Adriatic Metals PLC
('Adriatic Metals' or 'Company')
Annual Report and Audited Financial Statements
for the Six Months Ended 31 December 2020
Adriatic Metals PLC (ASX:ADT & LSE:ADT1) is pleased to announce its Annual Report and Audited Financial Statements for the six months ended 31 December 2020.
The Board advises all shareholders and interested stakeholders that the Company's Annual Report including the audited results for the six months ended 31 December 2020 is available on the Company's website: https://www.adriaticmetals.com/investors/financial-reports-2/
An abridged version of the results for the six months ended 31 December 2020 is included below.
By order of the Board
Geoff Eyre
Chief Financial Officer and Joint Company Secretary
AS AT 31 DECEMBER 2020
(In GBP) |
Note |
31 December 2020 |
(Restated) 30 June 2020 |
Assets |
|
|
|
Current assets |
|
|
|
Cash and cash equivalents |
|
29,580,538 |
9,942,729 |
Other receivables and prepayments |
5 |
654,514 |
451,546 |
Financial asset at fair value through profit and loss |
6 |
- |
1,241,514 |
Total current assets |
|
30,235,052 |
11,635,789 |
Non-current assets |
|
|
|
Property, plant and equipment |
8 |
969,464 |
910,920 |
Right of use asset |
12 |
236,349 |
251,898 |
Exploration and evaluation assets |
9, 10 |
36,479,724 |
9,045,169 |
Total non-current assets |
|
37,685,537 |
10,207,987 |
Total assets |
|
67,920,589 |
21,843,776 |
Equity and liabilities |
|
|
|
Current liabilities |
|
|
|
Accounts payable and accrued liabilities |
11 |
1,900,437 |
682,402 |
Lease liability |
12 |
35,609 |
10,530 |
Option Liability |
10 |
2,515,399 |
- |
Borrowings |
7 |
105,515 |
- |
Total current liabilities |
|
4,556,960 |
692,932 |
Non-current liabilities |
|
|
|
Lease liability |
12 |
219,731 |
255,091 |
Borrowings |
7 |
11,590,172 |
- |
Derivative Liability |
7 |
3,045,213 |
- |
Total non-current liabilities |
|
14,855,116 |
255,091 |
Total liabilities |
|
19,412,076 |
948,023 |
Capital and reserves attributable to shareholders of the parent |
|||
Share capital |
15 |
2,772,186 |
2,401,777 |
Share premium |
15 |
51,471,748 |
23,992,967 |
Share-based payment reserve |
15 |
5,756,069 |
4,426,185 |
Warrants Reserve |
15 |
2,797,086 |
- |
Other Equity |
10 |
(2,515,399) |
- |
Foreign currency translation reserve |
|
225,580 |
219,805 |
Retained deficit |
|
( 13,995,045 ) |
( 10,144,981 ) |
|
|
46,512,225 |
20,895,753 |
Non-controlling interest |
10 |
1,996,288 |
- |
Total equity |
|
48,508,513 |
20,895,753 |
Total equity and liabilities |
|
67,920,589 |
21,843,776 |
See note 24 for details of the restatement of the prior year comparatives.
The above Consolidated Financial Statements should be read in conjunction with the accompanying notes.
The Consolidated Financial Statements of Adriatic Metals PLC, registered number 10599833, were approved and authorised for issue by the Board of Directors on 30 March 2021 and were signed on its behalf by:
Paul Cronin Managing Director & Chief Executive Officer |
Geoff Eyre Chief Financial Officer & Joint Company Secretary |
FOR THE SIX MONTHS ENDED 31 DECEMBER 2020
(In GBP) |
|
Note |
Six Months Ended 31 December 2020 |
Year Ended 30 June 2020 |
|
|
|
|
|
Exploration costs |
17 |
(798,028) |
- |
|
General and administrative expenses |
18 |
(2,115,707) |
(3,315,634) |
|
Share-based payment expense |
15e |
(2,267,239) |
(3,443,359) |
|
Other income |
21 |
4,816 |
6,131 |
|
Operating loss |
|
(5,176,158) |
(6,752,862) |
|
|
||||
Finance income |
19 |
- |
203,131 |
|
Finance expense |
19 |
(197,039) |
(11,580) |
|
Revaluation of fair value asset |
6,7 |
(322,987) |
322,987 |
|
Loss before tax |
|
(5,696,184) |
(6,238,324) |
|
|
||||
Tax charge |
16 |
1,681 |
- |
|
|
||||
Loss for the period |
|
(5,694,503) |
(6,238,324) |
|
|
||||
Other comprehensive income that might be reclassified to profit or loss in subsequent periods: |
||||
Exchange gain arising on translation of foreign operations |
|
5,775 |
145,563 |
|
|
|
5,775 |
145,563 |
|
Total comprehensive loss for the period |
|
(5,688,728) |
(6,092,761) |
|
|
||||
Total comprehensive loss attributable to: |
|
|
|
|
Owners of the parent |
|
(5,169,617) |
(6,092,761) |
|
Non-controlling interest |
|
(519,111) |
- |
|
|
|
(5,688,728) |
(6,092,761) |
|
|
||||
Net loss per share |
Basic and diluted (pence) |
15f |
(2.99) |
(3.69) |
The above Consolidated Financial Statements should be read in conjunction with the accompanying notes.
