Source - LSE Regulatory
RNS Number : 4980D
Tertiary Minerals PLC
19 February 2020
 

TERTIARY MINERALS PLC

("Tertiary" or the "Company")

19 February 2020

Audited Results for the year to 30 September 2019

The Board of Tertiary Minerals plc is pleased to announce audited results for the year ended 30 September 2019.

OPERATIONAL HIGHLIGHTS FOR THE 12 MONTHS ENDING 30 SEPTEMBER 2019:

In line with the Company's strategy to build a new multi-commodity project portfolio to enable the Company to reduce its future geographical, technical, permitting and commodity risk exposure and provide long-term shareholder value, two new exploration projects have been acquired in the period:

Pyramid Project

Ø Geological analogies with high-grade multi-million ounce Fire Creek & Midas Gold Mines

Ø 20-year lease secured over group of 9 patented claims with option to purchase (subject to underlying royalties)

Ø Additional 25 mining claims staked to cover additional targets along strike

Ø Limited historical exploration (1989-90) has defined priority epithermal vein drill target:

·     Drill hole PYR 9 - intersected visible gold and assayed 1.52m grading 17.8 g/t Au from 94.5m down hole

·     PYR 9 ended in 1.52m grading 2.6 g/t Au at 115.8m depth

Ø PYR 9 was only drill hole to effectively test a cohesive 750m long open-ended gold-mercury-arsenic soil geochemical anomaly

Ø Claims contain a number of untested epithermal veins and stockwork target zones - 43 widespread surface samples assayed up to 7.27 g/t Au and averaged 1.3 g/t Au

Ø The State of Nevada:

·     5th largest gold producer in world

·     5.58 M oz of gold produced in 2018

·     Ranked #1 most desirable mining jurisdiction in the world by The Fraser Institute

Ø The Company is currently planning an initial drilling programme; drill contractor selected to start as soon as possible.

Paymaster Polymetallic Project

Ø The Company staked claim to the Paymaster zinc-copper-silver-cobalt-tellurium prospect in Nevada, USA

Ø Grab samples assay up to 21% zinc (Zn), 6.5% lead (Pb), 3.3% copper (Cu) and 253g/t silver (Ag)

Ø Mineralisation intermittently exposed and sampled over 1.7km strike length

Ø Samples also contain high levels of high-tech metals tellurium and cobalt (Co)

Ø Successful soil sampling programme completed:

·     165 soil samples

·     Significant elevated levels of Ag, Cu, Zn, Co and Pb over a strike length of over 2,000 metres, maximum values:

Ag: 17.5 ppm; Cu: 896 ppm; Zn: 872 ppm; Co: 33 ppm; Pb: 2251 ppm

 

A further two zones of zinc-silver mineralisation have also been identified in the field:

 

Ø Valley Prospect

·     New thick skarn zone observed in the field: Approximately 350m long and up to 8m thick

·     Rock sample taken from historic shaft spoil assayed 7.5% zinc, 4.3% lead and 180 g/t silver

 

 

Ø East Slope Prospect

·     650m long zinc soil anomaly (100-250 ppm Zinc) surrounding previously sampled outcrop of zinc-silver-cobalt bearing skarn mineralisation, including 175m long 250-500 ppm zinc soil anomaly

·     Previous rock sample assays up to 20.9% zinc, 0.11% cobalt and 198 ppm silver within the prospect  

 

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.

 

For more information please contact:

Tertiary Minerals plc:

Richard Clemmey, Managing Director

+44 (0) 1625 838 679

Patrick Cheetham, Chairman


 

SP Angel Corporate Finance LLP

Nominated Adviser and Broker

Richard Morrison

+44 (0) 203 470 0470

Caroline Rowe


 

 

Chairman's Statement

I am pleased to present the Company's Annual Report and Financial Statements for the year ended 30 September 2019.

 

In my interim report in May 2019, I spoke of our disappointment in the decision of the Swedish Mining Inspectorate to overturn their 2016 grant of our mining concession for the Storuman Fluorspar Project and our submission of an appeal to the Swedish Government. The Mining Inspectorate's decision was made on the basis that our proposed mine infrastructure and reindeer herding in the area could not coexist although their decision states that the economic aspects point in favour of granting the exploitation concession, that a permit regarding Natura 2000-area is unnecessary, that fluorspar is included in the EU list of critical raw materials and that a mining establishment would mean positive socio-economic benefit for the municipality of Storuman. Our appeal contends that the Mining Inspectorate did not adequately consider the extensive mitigation measures proposed for the local reindeer herding activities.

 

The Government has not yet decided on the appeal and, frustratingly, will not commit to a decision timeframe. Many new mining projects in Sweden are similarly affected and lobbying of the Government by other mining companies has not resulted in a change in the Government's current position towards mining projects.

 

Financial constraints during the year have limited our ability to fund activities on other fluorspar projects and so only limited work has taken place on the Company's large MB Fluorspar Project in Nevada. However, testwork is ongoing to address the metallurgical complexity that characterises the near surface mineralisation that would be mined in the early years of the Company's preliminary mine plan. When finances allow we intend to progress the economic scoping study for development of the project. This may include further drilling of conceptual higher-grade targets in the northern part of the project. No work was carried out at the Lassedalen Fluorspar Project in Norway.

 

As a Board we have faced some difficult decisions in 2019 as our fluorspar projects have not sustained the value they once added to the Company and our efforts to acquire a more advanced project are limited by our size and available financial resources. Consequently, the Board initiated a parallel back-to-its-roots strategy of gold and base metal exploration with an emphasis on low cost value adding acquisition and exploration of gold and base metal projects in Nevada, USA. Nevada is ranked as the most desirable mining jurisdiction in the world by the Fraser Institute and in 2018 produced 5.58 million ounces of gold.

 

In line with this parallel strategy we are delighted to have acquired interests in two new projects in 2019 of which the most advanced is the Pyramid Gold Project in Nevada where we have leased a parcel of private land and staked additional mining claims. Limited exploration in the late 1980s defined a priority epithermal gold vein drill target defined by a single drill hole which intersected visible gold and assayed 1.52m grading 17.8 g/t Au from 94.5m down hole. The broader target and vein trend are defined by a cohesive 750m long open-ended gold-mercury-arsenic soil geochemical anomaly. We intend to drill this target as soon as possible.

 

We also staked claims to secure the Paymaster Project in Nevada where grab samples of skarn-type mineralisation have returned assays up to 21% zinc, 6.5% lead, 3.3% copper and 253 g/t silver and where mineralisation is intermittently exposed and sampled over 1.7km strike length. We conducted a soil sampling programme in 2019 and identified the Valley and East Slope zinc-silver prospects as key prospects for follow up exploration in 2020.

 

In 2019, the stock market for junior mining companies on the AIM market was the most challenging I have experienced in over 20 years. Brexit was undoubtedly a factor as were the trade tensions between the US and China. For Tertiary, these factors have been exacerbated by the negative news from Sweden for our key Storuman Project and the inertia of the Swedish Government in its decision making.

 

Whilst we raised a modest amount of money in early 2019 to fund our activities in the first half of the year, fundraising for Tertiary and its peers at near market prices has been nearly impossible in the second half of 2019 and we have not been prepared to accept opportunistic offers of heavily discounted share placings. Instead, following the end of the financial year, we accepted an offer of funding from Bergen Global Opportunity Fund, LP, a U.S. based institutional investment fund and raised an initial £232,000 before expenses through the issuance of zero-coupon convertible securities as part of a facility having a nominal value of up to £653,000.  We believe this will prove less dilutive to shareholders at this time.  The balance of this facility can be drawn down by agreement with Bergen. As has been the case at year-end for several previous years, the Company will need to raise further funds in the next 12 months to continue as a going concern.

 

Market commentators are anticipating a better year for small cap companies in 2020 and we look forward to reporting news from our exciting new gold and base metal projects in Nevada over this coming year.

 

Our Annual General Meeting for the year ended 30 September 2019 will be held in our offices in Macclesfield this year, on Thursday 19 March 2020.

 

 

 

 

Patrick Cheetham

Executive Chairman

18 February 2020

 

 

Strategic Report

Group Overview

 

Company's Aims

·      Increase shareholder value through the discovery and development of valuable mineral deposits.

·      Reduce the Group's geographical, technical, permitting and commodity risk exposure.

 

Company's Strategy

·      Build and explore a new multi-commodity project portfolio.

·      Continue the evaluation of the Company's fluorspar deposits.

·      Operate only in stable, democratic and mining friendly jurisdictions.

 

Principal Activities

·      The identification, acquisition, exploration and development of mineral deposits including precious metals, base metals and industrial minerals in Nevada, USA and northern Europe.

 

The head office is based in Macclesfield in the United Kingdom with core operating locations in Nevada, USA, Sweden and Norway.

 

Company's Business Model

For exploration projects, the Group prefers to acquire 100% ownership of mineral assets at minimal cost. This either involves applying for exploration licences from the relevant authority or negotiating rights with existing project owners for initially low periodic payments that rise over time as confidence in the project value increases.

 

The Group currently operates with a low-cost base to maximise the funds that can be spent on exploration and development - value adding activities. The Company has five full-time employees including the Managing Director who work with and oversee carefully selected and experienced consultants and contractors. During the year the Board of Directors comprised one independent Non-Executive Director, the Managing Director and the Chairman.

 

Administration costs are reduced via an arrangement governed by a Management Services Agreement with Sunrise Resources plc, whereby Sunrise Resources pays a share of the cost of head office overheads. As at the 30 September 2019, Tertiary holds 2.71% of the issued ordinary share capital of Sunrise Resources plc.

 

The Company's activities are financed by periodic capital raisings, through share placings or share related financial instruments. Access to capital through this method has continued to be very challenging and this is a limiting factor to the speed at which the Company can progress the development of its projects. When projects become more advanced, or as acquisition opportunities advance, the Board will seek to secure additional funding from a range of various sources, for example debt funding, pre-financing through off-take agreements and joint venture partnerships.

 

 

Review & Operating Performance

 

Pyramid Gold Project, Nevada, USA

 

As part of the Company's strategy to build a new multi-commodity project portfolio, in May 2019, the Company secured exploration rights and an option to purchase a group of claims in the Pyramid Mining District of Nevada. The project is located 25 miles northwest of Reno and is readily accessible from State Highway 445 which crosses the northwest tip of the project.

 

Project Highlights

·      20-year lease secured over a group of 9 patented claims with options to purchase (subject to underlying royalties)

·      Additional 25 mining claims staked to cover additional targets along strike

·      Located in productive Walker Lane porphyry copper/epithermal gold belt

·      Limited historical exploration (1989-90) has defined priority epithermal vein drill target:

Drill hole PYR 9 - intersected visible gold and assayed 1.52m grading 17.8 g/t Au from 94.5m down hole

PYR 9 ended in 1.52m grading 2.6 g/t Au at 115.8m depth

PYR 9 was only drill hole to effectively test a cohesive 750m long open-ended gold-mercury-arsenic soil geochemical anomaly

Claims contain a number of untested epithermal veins and stockwork target zones - 43 widespread surface samples assayed up to 7.27 g/t Au and averaged 1.3 g/t Au

 

Geology and Mineralisation

The Pyramid Mining District lies at the northwest end of the Walker Lane mineral belt, a major northwest trending structural deformation zone and a highly productive gold, silver and copper producing region which is host to numerous past and currently producing multi-million ounce epithermal gold deposits as well porphyry copper and porphyry molybdenum deposits.

 

Within the Pyramid Mining District, the Company's Pyramid Project is underlain by a thick sequence of mid-late Tertiary age (23 Ma old) rhyolitic tuffs interpreted by the Nevada Bureau of Mines & Geology to have formed within an east-west elongated Caldera structure named the Perry Canyon Caldera.

 

The gold veins at Pyramid lie within the Perry Canyon Caldera and are interpreted from historical mapping and mineral exploration to lie on the margins of a large and deeply buried porphyry system in the southeast part of the district that is currently claimed by copper producer Asarco LLC (a division part of Groupo Mexico). At the higher erosional levels currently preserved at Pyramid such porphyry systems are prospective for high-sulphidation gold deposits (in more central areas) such as those found further south in the Walker Lane at the Goldfield Mining District (4 million ounces of past production at 1oz gold/ton) and low and intermediate-sulphidation epithermal deposits (of which there are many examples in the Walker Lane) in more peripheral areas where the Company's claims are located. This pattern of mineralisation is similar to that of many large porphyry systems in the US, Peru and the Pacific Basin countries.

 

Past Mining and Exploration

In the main part of the Pyramid District, precious metals were mined from three moderately to steeply dipping, northwest-striking vein systems named after the prominent mines that occur along them - Ruth, Burrus, and Bluebird. The Company's claim interests cover the Ruth vein system and a number of parallel vein systems and zones of alteration.  In addition to abundant quartz and pyrite, vein minerals in unoxidized ore from the Ruth vein system include barite, anglesite, galena, sphalerite, acanthite, gold and cassiterite.

