolidated entity's foreign operations are translated at exchange rates prevailing at the reporting date. Income and expense items are translated at the average exchange rates for the period unless exchange rates fluctuate significantly in which case they are recorded at the actual rate. Exchange differences arising, if any, are recognized in the foreign currency translation reserve and as a component of other comprehensive income, and recognized in profit or loss on disposal of the foreign operation.

Revenue recognition

The Group had no sales or revenue during the year ended 31 December 2016 (2015: £Nil).

 

Property plant and equipment

Property plant and equipment are stated at their cost of acquisition at the date of acquisition, being the fair value of the consideration provided plus incidental costs directly attributable to the acquisition less depreciation.

Depreciation is calculated using the straight-line method to write off the cost of each asset to their residual values over their estimated useful life.  The annual depreciation rates used are as follows:

Furniture, fixtures and office equipment

25%

Motor vehicles

Plant and equipment

25%

25%

 

Acquisitions and goodwill

The acquisition of subsidiaries is accounted for using the purchase method.  The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. Any costs directly attributable to the business combination are written off to the statement of comprehensive income.  The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognized at their fair values at the acquisition date.  Where the Group acquires a subsidiary for less than the fair value of its assets and liabilities, this results in negative goodwill which is recognized in profit and loss.

Purchased goodwill is capitalized and classified as an asset on the statement of financial position.  Goodwill arising on acquisition is recognized as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognized.

Goodwill is reviewed for impairment on an annual basis.  When the directors consider the initial value of the acquisition to be negligible, the goodwill is written off to the statement of comprehensive income immediately.  Trading results of acquired subsidiary undertakings are included from the date of acquisition.

Goodwill is deemed to be impaired when the present value of the future cash flows expected to be derived is lower than the carrying value.  Any impairment is charged to the statement of comprehensive income immediately.



 

Notes to the consolidated financial statements (continued)

Year ended 31 December 2016

 

 

2. Accounting policies (continued)

Interest in jointly controlled entities

Joint venture arrangements that involve the establishment of a separate entity in which each venturer has joint control are referred to as jointly controlled entities.  The results and assets and liabilities of jointly controlled entities are included in these financial statements for the period using the equity method of accounting.

Finance costs

Interest expense and other borrowing costs are charged to the statement of comprehensive income as incurred.

Tax

The tax payable is based on taxable profit for the period.  Taxable profit differs from net profit as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. Tax is payable in the relevant jurisdiction at the rates described in note 9.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the statement of financial position liability method.  Deferred tax liabilities are generally recognized for all taxable differences and deferred tax assets are recognized to the extent that taxable profits will be available against which deductible temporary differences can be utilized. The amount of deferred tax is based on the expected manner of realisation or settlement of the carrying amounts of assets and liabilities, using tax rates that have been enacted or substantively enacted at the reporting date.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off deferred tax assets against deferred tax liabilities and when the deferred taxes relate to the same fiscal authority.

 

Investments

Investments in subsidiary companies are stated at cost less provision for impairment in value, which is recognized as an expense in the period in which the impairment is identified, in the Company accounts.  These investments are consolidated in the Group accounts.

 

Exploration costs

The Group has adopted the provisions of IFRS 6 "Exploration for and Evaluation of Mineral Resources".

Exploration, evaluation and development expenditure, including acquisition costs of licences, in respect of each identifiable area of interest is expensed to the statement of comprehensive income as incurred, until the point at which development of a mineral deposit is considered economically viable.

Once the Board decides on the development of a project, development expenditure will be capitalized as incurred and amortized over the estimated useful life of the area according to the rate of depletion of the economically recoverable reserves or over the estimated useful life of the mine, if shorter. 

The directors consider that the stage of development of its Licence areas in Saudi Arabia has not yet met its criteria for capitalization. Capitalized development costs for the Group's project in Ethiopia have been recognized on acquisition, and will continue to be capitalised since this date, in accordance with IFRS 6.

A regular review will be undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. Accumulated capitalized costs in relation to an abandoned area of interest will be written off in full against profit in the year in which the decision to abandon the area is made.  Capitalized development expenditure will be amortized from the date at which production commences on a unit of production basis over the lifetime of the ore reserves for the area to which the costs relate.

 

 

Notes to the consolidated financial statements (continued)

Year ended 31 December 2016

 

Share‑based compensation benefits

IFRS 2 "Share‑based Payment" requires the recognition of equity‑settled share‑based payments at fair value at the date of grant and the recognition of liabilities for cash‑settled share‑based payments at the current fair value at each statement of financial position date. The total amount expensed is recognized over the vesting period, which is the period over which performance conditions are to be satisfied.

The fair value is measured using the Black Scholes pricing model.  The inputs used in the model are based on management's best estimate, including consideration of the effects of non-transferability, exercise restrictions and behavioural considerations.

Financial instruments

 

Financial assets at amortized cost

Loans and receivables are recognized when the Group becomes party to the contractual provisions of the financial instrument.  Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as 'loans and receivables'.  Loans and receivables are measured at amortized cost using the effective interest method, less any impairment. Interest income is recognized by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

Financial assets at fair value through profit or loss

Subsequent to initial recognition, when a financial asset is designated as such on initial recognition, it is classified as held at fair value through profit or loss. Assets other than held for trading are designated at fair value through profit and loss when the Group manages the holdings and makes purchase and sale decisions based on fair value assessments and documented risk management and investment strategies. Attributable transaction costs and changes in fair value are recognized in profit or loss.

Financial liabilities - equity

Financial liabilities are recognized when the Group becomes party to the loan.  Financial liabilities represent trade payables and are initially measured at fair value and subsequently at amortized cost. 

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.  An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.  Equity instruments issued by the Group are recognized at the proceeds received, net of direct issue costs. The Group derecognizes financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they expire.

 

3. Financial risk management

 

Cash and cash equivalents

For the purposes of the cash flow statement, cash and cash equivalents comprise cash at bank and in hand with an original maturity date of less than three months.

 

Financial risk factors

The Group is exposed to market risk (interest rate risk and currency risk), liquidity risk and capital risk management arising from the financial instruments it holds. The risk management policies employed by the Group to manage these risks are discussed below:

 

Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group does not consider this risk to be significant.

 

 

 

Notes to the consolidated financial statements (continued)

Year ended 31 December 2016

 

3. Financial risk management (continued) 

 

Market risk - Interest rate risk

Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. The Group's operating cash flows are substantially independent of changes in market interest rates as the Group has no significant interest-bearing assets. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. The Group's management monitors the interest rate fluctuations on a continuous basis and acts accordingly.

At the reporting date the interest rate profile of interest-bearing financial instruments was:


2016


2015

Variable rate instruments




Financial assets

410


562

 

Sensitivity analysis

An increase of 100 basis points in interest rates at 31 December 2016 would have increased equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. Given current interest rate levels, a decrease of 25 basis points has been considered, with the impact on profit and equity shown below.


Equity

Profit or Loss


Equity

Profit or Loss


2016

2016


2015

2015

Variable rate instruments






Financial assets - increase of 100 basis points

4

4


6

6

Financial assets - decrease of 25 basis points

(1)

(1)


(1)

(1)

 

Currency risk

Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. Currency risk arises when future commercial transactions and recognized assets and liabilities are denominated in a currency that is not the functional currency of the entity.

The Group is exposed to foreign exchange risk arising from various currency exposures primarily with respect to the Euro, Turkish Lira, US Dollar, Ethiopia ETB and Saudi Arabian Riyal. Since 1986 the Saudi Arabian Riyal is pegged to the US Dollar, it is fixed at USD/SAR 3.75. The Group's management monitors the exchange rate fluctuations on a continuous basis and acts accordingly.