FOR THE SIX MONTHS ENDED 31 DECEMBER 2020
(In GBP) |
Note |
Number Of |
Share Capital |
(Restated) Share Premium |
Share- Based Payment Reserve |
Warrants |
Other Equity |
Foreign Currency Translation Reserve |
(Restated) Retained Earnings |
Capital And Reserves Attributable To Owners Of The Parent |
Non- Controlling Interest |
Total Equity |
|
|||||||||
30 June 2019 |
|
150,782,587 |
2,013,701 |
11,084,777 |
1,714,826 |
- |
|
74,242 |
(4,638,657) |
10,248,889 |
- |
10,248,889 |
|
|||||||||
|
|
|
|
|
|
|
Comprehensive income for the year: |
|||||||||||||||
Loss for the year |
|
- |
- |
- |
- |
- |
|
|
(6,238,324) |
(6,238,324) |
- |
(6,238,324) |
|
|||||||||
Other comprehensive income |
|
- |
- |
- |
- |
- |
|
145,563 |
- |
145,563 |
- |
145,563 |
|
|||||||||
Total comprehensive loss |
|
- |
- |
- |
- |
- |
|
145,563 |
(6,238,324) |
(6,092,761) |
- |
(6,092,761) |
|
|||||||||
|
|
|
|
|
|
|
Contributions by and distributions to owners: |
|||||||||||||||
Issue of share capital |
15 |
25,083,400 |
334,989 |
13,015,388 |
- |
- |
|
- |
- |
13,350,377 |
- |
13,350,377 |
|
|||||||||
Share issue costs |
15 |
- |
- |
(797,655) |
- |
- |
|
- |
- |
(797,655) |
- |
(797,655) |
|
|||||||||
Exercise of options |
15 |
3,975,000 |
53,087 |
690,457 |
(732,000) |
- |
|
- |
732,000 |
743,544 |
- |
743,544 |
|
|||||||||
Issue of options |
15 |
- |
- |
- |
3,443,359 |
- |
|
- |
- |
3,443,359 |
- |
3,443,359 |
|
|||||||||
30 June 2020 |
|
179,840,987 |
2,401,777 |
23,992,967 |
4,426,185 |
- |
|
219,805 |
(10,144,981) |
20,895,753 |
|
20,895,753 |
|
|||||||||
|
|
|
|
|
|
|
Comprehensive income for the Period: |
|||||||||||||||
Loss for the period |
|
- |
- |
|
|
- |
|
|
(5,175,392) |
(5,175,392) |
(519,111) |
(5,694,503) |
|
|||||||||
Other comprehensive income |
|
- |
- |
- |
- |
- |
|
5,775 |
- |
5,775 |
- |
5,775 |
|
|||||||||
Total comprehensive loss |
|
- |
- |
-
|
- |
- |
|
5,775 |
(5,175,392) |
(5,169,617) |
( 519,111 ) |
(5,688,728) |
|
|||||||||
|
|
|
|
|
|
|
Contributions by and distributions to owners: |
|||||||||||||||
Issue of share capital |
15 |
5,276,595 |
70,469 |
6,129,531 |
- |
- |
- |
- |
- |
6,200,000 |
|
6,200,000 |
|
|||||||||
Settlement Placement |
15 |
4,830,156 |
64,507 |
4,791,547 |
- |
- |
- |
- |
- |
4,856,054 |
|
4,856,054 |
|
|||||||||
Share issue costs |
|
- |
|
(1,598,603) |
|
- |
- |
- |
151,402 |
(1,447,201) |
|
(1,447,201) |
|
|||||||||
Exercise of options |
15 |
4,350,000 |
58,093 |
1,203,817 |
(1,173,926) |
- |
- |
- |
1,173,926 |
1,261,910 |
|
1,261,910 |
|
|||||||||
Issue of options |
15 |
- |
- |
- |
2,267,239 |
- |
- |
- |
- |
2,267,239 |
|
2,267,239 |
|
|||||||||
Acquisition of subsidiary |
15 |
13,278,937 |
177,340 |
16,952,489 |
236,571 |
2,797,086 |
(2,515,399) |
- |
- |
17,648,087 |
2,515,399 |
20,163,486 |
|
|||||||||
31 December 2020 |
|
207,576,675 |
2,772,186 |
51,471,748 |
5,756,069 |
2,797,086 |
(2,515,399) |
225,580 |
(13,995,045) |
46,512,225 |
1,996,288 |
48,508,513 |
|
|||||||||
See note 24 for details of the restatement of the prior year comparatives.
The above Consolidated Financial Statements should be read in conjunction with the accompanying notes.
FOR THE SIX MONTHS ENDED 31 DECEMBER 2020
(In GBP) |
Note |
Six Months Ended 31 December 2020 |
Year Ended 30 June 2020 |
Cash flows from operating activities |
|
|
|
Loss for the period |
|
(5,694,503) |
(6,238,324) |
Adjustments for: |
|||
Loss on Disposal of Fixed Asset |
|
1,106 |
- |
Depreciation of property, plant and equipment |
8 |
36,157 |
52,645 |
Amortisation of exploration & evaluation assets |
9 |
11,469 |
23,317 |
Amortisation of right-of-use assets |
12 |
15,549 |
13,714 |
Share-based payment expense |
15 |
2,267,239 |
3,443,359 |
Finance income |
19 |
- |
(203,131) |
Finance expense |
19 |
197,039 |
11,580 |
Revaluation of fair value asset and liability |
6,7 |
322,987 |
(322,987) |
Changes in working capital items: |
|||
Increase in other receivables and prepayments |
|
(151,833) |
(85,438) |
Increase in accounts payable and accrued liabilities |
|
687,582 |
498,074 |
Net cash used in operating activities |
|
(2,307,208) |
(2,807,191) |
Cash flows from investing activities: |
|||
Cash acquired on acquisition |
10 |
311,964 |
- |
Purchase of property, plant and equipment |
8 |
(90,864) |
(235,117) |
Purchase of exploration & evaluation assets |
9 |
(3,052,019) |
(4,942,689) |
Sale of Property, plant and equipment |
|
1,970 |
- |
Loans issued |
6 |
(723,300) |
(876,201) |
Interest received |
|
- |
37,742 |
Net cash used in investing activities |
|
(3,552,249) |
(6,016,265) |
Cash flows from financing activities: |
|||
Net proceeds from the issue of ordinary shares |
15i |
12,317,964 |
13,296,266 |
Gross proceeds from loans and borrowings |
7 |
14,956,849 |
- |
Transaction costs arising from financing activities |
15i |
(1,447,201) |
- |
Interest paid on lease liabilities |
|
(10,523) |
(11,580) |
Net cash flows from financing activities |
|
25,817,089 |
13,284,686 |
Net increase in cash and cash equivalents |
|
19,957,632 |
4,461,230 |
Exchange (losses) / gains on cash and cash equivalents |
|
(319,823) |
111,740 |
Cash and cash equivalents at beginning of the period |
|
9,942,729 |
5,369,759 |
Cash and cash equivalents at end of the period |
|
29,580,538 |
9,942,729 |
The above Consolidated Financial Statements should be read in conjunction with the accompanying notes.
