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Chief Executive Officer's Statement

The advancement to gold production from the Homase Mine within the Company's Akrokeri-Homase Gold Project ("AKHM") in Ghana remains Goldstone's priority, and significant progress was made in this regard during H1 2021.

The Company has been responsible for building and commissioning the heap leach and plant and, once our elution facility has been completed, will commence the smelting of the gold concentrate and delivery of gold doré bars. 

With the award of the Environmental Permit by the Environmental Protection Agency in February 2021, shortly followed by the granting of our Operating and Water Permit, mining commenced at the first pit within the Homase Mine in April, following the pre-stripping and clearing.

The mechanical and electrical components, associated with the dry plant for the agglomerated ore, transport and stacking, were assembled and commissioned in March and April, including a screening plant, grasshopper conveyors and an extendable stacker, which was positioned on the Leach-pad for ore stacking.

The first two cells of the heap leach pad, with a combined area of 13,000m², were commissioned on 13 May 2021, and a total of seven cells will complete this initial Leach-pad with an area of approximately 73,000m². The first two cells enabled stacking at an initial rate of 100 tonnes per hour to commence, which is expected to ramp up to a target of 200 tonnes per hour (c.2,500 tonnes per day).

The first ore was stacked on the leach pad on 6 May 2021, and, to date, 87,300 tonnes of ore have been stockpiled, equating to around one month of mine production at full 3,000 tonne per day heap leach capacity.

The Company had a prolonged wait for approval from the Minerals Commission of Ghana to start irrigation and leaching of ore placed on the heap leach pad at the Homase Mine, which was awarded, post period end, on 12 July 2021.  In August 2021, the Company successfully commissioned the Carbon in Solution ("CIS") plant on-site, and despite some delays, and some initial commissioning issues with stacking and agglomeration, the Heap Leach Plant is now operating as planned.  These issues unfortunately meant that the Company's target production of 25,000 ounces of gold for the first eight months of production has been delayed.  

As at 17 September 2021, the Company had mined 133,000 tonnes of ore and 385,700 tonnes of waste from the first four benches of the Krodua Pit within the Homase Mine. All indications are that the grade and tonnes mined to date are within expectations and at a total cash cost, pre-tax, of under US$600 per ounce.  These figures have been derived by the Company and the Board believes the cash cost lies within the lower quartile of industry cost standards.

As noted above, 87,300 tonnes of ore have been stacked on the Heap Leach pads and, whilst this is behind our initial forecast schedule, the Company is now stacking the balance of the stockpile at a consistent 120 tonnes per hour. We have temporarily paused further mining whilst the existing stockpile is being depleted and expect to recommence shortly. 

The Company is pleased with the initial permeability and dissolution of the leachate, and the CIS plant is operating well and producing loaded carbon at the expected recovery rates. The Company is continuing to make improvements to the CIS plant and investigating further ramping up the speed of stacking and the subsequent processing. The Company has now taken the first batch of loaded carbon out of the CIS plant for further processing, but unfortunately has not yet been able to elute the contained gold.

The Company had been seeking to elute the gold from the loaded carbon at a nearby rented facility, however approval from the Minerals Commission of Ghana for use of this facility has not yet been forthcoming. In light of this, the Company is now accelerating its plans to complete its own elution facility on site, which we are endeavouring to complete in the shortest possible timeframe.

The Company expects to increase the planned gold production from the Company's original guidance of 14,400 ounces, stated in the Definitive Economic Plan ("DEP") announced on 19 June 2019 to around 50,000 ounces of gold per annum within the first year of production, which would represent an increase of more than 300% from the original production schedule.  

Whilst the Company is ramping up stacking and production, it has paused the update of the DEP, announced 13 May 2021. The Company expects to complete the update in early 2022.