 

The Pyramid Mining District was established in 1866 with only small-scale production reported. Modern exploration in the Pyramid district has focused primarily on the search for porphyry copper mineralisation with only limited exploration having been carried out for gold.

 

The only documented field exploration in the area of the Company's claims was carried out by Battle Mountain Gold Mining ("Battle Mountain") who leased the project from the current lessors, Golden Crescent Corporation, in the period 1988-89. Battle Mountain carried out surface sampling, soil sampling and drilled 10 shallow exploration holes for a total of 1,006m of drilling to depths between 43m and 140m.

 

Soil sampling was conducted on a 30m x 120m grid within a confined area 600m x 600m centred on Battle Mountain's main target area, the Ruth Mine vein system and associated vein stockwork. This identified a series of gold-in-soil anomalies and eight of their ten drill holes were designed to test a broad gold anomaly located just northwest of the Ruth Mine. These intersected areas of anomalous gold up to 1.5m grading 1.64 grammes/tonne gold (g/t Au) in hole PYR 1 from 10.7m depth.

 

Battle Mountain's two other drill holes were designed to test a parallel vein west of the Ruth vein system which correlates with a separate strong gold-arsenic-mercury soil anomaly, mercury and arsenic being strongly associated with gold in epithermal gold deposits. This soil anomaly is open ended and continues strongly to the northwest and southeast boundaries of the sampled area.

 

Drill hole PYR 9 on this western line intersected high-grade gold mineralisation and visible gold within a sample thickness of 1.52m grading 17.8 g/t Au from 94.5m downhole. A broad zone of low-grade mineralisation continued to the end of the hole at 115.8m where the last 1.52m sample graded 2.6 g/t Au.

 

PYR 10 targeted the same western line soil anomaly some 150m to the southwest but was interpreted to have been drilled in the wrong direction and made no significant gold intersections.

 

Battle Mountain did not carry out any follow up exploration.

 

Next Steps

The association of high-grade gold mineralisation in a previous drill hole associated with a strong and open-ended gold soil anomaly supported strongly by epithermal pathfinder elements mercury and arsenic presents a compelling drill target.

 

Similar narrow high-grade epithermal gold deposits in Nevada have hosted multi-million-ounce deposits such as the producing Midas Mine where the main veins produced more than 2.2 million ounces of gold and 26.9 million ounces of silver between 1998 and 2013.

 

Tertiary Minerals intends to follow up Battle Mountain's drilling and soil sampling results with an initial drilling programme as soon as possible. Core drilling is planned as water, which can affect sample quality, was encountered in drilling both holes PYR 9 and 10.

 

The broader potential of the vein systems on the Project area are highlighted by the results of 43 surface chip samples taken by Battle Mountain from various outcropping veins and old mine workings within the Company's Project area. These assayed up to 7.27 g/t Au and averaged 1.3 g/t Au.

 

This high prospectivity was confirmed by surface grab carried out by the Nevada Bureau of Mines & Geology during a regional assessment in 1999 when samples from the 1km long Ruth vein system averaged 1.3 g/t gold and 131 g/t silver. The highest gold content, 8 g/t Au, was from the Surefire Mine area which has never been drill tested.

 

 

Paymaster Polymetallic Project, Nevada, USA

 

In February 2019, the Company staked claim (19 claims) to the Paymaster zinc-copper-silver-cobalt-tellurium prospect. The project is located approximately 30km southwest of Tonopah in Nevada, USA, and covers an area of more than 390 acres.

 

Project Highlights

·      Grab samples assay up to 21% zinc, 6.5% lead, 3.3% copper and 253 g/t silver 

·      Mineralisation intermittently exposed and sampled over 1.7km strike length 

·      Samples also contain high levels of high-tech metals tellurium and cobalt 

 

Geology, Mineralisation and Past Exploration

Zinc skarns are important not only as a source of zinc, lead, copper, silver and other associated metals but also as indicators of buried porphyry copper and molybdenum deposits. As a class of mineral deposit they include a number of world class zinc-silver deposits such as Antamina in Peru.

 

The Paymaster skarn mineralisation was originally prospected in the late 1950's under US Defense Minerals Exploration Administration grant system. A government mining engineer recommended that the project be drill tested, but records suggest this did not take place and no production ensued.

 

In 1960, it was the subject of a brief publication by the US Geological Survey when zinc rich secondary clay minerals, sphalerite (zinc sulphide), galena (lead sulphide) and magnetite were identified in a pyroxene-garnet-quartz skarn mineral assemblage at the eastern end of the area now claimed by the Company.  The prospector scale workings were later described in a Geological Survey of Nevada publication in 1991 by an acknowledged world expert on skarn deposits, Lawrence (Larry) Meinert who, on the basis of his observations, concluded that the Paymaster skarn must be part of a much larger hydrothermal system.

 

Within the Company's claim holdings, the skarn mineralisation has recently been traced westward over a total distance of 1.7km in a number of wide spaced and very shallow prospector pits. Seven grab samples of the skarn mineralisation exposed in or excavated from the pits average 10.1% zinc (maximum 20.9%), 1.5% lead (max. 6.5%) 134 g/t silver (max 253 g/t or 7.3 ounces/ton) and 0.68% copper (maximum 3.4%).

 

The skarn samples also contain up to 0.11% cobalt (average of 419ppm or 0.045%) and up to 58ppm tellurium (average 31ppm) and 782ppm bismuth (average 315ppm).

 

The mineralised skarn samples were collected largely from one stratigraphic horizon within Cambrian age limestone in contact with shale and 1 mile south of the limestone contact with the Cretaceous age Lone Mountain granite pluton.  Where sampled the skarn appears to be associated with cross cutting faults and the continuity along strike between exposures is currently unknown but pinch and swell is seen on a local scale.

 

Follow-up soil sampling programme was completed by the Company in 2019:

 

·      165 soil samples

·      Significant elevated levels of Ag, Cu, Zn, Co and Pb over a strike length of over 2,000 metres, maximum values:

 

Ag: 17.5 ppm

Cu: 896 ppm

Zn: 872 ppm

Co: 33 ppm

Pb: 2251 ppm

 

A further two zones of zinc-silver mineralisation have also been identified in the field:

 

Valley Prospect

·      New thick skarn zone observed in the field: Approximately 350m long and up to 8m thick

·      Rock sample taken from historic shaft spoil assayed 7.5% zinc, 4.3% lead and 180 g/t silver

 

East Slope Prospect

·      650m long zinc soil anomaly (100-250 ppm Zinc) surrounding previously sampled outcrop of zinc-silver-cobalt bearing skarn mineralisation, including 175m long 250-500 ppm zinc soil anomaly

·      Previous rock sample assays up to 20.9% zinc, 0.11% cobalt and 198 ppm silver within the prospect  

 

Next Steps

Follow up mapping, sampling, geophysics are now planned to identify future drilling targets.

 

 

Storuman Fluorspar Project, Sweden

 

The Company's 100% owned Storuman Project is located in north central Sweden and is linked by the E12 highway to the port city of Mo-i-Rana in Norway and by road and rail to the port of Umeå on the Gulf of Bothnia.

 

 

JORC Compliant Mineral Resource

 

Classification

Million Tonnes (Mt)

Fluorspar (CaF2 %)

Indicated

25.0

10.28

Inferred

2.7

9.57

Total

27.7

10.21

 

Exploitation (Mine) Permit

The Company, together with its Swedish Lawyers, prepared and submitted, on 3 May 2019, a detailed appeal to the Swedish Government against the decision by the Swedish Mining Inspectorate to reject Tertiary's Exploitation (Mine) Permit in its current form. The Company now awaits feedback from the Swedish Government in response to its appeal.

 

 

MB Fluorspar Project, Nevada, USA

 

The MB Property comprises 60 contiguous mining claims and is located 19km southwest of the town of Eureka in central Nevada, USA. The state of Nevada is widely and justifiably recognised to be one of the most attractive mining jurisdictions in the world. Eureka is located on US Highway 50 and the main railroad is located 165km to the north of the deposit providing bulk freight distribution to the East and West of the USA. The USA, like Europe, is a key fluorspar market currently importing the majority of its fluorspar requirements. Rail access to the west coast provides access to Asian markets, which may be a target market in the future.

 

JORC Compliant Mineral Resource

 

Classification

Million Tonnes (Mt)

Fluorspar (CaF2 %)

Indicated

6.1

10.8

Inferred

80.3

10.7

Total

86.4

10.7

 

Metallurgical Testwork

Early metallurgical testwork completed at SGS Lakefield has indicated that the ore in certain areas of the deposit is metallurgically complex, presenting processing challenges, and therefore the Company has engaged the services of one of the world's leading consultant fluorspar metallurgists to assist with the testwork. Progress has been slow during the period 2018/2019 due to lack of available funding. The Company has budgeted further testwork during 2020 subject to available funds.

 

Following successful completion of the metallurgical testwork, the Company will progress to modelling various production scenarios and optimisation of the transport method/cost from mine to the USA market and ports. Successful completion of these work programmes should enable the Company to work towards completion of a Scoping Study. Further work required for the completion of the Scoping Study may include an additional phase of drilling to target higher grade mineralisation, in line with the recommendations received from the appraisal of the MB deposit from world renowned economic geologist, Dr Richard Sillitoe.

 

Lassedalen Fluorspar Project, Norway

 

The Lassedalen Fluorspar Project is favourably located near Kongsberg, 80km to the south-west of Oslo in Norway. It is less than 1km from highway E134 and approximately 50km from the nearest Norwegian port. The Company views this resource as strategically important for the European market alongside its Storuman Project.

 

 

JORC Compliant Mineral Resource

 

Classification

Million Tonnes (Mt)

Fluorspar (CaF2 %)

Inferred

4.0

24.6

 

Given the commitments on its other projects and available funding, further exploration at the Lassedalen Project has been a lower priority in 2018/2019.

 

 

Strategic Relationship with Possehl Erzkontor GmbH & Co. KG

 

Further to the signing of a MOU in 2017 with leading global commodities trading group, Possehl Erzkontor GmbH & Co. KG ("Possehl"), a wholly owned subsidiary of CREMER, Possehl continue to support the Company with the development of its projects.

 

 

Non-Core Projects

 

Kaaresselkä and Kiekerömaa Gold Projects, Finland

Following the successful sale of its two legacy gold assets, Kaaresselkä and Kiekerömaa in Finland, to TSX‑V listed Aurion Resources Ltd ("Aurion"), the Company retains a royalty interest in the projects. Aurion continue to be supported by Kinross Gold Corporation which currently holds a 9.9% interest in Aurion.

 

Rosendal Tantalum Project, Finland

The Exploration Licence for the project expired in October 2015 and the Company has applied for a renewal of the Licence. If the Company is unsuccessful in finding a suitable partner or buyer to progress the project, it is unlikely the renewal will be granted.

 

 

Health and Safety

The Group has maintained strict compliance with its Health and Safety Policy and is pleased to report there have been no lost time accidents during the year.

 

 

Environment

No Group company has had or been notified of any instance of non-compliance with environmental legislation in any of the countries in which they work. The Company has previously received a prestigious national award for its innovative reclamation and sustainable mineral development work on its MB Project in Nevada, USA.

 



 

 

Financial Review & Performance

 

The Group is currently in the earlier stages of the typical mining development cycle and so has no income other than cost recovery from the management contract with Sunrise Resources plc and a small amount of bank interest. Consequently, the Group is not expected to report profits until it is able to profitably develop, dispose of, or otherwise commercialise its exploration and development projects.

 

The Group reports a loss of £831,507 for the year (2018: £2,267,197) after administration costs of £502,788 (2018: £507,931) and after crediting interest receivable of £234 (2018: £142). The loss includes impairment of the Lassedalen Project of £442,917, expensed pre-licence and reconnaissance exploration costs of £75,778 (2018: £38,725). Administration costs include £8,021 (2018: £8,997) as non-cash costs for the value of certain share warrants held by employees as required by IFRS 2.

 

Revenue includes £189,742 (2018: £218,841) from the provision of management, administration and office services provided to Sunrise Resources plc, to the benefit of both companies through efficient utilisation of services.

 

The financial statements show that, at 30 September 2019, the Group had net current assets of £21,499 (2018: £249,787). This represents the cash position after allowing for receivables and trade and other payables. These amounts are shown in the Consolidated and Company Statements of Financial Position and are also components of the Net Assets of the Group. Net assets also include various "intangible" assets of the Company. As the name suggests, these intangible assets are not cash assets but include this year's and previous years' accrued expenditure on minerals projects where that expenditure meets the criteria set out in Note 1(d) (accounting policies) to the Financial Statements. The intangible assets total £2,461,972 (2018: £2,670,386) and the breakdown by project is shown in Note 2 to the Financial Statements.