1. Corporate information
The consolidated financial statements present the financial information of Adriatic Metals PLC and its subsidiaries detailed in Section 3 (collectively, the Group) for the period ended 31 December 2020. Adriatic Metals PLC (the Company or the parent) is a public company limited by shares and incorporated in England & Wales. The Registered office has changed during the year. The registered office is located at Ground Floor, Regent House, 65 Rodney Road, Cheltenham GL50 1HX, United Kingdom.
The Group's principal activity is precious and base metals exploration and development. The Group owns the world-class advanced Vares Silver Project in Bosnia & Herzegovina. The Vares Silver Project consists of two high-grade polymetallic deposits, located at Rupice and Veovaca. The Group expanded its exploration activities to Serbia during the period with the acquisition of the Tethyan Resource Corp to order to advance the former Kizevak and Sastavci polymetallic mines in the Raska District of southern Serbia.
Bosnia & Herzegovina and Serbia are well-positioned in central Europe and boast strong mining history, pro-mining environment, highly skilled workforce as well as extensive existing infrastructure and logistics.
The Vares Silver Project's captivating economics and impressive resource inventory have attracted Adriatic's highly experienced team, which is expediting exploration efforts to expand the current JORC resource. Results of a recent Pre-Feasibility study indicate an NPV8 of US$1,040 million and IRR of 113%. Leveraging its first-mover advantage, Adriatic is rapidly advancing the project into the development phase and through to production.
2. Basis of preparation
a Statement of compliance
These consolidated financial statements have been prepared in accordance with international accounting standards in conformity with the requirements of international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union in accordance with the provisions of the Companies Act 2006. IFRS is subject to amendment and interpretation by the International Accounting Standards Board ("IASB") and the IFRS Interpretations Committee, and there is an ongoing process of review and endorsement by the European Commission.
The Consolidated Financial Statements were authorised for issue by the Board of Directors on 30 March 2021.
b Basis of measurement
These Consolidated Financial Statements have been prepared on a historical cost basis, except for certain financial instruments that have been measured at fair value.
These Consolidated Financial Statements are presented in Great Britain Pounds ("GBP"). The functional currency of the Company is the Great Britain Pound.
c Going Concern
The Group incurred a loss in the period of £5,694,503 (30 June 2020 - £6,238,324). However, the Group also had a net asset position at the balance sheet date of £ 46,512,225 (30 June 2020 - £20,895,753 ).
The Company and Group continue to meet their working capital requirements with the support of investors completed a £6.2 million equity private placement with the European Bank for Reconstruction and issue of US$20 million in convertible debentures to Queens Road Capital during Q4 2020. The results from the October 2020 Vares Silver Project Pre-Feasibility study indicated a project NPV8 of US$1,040 million and IRR of 113% further underline the Group's future potential as producing mine generating health cash flows.
The Group's operations have been largely unaffected by COVID-19 with exploration and development work continuing with only minor disruption. The Vares Silver Project's economics, the resource based of which includes a substantial element attributable to precious metals, remain attractive notwithstanding the impact that COVID-19 has had on commodity prices and demand.
Cash flow forecasts prepared inclusive of discretionary expenditure, based on planned levels of future activity including commencement of construction of the Vares Silver Project, indicate that the Group will need to raise additional finance within the next 12 months. However, the Directors' believe that the Group can secure the additional funding necessary to continue in operational existence for the next 12 months at planned activity level from the date of this report and would defer the acceleration in cash burn rate that would arise on the commencement of construction until adequate funding is in place to do so.
Cash flow forecasts prepared based on current committed expenditure and non-discretionary spend only, indicate that the Company has sufficient cash resources to continue in operation for a period in excess of 12 months from the date of signing the Consolidated and Parent Company Financial Statements. The Directors therefore believe there is not a material uncertainty regarding going concern that it is appropriate to prepare the financial statements on a going concern basis.
3. Significant accounting policies
The preparation of Consolidated Financial Statements in compliance with IFRS requires management to make certain critical accounting estimates. It also requires management to exercise judgement in applying the Group's accounting policies. Below are the significant accounting policies applied by management. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Consolidated Financial Statements are disclosed in note 4 .
a Basis of consolidation
Where the company has control over an investee, it is classified as a subsidiary. The company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.
De-facto control exists in situations where the company has the practical ability to direct the relevant activities of the investee without holding the majority of the voting rights. In determining whether de-facto control exists the company considers all relevant facts and circumstances, including:
• The size of the company's voting rights relative to both the size and dispersion of other parties who hold voting rights
• Substantive potential voting rights held by the company and by other parties
• Other contractual arrangements
• Historic patterns in voting attendance.
The consolidated financial statements present the results of the company and its subsidiaries ("the Group") as if they formed a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date on which control ceases.
The Consolidated Financial Statements comprise the Financial Statements of the Company and following subsidiaries at 31 December 2020:
Name of subsidiary |
Country of incorporation |
Shareholding on 31 December 2020 |
Shareholding on 30 June 2020 |
Nature of business |
Eastern Mining d.o.o. |
Bosnia and Herzegovina |
100% |
100% |
Mineral exploration & development |
Tethyan Resource Corp |
Canada |
100% |
0% |
Holding company - financing mining exploration of subsidiary |
Tethyan Resources Limited |
England & Wales |
100% |
0% |
Holding company - financing mining exploration of subsidiary |
Tethyan Resources Jersey Ltd |
Jersey |
100% |
0% |
Holding company - financing mining exploration of subsidiary |
Taor d.o.o. |
Serbia |
100% |
0% |
Mineral exploration and development |
Tethyan Resources d.o.o. |
Serbia |
100% |
0% |
Mineral exploration and development |
Global Mineral Resources d.o.o. |
Serbia |
100% |
0% |
Mineral exploration and development |
Tethyan Resources Bulgaria EOOD |
Bulgaria |
100% |
0% |
Mineral exploration and development |
Kosovo Resource Company |
Kosovo |
100% |
0% |
Mineral exploration and development |
Ras Metals d.o.o. |
Serbia |
10%* |
0% |
Mineral exploration and development |
* The Group holds 10% of the equity in Ras Metals d.o.o. and has an option to acquire remaining 90% it does not hold. The Group has substantive control of Ras Metals d.o.o. and has consolidated the net assets into the Group financial statements.