The carrying amounts of the Group's foreign currency denominated monetary assets and monetary liabilities at the reporting date are as follows: The Saudi Arabian Riyal exposure is included in the USD amounts.


Liabilities

Assets


Liabilities

Assets


2016

2016


2015

2015







Australian Dollar

215

-


24

-

Euro

205

2


276

2

Turkish Lira

1

40


1

40

US Dollar

1,025

318


663

266

Ethiopia ETB

187

2,943


779

354

 



 

Notes to the consolidated financial statements (continued)

Year ended 31 December 2016

 

3. Financial risk management (continued) 

 

Sensitivity analysis

A 10% strengthening of the British Pound against the following currencies at 31 December 2016 would have increased/(decreased) equity and profit or loss by the amounts shown in the table below. This analysis assumes that all other variables, in particular interest rates, remain constant. For a 10% weakening of the British Pound against the relevant currency, there would be an equal and opposite impact on the loss and equity.

 


Equity

Profit or Loss


Equity

Profit or Loss

 


2016

2016


2015

2015

 







AUD Dollar

22

22


3

3

 

Euro

20

20


27

27

 

Turkish Lira

(4)

(4)


(4)

(4)

 

US Dollar

58

58


40

40

 

Ethiopia ETB

(276)

(276)


42

42

 

 

Liquidity risk

Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. An unmatched position potentially enhances profitability, but can also increase the risk of losses. The Group has procedures with the object of minimising such losses such as maintaining sufficient cash and other highly liquid current assets and by having available an adequate amount of committed credit facilities.

The Group's contractual cash flows for its financial liabilities are all due within 3 months or less. In January 2014 agreement was made with the Ethiopian tax authorities to pay the reverse VAT over a period of three years (principal and interest). The VAT amount was settled during 2016 and has given rise to a VAT refund.

 

Capital risk management

The Group manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to shareholders through the optimization of the debt and equity balance. This is done through the close monitoring of cash flows.

The capital structure of the Group consists of cash and cash equivalents of £410,000 (2015: £562,000) and equity attributable to equity of the parent, comprising issued capital and deferred shares of £16,319,000 (2015: £15,059,000), other reserves of £17,923,000, (2015: £13,529,000) and accumulated losses of £18,695,000 (2015: £17,645,000).  The Group does not use derivative financial instruments and has no long-term debt facilities.

Fair value estimation

The fair values of the Group's financial assets and liabilities approximate their carrying amounts at the reporting date.

 


Carrying Amounts


Fair Values


2016


2015


2016


2015

Financial assets








Cash and cash equivalents (Note 16)

410


562


410


562

Available for sale financial assets (Note 14)

95


92


95


92

Trade and other receivables (Note 15)

3,056


358


3,056


358









Financial liabilities








Trade payables (Note 20)

2,067


1,995


2,066


1,995









 

Available for sale financial assets are classified as Level 1 within the fair value hierarchy, except for Ethiopian Government bonds, which are classified as Level 2. Level 1 items are derived from quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 items are derived from inputs other than quoted prices included within Level 1 that are observable for the assets either directly or indirectly.

 

Other financial assets and liabilities are short term and their carrying value is considered to approximate to their fair value.



 

Notes to the consolidated financial statements (continued)

Year ended 31 December 2016

 

4. Use and revision of accounting estimates and judgements

The preparation of the financial report requires the making of estimations and assumptions that affect the recognized amounts of assets, liabilities, revenues and expenses and the disclosure of contingent liabilities.  The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates. 

Significant judgements include:

 

Going concern

The going concern presumption depends principally on securing funding to develop the Tulu Kapi mine project as an economically viable mineral deposit, and the availability of subsequent funding to extract the resource, or alternatively the availability of funding to extend the Company's and Group's exploration activities.

 

Significant estimates include:

 

Fair value of acquisitions

The 'acquisition method', which generally requires assets acquired and liabilities assumed to be measured at their fair values at the acquisition date. Fair value estimates are required. In calculating the fair value estimates of net identifiable net assets on acquisition significant judgements and estimates are required.

 

Share based payments

In calculating the fair value at the grant date, the Black Scholes model requires us to estimate the inputs to this model, in particular in respect of volatility.  This assessment is based on historical share price movements assuming these will continue into the future.

 

Impairment review of asset carrying values

Events or changes in circumstances can give rise to significant impairment charges or reversals of impairment in a particular year.  Where the recoverable amounts of Group cash generating units are assessed by analyses of discounted cash flows, the resulting valuations are particularly sensitive to changes in estimates of long term commodity prices, exchange rates, operating costs, the grouping of assets within cash-generating units and discount rates.

Capitalisation of exploration and evaluation costs

Under the Group's accounting policy, exploration and evaluation expenditure is not capitalised until the point is reached at which there is a high degree of confidence in the project's viability and it is considered probable that future economic benefits will flow to the Group. Subsequent recovery of the resulting carrying value depends on successful development or sale of the undeveloped project. If a project does not prove viable, all irrecoverable costs associated with the project net of any related impairment provisions are written off.

 

Contingent liabilities

A contingent liability arises where a past event has taken place for which the outcome will be confirmed only by the occurrence or non-occurrence of one or more uncertain events outside of the control of the Group, or a present obligation exists but is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A provision is made when a loss to the Group is likely to crystallise. The assessment of the existence of a contingency and its likely outcome, particularly if it is considered that a provision might be necessary, involves significant judgment taking all relevant factors into account.



Notes to the consolidated financial statements (continued)

Year ended 31 December 2016

5. Operating segments

The Group has only one distinct operating segment, being that of mineral exploration.  The Group's exploration activities are located in the Kingdom of Saudi Arabia (through the jointly controlled entity), Ethiopia and its administration and management is based in Cyprus.


Cyprus

Turkey

Bulgaria

Ethiopia


Consolidated








2016







Operating (loss)/profit

(2,467)

(34)

(3)

(255)


(2,759)

Material non-recurring item

(482)

-

-

2,994


2,512

Foreign exchange profit/(loss)

(193)

70

-

-


(123)

Interest

(136)

-

-

-


(136)


(3,278)

36

(3)

2,739


(506)

Share of loss from jointly controlled entity






(726)

Loss before tax






(1,232)

Tax






-

Loss for the year






(1,232)

Total assets

4,520

42

4

13,049


17,615

Total liabilities

1,617

2

4

443


2,066

 

Depreciation of property, plant and equipment

1

-

-

54


55

Impairment of intangible assets

-

-

-

266


266


 

 





Cyprus

Turkey

Bulgaria

Ethiopia


Consolidated

2015







Operating loss

(1,552)

(33)

8

(525)


(2,102)

Foreign exchange profit/(loss)

13

(26)

-

(37)


(50)

Interest

(179)

-

-

(140)


(319)


(1,718)

(59)

8

(702)


(2,471)

Share of loss from jointly controlled entity






(735)

Loss before tax






(3,206)

Tax






-

Loss for the year






(3,206)

Total assets

1,695

42

4

11,197


12,938

Total liabilities

976

2

4

1,013


1,995

Depreciation of property, plant and equipment

-

-

-

90


90








 

 

 



 

Notes to the consolidated financial statements (continued)

Year ended 31 December 2016

6. Expenses by nature


Year Ended

31.12.16

£'000


Year Ended

31.12.15

£'000





Exploration costs

125


4

Depreciation of property, plant and equipment (Note 11)

55


90

Material non-recurring item- vat refund (Note 15 and Note 20)

(2,512)


-

Impaired intangible assets (Note 12)

266


-

Warrants issue costs (Note 17)

164


163

Share based benefits to employees (Note 17)

77


69

Share of losses from jointly controlled entity (Note 5 and Note 19)

726


735

Directors' fees and other benefits (Note 21.1)

716


718

Consultants' costs

439


246

Auditors' remuneration   - audit current year

62


51

Auditors' remuneration - associated firm

7


-

Other expenses

849


761

Operating loss

974


2,837

 

The Group's stages of operations in Saudi Arabia as at the year-end and as at the date of approval of these financial statements have not yet met the criteria for capitalization of exploration costs. The Company only capitalises direct development costs for the Tulu Kapi gold project in Ethiopia.