 

Expenditure which does not meet the criteria set out in Notes 1(d) and 1(n), such as pre-licence and reconnaissance costs, are expensed and add to the Company's loss. The loss reported in any year can also include expenditure that was carried forward in previous reporting periods as an intangible asset but which the Board determines is "impaired" in the reporting period.

 

The extent to which expenditure is carried forward as intangible assets is a measure of the extent to which the value of the Company's expenditure is preserved.

 

The intangible asset value of a project does not equate to the realisable or market value of a particular project which will, in the Directors' opinion, be at least equal in value and often considerably higher. Hence the Company's market capitalisation on AIM can be in excess of or less than the net asset value of the Group.

 

Details of intangible assets, property, plant and equipment and investments are set out in Notes 8, 9 and 10 of the financial statements.

 

The Financial Statements of a mineral exploration company can provide a moment in time snapshot of the financial health of the Company but do not provide a reliable guide to the performance of the Company or its Board and its long-term potential to create value.

 

Key Performance Indicators

The usual financial key performance indicators ("KPIs") are neither applicable nor appropriate to measurement of the value creation of a company involved in mineral exploration and which currently has no turnover other than cost recovery. The directors consider that the detailed information in the Operating Review is the best guide to the Group's progress and performance during the year.

 

The Company does seek to reduce overhead costs, where practicable, and is reporting reduced administration costs this financial year - current year £502,788 (2018: £507,931).

 

 

Fundraising

During the 2019 financial year the Company raised a total of £250,000, before expenses, as shown in Note 14 of the Financial Statements.

 

The directors prepare annual budgets and cash flow projections that extend beyond 12 months from the date of this report.  Given the Group's cash position at the year-end (£50,617), these projections include the proceeds of future fundraising necessary within the next 12 months to meet the Group's overheads and planned discretionary project expenditures and to maintain the Company and its subsidiaries as going concerns.

 

Impairment

 

A biannual review is carried out by the directors to assess whether there are any indications of impairment of the Group's assets.

 

Investments in Group undertakings

The directors have reviewed the carrying value of the Company's investments in shares of subsidiary undertakings totalling £224,890, by reference to estimated recoverable amounts. In turn, this requires an assessment of the recoverability of underlying exploration assets in those subsidiaries in accordance with IFRS 6.

 

Loans to Group undertakings

A review of the recoverability of loans to subsidiary undertakings, totalling £1,971,407 has been carried out. This indicated a potential credit loss arising in the year of £486,907 (2018: £4,681,523) relating to Tertiary Gold Limited. The assessment and provision arises from the fact that there has been an impairment of the underlying exploration assets held by Tertiary Gold Limited, leading to doubt over recoverability of the loan. The provision made against the receivable has reduced it to the value of the underlying development assets.

 

Risks & Uncertainties

The Board regularly reviews the risks to which the Group is exposed and ensures through its meetings and regular reporting that these risks are minimised as far as possible.

 

The principal risks and uncertainties facing the Group at this stage in its development and in the foreseeable future are detailed below together with risk mitigation strategies employed by the Board.

 

RISK

MITIGATION STRATEGIES

Exploration Risk

 

The Group's business is mineral exploration and evaluation which are speculative activities. There is no certainty that the Group will be successful in the definition of economic mineral deposits, or that it will proceed to the development of any of its projects or otherwise realise their value.

 

The directors bring many years of combined mining and exploration experience and an established track record in mineral discovery.

The Company mainly targets advanced and drill ready exploration projects in order to avoid higher risk grass roots exploration.

Resource Risk

 

All mineral projects have risk associated with defined grade and continuity. Mineral Reserves are always subject to uncertainties in the underlying assumptions which include geological projections and metal/mineral assumptions.

 

Resources and reserves are estimated by independent specialists on behalf of the Group in accordance with accepted industry standards and codes. The Directors are realistic in the use of mineral price forecasts and impose rigorous practices in the QA/QC programmes that support its independent estimates.

Development Risk

 

Delays in permitting, or changes in permit legislation and/or regulation, financing and commissioning a project may result in delays to the Group meeting production targets or even the Company ultimately not receiving the required permits and in extreme cases loss of title.

 

 

 

In order to reduce development risk in future, the directors will ensure that its permit application processes and financing applications are robust and thorough.

 

Commodity Risk

 

Changes in commodity prices can affect the economic viability of mining projects and affect decisions on continuing exploration activity.

 

 

 

The Company consistently reviews commodity prices and trends for its key projects throughout the development cycle.

Mining and Processing Technical Risk

 

Notwithstanding the completion of metallurgical testwork, test mining and pilot studies indicating the technical viability of a mining operation, variations in mineralogy, mineral continuity, ground stability, groundwater conditions and other geological conditions may still render a mining and processing operation economically or technically non-viable.

 

From the earliest stages of exploration the directors look to use consultants and contractors who are leaders in their field and in future will seek to strengthen the executive and the Board with additional technical and financial skills as the Company transitions from exploration to production.

Environmental Risk

 

Exploration and development of a project can be adversely affected by environmental legislation and the unforeseen results of environmental studies carried out during evaluation of a project. Once a project is in production unforeseen events can give rise to environmental liabilities.

 

Mineral exploration carries a lower level of environmental liability than mining. The Company has adopted an Environmental Policy and the directors avoid the acquisition of projects where liability for legacy environmental issues might fall upon the Company.

Political Risk

 

All countries carry political risk that can lead to interruption of activity. Politically stable countries can have enhanced environmental and social permitting risks, risks of strikes and changes to taxation, whereas less developed countries can have, in addition, risks associated with changes to the legal framework, civil unrest and government expropriation of assets.

 

 

 

The Company's strategy currently restricts its activities to stable, democratic and mining friendly jurisdictions.

 

The Company has adopted a strong Anti-corruption Policy and Code of Conduct and this is strictly enforced.

Partner Risk

 

Whilst there has been no past evidence of this, the Group can be adversely affected if joint venture partners are unable or unwilling to perform their obligations or fund their share of future developments.

 

 

The Company currently maintains control of certain key projects so that it can control the pace of exploration and reduce partner risk.

 

For projects where other parties are responsible for critical payments and expenditures the Company's agreements legislate that such payments and expenditures are met.

 

Financing & Liquidity Risk

 

Liquidity risk is the risk that the Company will not be able to raise working capital for its ongoing activities. 

The Group's goal is to finance its exploration and evaluation activities from future cash flows, but until that point is reached the Company is reliant on raising working capital from equity markets or from industry sources. There is no certainty such funds will be available when needed.

 

 

The Company maintains a good network of contacts in the capital markets that has historically met its financing requirements.

The Company's low overheads and cost-effective exploration strategies help reduce its funding requirements. Nevertheless, further equity issues will be required over the next 12 months.

Financial Instruments

 

Details of risks associated with the Group's Financial Instruments are given in Note 19 to the financial statements.

 

 

The directors are responsible for the Group's systems of internal financial control. Although no systems of internal financial control can provide absolute assurance against material misstatement or loss, the Group's systems are designed to provide reasonable assurance that problems are identified on a timely basis and dealt with appropriately.

In carrying out their responsibilities, the directors have put in place a framework of controls to ensure as far as possible that ongoing financial performance is monitored in a timely manner, that corrective action is taken and that risk is identified as early as practically possible, and they have reviewed the effectiveness of internal financial control.

The Board, subject to delegated authority, reviews capital investment, property sales and purchases, additional borrowing facilities, guarantees and insurance arrangements.

 

 

 

Forward-Looking Statements

This Annual Report may contain certain statements and expressions of belief, expectation or opinion which are forward-looking statements, and which relate, inter alia, to the Company's proposed strategy, plans and objectives or to the expectations or intentions of the Company's directors. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond the control of the Company that could cause the actual performance or achievements of the Company to be materially different from such forward-looking statements.

 

This Strategic Report was approved by the Board on 18 February 2020 and signed on its behalf.

 

 

 

Richard Clemmey

Managing Director

 

 

Our Governance

Corporate Governance Statement

 

There is no prescribed corporate governance code for AIM companies and London Stock Exchange prefers to give companies the flexibility to choose from a range of codes which suit their specific stage of development, sector and size.

 

The Board considers the corporate governance code published by the Quoted Companies Alliance, the Corporate Governance Code 2018 ("the QCA Code") for small and mid-sized quoted companies to be the most suitable code for the Company and has adopted the principles set out in the QCA Code and applies these principles wherever possible, and where appropriate to its size and available resources.

 

The Chairman, Patrick Cheetham, has overall responsibility for the Corporate Governance of the Company. This Corporate Governance Statement was approved by the Board on 18 February 2020.

 

The QCA Code sets out ten principles which should be applied. The principles are listed below with an explanation of how the Company applies each principle and/or the reasons for any aspect of non-compliance.

 

Principle One: Establish a strategy and business model which promotes long-term value for shareholders.

 

The Company has a clearly defined strategy and business model that has been adopted by the Board.

 

Principle Two: Seek to understand and meet shareholder needs and expectations.

 

All shareholders are encouraged to attend the Annual General Meeting where they can meet and directly communicate with the Board. Shareholders are welcome to contact the Company via email at info@tertiaryminerals.com with any specific queries.

 

The Company also provides regulatory, financial and business news updates through the Regulatory News Service (RNS) and various media channels such as Twitter. Shareholders also have access to information through the Company's website, www.tertiaryminerals.com, which is updated on a regular basis.

 

Principle Three: Take into account wider stakeholder and social responsibilities and their implications for long-term success.

 

The Board takes regular account of the significance of social, environmental and ethical matters affecting the business of the Group. At this stage in the Group's development, the Board has not adopted a specific written policy on Corporate Social Responsibility as it has a limited pool of stakeholders other than its shareholders. Rather, the Board seeks to protect the interests of the Group's stakeholders (both internal and external to the Group) through individual policies and through ethical and transparent actions. The Company engages positively with local communities and stakeholders in its project locations and encourages feedback through this engagement.

 

Principle Four: Embed effective risk management, considering both opportunities and threats, throughout the organisation.

 

The Board regularly reviews the risks to which the Group is exposed and ensures through its meetings and regular reporting that these risks are minimised as far as possible whilst recognising that its business opportunities carry an inherently high level of risk. The principal risks and uncertainties facing the Group at this stage in its development and in the foreseeable future together with risk mitigation strategies employed by the Board are detailed in the Strategic Report.

 

Principle Five: Maintain the board as a well-functioning, balanced team led by the chair.

 

The Board's role is to agree the Group's long-term direction and strategy and monitor achievement of its business objectives. The Board meets formally four times a year for these purposes and holds additional meetings when necessary to transact other business. The Board receives reports for consideration on all significant strategic, operational and financial matters.

 

The Board is supported by the Audit, Remuneration and Nomination Committees.

 

The Board currently consists of the Chairman, Managing Director and one Non-Executive Director. The current Board's preference is that independent Non-Executive Directors are equally represented or comprise the majority of Board members. However, this is not currently the case as the Company intends that an additional Non-Executive Director will be appointed in due course. When there are two Non-Executive Directors in post, the Board considers that the current Board structure is nevertheless acceptable having regard to the fact that it is not yet revenue-earning.

 

Despite serving as a Non-Executive Director for more than nine years, Donald McAlister is considered independent of management and free from any business or other relationship which could materially interfere with the exercise of his independent judgement. In compliance with good practice, he will continue to seek annual re-election rather than every third year as per the Articles of Association.

 

Attendance at Board and Committee Meetings

The Board retains full control of the Group with day-to-day operational control delegated to Executive Directors. The full Board meets formally four times a year and on any other occasions it considers necessary. During the period under review there were twelve Board meetings, two Remuneration Committee meetings, two Audit Committee meetings and one Nomination Committee meeting. All meetings were attended by their constituent directors.

 

Principle Six: Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities.

 

The Board considers the current balance of sector, financial and public market skills and experience appropriate given the current size and stage of development of the Company and that the Board has the skills and experience necessary to execute the Company's strategy and business plan and discharge its duties effectively.

 

The directors maintain their skills through membership of various professional bodies, attendance at mining conferences and through their various external appointments.

 

All directors have access to the Company Secretary who is responsible for ensuring that Board procedures and applicable rules and regulations are observed.

 

The Board and its committees will also seek external expertise and advice where required.

 

Principle Seven: Evaluate board performance based on clear and relevant objectives, seeking continuous improvement.

 

The ultimate measure of the effectiveness of the Board is the Company's progress against the long-term strategy and aims of the business. This progress is reviewed in Board meetings held at least four times a year. The Managing Director's performance is reviewed once a year by the rest of the Board, and measured against a definitive list of short, medium and long-term strategic targets set by the Board.

 

The Nomination Committee, currently consisting of the Chairman, Managing Director and one Non-Executive Director, meets once a year to lead the formal process of rigorous and transparent procedures for Board appointments. During this meeting, the Nomination Committee reviews the structure, size and composition of the Board; succession planning; leadership; key strategic and commercial issues; conflicts of interest; time required from Non-Executive Directors to execute their duties effectively; overall effectiveness of the Board and its own terms of reference.