The Group also owns 10% of the equity in EFPP d.o.o. with an option to acquire the remaining 90%. However, the Group does not have substantive control over this entity and has not consolidated the net assets into the Group financial statements. See Section 4 for more details on critical accounting judgements.
Entities in which the Group has a shareholding that are not included in consolidation are as follows:
Name of subsidiary |
Country of incorporation |
Shareholding on 31 December 2020 |
Shareholding on 30 June 2020 |
Nature of business |
EFPP d.o.o. |
Serbia |
10%* |
0% |
Mineral exploration and development |
b Standards, amendments and interpretations adopted
During the period, the following new standards and amendments have been implemented.
Standard |
Detail |
Effective date |
IAS 1 |
IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (Amendment - Disclosure Initiative - Definition of Material) |
1 January 2020 |
IFRS 3 |
Business Combinations (Amendment - Definition of Business) |
1 January 2020 |
N/A |
Conceptual Framework for Financial Reporting (Revised) |
1 January 2020 |
IFRS 9, IFRS 7, IFRS 4 and IFRS 16 |
IBOR Reform and its Effects on Financial Reporting - Phase 1 |
1 January 2020 |
IFRS 16 |
Covid-19-Related Rent Concessions - Amendment to IFRS 16 |
1 June 2020 |
c Standards, amendments and interpretations effective in future periods
At the date of authorisation of these Consolidated Financial Statements, the following new standards, amendments and interpretations to existing standards have been published but are not yet effective and have not been adopted early by the Group.
Standard |
Detail |
Effective date |
IFRS 17 |
Insurance contracts |
1 January 2021 |
|
|
|
IAS 1 |
Amendment - regarding the classification of liabilities |
1 January 2022 |
IAS 37 |
Onerous Contracts - Cost of Fulfilling a Contract |
1 January 2022 |
IAS 16 |
Property, Plant and Equipment: Proceeds before Intended Use |
1 January 2022 |
IFRS 1, IFRS 9, IFRS 16 and IAS 41) |
Annual Improvements to IFRS Standards 2018-2020 |
1 January 2022 |
IFRS 3 |
References to Conceptual Framework |
1 January 2022 |
Management anticipates that all the pronouncements will be adopted in the Group's accounting policies for the first period beginning after the effective date of the pronouncement. The group does not expect these Standard or Interpretation to have a material impact on the entity's financial statements in the period of initial application.
d Foreign currency transactions and translations
The Group's consolidated financial statements are presented in GBP (£), which is considered to be the Company's functional currency. For each entity the Group determines the functional currency and items included in the financial statements of each entity are measured using that functional currency which is the currency of the primary economic environment in which the entity operates ('the local functional currency').
i) Transactions and balances
Transactions in foreign currencies are initially recorded by the Group's entities at their respective functional currency spot rates at the date the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date.
Differences arising on settlement or translation of monetary items are recognised in profit or loss.
ii) Group companies
On consolidation, the assets and liabilities of foreign operations are translated into GBP (£) at the rate of exchange prevailing at the reporting date and their income statements are translated at average exchange rates prevailing during the period. The exchange differences arising on translation for consolidation are recognised in other comprehensive income.
e Cash and cash equivalents
Cash and cash equivalents are comprised of cash held on deposit and other short-term, highly liquid investments with original maturities of three months or less. These deposits and investments are readily convertible to known amounts of cash and subject to an insignificant risk of change in value.
f Other receivables
All receivables are held at amortised cost less any provision for impairment. A loss allowance for expected credit losses is made to reflect changes in credit risk since the initial recognition.
g Exploration and evaluation assets
Pre-license costs
Pre-license costs relate to costs incurred before the Group has obtained legal rights to explore in a specific area. Such costs may include the acquisition of exploration data and the associated costs of analysing that data. These costs are expensed in the period in which they are incurred.
Exploration and evaluation expenditure
Exploration and evaluation activity involves the search for mineral resources, the determination of technical feasibility and the assessment of commercial viability of an identified resource.
Exploration and evaluation activity includes:
· Researching and analysing historical exploration data
· Gathering exploration data through geophysical studies
· Exploratory drilling and sampling
· Determining and examining the volume and grade of the resource
· Surveying transportation and infrastructure requirements
· Conducting market studies
License costs paid in connection with a right to explore in an existing exploration area are capitalised and amortised over the term of the permit.
Where the purchase of a business or group of assets provides the group exploration rights, these costs are capitalised in exploration and evaluation expenditure.
Once the legal right to explore has been acquired, exploration and evaluation expenditure is charged to profit or loss as incurred, unless the Group concludes that a future economic benefit is more likely than not to be realised. These costs include directly attributable employee remuneration, materials and fuel used, surveying costs, drilling costs and payments made to contractors.
In evaluating whether the expenditures meet the criteria to be capitalised, several different sources of information are used. The information that is used to determine the probability of future benefits depends on the extent of exploration and evaluation that has been performed.
Exploration and evaluation expenditure on licenses where a JORC-compliant resource has not yet been established is expensed as incurred until sufficient evaluation has occurred in order to establish a JORC-compliant resource.
Costs expensed during this phase are included in 'Other operating expenses' in the statement of profit or loss and other comprehensive income.
Upon the establishment of a JORC-compliant resource (at which point, the Group considers it probable that economic benefits will be realised), the Group capitalises any further evaluation expenditure incurred for the particular license as exploration and evaluation assets up to the point when a JORC-compliant reserve is established. Capitalised exploration and evaluation expenditure is considered to be an intangible asset and measured at cost less accumulated impairment.
Exploration and evaluation assets acquired in a business combination are initially recognised at fair value, including resources and exploration potential that is considered to represent value beyond proven and probable reserves. Similarly, the costs associated with acquiring an exploration and evaluation asset (that does not represent a business) are also capitalised and subsequently measured at cost less accumulated impairment.