7. Staff costs 

Year Ended

31.12.16

£'000


Year Ended

31.12.15

£'000





Salaries

550


474

Accumulated Leave Provision

49


-

Termination Package

126


-

Social insurance costs and other funds

32


39


757


513





Average number of employees

45


46

 

Excludes Directors' remuneration and fees which are disclosed in note 21.1. These staff costs are capitalised in development exploration costs.

 

8. Finance costs 

2016



2015






Interest paid to Ethiopian Revenue and Customs Authority ("ERCA") - Note 20

-



140

Other finance costs

136



179


136



319










9. Tax

 

2016



 

2015






Loss before tax

(1,233)



(3,206)






Tax calculated at the applicable tax rates

(382)



(515)

Tax effect of non-deductible expenses

248



308

Tax effect of tax losses

341



280

Tax effect of items not subject to tax

(207)



(92)

Tax effect of capital allowances

-



19

Tax effect of other timing differences

-



-

Charge for the year

-



-

The Company is resident in Cyprus for tax purposes. A deferred tax asset of £1,242,770 (2015: £1,336,989) has not been accounted for due to the uncertainty over future recoverability.



 

Notes to the consolidated financial statements (continued)

Year ended 31 December 2016

 

9. Tax (continued)

 

Cyprus

The corporation tax rate is 12.5%. Under certain conditions interest income may be subject to defence contribution at the rate of 15%. In such cases this interest will be exempt from corporation tax.  In certain cases, dividends received from abroad may be subject to defence contribution at the rate of 20% for the tax year 2013 and 17% for 2014 and thereafter.  Due to tax losses sustained in the year, no tax liability arises on the Company. Under current legislation, tax losses may be carried forward and be set off against taxable income of the five succeeding years. As at 31 December 2016, the balance of tax losses which is available for offset against future taxable profits amounts to £ 9,942,163 (2015: £ 7,795,644).

 

Bulgaria

Mediterranean Minerals (Bulgaria) EOOD, the 100% subsidiary of the Company, is resident in Bulgaria for tax purposes.  The corporation tax rate is 10%. Due to tax losses sustained in the period, no tax liability arises on the Mediterranean Minerals (Bulgaria) EOOD. Under current legislation, tax losses may be carried forward and be set off against taxable income of the following five years. As at 31 December 2016, the balance of tax losses which is available for offset against future taxable profits amounts to £25,476 (2015: £34,035). The reduction in tax losses from the prior year is due to losses passing the five year threshold for their utilization.

 

Turkey

Doğu Akdeniz Mineralleri Sanayi ve Ticaret Limited Şirket (Doğu Akdeniz Mineralleri), the 100% subsidiary of Mediterranean Minerals (Bulgaria) EOOD, and ultimately 100% subsidiary of the Company, is resident in Turkey for tax purposes.  The corporation tax rate is 20%. Under local tax legislation, exploration costs are can only be set off against income from mining operations. Tax losses may be carried forward and be set off against taxable income of the five succeeding years. As at 31 December 2016, the balance of exploration costs that is available for offset against future income from mining operations amount to £ 811,471 (2015: £948,764).

Ethiopia

KEFI Minerals Ethiopia Limited is subject to other direct and indirect taxes in Ethiopia through its foreign operations. The mining industry in Ethiopia is relatively undeveloped. As a result, tax regulations relating to mining enterprises are evolving. There are transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred tax provisions in the period in which such determination is made.

During 2013, the House of People's Representatives passed an amendment to the Mining Income Tax Proclamation, reducing income tax from 35% to 25% and had received an initial draft of proposed amendments to the Mining Proclamation, which includes a reduction in royalty on gold production from 8% to 7%.

10. Loss per share

The calculation of the basic and fully diluted loss per share attributable to the ordinary equity holders of the parent is based on the following data:


Year Ended

31.12.16

£'000


Year Ended

31.12.15

£'000





Net loss attributable to equity shareholders

(1,233)


(3,206)

Average number of ordinary shares for the purposes of basic loss per share (000's)

3,313,626


1,577,708





Loss per share:




Basic and fully diluted loss per share (pence)

(0.037)


(0.203)

 

The effect of share options and warrants on losses per share is anti-dilutive.

Notes to the consolidated financial statements (continued)

Year ended 31 December 2016

 

11. Property, plant and equipment


Motor Vehicles


Plant and equipment


Furniture, fixtures and office equipment


Total

The Group








Cost








At 1 January 2015

60


198


61


319

Additions

-


7  


4


 11

Disposals

(17)


(70)


(6)


(93)

At 31 December 2015

43


135


59


237

Additions

32



3


 35

At 31 December 2016

75


135


62


272









Accumulated Depreciation








At 1 January 2015

39


73


47


159

Charge for the year

5


67


18


90

Disposals

(17)


(70)


(6)


(93)

At 31 December 2015

27


70


59


156

Charge for the year

6


46


3


55

At 31 December 2016

33


116


62


211









Net Book Value at 31 December 2016

42


19


-


61

Net Book Value at 31 December 2015

16


65


-


81

 

The above property, plant and equipment is located in Turkey and Ethiopia. 

 

The Company has no significant property, plant and equipment.



 

Notes to the consolidated financial statements (continued)

Year ended 31 December 2016

 

12. Intangible assets

 


 





 

Project

evaluation

costs


 

 Deferred

exploration

costs


                        

 

 

Total


 


 The Group















 


Cost












At 1 January 2015





976


8,163


9,139



Additions





1,739


967


2,706



At 31 December 2015





2,715


9,130


11,845



Additions





1,224


1,189


2,413



At 31 December 2016





3,939


10,319


14,258















Accumulated Amortization and Impairment












At 1 January 2015





-


-


-



Charge for the year





-


-


-



At 31 December 2015





-


-


-



Impairment Charge for the year





-


266


266



At 31 December 2016





-


266


266















Net Book Value at 31 December 2016





3,939


10,053


13,992



Net Book Value at 31 December 2015





2,715


9,130


11,845



 

 

 


 





 

Project

evaluation

costs



                        

 

 

Total


 


The Company














 


Cost











At 1 January 2015





976



976



Additions





587



587



Transfer from subsidiary





(485)



(485)



At 31 December 2015





1,078



1,078



Additions





1,225



1,225



Transfer to subsidiary





1,636



1,636



At 31 December 2016





3,939



3,939














Accumulated Amortization and Impairment











At 1 January 2015





-



-



Charge for the year





-



-



At 31 December 2015





-



-



Charge for the year





-



-



At 31 December 2016





-



-














Net Book Value at 31 December 2016





3,939



3,939



Net Book Value at 31 December 2015





1,078



1,078



 

 



 

Notes to the consolidated financial statements (continued)

Year ended 31 December 2016

 

12. Intangible assets

 

Deferred exploration costs are associated with the Tulu Kapi mine in Ethiopia. The group recognized deferred exploration costs with a fair value of US$ 6,900,000 on acquisition of the project in December 2013. Further costs incurred by the Group since the acquisition have been capitalized.