 

Principle Eight: Promote a corporate culture that is based on ethical values and behaviours.

 

The Board recognises and strives to promote a corporate culture based on strong ethical and moral values. The corporate culture of the Company is promoted throughout its workforce, suppliers and contractors and is underpinned by the implementation and regular review, enforcement and documentation of various policies: Health and Safety Policy; Environmental Policy; Share Dealing Policy; Anti-Corruption Policy and Code of Conduct; Privacy and Cookies Policy and Social Media Policy.

 

 

Employees

The Group encourages its employees to understand all aspects of the Group's business and seeks to remunerate its employees fairly, being flexible where practicable. The Group gives full and fair consideration to applications for employment received regardless of age, gender, colour, ethnicity, disability, nationality, religious beliefs, transgender status or sexual orientation. The Board takes account of employees' interests when making decisions, and suggestions from employees aimed at improving the Group's performance are welcomed.

 

Suppliers and Contractors

The Group recognises that the goodwill of its contractors, consultants and suppliers is important to its business success and seeks to build and maintain this goodwill through fair dealings. The Group has a prompt payment policy and seeks to settle all agreed liabilities within the terms agreed with suppliers. The amount shown in the Consolidated and Company Statements of Financial Position in respect of trade payables at the end of the financial year represents 11 days of average daily purchases (2018: 15 days).

 

Anti-Corruption Policy and Code of Conduct

The Company has adopted and implements an Anti-Corruption Policy and Code of Conduct.

 

Health and Safety

The Board recognises it has a responsibility to provide strategic leadership and direction in the development of the Group's health and safety strategy in order to protect all of its stakeholders. The Company has developed and implemented a Health and Safety Policy to clearly define roles and responsibilities and in order to identify and manage risk.

 

Principle Nine: Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board.

 

The Board has overall responsibility for all aspects of the business. The Chairman is responsible for overseeing the running of the Board, ensuring that no individual or group dominates the Board's decision-making and ensuring the Non-Executive Directors are properly briefed on all operational and financial matters. The Chairman has overall responsibility for corporate governance matters in the Group and chairs the Nomination Committee. The Managing Director has the responsibility for implementing the strategy of the Board and managing the day-to-day business activities of the Group. The Company Secretary is responsible for ensuring that Board procedures are followed and applicable rules and regulations are complied with.

 

Non-Executive Director, Donald McAlister, is responsible for bringing independent and objective judgment to Board decisions. The Board has established Audit and Remuneration Committees with formally delegated duties and responsibilities. Donald McAlister currently chairs the Audit and Remuneration Committees.

 

Audit Committee

The Audit Committee currently, composed entirely of the Non-Executive Director, assists the Board in meeting responsibilities in respect of external financial reporting and internal controls. The Audit Committee also keeps under review the scope and results of the audit. It also considers the cost-effectiveness, independence and objectivity of the Auditor taking account of any non-audit services provided by them.

 

Remuneration Committee

The Remuneration Committee also comprises the Non-Executive Director. The Remuneration Committee determines the appropriate remuneration for the Company's executive directors, ensuring that this reflects their performance and that of the Group, and to demonstrate to shareholders that executive remuneration is set by Board members who have no personal interest in the outcome of their decisions.

 

The Company operates a long-term bonus and incentive scheme for the Managing Director. The objective of adopting the scheme is to provide reward for successfully achieving performance targets set by the Board in line with the Company's Aims and Strategy. The Company has in place an Inland Revenue approved share option scheme and also issues warrants to subscribe for shares to executive directors and employees. Directors' emoluments are disclosed in Note 4 to the financial statements and details of directors' warrants are disclosed in Note 17.

 

Conflicts of Interest

The Companies Act 2006 permits directors of public companies to authorise directors' conflicts and potential conflicts, where appropriate, and the Articles of Association contain a provision to this effect.

 

At 30 September 2019, Tertiary Minerals plc held 2.71% of the issued share capital of Sunrise Resources plc and the Chairman of Tertiary Minerals plc is also Chairman of Sunrise Resources plc. Tertiary Minerals plc also provides management services to Sunrise Resources plc, in the search, evaluation and acquisition of new projects.

 

Procedures are in place in order to avoid any conflict of interest between the Company and Sunrise Resources plc.

 

Principle Ten: Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders.

 

The Company regularly communicates with, and encourages feedback from, its various stakeholder groups. The Company's website is regularly updated and users can register to be alerted via email when certain announcements are made.

 

The Group's financial reports can be found here: www.tertiaryminerals.com/investor-media/financial-reports

 

Notices of General Meetings held for at least the past five years can be found here: www.tertiaryminerals.com/news-releases 

 

The results of voting on all resolutions in general meetings will be posted to the Company's website, including any actions to be taken as a result of resolutions for which votes against have been received from at least 20 per cent of independent votes.

 

This Corporate Governance statement will be reviewed at least annually to ensure that the Company's corporate governance framework evolves in line with the Company's strategy and business plan.

 

 

 

Patrick Cheetham

Executive Chairman

18 February 2020

Board of Directors

The directors and officers of the Company during the financial year were:

Patrick Cheetham (60)

Chairman

 

Key Strengths and Experience

·      Geologist.

·      38 years' experience in mineral exploration.

·      33 years' experience in public company management.

·      Founder of the Company, Dragon Mining Ltd, Archaean Gold NL and Sunrise Resources plc.

External Appointments

Chairman and founder of Sunrise Resources plc.

 

 

Richard Clemmey (47)

Managing Director

 

Key Strengths and Experience

·      Chartered Engineer.

·      26 years' experience in developing and managing mining/quarrying projects worldwide for Derwent Mining, Lafarge, Hargreaves (GB) Ltd, Marshalls plc and CFE.

·      Board Director since May 2012.

External Appointments

Gritstone Ltd.

 

 

Donald McAlister (60)

Non-Executive Director*

 

Key Strengths and Experience

·      Accountant.

·      Previously Finance Director at Mwana Africa plc, Ridge Mining plc, Reunion Mining and Moxico Resources plc.

·      25 years' experience in all financial aspects of the resource industry, including metal hedging, tax planning, economic modelling/evaluation, project finance and IPOs.

·      Founding director of the Company.

External Appointments

Financial Director of ZincOx Resources plc.

 

* Currently Chair of the Audit Committee and the Remuneration Committee.

 

 

 

Rod Venables - City Group PLC

Company Secretary

 

Key Strengths and Experience

·      Qualified company/commercial solicitor

·      Director and Head of Company Secretarial Services at City Group PLC

·      Experienced in both Corporate Finance and Corporate Broking

·      Company Secretary for Sunrise Resources plc.

External Appointments

Company Secretary for Sunrise Resources plc and other corporate clients of City Group PLC.



 

Directors' Responsibilities

 

The directors are responsible for preparing the Strategic Report, the Directors' Report and the Financial Statements in accordance with applicable law and regulations.

 

Company law requires the directors to prepare financial statements for each financial year.  Under that law the directors have elected to prepare the Group and Company Financial Statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and applicable law. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of the Group for that period. The directors are also required to prepare financial statements in accordance with the AIM Rules of the London Stock Exchange for companies trading securities on the AIM market.

 

In preparing these Financial Statements, the directors are required to:

 

·       select suitable accounting policies and then apply them consistently;

 

·       make judgements and accounting estimates that are reasonable and prudent;

 

·       state whether they have been prepared in accordance with IFRSs as adopted by the European Union, subject to any material departures disclosed and explained in the financial statements; and

 

·       prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company and the Group will continue in business.

 

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Financial Statements comply with the requirements of the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

 

They are further responsible for ensuring that the Strategic Report and the Directors' Report and other information included in the Annual Report and Financial Statements are prepared in accordance with applicable law in the United Kingdom.

 

Website Publication

The maintenance and integrity of the Tertiary Minerals plc website is the responsibility of the directors. Legislation in the United Kingdom governing the preparation and dissemination of the accounts and the other information included in annual reports may differ from legislation in other jurisdictions.

Information from the Directors' Report

 

The directors are pleased to submit their Annual Report and audited accounts for the year ended 30 September 2019.

 

The Strategic Report contains details of the principal activities of the Company and includes the Operating Review and Performance which provides detailed information on the development of the Group's business during the year and indications of likely future developments.

 

Going Concern

In common with many exploration companies, the Company raises finance for its exploration and appraisal activities in discrete tranches. Further funding is raised as and when required. When any of the Group's projects move to the development stage, specific project financing will be required.

 

The directors prepare annual budgets and cash flow projections that extend beyond 12 months from the date of this report.  Given the Group's cash position at year end (£50,617), these projections include the proceeds of future fundraising necessary within the next 12 months to meet the Company's and Group's overheads and planned discretionary project expenditures and to maintain the Company and Group as going concerns. Although the Company has been successful in raising finance in the past, there is no assurance that it will obtain adequate finance in the future. This represents a material uncertainty related to events or conditions which may cast significant doubt on the Group and Company's ability to continue as going concerns and, therefore, that they may be unable to realise their assets and discharge their liabilities in the normal course of business. However, the directors have a reasonable expectation that they will secure additional funding when required to continue meeting corporate overheads and exploration costs for the foreseeable future and therefore believe that the going concern basis is appropriate for the preparation of the financial statements.

 

Dividend

The directors are unable to recommend the payment of a dividend.

 

Financial Instruments & Other Risks

Details of the Group's financial instruments and risk management objectives and of the Group's exposure to risk associated with its financial instruments is given in Note 19 to the Financial Statements.

 

The business of mineral exploration and evaluation has inherent risks. Details of risks and uncertainties that affect the Group's business are given in Risks and Uncertainties in the Strategic Report.

 

Directors

The directors currently holding office are:

 

Mr P L Cheetham

Mr R H Clemmey

Mr D A R McAlister

 

Post Balance Sheet Events

On 8 October 2019, the Swedish tax office informed the Company that the appeal was not successful with regards to levy of an incorrect tax return relating to tax year 2013/14 in Tertiary Gold Sweden Branch. The levy was increased to SEK 296,958 (approximately £24,461) by the interest of SEK 8,703. The Company's tax lawyer in Sweden is further appealing the decision. This event is treated as a post balance sheet adjusting event and the full cost of potential tax levy was accrued.

 

On 19 November 2019 the Company entered into a convertible securities issuance deed (the "Agreement") with Bergen Global Opportunity Fund, LP (the "Investor"), a US based institutional investment fund, in connection with an issuance by the Company of zero coupon convertible securities having a nominal amount of up to £653,000 (the "Convertible Securities"). Pursuant to the Agreement, on 26 November 2019 the Company issued a convertible security with the nominal value of £263,000 (at the purchase price of £232,000).

 

In connection with the Agreement:

 

(a)   the Company issued to the Investor 17,000,000 Shares by way of a commencement fee in relation to the overall funding ("Commencement Fee Shares");

 

(b)   the Company will issue to the Investor 18,000,000 Shares at par to collateralise the investment ("Collateral Shares"). Investor may be required to make a further payment to the Company once all of the obligations of the Company under the Agreement have been finally met and no amount remains outstanding to the Investor, depending on the price of Shares at such time; and

 

(c)   the Company issued 22,000,000 warrants with an exercise period of 48 months from the date of issue (the "Warrants") to the Investor entitling the Investor (or any subsequent holder of the Warrants) to subscribe for one Share per Warrant at the exercise price equal to 0.33588 pence.

 

(d)   On 18th February 2020 the Company received a Conversion Notice from the Investor in respect of the Conversion of £263,000 of the Convertible Security as a result of which the Company will issue 154,705,883 new ordinary shares at a Conversion Price of 0.17 pence per share.

 

 

Shareholders

As at the date of this report the following interests of 3% or more in the issued share capital of the Company appeared in the share register:

 

 

As at 18 February 2020

Number of shares

% of share capital

Interactive Investor Services Nominees Limited SMKTNOMS

36,591,837

7.64

Securities Services Nominees Limited 1850004

31,278,520

6.53

JIM Nominees Limited JARVIS

30,912,864

6.46

Barclays Direct Investing Nominees Limited CLIENT1

28,903,754

6.04

Interactive Investor Services Nominees Limited SMKTISAS

27,609,274

5.77

SVS (Nominees) Limited POOL

20,529,450

4.29

SVS Securities (Nominees) Ltd ONL

20,474,804

4.28

Hargreaves Lansdown (Nominees) Limited 15942

17,171,588

3.59

Vidacos Nominees Limited IGUKCLT

16,934,318

3.54

SVS Securities (Nominees) ISA Ltd ISA

16,100,891

3.36

 

Disclosure of Audit Information

Each of the directors has confirmed that so far as he is aware, there is no relevant audit information of which the Company's Auditor is unaware, and that he has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the Company's Auditor is aware of that information.

 

Auditor

A resolution to re-appoint Crowe U.K. LLP as Auditor of the Company and the Group will be proposed at the forthcoming Annual General Meeting.

 

Charitable and Political Donations

During the year, the Group made no charitable or political donations.