Once JORC-compliant reserves are established and development is sanctioned, exploration and evaluation assets are tested for impairment and transferred to 'Mines under construction' which is a sub-category of 'Mine properties' and will be subsequently amortised in line with the useful economic life of the mine and rate of depletion of resources. Exploration and evaluation assets are not amortised during the exploration and evaluation phase and are considered to have an indefinite life until determine as part of a mine plan.
h Property, plant and equipment
i) Land
Land is held at cost less accumulated impairment losses. Once JORC-compliant reserves are established and development is sanctioned, land is tested for impairment and transferred to 'Mines under construction' which is a sub-category of 'Mine properties' and will be subsequently depreciated in line with the useful economic life of the mine and rate of depletion of resources. Land is not depreciated during the exploration and evaluation phase and is considered to have an indefinite life until determine as part of a mine plan.
ii) Short lived property, plant and equipment
Short lived property, plant and equipment consists of buildings, plant and machinery, office furniture and equipment, transportation assets and computer equipment. Short lived property, plant and equipment are carried at cost less accumulated depreciation and accumulated impairment losses. The cost of an item of short lived property, plant and equipment consists of the purchase price and any costs directly attributable to bringing the asset to the location and condition necessary for its intended use and an estimate of the costs of dismantling and removing the item and restoring the site on which it is located.
iii) Depreciation and amortisation
Land is not depreciated. All other short-lived property, plant and equipment depreciation is provided at rates calculated to expense the cost of property, plant and equipment, less their estimated residual value, using the straight-line method over their estimated useful life of the asset giving the following rates:
Land |
Not depreciated |
Buildings & Leasehold improvements |
Shorter of 10% or lease term |
Plant and equipment |
15% - 33% |
Assets under construction |
Not depreciated |
The assets' residual values, useful lives and methods of depreciation are reviewed at each financial year-end and adjusted prospectively if appropriate.
i Leases
The Group applied IFRS 16 for the first time in the comparative period using the modified retrospective approach, with recognition of transitional adjustments on the date of initial application (1 July 2019), without restatement of comparative figures. There were no adjustments to prior periods as a result of the application of this standard because the Group did not have any leases in the prior year.
The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
i) Transition Method and Practical Expedients Utilised
The Group adopted IFRS 16 using the modified retrospective approach, with recognition of transitional adjustments on the date of initial application (1 July 2019), without restatement of comparative figures. The Group elected to apply the practical expedient to not reassess whether a contract is, or contains, a lease at the date of initial application. Contracts entered into before the transition date that were not identified as leases under IAS 17 and IFRIC 4 were not reassessed. The definition of a lease under IFRS 16 was applied only to contracts entered into or changed on or after 1 July 2019.
IFRS 16 provides for certain optional practical expedients, including those related to the initial adoption of the standard. The Group applied the following practical expedients when applying IFRS 16 to leases previously classified as operating leases under IAS 17:
· Apply a single discount rate to a portfolio of leases with reasonably similar characteristics;
· Exclude initial direct costs from the measurement of right-of-use assets at the date of initial application for leases where the right-of-use asset was determined as if IFRS 16 had been applied since the commencement date;
· Reliance on previous assessments on whether leases are onerous as opposed to preparing an impairment review under IAS 36 as at the date of initial application; and
· Applied the exemption not to recognise right-of-use assets and liabilities for leases with less than 12 months of lease term remaining as of the date of initial application.
As a lessee, the Group previously classified leases as operating or finance leases based on its assessment of whether the lease transferred substantially all of the risks and rewards of ownership. Under IFRS 16, the Group recognises right-of-use assets and lease liabilities for most leases. However, the Group has elected not to recognise right-of-use assets and lease liabilities for some leases of low value assets based on the value of the underlying asset when new or for short-term leases with a lease term of 12 months or less.
ii) Group as a lessee
The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets which, are either expensed as incurred though the income statement or capitalised in exploration and evaluation assets. The Group recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
iii) Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are amortised on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets.
The Company has a single right of use asset, relating to the lease of an office premised in the UK. Given the nature of the asset, the amortisation charge is included in general and administrative expenses.
If ownership of the leased asset transfers to the Group at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset.
The right-of-use assets are also subject to impairment.
iv) Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating the lease, if the lease term reflects the Group exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognised as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
v) Revision of lease term
When the group revises its estimate of the term of any lease (because, for example, it re-assesses the probability of a lessee extension or termination option being exercised), it adjusts the carrying amount of the lease liability to reflect the payments to make over the revised term, which are discounted using a revised discount rate. The carrying value of lease liabilities is similarly revised when the variable element of future lease payments dependent on a rate or index is revised, except the discount rate remains unchanged. In both cases an equivalent adjustment is made to the carrying value of the right-of-use asset, with the revised carrying amount being amortised over the remaining (revised) lease term. If the carrying amount of the right-of-use asset is adjusted to zero, any further reduction is recognised in profit or loss.
j Rehabilitation provision
The Group recognises provisions for contractual, constructive or legal obligations, including those associated with the reclamation of mineral interests and property, plant and equipment, when those obligations result from the acquisition, construction, development or normal operation of the assets. Initially, a provision for the rehabilitation is recognised at its present value in the period in which it is incurred. Upon initial recognition of the liability, the corresponding provision is added to the carrying amount of the related asset and the cost is amortised as an expense over the economic life of the asset. Following the initial recognition of the rehabilitation provision, the carrying amount of the liability is increased for the passage of time and adjusted for changes to the current market-based discount rate, and amount or timing of the underlying cash flows needed to settle the obligation. Currently the Group has not done any significant mining and thus management have assessed that no rehabilitation provision is necessary.
k Interest income
Interest income is recorded on an accrual basis using the effective interest method.
l Financial instruments
Financial assets and liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expired.
Except for trade and other receivables which do not contain a significant financing component, financial assets and financial liabilities are measured initially at fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss, transactions costs that are directly attributable to the acquisition or issue of the financial instrument. Trade receivables which do not contain a significant financing component are recognised at their transaction price. Financial assets and financial liabilities are subsequently measured as described below.
i) Financial assets
Financial assets are subsequently recognised at amortised cost under IFRS 9 if it meets both the hold to collect and contractual cash flow characteristics tests. A financial asset is measured at fair value through other comprehensive income if the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
If neither of the above classification are met the asset is classified as fair value through the profit and loss or unless management elect to do so provided the classification eliminates or significantly reduces a measurement or recognition inconsistency.
a) Cash and cash equivalents and trade and other receivables
Cash and cash equivalents and trade and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition these are measured at amortised cost using the effective interest method, less provision for impairment, if any.
b) Fair value through profit or loss
Financial assets measured at fair value through profit or loss are subsequently measured at fair value with changes in those fair values recognised in the profit and loss statement.