Once the Board decides on the development of a project, development expenditure will be capitalized as incurred and amortised over the estimated useful life of the area according to the rate of depletion of the economically recoverable reserves or over the estimated useful life of the mine, if shorter. 

As at 31 December 2016 management performed an impairment review for deferred exploration costs, which relate to the Tulu Kapi licence area, at 31 December 2016.The Net Present Value of the Tulu Kapi asset exceeded the net book value significantly.

The impairment review compared the recoverable amount of assets to the carrying value. The recoverable amount of an asset is assessed by reference to the higher of value in use ("VIU"), being the net present value ("NPV") of future cash flows expected to be generated by the assets, and fair value less costs to dispose ("FVLCD"). The FVLCD is based on an estimate of the amount that the Company may obtain in a sale transaction on an arm's length basis.

Project evaluation costs relating to work performed in assessing the economic feasibility and the independent technical review of the Tulu Kapi project have been capitalised by the Company. In August 2015, the Company published the Tulu Kapi Definitive Feasibility Study ("DFS") evaluating a conventional open-pit mining operation and carbon-in leach ("CIL") processing plant.

Feedback on the 2015 Definitive Feasibility Study ("2015 DFS") from project contractors, financiers and partners was incorporated into an improved plan in early 2016. All refinements to the 2015 DFS were, in May 2017, incorporated into the 2017 DFS Update in preparation for financing. This reflects, among other things, the fixed price, lump-sum processing plant construction contract with Lycopodium and a warranted ore processing rate of 1.5-1.7 million tonnes per annum.

The Tulu Kapi Mining Agreement between the Ethiopian Government and the Company was formalised in April 2015. The terms include a 20-year Mining License, full permits for the development and operation of the Tulu Kapi gold project and a 5% Government free-carried interest. The Company is working towards funding the development of the Tulu Kapi project.

The schedule remains on track for project finance syndicate documentation and inter-creditor arrangements to be assembled and approved by syndicate and National Bank of Ethiopia for full drawdown by late- 2017. The Government of Ethiopia confirmed its intention to invest equity capital of US$20 million.

KEFI Minerals Ethiopia also has no other mining exploration licences in Ethiopia. All development costs relating to Yubdo and Billa Guilisso exploration licenses capitalised in previous years was impaired in the current year.

 



 

Notes to the consolidated financial statements (continued)

Year ended 31 December 2016

 

13. Investments

 

13.1 Fixed asset investments

The Company

Year Ended

31.12.16

£'000


Year Ended 31.12.15

£'000

Cost




At 1 January

4,598


4,598

Acquisitions

-


-

At 31 December

4,598


4,598

 

 

 

 

 

Subsidiary companies

Date of acquisition/

incorporation

 

Country of incorporation

Effective

proportion of

shares held





Mediterranean Minerals (Bulgaria) EOOD

08/11/2006

Bulgaria

100%-Direct

Doğu Akdeniz Mineralleri Sanayi ve Ticaret Limited Şirket

08/11/2006

Turkey

100%-Indirect

KEFI Minerals Ethiopia Limited

30/12/2013

United Kingdom

100%-Direct

KEFI Minerals Marketing and Sales Cyprus Limited

30/12/2014

Cyprus

100%-Direct

               

 

Subsidiary companies

 

The following companies have the address of:





Mediterranean Minerals (Bulgaria) EOOD

10 Tsar Osvoboditel Blvd., 3rd floor, Sredets Region, 1000 Sofia, the Republic of Bulgaria.

Doğu Akdeniz Mineralleri Sanayi ve Ticaret Limited Şirket

Zeytinalani Mah. 4183 SK. Kapı No:6 Daire:2 UrlaA Izmir

KEFI Minerals Ethiopia Limited

27/28 Eastcastle Street, London, United Kingdom w1w 8DH

KEFI Minerals Marketing and Sales Cyprus Limited

23 Esekia Papaioannou Floor 2, Flat 21 1075, Nicosia Cyprus

               

On 8 November 2006, the company entered into an agreement to acquire from Atalaya Mining PLC (previously EMED) the whole of the issued share capital of Mediterranean Minerals (Bulgaria) EOOD, a company incorporated in Bulgaria, in consideration for the issue of 29,999,998 ordinary shares in the Company.

Mediterranean Minerals (Bulgaria) EOOD owns 100% of the share capital of Doğu Akdeniz Mineralleri ("Dogu"), a private limited liability company incorporated in Turkey, engaging in activities for exploration and developing of natural resources.

The Company owns 100% of Kefi Minerals Ethiopia, which operates the Tulu Kapi project in Ethiopia. The Government of Ethiopia is entitled to a 5% free-carried interest in the Tulu Kapi Gold Project. This entitlement is enshrined in the Ethiopian Mining Law and the Ethiopian Mining Agreement between the Ethiopian Government and KEFI Minerals Ethiopia. The implementation of this entitlement is intended to issue 5% of the shareholding of KEFI Minerals Ethiopia at the time of the final completion of the full project finance of the Tulu Kapi Gold Project. Once all the relevant documents are executed the intended arrangement would add 5% to the shareholding paid by the Ethiopian Government. 

The company owns 100% of KEFI Minerals Marketing and Sales Cyprus, a company incorporated in Cyprus. The company was dormant for the year end 31 December 2016 and 2015. KEFI Minerals Marketing and Sales Cyprus had no assets or liabilities at the date of acquisition. No additional disclosure is considered necessary, as the entity is not significant to the financial statements. KEFI Minerals Marketing and Sales Cyprus will provide sales and marketing services for the Group once production commences. It is planned that this company will act as agent and off-taker for the onward sale of gold and other products in international markets.

 



 

Notes to the consolidated financial statements (continued)

Year ended 31 December 2016

 

13.2 Investment in jointly controlled entity


Year Ended

31.12.16

£'000


Year Ended

31.12.15

£'000





The Company




At 1 January/31 December

181


181

 

 

 

 

 

Jointly controlled entity

Date of acquisition/

incorporation

Country of incorporation

Effective proportion of shares held





Gold and Minerals Co. Limited (G&M)

04/08/2010

Saudi Arabia

40%-Direct





The company owns 40% of G&M more information in note 19.2.

 

14. Available for sale financial assets


Year Ended

31.12.16

£'000


Year Ended

31.12.15

£'000

 

The Group



 

 

 

At 1 January

92


86

 

Change in value of available-for-sale financial assets

3


6

 

 

On 31 December

95


92

 


Year Ended

31.12.16

£'000


Year Ended

31.12.15

£'000

 

The Company




 

At 1 January

8


8

 

Disposal of Investment

(16)


-

 

Profit on Sale

8


-

 

Change in value of available-for-sale financial assets

-


-

 

 

At 31 December

-


8

 

The Company successfully divested four Licences in Turkey in July 2011 to AIM listed Ariana Resources (AIM:AAU)  for a nominal cash payment of 10,000 Turkish Lira, 910,747 new ordinary shares in Ariana and  a Net Smelter Royalty ("NSR") of 2%.  The NSR is payable by Ariana's wholly owned Turkish subsidiary Galata Madencilik San. ve Tic. Ltd. ("Galata") to KEFI Mineral's Turkish Subsidiary, Dogu, on commercial production of any mineral from the licences.  No value has been attributed in these financial statements for the NSRs, due to uncertainty regarding when income from the NSRs will commence.