 

Annual General Meeting

The Annual General Meeting will be held on Thursday, 19 March 2020 at 2.00 p.m. in Macclesfield.

 

Approved by the Board on 18 February 2020 and signed on its behalf.

 

 

 

 

 

Richard Clemmey

Managing Director



 

Publication of Statutory Accounts

 

The financial information set out in this announcement does not constitute the Company's Annual Accounts for the period ended 30 September 2019 or 2018. The financial information for 2018 is derived from the Statutory Accounts for 2018. Full audited accounts in respect of that financial period have been delivered to the Registrar of Companies. The Statutory Accounts for 2019 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The Auditors have reported on the 2019 and 2018 accounts. Neither set of accounts contain a statement under section 498(2) of (3) the Companies Act 2006 and both received an unqualified audit opinion. However, there was an emphasis of matter in relation to a requirement that the Company raise funds in the future to continue as a going concern.

 

Availability of Financial Statements

 

The Annual Report containing the full financial statements for the year to 30 September 2019 will be posted to shareholders on or around 25 February 2020, a soft copy of which will then be available to download from the company's website:

https://www.tertiaryminerals.com/

 

 

Consolidated Income Statement

for the year ended 30 September 2019

 


Notes

2019

£

2018

£

Revenue

2,17

189,742

218,841

Administration costs


(502,788)

(507,931)

Pre-licence exploration costs


(75,778)

(38,725)

Impairment of deferred exploration asset

8

(442,917)

(1,976,618)

Operating loss


(831,741)

(2,304,433)

Disposal of other investments


-

37,094

Interest receivable


234

142

Loss before income tax

3

 

(831,507)

(2,267,197)

Income tax

7

-

-

Loss for the year attributable to equity holders of the parent


(831,507)

(2,267,197)

Loss per share - basic and diluted (pence)

6

(0.19)

(0.65)

 

All amounts relate to continuing activities.

 

 

 

Consolidated Statement of Comprehensive Income
for the year ended 30 September 2019

 


2019

£

2018

£

Loss for the year

(831,507)

(2,267,197)

Items that could be reclassified subsequently to the income statement:



Foreign exchange translation differences on foreign currency net investments in subsidiaries

 

115,415

 

(62,575)

Fair value movement on other investments

-

(72,010)


115,415

(134,585)

Items that have been reclassified subsequently to the income statement:



Disposal of other investments

-

(38,634)


-

(38,634)

Items that will not be reclassified to the income statement:



Changes in the fair value of other investments

(71,670)

-


(71,670)

-

Total comprehensive income/(loss) for the year attributable to

equity holders of the parent

 

(787,762)

 

(2,440,416)

 

Consolidated and Company Statements of Financial Position

at 30 September 2019

 

Company Number 03821411

 


Notes

Group

2019

£

Company

2019

£

Group

2018

£

Company

2018

£

Non-current assets






Intangible assets

8

2,461,972

-

2,670,386

-

Property, plant & equipment

9

4,182

4,182

3,308

3,308

Investment in subsidiaries

10

-

2,196,297

-

2,478,924

Other investments

10

89,775

89,775

202,328

202,328



2,555,929

2,290,254

2,876,022

2,684,560

Current assets





Receivables

11

41,568

19,347

96,653

72,749

Cash and cash equivalents

12

50,617

29,445

218,297

202,732



92,185

48,792

314,950

275,481

Current liabilities






Trade and other payables

13

(70,686)

(29,717)

(65,163)

(38,602)

Net current assets


21,499

19,075

249,787

236,879

Net assets


2,577,428

2,309,329

3,125,809

2,921,439

Equity






Called up Ordinary Shares

14

44,307

44,307

35,932

35,932

Deferred Shares

14

2,644,062

2,644,062

2,644,062

2,644,062

Share premium account


10,008,687

10,008,687

9,785,702

9,785,702

Merger reserve


131,096

131,096

131,096

131,096

Share option reserve

14

67,468

67,468

168,923

168,923

Fair value reserve


(8,444)

(8,444)

63,226

63,226

Foreign currency reserve

14

419,752

-

304,337

-

Accumulated losses


(10,729,500)

(10,577,847)

(10,007,469)

(9,907,502)

Equity attributable to the owners of the parent


2,577,428

2,309,329

3,125,809

2,921,439

 

The Company reported a loss for the year ended 30 September 2019 of £779,821 (2018 - £4,971,649).

 

These financial statements were approved and authorised for issue by the Board on 18 February 2020 and were signed on its behalf.

 

 

 

R H Clemmey                                                                      D A R McAlister

Director                                                                                  Director

 

 

 

 

Consolidated Statement of Changes in Equity

 

Group

Ordinary share

capital

£

 

Deferred shares

£

Share

premium

account

£

Merger

reserve

£

Share

option

reserve

£

Fair value

reserve

£

Foreign

currency

reserve

£

Accumulated

losses

£

Total

£

At 30 September 2017

31,708

 

2,644,062

9,331,768

131,096

259,690

173,870

366,912

(7,840,036)

5,099,070

Loss for the period

-

-

-

-

-

-

-

(2,305,831)

(2,305,831)

Change in fair value

-

-

-

-

-

(72,010)

-

-

(72,010)

Transfer of disposals to income statement

-

-

-

-

-

(38,634)

-

38,634

-

Exchange differences

-

-

-

-

-

-

(62,575)

-

(62,575)

Total comprehensive loss for the year

-

-

-

-

-

(110,644)

(62,575)

(2,267,197)

(2,440,416)

Share issue

4,224

-

453,934

-

-

-

-

-

458,158

Share based payments expense

-

-

-

-

8,997

-

-

-

8,997

Transfer of expired warrants

-

-

-

-

(99,764)

-

-

99,764

-

At 30 September 2018

35,932

 

2,644,062

9,785,702

131,096

168,923

63,226

304,337

(10,007,469)

3,125,809

Loss for the period

-

-

-

-

-

-

-

(831,507)

(831,507)

Change in fair value

-

-

-

-

-

(71,670)

-

-

(71,670)

Exchange differences

-

-

-

-

-

-

115,415

-

115,415

Total comprehensive loss for the year

-

-

-

-

-

(71,670)

115,415

(831,507)

(787,762)

Share issue

8,375

-

222,985

-

-

-

-

-

231,360

Share based payments expense

-

-

-

-

8,021

-

-

-

8,021

Transfer of expired warrants

-

-

-

-

(109,476)

-

-

109,476

-

At 30 September 2019

44,307

 

2,644,062

10,008,687

131,096

67,468

(8,444)

419,752

(10,729,500)

2,577,428

 

 

Company Statement of Changes in Equity

 

 

Company

Ordinary share

capital

£

 

Deferred shares

£

Share

premium

account

£

Merger

reserve

£

Share

option

reserve

£

Fair value

reserve

£

Accumulated

losses

£

Total

£

At 30 September 2017

31,708

 

2,644,062

9,331,768

131,096

259,690

115,987

(5,035,617)

7,478,694

Loss for the period

-

-

-

-

-


(4,977,649)

(4,977,649)

Change in fair value

-

-

-

-

-

(46,761)

-

(46,761)

Transfer of disposals to income statement

-

-

-

-

-

(6,000)

6,000

-

Total comprehensive

loss for the year

-

 

 

-

-

-

-

(52,761)

(4,971,649)

(5,024,410)

Share issue

4,224

-

453,934

-

-

-

-

458,158

Share based payments expense

-

-

-

-

8,997

-

-

8,997

Transfer of expired warrants

-

-

-

-

(99,764)

-

99,764

-

At 30 September 2018

35,932

 

2,644,062

9,785,702

131,096

168,923

63,226

(9,907,502)

2,921,439

Loss for the period

-

-

-

-

-


(779,821)

(779,821)

Change in fair value

-

-

-

-

-

(71,670)

-

(71,670)

Total comprehensive

loss for the year

-

 

 

-

-

-

-

(71,670)

(779,821)

(851,491)

Share issue

8,375

-

222,985

-

-

-

-

231,360

Share based payments expense

-

-

-

-

8,021

-

-

8,021

Transfer of expired warrants

-

-

-

-

(109,476)

-

109,476

-

At 30 September 2019

44,307

 

2,644,062

10,008,687

131,096

67,468

(8,444)

(10,577,847)

2,309,329

 

 

 

Consolidated and Company Statements of Cash Flows

for the year ended 30 September 2019

 


Notes

Group

2019

£

Company

2019

£

Group

2018

£

Company

2018

£

Operating activity






Total (loss)/profit after tax excluding interest received


(831,741)

(810,097)

(2,267,339)

(4,985,875)

Depreciation charge

9

1,635

1,635

4,019

3,999

Shares issued in lieu of net wages


1,360

1,360

8,158

8,158

Share based payment charge


8,021

8,021

8,997

8,997

Impairment charge - deferred exploration asset


442,917

-

1,976,618

-

Impairment charge - other investments


-

-

-

-

Non-cash additions to other investments


-

-

-

-

Gain on disposal of other investments


-

-

(37,094)

(5,830)

Increase/(decrease) in provision for impairment of loans to subsidiaries

10

-

487,610

-

4,682,590

(Increase)/decrease in receivables

11

55,084

53,401

(2,400)

641

Increase/(decrease) in payables

13

5,523

(8,885)

(10,645)

(2,679)

Net cash outflow from operating activity


(317,201)

(266,955)

(319,686)

(289,999)

Investing activity






Interest received


234

30,279

142

14,226

Exploration and development expenditures

8

(121,967)

-

(201,622)

-

Disposal of development asset


-

-

-

-

Disposal of other investments

10

40,883

40,883

133,094

16,828

Purchase of property, plant & equipment

9

(2,509)

(2,509)

(2,966)

(2,966)

Additional loans to subsidiaries

10

-

(204,985)

-

(126,285)

Net cash outflow from investing activity


(83,359)

(136,332)

(71,352)

(98,197)

Financing activity






Issue of share capital (net of expenses)


230,000

230,000

450,000

450,000

Net cash inflow from financing activity


230,000

230,000

450,000

450,000

Net increase/(decrease) in cash

and cash equivalents


(170,560)

(173,287)

58,962

61,804

Cash and cash equivalents at start of year


218,297

202,732

159,278

140,928

Exchange differences


2,880

-

57

-

Cash and cash equivalents at 30 September

12

50,617

29,445

218,297

202,732

 

 

Notes to the Financial Statements

for the year ended 30 September 2019

 

Background

Tertiary Minerals plc is a public company incorporated and domiciled in England. It is traded on the AIM market of the London Stock Exchange - EPIC: TYM.

 

The Company is a holding company for a number of companies (together, "the Group"). The Group's financial statements are presented in Pounds Sterling (£) which is also the functional currency of the Company.

 

The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the Group's financial statements.

 

1.   Accounting policies

 

(a) Basis of preparation

The financial statements have been prepared on the basis of the recognition and measurement requirements of International Financial Reporting Standards (IFRS), as adopted by the European Union. They have also been prepared in accordance with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

 

The Group has adopted IFRS 9 from 1 October 2018. The directors reviewed the Group's existing financial assets as at 1 October 2018 and reclassified the investments previously held as available for sale into at fair value through other comprehensive income (OCI) category. The adoption of IFRS 9 did not result in adjustments to the amounts recognised in the financial statements. The new accounting policy is set out in Note 1(f).

 

(b) Going concern

In common with many exploration companies, the Company raises finance for its exploration and appraisal activities in discrete tranches. Further funding is raised as and when required. When any of the Group's projects move to the development stage, specific project financing will be required.

 

The directors prepare annual budgets and cash flow projections that extend beyond 12 months from the date of this report. Given the Group's cash position at year end (£50,617), these projections include the proceeds of future fundraising necessary within the next 12 months to meet the Company's and Group's overheads and planned discretionary project expenditures and to maintain the Company and Group as going concerns. Although the Company has been successful in raising finance in the past, there is no assurance that it will obtain adequate finance in the future. This represents a material uncertainty related to events or conditions which may cast significant doubt on the Group and Company's ability to continue as going concerns and, therefore, that they may be unable to realise their assets and discharge their liabilities in the normal course of business. However, the directors have a reasonable expectation that they will secure additional funding when required to continue meeting corporate overheads and exploration costs for the foreseeable future and therefore believe that the going concern basis is appropriate for the preparation of the financial statements.

 

(c) Basis of consolidation

Investments, including long-term loans, in subsidiaries are valued at the lower of cost or recoverable amount, with an ongoing review for impairment.

 

The Group's financial statements consolidate the financial statements of Tertiary Minerals plc and its subsidiary undertakings using the acquisition method and eliminate intercompany balances and transactions.

 

In accordance with section 408 of the Companies Act 2006, Tertiary Minerals plc is exempt from the requirement to present its own Statement of Comprehensive Income. The amount of the loss for the financial year recorded within the financial statements of Tertiary Minerals plc is £779,821 (2018: £4,971,649). The loss for 2019 includes provision for impairment of its investment in subsidiary undertakings in the amount of £487,610 (Note 10).