Assets held at fair value through profit or loss comprise of the convertible loan asset.
ii) Financial liabilities
Financial liabilities are subsequently measured at amortised cost using the effective interest method, except for financial liabilities designated at fair value through profit or loss, that are carried subsequently at fair value with gains and losses recognised in the profit and loss statement.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.
The Group's financial liabilities initially measured at fair value and subsequently recognised at amortised cost include accounts payables and accrued liabilities, and the liability associated with the right of use asset (note 11).
Iii) Convertible debt
The proceeds received on issue of the Group's convertible debt are allocated into their liability and derivative liability components. The amount initially attributed to the debt component equals the discounted cash flows using a market rate of interest that would be payable on a similar debt instrument that does not include an option to convert. Subsequently, the debt component is accounted for as a financial liability measured at amortised cost until extinguished on conversion or maturity of the bond. The remainder of the proceeds is allocated to the conversion option and is recognised as a derivative liability.
m Impairment of assets
i) Financial assets
A financial asset that is not carried at fair value through profit or loss is assessed at each reporting date to determine a loss allowance for expected credit losses. If the credit risk on a financial instrument has increased significantly since initial recognition, the loss allowance is equal to the lifetime expected credit losses. If the credit risk has not increased significantly, the loss allowance is equal to the twelve month expected credit losses.
The expected credit losses are measured in a way that reflects the unbiased and probability weighted amount that is determined by evaluating a range of possible outcomes; the time value of money and reasonable and supportable information that is available about past events, current conditions and forecasts of future economic conditions.
ii) Non-financial assets
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is an indication that the assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. Where the asset does not generate largely independent cash inflows, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.
The recoverable amount is the higher of fair value less costs to sell, and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessment of the time value of money and the risks specific to the asset.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than the carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in the profit and loss statement.
With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. Where an impairment loss is subsequently reversed, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but to an amount that does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior periods. A reversal of an impairment loss is recognised in the profit and loss statement.
n Income taxes
Current income tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable or receivable in respect of previous years.
Deferred income taxes are calculated based on temporary differences between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not recognised on the initial recognition of goodwill, on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss at the time of the transaction, and on temporary differences relating to investments in subsidiaries and jointly controlled entities where the reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future.
Deferred income tax assets and liabilities are measured, without discounting, at the tax rates that are expected to apply when the assets are recovered, and the liabilities settled, based on tax rates that have been enacted or substantively enacted by the reporting date.
A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised.
Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow the related tax benefit to be utilised.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to set off current tax assets against current tax liabilities, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities and assets are expected to be settled or recovered.
The Group has no deferred tax assets or liabilities.
o Earnings/loss per share
Basic loss per share is calculated by dividing the loss attributable to the common shareholders of the Group by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share is calculated by adjusting the loss attributable to common shareholders and the weighted average number of common shares outstanding for the effects of all dilutive potential common shares, which comprise share options and warrants granted.
p Share premium
Share premium represents the excess of proceeds received over the nominal value of new shares issued.
q Share-based payments & Warrants payments
i) Share-based payment transactions
The Company grants share options and performance rights to Directors, Officers, Consultants and employees ("equity-settled transactions"). The company grants warrants to institutions issued as part of an equity raise as part of overall in connection with the acquisition of Tethyan. The Board of Directors determines the specific grant terms within the limits set by the Company's share option plans.
ii) Equity-settled transactions
The costs of equity-settled transactions are measured by reference to the fair value at the grant date and are recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant persons become fully entitled to the award (the "vesting date"). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the Company's best estimate of the number of equity instruments that will ultimately vest. The profit or loss charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period and the corresponding amount is represented in share option reserve. No expense is recognised for awards that do not ultimately vest.
Where the terms of an equity-settled award are modified, the minimum expense recognised is the expense as if the terms had not been modified. An additional expense is recognised for any modification which increases the total fair value of the share-based payment arrangement or is otherwise beneficial to the employee as measured at the date of modification.
Where equity-settled transactions are awarded to employees, the fair value of the options at the date of grant is charged to the profit and loss statement over the vesting period. Performance vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of the options that will eventually vest.
Where equity-settled transactions are entered into with non-employees and some or all of the goods or services received by the entity as consideration cannot be specifically identified, they are measured at the fair value of the equity instruments issued. Otherwise, share-based payments to non-employees are measured at the fair value of the goods or services received.
Upon exercise of share options or warrants, the proceeds received are allocated to share capital, and premium if applicable together with any associated balance in share-based payments reserve are transferred to retained earnings. The dilutive effect of outstanding options is reflected as additional dilution in the computation of diluted earnings per share.
r Non-controlling Interest
The Group has the choice, on a transaction by transaction basis, to initially recognise any non-controlling interest in the acquiree which is a present ownership interest and entitles its holders to a proportionate share of the entity's net assets in the event of liquidation at either acquisition date fair value or, at the present ownership instruments' proportionate share in the recognised amounts of the acquiree's identifiable net assets. Other components of non-controlling interest such as outstanding share options are generally measured at fair value.
The total comprehensive income of non-wholly owned subsidiaries is attributed to owners of the parent and to the non-controlling interests in proportion to their relative ownership interests.
s Segmental reporting
The reportable segments identified make up all of the Group's activities. The reportable segments are an aggregation of the operating segments within the Group as prescribed by IFRS 8. The reportable segments are based on the Group's management structures and the consequent reporting to the Chief Operating Decision Maker, the Board of Directors. These reportable segments also correspond to geographical locations such that each reportable segment is in a separate geographic location. Income and expenses included in profit or loss for the period are allocated directly or indirectly to the reportable segments.
The group has reviewed its operating segments following the acquisition of the Tethyan Resource Corp and subsidiaries in October 2020 and as a result of the expansion in the group's range to operating activities and determined that there are now three distinct reporting segments as follows:
· Bosnia (principally the Vares Project)
· Serbia (principally the Raska Project)
· Corporate (which supports the activities of the other two segments)
The Vares and Raska projects operate in two separate distinct jurisdictions and are at different points in their respective project life cycles.
The reportable segments are based on the Group's management structures and the consequent reporting to the Chief Operating Decision Maker, the Board of Directors.