 

Notes to the consolidated financial statements (continued)

Year ended 31 December 2016

 

15. Trade and other receivables


Year Ended 31.12.16

£'000


Year Ended

31.12.15

£'000

 

The Group




 

Other receivables

38


45

 

Placing funds

198


207

 

Amount receivable from Saudi Arabia Jointly controlled entity (Note 21.3)

6


6

 

VAT Refund

2,809


95

 

 

Deposits and prepayments

5


5

 


3,056


358

 

The Company fully discharged the inherited VAT liability during August 2016 and is entitled to a £2.7 million (Birr 73,5000,000) VAT refund. The directors are of the opinion that the results of recent discussion with the VAT office that the reverse VAT refund is been processed by the relevant VAT branch office for settlement. Post Balance sheet during April 2017, the company received c.£1 million of the £2.7 million VAT refund. The Company has come to an agreement with Ethiopian Revenues and Customs Authority to receive the remainder of the funds by mid-2017.

 

 

 


Year Ended 31.12.16

£'000


Year Ended

31.12.15

£'000

 

The Company




 

Deposits

8


3

 

Placing Funds

198


207

 

KEFI Minerals Marketing and Sales Cyprus Limited (Note 21.3)

3


3

 

Advance to KEFI Minerals Ethiopia Limited (Note 21.3)

7,815


7,417

 

Amount receivable from Saudi Arabia Jointly controlled entity (Note 21.3)

45


80

 

 


8,069


7,710

 

Amounts owed by group companies total £7,818,000 (2015: £7,420,000).  Balances of £1,256,000 have been fully provided for all projects except for Ethiopia due to the uncertainty over the timing of future recoverability. The advance issued to KEFI Minerals Ethiopia Limited are unsecured interest free and repayable on demand. At the reporting date, no receivables were past their due date.

 

 

16. Cash and cash equivalents




 


Year Ended

31.12.16

£'000


Year Ended

31.12.15

£'000

The Group




Cash at bank and in hand

410


562





The Company



Cash at bank and in hand

400


393

 

 


 

Notes to the consolidated financial statements (continued)

Year ended 31 December 2016

 

 

 

17. Share capital

Number of shares '000


Share Capital


Deferred

Shares


Share premium


 

Total

 

 











 

 

Issued and fully paid










 

 

At 1 January 2015

1,235,337


12,352


-


8,433


20,785

 

 

Issued 20 March 2015 at 1p

   80,000


800


-


-


800

 

 

Issued 16 May 2015 at 1p

66,611


667


-


-


667

 

 

Sub-division of shares 16 June 2015 0.1p

-


(12,436)


12,436


-


-

 

 

Issued 16 June 2015 at 0.8p

362,500


363


-


2,538


2,901

 

 

Issued 11 December 2015 at 0.3p

877,191


877


-


      1,755


2,632

 

 

Share issue costs

-


-


-


(379)


(379)

 

 

At 31 December 2015

2,621.639


2,623


12,436


12.347


27,406

 

Issued 22 March 2016 at 0.35p

  499,360  


499


-


1,248


1,747

Issued 29 July 2016 at 0.5p

761,922  


761


-


3,048


3,809

 

Share issue costs

-


-  


-


(364)

(364)

 

 

At 31 December 2016

3,882,921


3,883  


12,436


16,279


32,598

 

 

Share issue costs of £Nil (2015: £64,000) relating to the 146,610,600 shares issued at par value during 2015 have been charged to equity. The remainder of share issue costs are charged against share premium arising on issue.

 

Authorized capital

 

That the articles of association of the Company were amended in 2010 and the liability of the members of the Company is limited.

 

Issued capital

 

2015

 

On 20 March 2015, 80,000,000 shares of 1p were issued at a price of 1p per share.

On 16 May 2015, 66,610,600 shares of 1p were issued at a price of 1p per share. 

On 16 June 2015, 362,500,000 shares of 0.1p were issued at a price of 0.8p per share.  On issue of the shares, an amount of £2,537,500 was credited to the Company's share premium reserve.

On 11 December 2015, 877,191,422 shares of 0.1p were issued at a price of 0.3 p per share.  On issue of the shares, an amount of £1,754,500 was credited to the Company's share premium reserve.

2016

On 22 March 2016, 499,359,791 shares of 0.1p were issued at a price of 0.35p per share.  On issue of the shares, an amount of £1,248,299 was credited to the Company's share premium reserve.

On 29 July 2016, 761,921,739 shares of 0.1p were issued at a price of 0.5p per share.  On issue of the shares, an amount of £3,047,687 was credited to the Company's share premium reserve.

 

Restructuring of share capital into deferred shares

 

On 16 June 2015 the Company's issued ordinary shares of 1p each in the capital of the Company were sub-divided into one new ordinary share of 0.1p and one deferred share of 0.9p. The deferred shares have no value or voting rights. After the share capital reorganization there were the same number of New Ordinary Shares in issue as there are existing Ordinary Shares. The New Ordinary Shares have the same rights as those currently accruing to the existing Ordinary Shares in issue under the Company's articles of association, including those relating to voting and entitlement to dividends.

 


 

Notes to the consolidated financial statements (continued)

Year ended 31 December 2016

 

17. Share capital (continued)

Warrants

 

2015

 

On 18 March 2015, the Company issued 4,000,000 warrants to subscribe for new ordinary shares of 1p each at 1p per share.

On 11 May 2015, the Company issued 1,680,530 warrants to subscribe for new ordinary shares of 1p each at 1p per share.

On 15 June 2015, the Company issued 14,500,000 warrants to subscribe for new ordinary shares of 0.1p each at 0.8p per share.

On 11 December 2015, the Company issued 43,859,571 warrants to subscribe for new ordinary shares of 0.1p each at 0.3p per share.

 

 

2016

On 22 March 2016, the Company issued 24,967,989 warrants to subscribe for new ordinary shares of 0.1p each at 0.35p per share.

On 29 June 2016, the Company issued 38,096,087 warrants to subscribe for new ordinary shares of 0.1p each at 0.5p per share.

 

During the period 1 January 2016 to 31 December 2016, 22,780,000 warrants were cancelled or expired.

 

Details of warrants outstanding as at 31 December 2016:

 

Grant date

Expiry date

Exercise price

Expected Life Years

000's

20-Feb-12

19-Feb-17

3.00p

5 years

2,917

04-Jul-13

03-Jul-18

2.10p

5 years

1,310

16-Oct-13

15-Oct-18

2.25p

5 years

1,111

02-Dec-14

01-Dec-17

1.00p

3 years

4,000

16-Dec-14

15-Dec-17

1.00p

3 years

5,500

18-Mar-15

17-Mar-18

1.00p

3 years

4,000

11-May-15

10-May-18

1.00p

3 years

1,680

15-Jun-15

14-Jun-18

0.80p

3 years

14,500

11-Dec-15

10-Dec-18

0.30p

3 years

43,860

22-Mar-16

21-Mar-19

0.35p

3 years

24,968

29-Jul-16

28-Jul-19

0.50p

3 years

38,096






141,942

 

 

 

 

 

Notes to the consolidated financial statements (continued)

Year ended 31 December 2016

 

17. Share capital (continued)

Warrants (continued)

 

The Company has issued warrants to advisers to the Group.  All warrants, as noted above expire between two to five years after grant date and are exercisable at the exercise price.


Number of warrants 000's

Outstanding warrants at 1 January 2016

101,658

- granted

63,064

 - cancelled/forfeited/expired

(22,780)

Outstanding warrants at 31 December 2016

141,942

 

 

The estimated fair values of the warrants were calculated using the Black Scholes option pricing model.