Corporate Overview

During the period, the Company announced exercise of warrants by the issue of, in aggregate, 126 million new ordinary shares of 1 penny each in the capital of the Company ("Ordinary Shares") (the "Warrant Exercise") for consideration of US$4.8 million. Of this, 102 million warrants were exercised by Asian Investment Management Services Ltd ("AIMS") and Paracale Gold Limited ("Paracale").  In addition, Paracale exercised 20,352,377 warrants at a price of 1.2 pence per Ordinary Share, was set against the related US$1,224,000 loan provided to the Company by Paracale on 28 December 2018, which accrues interest at a daily compound rate of 6% (the "Loan").  Accordingly, the amount due in respect of the Warrant Conversion Exercise being £244,229 (c.US$344,362) was satisfied by reducing the total amount of principal and interest outstanding under the Loan to US$1,036,558 on 1 June 2021.

In March 2021, as consideration for the Deferment of the Gold Loan, announced 14 March 2020, 2,000,000 new Ordinary Shares were issued to AIMS.

On 12 July 2021, the Company reached agreement for settlement of its twenty outstanding unsecured bonds of US$50,000 each (the "Bonds") with the holders of the Bonds (the "Bondholders"). The offer was accepted by all Bondholders, who agreed to full and final settlement of the Bonds in exchange for the issue of, in aggregate, 12,000,000 Ordinary Shares (the "Bond Settlement Shares") (the "Bond Settlement Agreement"). 

Verbal agreement has been received from BCM Investments Limited ("BCM"), which will be allotted its 3,600,000 Bond Settlement Shares immediately following signature of a written Bond Settlement Agreement. A further announcement will be made in due course.

Losses for the six months to 30 June 2021 were approximately US$0.5 million (30 June 2020: Loss of US$0.3 million).  The financial statements at the period end show the Group's balance sheet, with net assets standing at US$15.5 million against net assets of US$10.8 million as at 31 December 2020.  The net assets increased as result of the funding secured during the period, with warrant exercises.

Having received funding from the Warrants Exercise of US$4.8 million during the H1 2021, to fund the development of the Homase Mine and general working capital, the Company had cash and cash equivalents of approximately US$1.5 million as at 30 June 2021 (30 June 2020: US$0.5 million). 

Post period end, on 17 July 2021, Paracale exercised 20 million warrants at a price of 1.2 pence per Ordinary Share, which was set against the related US$1,224,000 Loan provided by Paracale.  Accordingly, the balance of the Loan has now been reduced to US$723,669. Interest shall accrue on this outstanding principal balance in accordance with the terms of the Loan Agreement.

In addition, the Company received further Warrant Exercise of 10 million Warrants at a price of 3 pence for consideration of US$409,000.

On 20 September 2021, AIMS agreed to extend the maturity date on the US$3 million secured gold loan announced on 22 June 2020 (the "Gold Loan") to 31 August 2022 (the "Extension").  The Extension restructures the repayment obligations to enable the Company to ramp up production.  The Company retains the right to repay the Gold Loan early without penalty. 

Interest will continue to accrue at the default rate of 17% until January 2022, then will revert to the original interest rate of 14% until maturity.  In conjunction with the Extension, the Company has agreed a repayment schedule for the Gold Loan and accrued and ongoing interest, as set out below:

In the event that any payment is not made when due in accordance with the agreed repayment schedule, this will be deemed an event of default.  Any interest that is not paid when due will accrue interest at the default rate of 17% until payment.

Other

On 18 January 2021, the Company reached an agreement with a former director of the Company, for full and final settlement of damages awarded by the South African Labour Court in December 2018, pursuant to which 1,800,000 new Ordinary Shares were issued to the former director. This represented full and final settlement of the damages awarded to him by the South African Labour Court and the Company has been indemnified against any future claims by the former director.

Outlook

I look forward to keeping shareholders updated as we move towards production and would like to thank the team, my fellow Board members, and all our stakeholders in Ghana and internationally for their continued support.

Emma Priestley

Chief Executive Officer

Consolidated statement of financial position

as at 30 June 2021

Consolidated statement of comprehensive income

for the 6 months ended 30 June 2021