Non-current segment assets comprise the non-current assets used directly for segment operations, including intangible assets and property, plant and equipment. Current segment assets comprise the current assets used directly for segment operations, including other receivables and deferred costs. Inter-company balances comprise transactions between operating segments making up the reportable segments. These balances are eliminated to arrive at the figures in the Consolidated Financial Statements.
4. Critical accounting estimates and judgements
The preparation of the Consolidated Financial Statements in accordance with IFRS requires management to make certain judgements, estimates, and assumptions about recognition and measurement of assets, liabilities, income and expenses. The actual results are likely to differ from these estimates. Information about the significant judgements, estimates, and assumptions that have the most significant effect on the recognition and measurement of assets, liabilities, income and expenses are discussed below.
Estimates
a Exploration and evaluation asset impairment testing
The Group reviews and tests the carrying value of exploration and evaluation assets when events or changes in circumstances suggest that the carrying amount may not be recoverable in terms of IFRS 6. Indicators of impairment the group assesses for are as follows:
a) the period for which the entity has the right to explore in the specific area has expired during the period or will expire in the near future, and is not expected to be renewed.
b) substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is neither budgeted nor planned.
c) exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable quantities of mineral resources and the entity has decided to discontinue such activities in the specific area.
d) sufficient data exist to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale.
When such indicators exist, management determine the recoverable amount by performing value in use and fair value calculations. These calculations require the use of estimates and assumptions. When it is not possible to determine the recoverable amount for an individual asset, management assesses the recoverable amount for the cash generating unit to which the asset belongs. The key estimates made includes discount rates, being the Group's weighted average cost of capital, future prices, E&E costs, production levels and foreign currency exchange rates.
b Convertible loan valuation
The financial instrument was valued at fair value through the profit and loss account in the prior year. The Group has utilised the Black-Scholes Option Pricing Model to estimate the fair value of the conversion option associated with a loan granted to Tethyan Resource Corp. The use of the Black-Scholes option pricing model requires management to make various estimates and assumptions that impact the value assigned to the loan granted to Tethyan Resource Corp. including the forecast future volatility of the share price and the risk-free interest rate. This financial instrument was eliminated on consolidation on the acquisition of Tethyan Resource Corp in the current period for the Group. The conversion option was not enacted, the loan agreement was amended to remove this option and the conversion value was released to the profit and loss in the current period.
c Convertible bond valuations
The Group issued USD 20 million 8.5% Convertible bonds through a deed of covenant dated 30 November 2020. The bonds are convertible into fully paid equity securities in the share capital of the issuer, subject to and in accordance with the Conditions and the Deed of Covenant. Management engaged experts to assist with the valuation of the bond holders call option imbedded within this agreement. The option is recognised as a derivative liability in the Group and company accounts and required a separate fair valuation.
See note 6 for further details regarding these inputs.
d Share-based payments
The Group utilises the Black-Scholes Option Pricing Model to estimate the fair value of share options and performance rights granted to Directors, Officers and employees. The use of the Black-Scholes Option Pricing Model requires management to make various estimates and assumptions that impact the value assigned to the share options and performance rights including the forecast future volatility of the share price, the risk-free interest rate, dividend yield, the expected life of the share options and performance rights and the expected number of share which will vest. See note 15 for further details regarding these inputs.
Judgements
a Functional currency
The Group transacts in multiple currencies. The assessment of the functional currency of each entity within the consolidated Group involves the use of judgement in determining the primary economic environment each entity operates in. The Group first considers the currency that mainly influences sales prices for goods and services, and the currency that mainly influences labour, material and other costs of providing goods or services. In determining functional currency, the Group also considers the currency from which funds from financing activities are generated, and the currency in which receipts from operating activities are usually retained. When there is a change in functional currency, the Group exercises judgement in determining the date of change. This assessment is driven by the primary economic environment of each entity including products, labour, materials and professional services and the currency they are primarily transacted in.
Name of entity |
Country of incorporation |
Functional currency |
Adriatic Metals PLC |
England & Wales |
GBP |
Eastern Mining d.o.o. |
Bosnia and Herzegovina |
BAM* |
Tethyan Resource Corp |
Canada |
CAD |
Tethyan Resources PLC |
England & Wales |
GBP |
Tethyan Resources Jersey Ltd |
Jersey |
GBP |
Taor d.o.o. |
Serbia |
RSD* |
Tethyan Resources d.o.o. |
Serbia |
RSD* |
Global Mineral Resources d.o.o. |
Serbia |
RSD* |
Tethyan Resources Bulgaria EOOD |
Bulgaria |
EUR |
Kosovo Resource Company |
Kosovo |
EUR |
Ras Metals d.o.o. |
Serbia |
RSD* |
* Bosnian Marks (BAM) and Republic of Serbia Dinars (RSD) currencies are pegged to the Euro.
b Capitalisation of exploration costs
The group uses its judgement to determine whether costs meet the capitalisation requirements in terms of the standard and its accounting policy on exploration and evaluation assets to determine whether exploration and evaluation costs should be capitalised or expensed based on whether the activities performed are directly attributable to increasing the value of the project.
c Option Agreement Treatment - Control of Ras Metals
As part of the Tethyan Resource Corp acquisition, the Group became the beneficiary of three mutually exclusive option agreements under which it could acquire, at its sole discretion, the entire share capital of Ras Metals d.o.o., EFPP d.o.o. and Deep Research d.o.o.
The Group assessed each option agreement to determine whether it provided the Company with control over each respective entity and if so from what point in time as follows:
i. Ras Metals d.o.o. (Ras)
The Group determined that Ras was controlled by the Group from 8 October 2020, being the date at which Tethyan Resource Corp (the option holder) was acquired by the Company, because the Group had the ability and intent to acquire the remaining equity interest in Ras. On 23 February 2021, the Company completed the acquisition of the entire issued share capital of Ras further details of which are provided in note 25.
The consideration paid in order to exercise right to purchase of the remaining equity contains both fixed and variable elements. As a result of the variable element of the consideration payable the Group did not have access to present returns in Ras at 31 December 2020 and has therefore recognised a non-controlling interest in this.
ii. EFPP d.o.o. (EFPP)
EFPP was determined to be outside the control of the Group because the option agreement holder, Tethyan Resource Corp, was unlikely to exercise its rights under the agreement. This position was further justified when on 22 February 2021, the Group disposed of its 10% equity stake in EFPP for a nominal amount.
iii. Deep Research d.o.o. (DR)
DR was determined to be outside of the control of the Group because although Tethyan Resource Corp (the option agreement holder) had the ability to control DR via exercise of the option it did not have the intent to do so at present until further exploration work has been completed to determine the economic value of DR to the Group relative to the consideration that would be payable on exercise of the option.