The inputs into the model and the results for warrants granted during the year are as follows:

 





29 July

2016

22 March

2016

11 Dec

2015

15 June

2015

11 May

2015

18 Mar

2015











Closing share price at issue date



 

0.56p

 

0.36p

0.32p

0.90p

0.88p

1.33p

Exercise price

0.50p

0.35p

0.3p

0.8p

1.00p

1.00p

Expected volatility

87.3%

80.3%

79.10%

61.10%

60.90%

59%

Expected life

3yrs

3yrs

3yrs

3yrs

3yrs

3yrs

Risk free rate

0.31%

0.31%

0.39%

0.98%

0.98%

0.98%

Expected dividend yield



 

Nil

 

Nil

Nil

Nil

Nil

Nil

Estimated fair value



0.32p

0.17p

0.17p

0.40p

0.33p

0.64p

 

 

Expected volatility was estimated based on the historical underlying volatility in the price of the Company's shares.

 

For 2016, the impact of issuing warrants is a net charge to income of £164,000 (2015: £163,000).  At 31 December 2016, the equity reserve recognized for share based payments, including warrants, amounted to £1,474,000 (2015: £1,212,000).


Year Ended

31.12.16

£'000


Year Ended

31.12.15

£'000





Opening amount

1,212

848

Warrants issued costs (Note 6)

164

163

Share options issued to employees (Note 6)

77

69

Share options issued to directors and key management (Note 6)

204

146

Cancelled options

(183)

(14)

Closing amount

1,474

1,212

 

 

 



 

Notes to the consolidated financial statements (continued)

Year ended 31 December 2016

 

18. Share options reserve

Details of share options outstanding as at 31 December 2016:

Grant date

Expiry date

Exercise price


Number of shares 000's

13-Sep-12

12-Sep-18

4.00p


14,150

24-May-13

23-May-19

2.915p


1,000

03-Sep-13

02-Sep-18

2.94p


1,000

08-Oct-13

07-Oct-18

2.27p


350

08-Jan-14

07-Jan-20

1.88p


400

16-Jan-14

15-Jan-20

1.99p


100

01-Feb-14

31-Jan-20

1.89p


100

27-Mar-14

26-Mar-20

2.30p


27,125

04-Apr-14

03-Apr-20

1.83p


100

12-Sep-14

11-Sep-20

1.76p


2,250

20-Mar-15

19-Mar-21

1.32p


27,000

16-Jun-15

15-Jun-21

1.32p


6,500

19-Jan-16

18-Jan-22

0.42p


80,190

23-Feb-16

22-Feb-22

0.74p


3,000

05-Aug-16

05-Aug-22

0.60p


35,000





198,265






 


Weighted average ex. Price

Number of shares 000's

Outstanding options at 1 January 2016


81,275

-  granted

0.48p

118,190

-  cancelled/forfeited/expired

3.94p

(1,200)

Outstanding options at 31 December 2016


198,265

 

The Company has issued share options to directors, employees and advisers to the Group.

On 13 September 2012, 15,500,000 options were issued which expire six years after the grant date, and are exercisable at the exercise price in whole or in part no more than one half after one year from the grant date and one half two years from the grant date.

On 24 May 2013 1,000,000 options were issued which expire six years after the grant date and are exercisable in part no more than one half after one year from the grant date and one half two years from the grant date. On 3 September 2013 1,000,000 options were issued and on 8 October 2013, 350,000 options were issued both which expire five after the grant date and are exercisable in part no more than one half after one year from the grant date and one half two years from the grant date

During January 2014 and February 2014 600,000 options were issued which expire six years after the grant date and are exercisable in part no more than one half after one year from the grant date and one half two years from the grant date.

On 27 March 2014, 22,000,000 options were issued to the Directors and a further 5,400,000 options have been granted to other non-board members of the senior management team. Of the options issued, previously granted options over 22,100,000 Ordinary shares which were due to expire during 2014 have all been cancelled and the new grants of options have been made, in accordance with the terms of the Scheme the options vest in equal annual instalments over a period of 2 years and expire after 6 years.



 

Notes to the consolidated financial statements (continued)

Year ended 31 December 2016

 

18. Share options reserve (continued)

On 4 April 2014, 100,000 options were issued which expire six years after the grant date and are exercisable in part no more than one half after one year from the grant date and one half two years from the grant date.

On 12 September 2014, 2,250,000 options were issued which expire six years after grant date and vest in equal annual instalments over a period of two years.

On 20 March 2015, 27,000,000 options were issued which expire six years after grant date and vest in equal annual instalments over a period of two years.

On 16 June 2015, 6,500,000 options were issued which expire six years after grant date and vest in equal annual instalments over a period of two years.

On 19 January 2016, 80,190,000 options were issued which expire six years after grant date and vest in normal circumstances, vest in two equal annual instalments, the first upon the achievement of practical completion of the planned processing plant at the Tulu Kapi Gold Project and the second upon the achievement of nameplate capacity for a twelve-month period.

On 23 February 2016, 3,000,000 options were issued which expire six years after grant date and vest immediately.

On 5 August 2016, 35,000,000 options were issued which expire six years after grant date and vest in normal circumstances, vest in two equal annual instalments, the first upon the achievement of practical completion of the planned processing plant at the Tulu Kapi Gold Project and the second upon the achievement of nameplate capacity for a twelve-month period.

The option agreements contain provisions adjusting the exercise price in certain circumstances including the allotment of fully paid Ordinary shares by way of a capitalisation of the Company's reserves, a sub division or consolidation of the Ordinary shares, a reduction of share capital and offers or invitations (whether by way of rights issue or otherwise) to the holders of Ordinary shares. The estimated fair values of the options were calculated using the Black Scholes option pricing model. The inputs into the model and the results are as follows:

Date

Closing share price at issue date

Exercise price

Expected volatility

Expected life

Risk free rate

Expected dividend yield

Discount factor

Estimated fair value

05-Aug-16

0.56p

0.60p

87.20%

6yrs

0.75%

Nil

0%

0.40p

23-Feb-16

0.33p

0.74p

82.65%

6yrs

0.90%

Nil

0%

0.11p

19-Jan-16

0.34p

0.42p

83.18%

6yrs

0.90%

Nil

0%

0.22p

16-Jun-15

0.83p

1.32p

61.11%

6yrs

1.53%

Nil

0%

0.38p

20-Mar-15

1.20p

1.32p

59.04%

6yrs

1.53%

Nil

0%

0.64p

12-Sep-14

1.43p

1.76p

43.40%

6yrs

1.09%

Nil

0%

0.52p

04-Apr-14

1.83p

1.83p

59.60%

6yrs

2.17%

Nil

0%

0.94p

27-Mar-14

1.85p

2.30p

59.60%

6yrs

2.17%

Nil

0%

0.94p

01-Feb-14

1.90p

1.89p

59.60%

6yrs

2.17%

Nil

0%

0.94p

16-Jan-14

1.83p

1.99p

59.60%

6yrs

2.17%

Nil

0%

0.94p

08-Jan-14

1.85p

1.88p

59.60%

6yrs

2.17%

Nil

0%

0.94p

08-Oct-13

2.69p

2.27p

63.83%

5yrs

1.70%

Nil

50%

0.80p

03-Sep-13

2.76p

2.94p

63.63%

5yrs

1.70%

Nil

50%

0.75p

24-May-13

2.19p

2.92p

59.80%

6yrs

5.00%

Nil

0%

1.18p

13-Sep-12

3.63p

4.00p

56.90%

6yrs

5.00%

Nil

0%

2.05p

 

Expected volatility was estimated based on the historical underlying volatility in the price of the Company's shares.

 

 



 

Notes to the consolidated financial statements (continued)

Year ended 31 December 2016

 

18. Share options reserve (continued)

For 2016, the impact of share option-based payments is a net charge to income of £281,000 (2015: £215,000). At 31 December 2016, the equity reserve recognized for share option-based payments, including warrants, amounted to £1,474,000 (2015: £1,212,000).