 

(d) Intangible assets

Exploration and evaluation

Accumulated exploration and evaluation costs incurred in relation to separate areas of interest (which may comprise more than one exploration licence or exploration licence applications) are capitalised and carried forward where:

 

(1) such costs are expected to be recouped through successful exploration and development of the area, or alternatively by its sale; or

 

(2) exploration and/or evaluation activities in the area have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation to the areas are continuing.

 

A biannual review is carried out by the directors to consider whether there are any indications of impairment in capitalised exploration and development costs. The biannual impairment reviews were conducted in April 2019 and December 2019.

 

Where an indication of impairment is identified, the relevant value is written off to the income statement in the period for which the impairment was identified. An impairment of exploration and development costs may be subsequently reversed in later periods should conditions allow.

Accumulated costs, where the Group does not yet have an exclusive exploration licence and in respect of areas of interest which have been abandoned, are written off to the income statement in the year in which the pre-licence expense was incurred or in which the area was abandoned.

 

      Development

Exploration, evaluation and development costs are carried at the lower of cost and expected net recoverable amount. On reaching a mining development decision, exploration and evaluation costs are reclassified as development costs and all development costs on a specific area of interest will be amortised over the useful economic life of the projects, once they become income generating and the costs can be recouped.

 

(e) Property, plant & equipment

All property, plant and equipment assets are stated at cost less accumulated depreciation. Depreciation is provided by the Group on all property, plant and equipment, at rates calculated to write off the cost, less estimated residual value, of each asset evenly over its expected useful life, as follows:

 

Fixtures and fittings                      20% to 33% per annum                     Straight-line basis

Computer equipment                   33% per annum                                   Straight-line basis

 

Useful life and residual value are reassessed annually.

 

(f) Financial assets designated at fair value through OCI

Upon initial recognition, the Group can elect to classify irrevocably its equity investments as equity instruments designated at fair value through OCI when they meet the definition of equity under IAS 32 Financial Instruments: Presentation and are not held for trading. The classification is determined on an instrument-by-instrument basis.

 

Gains and losses on these financial assets are never recycled to profit or loss. Dividends are recognised as other income in the statement of profit or loss when the right of payment has been established, except when the Group benefits from such proceeds as a recovery of part of the cost of the financial asset, in which case, such gains are recorded in OCI. Equity instruments designated at fair value through OCI are not subject to impairment assessment.

 

The Group elected to classify irrevocably its listed equity investments under this category.

 

(g) Trade and other receivables and payables

Trade and other receivables and payables are measured at initial recognition at fair value and subsequently measured at amortised cost.

 

(h) Cash and cash equivalents

Cash and cash equivalents consist of cash at bank and in hand and short-term bank deposits with a maturity of three months or less.

 

(i) Deferred taxation

Deferred taxation, if applicable, is provided in full in respect of taxation deferred by temporary differences between the treatment of certain items for taxation and accounting purposes.

 

Deferred tax assets are recognised to the extent that they are regarded as recoverable.

 

(j) Revenue

Revenue is recognised as the fair value of management services provided to Sunrise Resources plc and relates to expenditure incurred and recharged. The company recognises revenue as contractual performance obligations are satisfied. Revenue is net of discounts, VAT and other sales-related taxes.

 

Other income

Other income includes amounts received from Sunrise Resources plc under the management services agreement. Other income is recognised in the period the management services are provided based on the expenditure incurred.

 

(k) Foreign currencies

The Group's consolidated financial statements are presented in Pounds Sterling (£), being the functional currency of the Company, and the currency of the primary economic environment in which the Company operates. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet date.

 

 

For consolidation purposes, the net investment in foreign operations and the assets and liabilities of overseas subsidiaries, associated undertakings and joint arrangements, that have a functional currency different from the Group's presentation currency, are translated at the closing exchange rates. Income statements of overseas subsidiaries, that have a functional currency different from the Group's presentation currency, are translated at exchange rates at the date of transaction. Exchange differences arising on opening reserves are taken to the foreign currency reserve in equity.

 

(l) Leasing and hire purchase commitments

Rentals applicable to operating leases where substantially all the benefits and risks of ownership remain with the lessor are charged to the income statement on a straight-line basis.

 

(m) Share warrants and share based payments

The Company issues warrants and options to employees (including directors) and third parties. The fair value of the warrants and options is recognised as a charge measured at fair value on the date of grant and determined in accordance with IFRS 2, IAS 32 and IAS 39, adopting the Black-Scholes-Merton model. The fair value is charged to administrative expenses on a straight-line basis over the vesting period, together with a corresponding increase in equity, based on the management's estimate of shares that will eventually vest. The expected life of the options and warrants is adjusted based on management's best estimates, for the effects of non-transferability, exercise restrictions and behavioural considerations. The details of the calculation are shown in Note 15.

 

The Company also issues shares in order to settle certain liabilities, including partial payment of fees to directors. The fair value of shares issued is based on the closing mid-market price of the shares on the AIM market on the day prior to the date of settlement and it is expensed on the date of settlement with a corresponding increase in equity.

 

(n) Judgements and estimations in applying accounting policies

In the process of applying the Group's accounting policies above, the Group has identified the judgemental areas that have the most significant effect on the amounts recognised in the financial statements:

 

Intangible assets - exploration and evaluation

IFRS 6 "Exploration for and Evaluation of Mineral Resources" requires that exploration and evaluation assets shall be assessed for impairment when facts and circumstances suggest that the carrying amount may exceed recoverable amount.

 

In practical terms, this requires that project carrying values are regularly monitored and assessed for recoverability whether from future exploitation of resources or realised by sale to a third party.

 

Where activities have not reached a stage which permits reasonable confirmation of the existence of mineral reserves, the directors must form a judgement whether future exploration and evaluation should continue. This requires management to use their sector experience, apply their specialist expertise and form a conclusive judgement as whether or not, on the balance of evidence that further exploration is justified to determine if an economically viable mining operation can be established in future. Such estimates, judgements and assumptions are likely to change as new information and evidence becomes available. If it becomes apparent, in the judgement of the directors, that recovery of capitalised expenditure is unlikely the carrying value should be considered as impaired as detailed below.

 

Impairment

Impairment reviews for deferred exploration and evaluation costs are carried out on a project by project basis, with each project representing a potential single cash generating unit. The directors are required to continually monitor and review the carrying values by reference to new developments, stages in the exploration process and new circumstances.  Assessment of the potential impairment of assets requires an updated judgement of the probability of adequate future cash flows from the relevant project. It includes consideration of:

 

(a)   The period for which the entity has the right to explore in the specific area and whether this right will expire in the near future, and whether the right is expected to be renewed.

 

(b)   Whether substantive expenditure on further exploration for and evaluation of mineral resources for the specific project is either budgeted or planned.

 

(c)   Whether exploration for and evaluation of mineral resources on the specific project has led to the discovery of commercially viable quantities of mineral resources and whether the entity has decided to discontinue such activities on the project.

 

(d)   Whether sufficient data exist to indicate that, although a development on the specific project is likely to proceed, the carrying amount of the exploration and evaluation asset is likely to be recovered in full from successful development of a mine or by the sale of the project.

 

The judgments in respect of key projects are;

 

MB fluorspar project has a carrying value of £2.1m and expenditure of £132k is budgeted for 2020. The complexity of ore was raised as an issue in the early exploration phase, however, using historical data and chemical analysis the directors expect that the deeper zones to the North-West of the site will not be as complex from a metallurgical viewpoint and there are reasonable prospects for progressing. So in their judgment development of this project is to continue.

 

Two gold projects with a total carrying value of £359,000 were sold to a third party in 2016. Tertiary has the right to future royalties, but only if these projects proceed to drilling, successful exploration and production. The directors have sought confirmation from the third party of their plans and commitment to continue with the project. Based upon this and their confidence regarding the likely outcome of exploration, the directors have concluded that the carrying value is not impaired.

 

Going concern

The preparation of financial statements requires an assessment of the validity of the going concern assumption. This in turn is dependent on finance being available for the continuing working capital requirements of the Group. Based on the assumption that such finance will become available, the directors believe that the going concern basis is appropriate for these accounts.

 

Share warrants, share options and share based payments

The estimates of costs recognised in connection with the fair value of share options and share warrants require that management selects an appropriate valuation model and make decisions on various inputs into the model, including the volatility of its own share price, the probable life of the warrants and options before exercise, and behavioural considerations of warrant holders.

 

(o) Standards, amendments and interpretations not yet effective

A number of new standards and amendments to standards and interpretations have been issued but are not yet effective and in some cases have not yet been adopted by the EU. Specifically, the adoption of IFRS 16 (leases) will change the accounting treatment by lessees of leases currently classified as operating leases. Lease agreements will give rise to the recognition by the lessee of an asset, representing the right to use the leased item and a related liability for future lease payments. Lease costs will be recognised in the income statement in the form of depreciation of the right of use asset over the lease term and finance charges representing the unwind of the discount on the lease liability. The adoption of IFRS 16 will not have a material impact on the financial statements of the Group as it has negligible leasing exposure and exploration project leases are exempt as exploration assets under IFRS 16.3(b).

 

 

2.    Segmental analysis

        The Chief Operating Decision Maker is the Board. The Board considers the business has one reportable segment, the management of exploration projects, which is supported by a Head Office function. For the purpose of measuring segmental profits and losses the exploration segment bears only those direct costs incurred by or on behalf of those projects. No Head Office cost allocations are made to this segment. The Head Office function recognises all other costs.

2019

Exploration

projects

£

Head

office

£

Total

£

Consolidated Income Statement




Revenue

-

189,742

189,742

Pre-licence exploration costs

(75,778)

-

(75,778)

Impairment of deferred exploration asset

(442,917)

-

(442,917)

Share-based payments

-

(8,021)

(8,021)

Administration costs and other expenses

-

(494,767)

(494,767)

Operating Loss

(518,695)

(313,046)

(831,741)

Disposal of other investments

-

-

-

Bank interest received

-

234

234

Loss before income tax

(518,695)

(312,812)

(831,507)

Income tax

-

-

-

Loss for the year attributable to equity holders

(518,695)

(312,812)

(831,507)

Non-current assets




Intangible assets:




    Deferred exploration costs:




        Kaaresselkä Gold Project, Finland

260,938

-

260,938

        Kiekerömaa Gold Project, Finland

97,828

-

97,828

        MB Fluorspar Project, USA

2,056,419

-

2,056,419

        Paymaster, USA

17,395

-

17,395

        Pyramid, USA

29,392

-

29,392


2,461,972

-

2,461,972

Property, plant & equipment

-

4,182

4,182

Other investments

-

89,775

89,775


2,461,972

93,957

2,555,929

Current assets




Receivables

22,154

19,414

41,568

Cash and cash equivalents

-

50,617

50,617


22,154

70,031

92,185

Current liabilities




Trade and other payables

(9,183)

(61,503)

(70,686)

Net current assets

12,971

8,528

21,499

Net assets

2,474,943

102,485

2,577,428

Other data




Deferred exploration additions

121,967

-

121,967

Exchange rate adjustments to deferred exploration costs

112,536

-

112,536

 

 

2.                                   Segmental analysis (continued)

 

2018

Exploration

projects

£

Head

office

£

Total

£

Consolidated Income Statement




Revenue

-

218,841

218,841

Pre-licence exploration costs

(38,725)

-

(38,725)

Impairment of deferred exploration asset

(1,976,618)

-

(1,976,618)

Share-based payments

-

(8,997)

(8,997)

Administration costs and other expenses

-

(498,934)

(498,934)

Operating Loss

(2,015,343)

(289,090)

(2,304,433)

Disposal of other investments

-

37,094

37,094

Bank interest received

-

142

142

Loss before income tax

(2,015,343)

(251,854)

(2,267,197)

Income tax

-

-

-

Loss for the year attributable to equity holders

(2,015,343)

(251,854)

(2,267,197)

Non-current assets




Intangible assets:




    Deferred exploration costs:




        Kaaresselkä Gold Project, Finland

260,992

-

260,992

        Kiekerömaa Gold Project, Finland

97,887

-

97,887

        Lassedalen Fluorspar Project, Norway

430,616

-

430,616

        MB Fluorspar Project, USA

1,880,891

-

1,880,891


2,670,386

-

2,670,386

Property, plant & equipment

-

3,308

3,308

Other investments

-

202,328

202,328


2,670,386

205,636

2,876,022

Current assets




Receivables

23,780

72,873

96,653

Cash and cash equivalents

-

218,297

218,297


23,780

291,170

314,950

Current liabilities




Trade and other payables

(15,299)

(49,864)

(65,163)

Net current assets

8,481

241,306

249,787

Net assets

2,678,867

446,942

3,125,809

Other data




Deferred exploration additions

201,622

-

201,622

Exchange rate adjustments to deferred exploration costs

(62,633)

-

(62,633)

 

 

 

 

 

3.    Loss before income tax


2019

£

2018

£

The operating loss is stated after charging



Operating lease rentals - land and buildings

21,081

20,668

Depreciation - owned assets

1,635

4,019

Fees payable to the Group's Auditor for:



    The audit of the Group's annual accounts

6,125

6,175

    The audit of the Group's subsidiaries, pursuant to legislation

3,105

3,087

Fees payable to the Group's Auditor and its associates for other services:



    Interim review of accounts

1,000

1,000

    Corporation tax fees

1,300

1,300

    Corporation tax review fees

3,300

-

    VAT review

-

2,250

 

 

4.    Directors' emoluments

  Remuneration in respect of directors was as follows:


Net cost

to Group

2019

£

Income from recharge to

Sunrise Resources plc

2019

£

 

Total

2019

£

 

Total

2018

£

P L Cheetham (salary)

18,821

68,067

86,888

114,472

R H Clemmey (salary)

86,183

706

86,889

98,354

D A R McAlister (salary)

16,833

-

16,833

16,000

D Whitehead (deceased) (salary)

-

-

-

2,500


121,837

68,773

190,610

231,326

 

The above remuneration amounts do not include non-cash share based payments charged in these financial statements in respect of share warrants issued to the directors amounting to £4,677 (2018: £4,224) or Employer's National Insurance contributions of £23,072 (2018: £28,050).

 

There was no bonus in the year 2019. The remuneration amount for R H Clemmey includes a bonus of £12,500 in 2018. Bonus remuneration is applicable to performance in the previous financial year.

 

Pension contributions made during the year on behalf of Directors amounted to £1,061 (2018: £599).

 

The directors are also the key management personnel.  If all benefits are taken into account, the total key management personnel compensation would be £195,287 (2018: £235,550).

 

After recharge to Sunrise Resources plc, if all benefits are taken into account, the key management personnel net compensation cost to the Group would be £126,514 (2018: £136,878).

 

 

5.    Staff costs

Total staff costs for the Group and Company, including directors, were as follows:


Net cost

to Group

2019

£

Income from recharge to

Sunrise Resources plc

2019

£

 

Total

2019

£

 

Total

2018

£

Wages and salaries

179,782

139,022

318,804

358,095

Social security costs

18,952

17,141

36,093

39,465

Share-based payments

8,021

-

8,021

8,997


206,755

156,163

362,918

406,557

 

 

The average monthly number of part-time and full-time employees, including directors, employed by the Group and Company during the year was as follows:

2019

Number

2018

Number

Technical employees

3

3

Administration employees (including non-executive directors)

5

5


8

8

 

The Company Secretary, Colin Fitch, retired in June 2019 and since July 2019 the company secretarial services have been provided by Rod Venables through City Group PLC.

 

6.    Loss per share

Loss per share has been calculated using the loss for the year attributable to equity holders of the parent and the weighted average number of ordinary shares in issue during the year.


2019

2018

Loss (£)

(831,507)

(2,267,197)

Weighted average ordinary shares in issue (No.)

416,198,199

351,361,810

Basic and diluted loss per ordinary share (pence)

(0.19)

(0.65)

       

The loss attributable to ordinary shareholders and weighted average number of ordinary shares for the purpose of calculating the diluted earnings per ordinary share are identical to those used for the basic earnings per ordinary share. This is because the exercise of share warrants and options would have the effect of reducing the loss per ordinary share and is therefore anti-dilutive. Deferred shares are excluded from the loss per share calculation as they have no attributable earnings.

 

7.    Income tax

 

No liability to corporation tax arises for the year due to the Group recording a taxable loss (2018: £Nil).

 

The tax credit for the period is lower than the credit resulting from the loss before tax at the standard rate of corporation tax in the UK - 19% (2018: 19%). The differences are explained below.

 

 

 

 

 

 

 

 


2019

£

2018

£

Tax reconciliation



Loss before income tax

(831,507)

(2,267,197)

Tax at hybrid rate 19% (2018: 19%)

(157,986)

(430,767)

Differences between capital allowances and depreciation

(1,828)

(110)

Expenditure disallowed for tax purposes

29,902

79,394

Pre-trading expenditure no longer deductible for tax purposes

43,625

42,707

Tax effect at 19% (2018: 19%)

13,623

23,178

Unrelieved tax losses carried forward

(144,363)

(407,589)

Tax recognised on loss

-

-

Total losses carried forward for tax purposes

8,689,670

7,859,632




 

Factors that may affect future tax charges

The Group has total losses carried forward of £8,689,670 (2018: £7,859,632).  This amount would be charged to tax, thereby reducing tax liability, if sufficient profits were made in the future. The deferred tax asset has not been recognised as the future recovery is uncertain given the exploration status of the Group. The carried tax loss is adjusted each year for amounts that can no longer be carried forward.

 

Following a review of the 2017 and 2018 tax returns there was a change in treatment of carried forward losses as excess management expenses of the Company. This change resulted in the difference of £1,469 between the 2018 and 2019 carried forward balances.

 

8.   Intangible assets

Group

Deferred

exploration

expenditure

2019

£

Deferred

exploration

expenditure

2018

£

Cost

At start of year

6,009,482

5,870,493

Additions

121,967

201,622

Exchange adjustments

112,536

(62,633)

At 30 September

6,243,985

6,009,482

Disposals

At start of year

(3,339,096)

(1,362,478)

Impairment losses during year

(442,917)

(1,976,618)

Disposals during year

-

-

At 30 September

(3,782,013)

(3,339,096)

Carrying amounts



At 30 September

2,461,972

2,670,386

At start of year

2,670,386

4,508,015

 

The directors carried out an impairment review which, with reference to IFRS6.20(b) and IAS36.12(b), resulted in an impairment charge, relating to the Tertiary Gold Limited Lassedalen project, being recognised in the Consolidated Income Statement as part of operating expenses. Refer to accounting policy 1(d) and 1(n) for a description of the considerations used in the impairment review.

 

9.    Property, plant & equipment


Group

fixtures

and fittings

2019

£

Company

fixtures

and fittings

2019

£

Group

fixtures

and fittings

2018

£

Company

fixtures

and fittings

2018

£

Cost

At start of year

49,543

34,785

46,577

31,819

Additions

2,509

2,509

2,966

2,966

Disposals

(3,900)

(3,900)

-

-

At 30 September

48,152

33,394

49,543

34,785

Depreciation

At start of year

(46,235)

(31,477)

(42,216)

(27,478)

Charge for the year

(1,635)

(1,635)

(4,019)

(3,999)

Disposals

3,900

3,900

-

-

At 30 September

(43,970)

(29,212)

(46,235)

(31,477)

Net Book Value





At 30 September

4,182

4,182

3,308

3,308

At start of year

3,308

3,308

4,361

4,341

 

10.  Investments

        Subsidiary undertakings

Company

Country of

incorporation/

registration

Type and percentage

of shares held at

30 September 2019

Principal activity

Tertiary Gold Limited

England & Wales

100% of ordinary shares

Mineral exploration

Tertiary (Middle East) Limited

England & Wales

100% of ordinary shares

Mineral exploration

Tertiary Minerals US Inc.

Nevada, USA

100% of ordinary shares

Mineral exploration

 

The registered office of Tertiary Gold Limited and Tertiary (Middle East) Limited is the same as the Parent Company, being Sunrise House, Hulley Road, Macclesfield, Cheshire, SK10 2LP.

 

The registered office of Tertiary Minerals US Inc. is 241 Ridge Street, Suite 210, Reno, NV 89501, USA.



 

Investment in subsidiary undertakings

Company

2019

£

Company

2018

£

Ordinary shares - Tertiary (Middle East) Limited

1

1

Ordinary shares - Tertiary Gold Limited

224,888

224,888

Ordinary shares - Tertiary Minerals US Inc.

1

1

Loan - Tertiary (Middle East) Limited

683,947

683,243

Less - Provision for impairment

(683,947)

(683,243)

Loan - Tertiary Gold Limited

5,302,305

5,246,129

Less - Provision for impairment

(5,168,430)

(4,681,523)

Loan - Tertiary Minerals US Inc.

1,837,532

1,689,428

At 30 September

2,196,297

2,478,924

 

Investments in share capital of subsidiary undertakings

 

The directors have reviewed the carrying value of the Company's investments in shares of subsidiary undertakings totalling £224,890, by reference to estimated recoverable amounts. In turn, this requires an assessment of the recoverability of underlying exploration assets in those subsidiaries in accordance with IFRS 6.

 

Loans to Group undertakings

 

Amounts owed by subsidiary undertakings are unsecured and repayable in cash. Loan interest is charged to US subsidiaries on intercompany loans with Parent Company.

 

A review of the recoverability of loans to subsidiary undertakings, totalling £1,971,407 has been carried out. This indicated a potential credit loss arising in the year of £486,907 (2018: £4,681,523) relating to Tertiary Gold Limited. The assessment and provision arises from the fact that there has been an impairment of the underlying exploration assets held by Tertiary Gold Limited, leading to doubt over recoverability of the loan. The provision made against the receivable has reduced it to the value of the underlying development assets.

 

Other investments - listed investments

Company

Country of

incorporation/

registration

Type and percentage

of shares held at

30 September 2019

Principal activity

Sunrise Resources plc

England & Wales

2.71% of ordinary shares

Mineral exploration

 

Investment designated at fair value through OCI

Group

2019

£

Company

2019

£

Group

2018

£

Company

2018

£

Value at start of year

202,328

202,328

408,971

266,087

Additions

-

-

-

-

Disposal

(40,883)

(40,883)

(134,633)

(17,000)

Movement in valuation

(71,670)

(71,670)

(72,010)

(46,759)

At 30 September

89,775

89,775

202,328

202,328

 

Disposals in the last financial year comprise a disposal of 52,000,000 Sunrise Resources plc shares (2018: 10,000,000 Sunrise Resources plc shares and the disposal of the Company's shareholding of Aurion Resources Limited shares).

 

The fair value of each investment is equal to the market value of its shares at 30 September 2019, based on the closing mid-market price of shares on its equity exchange market.

 

These are level one inputs for the purpose of the IFRS 13 fair value hierarchy.

11.  Receivables


Group

2019

£

Company

2019

£

Group

2018

£

Company

2018

£

Trade receivables

10,496

10,496

59,690

59,690

Other receivables

20,020

1,725

23,229

1,913

Prepayments

11,052

7,126

13,734

11,146

At 30 September

41,568

19,347

96,653

72,749

 

The Group aged analysis of trade receivables is as follows:


Not

impaired

 

£

30 days

or less

 

£

Over

30 days

 

£

Total

carrying

 amount

£

2019 Trade receivables

10,496

10,496

-

10,496

2018 Trade receivables

59,690

59,690

-

59,690

 

 

12.  Cash and cash equivalents


Group

2019

£

Company

 2019

£

Group

2018

£

Company

 2018

£

Cash at bank and in hand

47,787

26,615

20,944

5,379

Short-term bank deposits

2,830

2,830

197,353

197,353

At 30 September

 50,617

29,445

 218,297

202,732

 

 

13.  Trade and other payables


Group

2019

£

Company

 2019

£

Group

2018

£

Company

 2018

£

Trade payables

11,592

5,737

18,650

6,337

Other taxes and social security costs

6,481

6,481

14,207

14,207

Accruals

48,055

12,941

30,468

16,220

Other payables

4,558

4,558

1,838

1,838

At 30 September

70,686

29,717

65,163

38,602

 

 

14.   Issued capital and reserves


2019

No.

2019

£

2018

No.

2018

£

Allotted, called up and fully paid Ordinary Shares





Balance at start of year

359,323,754

35,932

317,076,933

31,708

Shares issued in the year

83,751,911

8,375

42,246,821

4,224

Balance at 30 September

443,075,665

44,307

359,323,754

35,932

 


2019

No.

2019

£

2018

No.

2018

£

Deferred Shares





Balance at start of year

267,076,933

2,644,062

267,076,933

2,644,062

Balance at 30 September

267,076,933

2,644,062

267,076,933

2,644,062

 

Capital restructure

 

At a General Meeting on 13 April 2017 the shareholders approved the subdivision of the Company's ordinary share capital whereby each existing Ordinary Share with a nominal value of 1p was subdivided into 1 new Ordinary Share of 0.01p and 1 Deferred Share of 0.99p each. The Deferred Shares have no significant rights attached to them and carry no right to vote or to participate in distribution of surplus assets and are not admitted to trading on the AIM market of the London Stock Exchange plc or any other stock exchange. The Deferred Shares effectively carry no value.

 

Share issues

 

During the year to 30 September 2019 the following share issues took place:

 

An issue of 83,333,333 0.01p ordinary shares at 0.3p per share, by way of placing, for a total consideration of £230,000 net of expenses (25 January 2019).

 

An issue of 418,578 0.01p ordinary shares at 0.325p per share to a director, in satisfaction of director's fees, for a total consideration of £1,360 (21 February 2019).