19. Jointly controlled entities

19.1 Jointly controlled entity with Centerra Gold (KB) Inc.

On 22 October 2008, the Company entered into a Joint Venture Agreement in respect of its 100%-owned Artvin Project with Centerra Gold (KB) Inc ("Centerra KB"), a wholly-owned subsidiary of Centerra Gold Inc.  In August 2011, KEFI Mineral's subsidiary holding these licences, was sold in return for a cash payment of US$100,000 and a 1% Net Smelter Royalty on all future mineral production from the Artvin licences.

19.2 Joint controlled entity with Gold and Minerals

 

 

Company name

 

Date of incorporation

Country of incorporation

Effective proportion of shares held at 31 December

Gold & Minerals Co. Limited

3 August 2010

Saudi Arabia

40%

 

Gold & Minerals Co. Limited has the following registered address: Olaya District. 659, King Fahad Road, Riyadh, Kingdom of Saudi Arabia.


SAR'000


GBP'000

 

Amounts relating to the Jointly Controlled Entity

Year Ended

31.12.16

 


Year Ended

31.12.15


Year Ended

31.12.16


Year Ended

31.12.15









Non-current assets

223


493


19


36

Current assets

685


1,473


59


106


908


1,966


78


142









Non-current liabilities

60,594


54,974


5,246


3,971

Current liabilities

667


1,048


58


76


61,261


56,022


5,304


4,047

Net liabilities

(60,353)


(54,056)


(5,226)


(3,905)









Share capital

2,500


2,500


217


181

Accumulated losses

(62,853)


(56,556)


(5,443)


(4,086)


(60,353)


(54,056)


(5,226)


(3,905)

Exchange rates SAR to GBP








 

Closing rate





0.2165


0.1806

 

 

In May 2009, KEFI announced the formation of a new minerals exploration jointly controlled entity, Gold & Minerals Co. Limited ("G&M"), a limited liability company in Saudi Arabia, with leading Saudi construction and investment group Abdul Rahman Saad Al-Rashid & Sons Company Limited ("ARTAR").  KEFI is the operating partner with a 40% shareholding in G&M with ARTAR holding the other 60%.  KEFI provides G&M with technical advice and assistance, including personnel to manage and supervise all exploration and technical studies.  ARTAR provides administrative advice and assistance to ensure that G&M remains in compliance with all governmental and other procedures.  G&M is treated as a jointly controlled entity and has been equity accounted and has reconciled its share in G&M's losses.

The above figures reported represent cumulative exploration activity incurred by G&M since its incorporation in 2009. The accounting policy for exploration costs recorded in the G&M audited financial statements is to capitalise qualifying expenditure and review for impairment, if applicable. This is in contrast to the Group's accounting policy relating to exploration costs which is to expense costs through profit and loss until the Board decides on the development of a project (Note 2). Consequently, exploration costs of G&M at 31 December 2016 amounting to SAR62.6 million (2015: SAR56.6 million) have been adjusted to bring the figures in line with the Group's accounting policies.

 



 

Notes to the consolidated financial statements (continued)

Year ended 31 December 2016

 

19. Jointly controlled entities (continued)

19.2 Jointly controlled entity with Gold and Minerals (continued)

A loss of £726,000 was recognized by the Group for the year ended 31 December 2016 (2015: £ 735,000) representing the Group's share of losses in the year.

As at 31 December 2016 KEFI owed ARTAR an amount of £170,000 (2015: receivable £90,000) - Note 21.5.

As at 31 December 2016, G&M owed KEFI an amount of £6,000 (2015: £6,000) - Note 21.4. 

 

20. Trade and other payables

The Group

Year Ended

31.12.16

£'000


Year Ended

31.12.15

£'000





Accruals and other payables

1,640


1,011

Other loans

257


236

Payable to shareholders (Note 21.2)

-


8

Payable to jointly controlled entity (Note 21.4)

170


90

VAT Liability

-


650






2,067


1,995

               

In January 2014 an agreement was made with Ethiopian Revenue and Customs Authority ("ERCA") to repay the balance of the VAT liability plus interest accruing on the unpaid principal amount over a three-year payment plan in accordance with the relevant tax proclamation, 25% of the assessed outstanding amount is payable immediately and the balance under an agreed payment schedule. . The balance of the liability plus interest accruing on the unpaid principal amount was paid within the three year payment period.

Other loans are unsecured, interest free and repayable on demand.

 

 

The Company

 

 

Year Ended

31.12.16

£'000


Year Ended

31.12.15

£'000





Accruals and other payables

1,447


886

Payable to jointly controlled entity (Note 21.4)

170


90


1,617


976

 

The fair values of trade and other payables due within one year approximate to their carrying amounts as presented above.



 

Notes to the consolidated financial statements (continued)

Year ended 31 December 2016

 

21. Related party transactions

The following transactions were carried out with related parties:

21.1 Compensation of key management personnel

The total remuneration of key management personnel was as follows:


Year Ended

31.12.16

£'000


Year Ended

31.12.15

£'000





Directors' consultancy fees *

500


471

Directors' other consultancy benefits

49


51

Directors' bonus

-


50

Share option-based benefits to directors (Note 17)

167


146

Other key management personnel fees and other benefits

323


204

Other key management personnel bonus

-


37

Share option-based benefits other key management personnel (Note 17)

37


11


1,076


970

 

* Part of the salary of the Exploration Director was paid directly by the jointly-controlled entity G&M.

* Directors' fees paid to the Executive Director Chairman and Finance Director are paid to consultancy companies of which they are beneficiaries. 

 

 

Share-based benefits

The Company has issued share options to directors and key management.  All options, except those noted in Note 18, expire six years after grant date and vest in normal circumstances, vest in two equal annual instalments, the first upon the achievement of practical completion of the planned processing plant at the Tulu Kapi Gold Project and the second upon the achievement of nameplate capacity for a twelve month period.

 

 

21.2 Payable to shareholders



      

 2016


 

2015

Name

Nature of transactions

Relationship




Atalaya Mining PLC (previously EMED)

Finance

Shareholder

-


            8

 

Name

 

Nature of transactions

 

Relationship










Atalaya Mining PLC (previously EMED)

Provision of management and other professional services

Shareholder

 

18


               8







 

21.3 Receivable from related parties

 






The Group



2016


2015

Name

Nature of transactions

Relationship




Gold & Minerals Co. Limited

Finance

Jointly controlled entity

6


             6




6


             6

 

The Company



2016


2015

Name

Nature of transactions

Relationship




Gold & Minerals Co. Limited

Finance

Jointly controlled entity

45


           80

KEFI Minerals Marketing and Sales Cyprus Limited

Finance

Subsidiary

3


3             

Kefi Minerals Ethiopia Limited

Advance

Subsidiary

7,815


7,417




7,863


7,500



 

 

Notes to the consolidated financial statements (continued)

Year ended 31 December 2016

 

21. Related party transactions (continued)

 




 

21.4 Payable to related parties

 






The Group



2016


2015

Name

Nature of transactions

Relationship




Abdul Rahman Saad Al-Rashid & Sons Company Limited ("ARTAR")

Finance

Jointly controlled entity

170


90




170


90

 

The Company




2015

Name

Nature of transactions

Relationship




Abdul Rahman Saad Al-Rashid & Sons Company Limited ("ARTAR")

Finance

Jointly controlled entity


90




170


90













22. Contingent liabilities

22.1 Geological database

 

In 2006, Atalaya Mining PLC (previously EMED) acquired a proprietary geological database that covers extensive parts of Turkey and Greece and transferred to the Company that part of the geological database that relates to areas in Turkey.