 

During the year to 30 September 2018 a total of 42,246,821 0.01p ordinary shares were issued, at an average price of 1.203p, for a total consideration of £458,158 net of expenses.

 

The total amount of transaction fees debited to the Share Premium account in the year was £20,000 (2018: £50,000).

 

Nature and purpose of reserves

 

Foreign currency reserve

Exchange differences relating to the translation of the net assets of the Group's foreign operations, which relate to subsidiaries only, from their functional currency into the Parent Company's functional currency, being Sterling, are recognised directly in the foreign currency reserve.

 

Share option reserve

The share option reserve is used to recognise the fair value of share-based payments provided to employees, including key management personnel, by means of share options and share warrants issued as part of their remuneration. Refer to Note 15 for further details.

 

 

15.  Warrants granted

Warrants not exercised at 30 September 2019

Issue date

Exercise

price

Number

Exercisable

Expiry

dates

20/02/2015

4.00p

1,200,000

Any time before expiry

20/02/2020

20/02/2015

4.00p

500,000

Any time before expiry

20/02/2020

11/03/2016

1.40p

200,000

Any time before expiry

11/03/2021

11/03/2016

1.40p

800,000

Any time before expiry

11/03/2021

31/01/2017

1.025p

200,000

Any time before expiry

31/01/2022

31/01/2017

1.025p

800,000

Any time before expiry

31/01/2022

31/01/2018

1.875p

200,000

Any time from 01/02/2019

31/01/2023

31/01/2018

1.875p

800,000

Any time from 01/02/2019

31/01/2023

21/02/2019

0.50p

3,500,000

Any time from 21/02/2020

21/02/2024

21/02/2019

0.35p

3,000,000

Any time from 21/02/2020

21/02/2024

21/02/2019

0.35p

400,000

Any time from 21/02/2020

21/02/2024

21/02/2019

0.35p

1,600,000

Any time from 21/02/2020

21/02/2024






 

Warrants are issued for nil consideration and are exercisable as disclosed above. They are exchangeable on a one for one basis for each ordinary share at the exercise price on the date of conversion.

 

Share-based payments

The Company issues warrants to directors and employees on varying terms and conditions.

 

Details of the share warrants outstanding during the year are as follows:


2019


2018


Number of

share warrants

Weighted

average

exercise

price

Pence


Number of

share warrants

and share

options

Weighted

average

exercise

price

Pence

Outstanding at start of year

9,050,000

7.877


10,050,000

8.425

Granted during the year

8,500,000

0.412


1,000,000

1.875

Exercised during the year

-

-


-

-

Forfeited during the year

-

-


-

-

Expired during the year

(4,350,000)

13.84


(2,000,000)

7.630

Outstanding at 30 September

13,200,000

1.106


9,050,000

7.877

Exercisable at 30 September

4,700,000

2.362


6,850,000

6.717

 

The warrants outstanding at 30 September 2019 had a weighted average exercise price of 1.1p (2018: 7.9p), a weighted average fair value of 0.43p (2018: 1.84p) and a weighted average remaining contractual life of 3.42 years (2018: 1.76 years).

 

In the year ended 30 September 2019, warrants were granted on 21 February 2019. The aggregate of the estimated fair values of the warrants granted on this date is £11,173. In the year ended 30 September 2018, warrants were granted on 31 January 2018. The aggregate of the estimated fair values of the warrants granted on this date is £7,082.

 

There were no warrants exercised in the year ending 30 September 2019.

 

The inputs into the Black-Scholes-Merton Pricing Model were as follows:


2019

2018

Weighted average share price

0.350p

1.875p

Weighted average exercise price

0.388p

1.875p

Expected volatility

75.0%

70.0%

Expected life

4 years

4 years

Risk-free rate

0.827%

1.06%

Expected dividend yield

0%

0%

 

        Expected volatility was determined by calculating the historical volatility of the Company's share price over the previous three years. The expected life used in the model has been adjusted based on management's best estimate for the effects of non-transferability, exercise restrictions and behavioural considerations.

 

        The Company recognised total expenses of £8,021 and £8,997 related to equity-settled share based payment transactions in 2019 and 2018 respectively.

 

16.  Operating lease commitments

 

The Company rents office premises under a short term operating lease agreement.

 

Future minimum lease payments under non-cancellable operating leases are:


2019

Land & buildings

£

2018

Land & buildings

£

Office accommodation:



Within one year

3,525

3,456

 

        The Company does not sub-let any of its leased premises.

 

        Lease payments recognised in loss for the period amounted to £21,081 (2018: £20,668).

 

 

17.  Related party transactions

Key management personnel

 

The directors holding office in the period and their warrants held in the share capital of the Company are:


At 30 September 2019


At 30 September 2018


Shares number

Share warrants

number

Warrants

exercise

price

Warrant expiry

 date


Shares

number

Share warrants

number

P L Cheetham*

12,612,113

1,000,000

4.000p

20/02/2020


12,612,113

1,500,000



2,000,000

0.500p

21/02/2024




D A R McAlister

1,295,343

1,500,000

0.500p

21/02/2024


876,765

-

R H Clemmey

977,405

3,000,000

0.350p

21/02/2024


977,405

3,350,000

       

* Includes 2,843,625 shares held by K E Cheetham, wife of P L Cheetham.

 

The directors have no beneficial interests in the shares of the Company's subsidiary undertakings as at 30 September 2019. The directors of the Company are the directors of all Group companies.

 

        Details of the Parent Company's investment in subsidiary undertakings are shown in Note 10.

 

        Sunrise Resources plc

During the year the Company charged costs of £189,742 (2018: £218,841) to Sunrise Resources plc being shared overheads of £27,025 (2018: £24,607), costs paid on behalf of Sunrise Resources plc of £6,554 (2018: £5,421),  staff salary costs of £78,590 (2018: £77,597) and directors' salary costs of £77,574 (2018: £111,216), comprising P L Cheetham £76,773 (2018: £110,790) and R H Clemmey £801 (2018: £426).  All salary costs include employer's National Insurance and Pension contributions.

 

The salary costs in Notes 4 and 5 include these charges.

 

        At the balance sheet date an amount of £10,496 (2018: £59,690) was due from Sunrise Resources plc.

 

        P L Cheetham, a director of the Company, is also a director of Sunrise Resources plc.

 

 

Shares and warrants held in Sunrise Resources plc by the Company's directors are as follows:

 


At 30 September 2019


At 30 September 2018


Shares

number

Number

Warrants

Exercise

price

Warrants

expiry date


Shares

number

Warrants

number

P L Cheetham*

125,593,683

3,000,000

0.275p

05/02/2020


83,454,885

5,000,000

D A R McAlister

550,000

-

-

-


550,000

-

R H Clemmey

-

750,000

0.275p

05/02/2020



2,750,000



500,000

0.160p

18/02/2021






500,000

0.135p

01/02/2022






500,000

0.160p

31/01/2023






750,000

0.110p

21/02/2024




       

* Includes 5,500,000 shares held by K E Cheetham, wife of P L Cheetham.

 

18.  Capital management

       

The Group's capital requirements are dictated by its project and overhead funding requirements from time to time. Capital requirements are reviewed by the Board on a regular basis.

 

        The Group manages its capital to ensure that entities within the Group will be able to continue as going concerns, to increase the value of the assets of the business and to provide an adequate return to shareholders in the future when exploration assets are taken into production.

       

The Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of its assets. In order to maintain or adjust the capital structure the possibilities open to the Group in future include issuing new shares, consolidating shares, returning capital to shareholders, taking on debt, selling assets and adjusting the amount of dividends paid to the shareholders.

 

19.  Financial instruments

       

At 30 September 2019, the Group's and Company's financial assets consisted of listed investments, trade receivables and cash and cash equivalents.  At the same date, the Group and Company had no financial liabilities other than trade and other payables due within one year and had no agreed borrowing facilities as at this date. There is no material difference between the carrying and fair values of the Group and Company's financial assets and liabilities.

 

        The carrying amounts for each category of financial instruments held at 30 September 2019, as defined in IFRS 9, are as follows:


Group

2019

£

Company

 2019

£

Group

2018

£

Company

 2018

£

Financial assets at amortised cost

81,133

41,670

301,215

264,335

Financial assets at fair value through other comprehensive income

89,775

89,775

202,328

202,328

Financial liabilities at amortised cost

62,156

21,187

50,276

23,715

       

Risk management

        The principal risks faced by the Group and Company resulting from financial instruments are liquidity risk, foreign currency risk and, to a lesser extent, interest rate risk and credit risk. The Directors review and agree policies for managing each of these risks as summarised below. The policies have remained unchanged from previous periods as these risks remain unchanged.

 

        Liquidity risk

        The Group holds cash balances in Sterling, US Dollars, Swedish Krona, Canadian Dollars, Euros and Saudi Riyals to provide funding for exploration and evaluation activity. The Group and the Company are dependent on equity fundraising through share placings which the directors regard as the most cost-effective method of fundraising. The directors monitor cash flow in the context of their expectations for the business to ensure sufficient liquidity is available to meet foreseeable needs.

 

        Currency risk

        The Group's financial risk management objective is broadly to seek to make neither profit nor loss from exposure to currency risk. The Group is exposed to transactional foreign exchange risk and takes profits and losses as they arise as, in the opinion of the directors, the cost of hedging against fluctuations would be greater than the related benefit from doing so.

 

Bank and cash balances were held in the following denominations:


Group

Company


2019

£

2018

£

2019

£

2018

£

United Kingdom Sterling

23,526

203,098

22,438

202,085

United States Dollar

11,628

4,171

6,691

313

Swedish Krona

5,734

483

-

5

Norwegian Krona

4

-

4

-

European Euro

9,664

10,486

303

314

Canadian Dollar

14

15

14

15

Saudi Riyal

47

44

-

-


50,617

218,297

29,450

202,732

 

 

        Surplus Sterling funds are placed with NatWest bank on short-term treasury deposits at variable rates of interest.

 

        The Company and the Group are exposed to changes in exchange rates mainly in the Sterling value of US Dollar denominated financial assets.

 

        Sensitivity analysis shows that the Sterling value of its US Dollar denominated financial assets at 30 September 2019 would increase or decrease by £581 for each 5% increase or decrease in the value of Sterling against the Dollar.

 

        Neither the Company nor the Group is exposed to material transactional currency risk.

 

        Interest rate risk

        The Group and Company finance their operations through equity fundraising and therefore do not carry borrowings.

 

        Fluctuating interest rates have the potential to affect the loss and equity of the Group and the Company insofar as they affect the interest paid on financial instruments held for the benefit of the Group. The directors do not consider the effects to be material to the reported loss or equity of the Group or the Company presented in the financial statements.

 

        Credit risk

        The Company has exposure to credit risk through receivables such as VAT refunds, invoices issued to related parties and its joint arrangements for management charges. The amounts outstanding from time to time are not material other than for VAT refunds which are considered by the directors to be low risk.

 

        The Company has exposure to credit risk in respect of its cash deposits with NatWest bank and this exposure is considered by the directors to be low.

 

 

20.  Events after the reporting date

 

        On 8 October 2019, the Swedish tax office informed the Company that the appeal was not successful with regards to levy of an incorrect tax return relating to tax year 2013/14 in Tertiary Gold Sweden Branch. The levy was increased to SEK 296,958 (approximately £24,461) by the interest of SEK 8,703. The Company's tax lawyer in Sweden is further appealing the decision. This event is treated as a post balance sheet adjusting event and the full cost of potential tax levy was accrued.

 

On 19 November 2019 the Company entered into a convertible securities issuance deed (the "Agreement") with Bergen Global Opportunity Fund, LP (the "Investor"), a US based institutional investment fund, in connection with an issuance by the Company of zero coupon convertible securities having a nominal amount of up to £653,000 (the "Convertible Securities"). Pursuant to the Agreement, on 26 November 2019 the Company issued a convertible security with the nominal value of £263,000 (at the purchase price of £232,000).

 

In connection with the Agreement:

 

(a)   the Company issued to the Investor 17,000,000 Shares by way of a commencement fee in relation to the overall funding ("Commencement Fee Shares");

 

(b)   the Company will issue to the Investor 18,000,000 Shares at par to collateralise the investment ("Collateral Shares"). Investor may be required to make a further payment to the Company once all of the obligations of the Company under the Agreement have been finally met and no amount remains outstanding to the Investor, depending on the price of Shares at such time; and

 

(c)   the Company issued 22,000,000 warrants with an exercise period of 48 months from the date of issue (the "Warrants") to the Investor entitling the Investor (or any subsequent holder of the Warrants) to subscribe for one Share per Warrant at the exercise price equal to 0.33588 pence.

 

(d)   On 18th February 2020 the Company received a Conversion Notice from the Investor in respect of the Conversion of £263,000 of the Convertible Security as a result of which the Company will issue 154,705,883 new ordinary shares at a Conversion Price of 0.17 pence per share.


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
END
 
 
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