Under the agreement, the Company has undertaken to make a payment of approximately £61,400 (AUD 105,000) for each tenement it is subsequently awarded in Turkey and which was identified from the database.  The maximum number of such payments required under the agreement is four, resulting in a contingent liability of up to £246,000.  These payments are to be settled by issuing shares in the Company.  To date, only one tranche of shares have been issued under this agreement in June 2007 for £43,750 (AUD 105,000).

22.2 Charge issued

 

On 13 August 2015, the Company created a fixed charge in favour of AIB Group (UK) Plc over amounts held in the Company's deposit accounts with the bank. The charge is in regard to time credit banking facilities provided by AIB Group (UK) Plc. At 31 December 2016, the balance in the deposit accounts was £20,000.

 

22.3 Legal Allegations

 

A claim for damages of £9,000,000 (approximately ETB249 million) had been lodged against the Company in 2014. The claim was based on the impact of exploration field activities conducted between 1998 and 2006, a period which pre-dated the Company's involvement in the Tulu Kapi project. These exploration activities comprised the construction of drill pads and access tracks. No objections had been made until 2014 when certain parties from outside the Tulu Kapi district raised this matter and initiated court action. Those parties have since been removed by the Court rulings from the list of plaintiffs. The Oromia Regional Supreme Court in April 2017 rejected 95% of these claims as having no basis in fact or law and reduced KEFI's potential liability to c.£435,000 (ETB12,762,721). Moreover, the Company has appealed to the Federal Supreme Court with regards to the remaining ETB12,762,721 on the basis that it remains firmly of the belief, on legal advice and as previously reported, that it has no contingent or actual liability, having already settled any obligations when the matter was originally closed by both the regulators and the land occupiers. The Federal Supreme Court last week officially admitted the Company's appeal after due review, and the case is expected to be heard within the next two years.



 

Notes to the consolidated financial statements (continued)

Year ended 31 December 2016

 

23. Capital commitments

The Group has the following capital or other commitments as at 31 December 2016 Nil (2015 0.03 Million),

                                                                                                               



Year Ended

31.12.16

£'000


Year Ended

31.12.15

£'000

 

 

Exploration programme commitments


 

-


 

-

 

 

Property, plant and equipment


 

-


 

27

 



-


27

 






 






24. Events after the reporting date

 

Consolidation of Ordinary Shares

At the close of business, 1 March 2017, shareholders received one New Ordinary Share of nominal value 1.7 pence each for every 17 Existing Ordinary Shares of nominal value 0.1 pence each. Immediately following the Consolidation (and prior to the issue of the Fundraising Shares) the number of New Ordinary Shares in issue and admitted to trading on AIM was 228,407,085.

Placing and the Lanstead Subscription

The Company conditionally raised £5,620,000 million before expenses on 1 March 2017 through a placing of 104,295,888 ordinary shares of 1.7p each at a price of 5.61p per share. After the placing and the 17:1 consolidation approved on 1 March 2017 there are 332,702,973 shares on issue.

The Lanstead Subscription involves the issuance of 82,352,941 shares and is governed according to a 'sharing agreement' and structured relative to a benchmark price, which has been set at 7.48p/share (0.44p/share pre-consolidation), such that KEFI may receive more than £4,620,000 if the share price exceeds this level and vice versa if it does not. To this end, £693,000 was contributed in March 2017 by Lanstead, with the balance being paid in equal instalments of £218,000 per month (subject to adjustment upwards or downwards) for 18 months commencing in April 2017.

Other

On 22 March 2017, 6,829,613 options were issued to persons who discharge director and managerial responsibilities ("PDMRs") and a further 2,705,509 options have been granted to other non-board members of the senior management team. The options have an exercise price of 7.5p, expire after 6 years, and vest in two equal annual instalments, the first upon the achievement of practical completion of the planned processing plant at the Tulu Kapi Gold Project and the second upon the achievement of nameplate capacity for a twelve-month period.

 


 

Notes to the consolidated financial statements (continued)

Year ended 31 December 2016

 

25.  Adoption of new and revised International Financial Reporting Standards (IFRSs)

During the current year the Group adopted all the new and revised International Financial Reporting Standards (IFRS) that are relevant to its operations and are effective for accounting periods beginning on 1 January 2016. This adoption did not have a material effect on the accounting policies of the Group.

Up to the date of approval of the consolidated financial statements, certain new standards, interpretations and amendments to existing standards have been published that are not yet effective for the current reporting period and which the Group has not early adopted, as follows:

 

Issued by the IASB and adopted by the European Union New standards

·      IFRS 9 ''Financial Instruments'' (effective for annual periods beginning on or after 1 January 2018).

·      IFRS 15 ''Revenue from Contracts with Customers'' (effective for annual periods beginning on or after 1 January 2018).

IFRS 9 "Financial Instruments"

IFRS 9 makes substantial changes to the measurement of financial assets and financial liabilities. There will only be three categories of financial assets at either fair value through profit and loss, fair value through comprehensive income or measured at amortized cost. On adoption of the standard the Group will have to re-determine the classification of its financial assets based on the business model for each financial asset. This is not considered likely to give rise to any significant adjustments, other than the re-classification.

The principal change to the measurement of financial assets measured at amortized cost or fair value through other comprehensive income is that impairments will be recognized on an expected loss basis, compared with the current incurred loss approach. As such, where there are expected to be credit losses, these are recognized in profit or loss. For financial assets measured at amortized cost, the carrying amount is reduced for the loss allowance. For financial assets measured at fair value through other comprehensive income, the loss allowance is recognized in other comprehensive income and does not reduce the carrying amount of the financial assets.

Financial liabilities of the Group are expected to continue to be recognized at amortized cost.

IFRS 15 "Revenue from Contracts with Customers"

The standard has been developed to provide a comprehensive set of principles in presenting the nature, amount, timing and uncertainty of revenue and cash flows arising from a contract with a customer. The standard is based around five steps in recognizing revenue:

 

1.     Identify the contract with the customer;

2.     Identify the performance obligations in the contract;

3.     Determine the transaction price;

4.     Allocate the transaction price; and

5.     Recognize revenue when a performance obligation is satisfied.

 

The Group is not currently generating income from gold sales revenue, hence there is not considered to be any significant impact at the Group's current stage of development. Management are currently evaluating the impact of the standard on the financial statements.

 


 

Notes to the consolidated financial statements (continued)

Year ended 31 December 2016

 

25.  Adoption of new and revised International Financial Reporting Standards (IFRSs) (continued)

 

Amendments

·      Amendments to IFRS2: Classification and Measurement of Share-based Payment Transactions (effective for annual periods beginning on or after 1 January 2018).

·      Clarifications to IFRS 15 ''Revenue from Contracts with Customers'' (effective for annual periods beginning on or after 1 January 2018).

·      IAS 7 (Amendments) ''Disclosure Initiative'' (effective for annual periods beginning on or after 1 January 2017)

·      IAS 12 (Amendments) ''Recognition of Deferred Tax Assets for Unrealised Losses'' (effective for annual periods beginning on or after 1 January 2017).

·      Annual Improvements to IFRSs 2014-2016 Cycle (issued on 8 December 2016) (effective for annual periods beginning on or after 1 January 2017).

·      Annual Improvements to IFRSs 2014-2016 Cycle (issued on 8 December 2016) (effective for annual periods beginning on or after 1 January 2018).

New IFRICs

 

·        IFRIC Interpretation 22 ''Foreign Currency Transactions and Advance Consideration'' (effective for annual periods beginning on or after 1 January 2018).

 

The Group is currently evaluating the effect of these standards or interpretations on its consolidated financial statements


This information is provided by RNS
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