5. Other receivables and prepayments
(In GBP) |
31 December 2020 |
30 June 2020 |
Other receivables |
8,729 |
17,853 |
Prepayments and deposits |
138,088 |
95,202 |
Taxes receivable |
507,698 |
338,491 |
Total |
654,514 |
451,546 |
All receivables are due within one year.
The Group has three reporting segments and two operating locations which are Bosnia & Herzegovina and Serbia.
Split of other receivables and prepayments as follows as at 31 December 2020:
|
Bosnia |
Serbia |
Corporate |
Total |
Other receivables |
829 |
7,900 |
- |
8,729 |
Prepayments and deposits |
29,475 |
38,196 |
70,416 |
138,088 |
Taxes receivable |
300,426 |
109,200 |
98,072 |
507,698 |
Total |
330,730 |
155,296 |
168,488 |
654,514 |
Split of other receivables and prepayments as follows as at 30 June 2020:
|
Bosnia |
Serbia |
Corporate |
Total |
Other receivables |
790 |
N/A |
17,063 |
17,853 |
Prepayments and deposits |
47,999 |
N/A |
47,203 |
95,202 |
Taxes receivable |
300,997 |
N/A |
74,994 |
338,491 |
Total |
349,786 |
N/A |
139,260 |
451,546 |
6. Financial assets at fair value through profit and loss
Tethyan Resources Corp Loan
As part of the agreement to acquire 100% of TSX-V listed Tethyan Resource Corp. via a plan of arrangement in British Columbia, the Company provided a convertible loan facility to Tethyan during the prior year and had advanced €1.8 million under the facility to the date of acquisition on 8 October 2020. Effective the same date this loan was amended removing the convertible option from the loan and the conversion value was released to the profit and loss in the current period. As at 31 December 2020, this financial instrument was eliminated on consolidation for the Group.
(In GBP) |
Tethyan Loan Receivable |
At 30 June 2019 |
- |
Additions |
876,201 |
Interest |
12,624 |
Foreign exchange gain |
29,702 |
Revaluation of fair value asset through profit and loss |
322,987 |
At 30 June 2020 |
1,241,514 |
Additions |
723,300 |
Interest |
7,129 |
Foreign exchange gain |
32,091 |
Revaluation of fair value asset through profit and loss |
(322,987) |
Acquisition (loan eliminated on consolidation) |
(1,681,047) |
At 31 December 2020 |
- |
The loan is revalued at its fair value each period end using the following inputs to the Black-Scholes valuation model:
31 December 2020 |
30 June 2020 |
|
Term |
- |
1 year |
Share Price (CAD) |
- |
CAD 0.22 |
Exercise Price (CAD) |
- |
CAD 0.15 |
Volatility |
- |
140% |
Risk Free rate |
- |
0.17% |
7. Financial liabilities at fair value through profit and loss
QRC Convertible Loan
The Group issued USD 20 million 8.5% Convertible bonds through a deed of covenant dated 30 November 2020. The bonds are convertible into fully paid equity securities in the share capital of the issuer, subject to and in accordance with the Conditions and the Deed of Covenant. Key terms and conditions of the Bond agreement between the Company and Queens Road Capital (QRC) is provided below.
Voluntary conversion
The bonds shall be convertible into equity securities of the company at the option of the bondholder at any time from the issue date 1 December 2020 until 30 November 2024. The number of equity securities to be issued on exercise of a conversion price in effect on the relevant conversion date. The initial conversion price is AUD 2.7976 per ordinary share.
Redemption and Purchase
a) Final redemption: Where the bonds are not converted, redeemed, purchased, or cancelled by the company prior to the final maturity date, the bonds shall be redeemed by the company at their principal amount
b) Redemption at the option of the issuer: Option to the issuer to redeem all the bonds outstanding, prior to the final maturity date, at their principal amount together with accrued but unpaid interest to such date if:
a. At any time prior to maturity date, the volume weighted average price of the equity securities for 20 consecutive days has exceeded 125% of the Conversion Price;
b. The issuer delivers an optional redemption notice that contains an optional redemption date which falls on or after the third anniversary of the issue date; or
c. A project refinancing has occurred
c) Redemption at the option of bondholder in change of control event: the bondholder receives an option to require the issuer to redeem the bonds prior to the final maturity date. In the event of a change of control, the bonds shall be redeemed at:
a. 130% of the principal amount, if the change of control event occurs on or prior to the second anniversary of the issuance date, together with accrued and unpaid interest till such date
b. 115% of the principal amount, if the change of control event occurs after the second anniversary of issuance date, together with accrued and unpaid interest till such date
d) Redemption at the option of the bondholder in the event of project financing: In any event where the company secures a project financing before the final maturity date of the bonds, the bondholder can require the issuer to redeem the bonds at its principal amount together with the accrued but unpaid interest to such date
Accounting Consideration and Results
QRC's option to convert the bonds into equity and the associated potential issue of shares give rise to a variable amount of cash that would be received by the Company and therefore the bonds fail to meet the requirements to be classified as equity. The conversion feature of the bonds has therefore been accounted for as a derivative liability, with the value of the conversion feature dependent on foreign exchange rates and other factors as set out below.
Management engaged external experts to review the terms of the agreement and perform a valuation. It was concluded that the call option in the hands of the bondholder satisfied the conditions stipulated by IFRS 9 Financial Instrument - Recognition and Measurement for the recognition as a derivative liability in the Group and company accounts and required a separate fair valuation.
The redemption options in the hands of the bondholder were concluded to be falling outside of the exemptions of IFRS 9 and closely related to the debt host contract. Therefore, the redemption options need not be separated from the debt host contract and hence need not be valued separately. The Group has elected to account for both the imbedded option and loan liability at fair value in the profit and loss.
Valuation Model
The Black Scholes model was chosen as the most appropriate pricing model to value the company call options. The main assumptions and inputs used in the options pricing model were as follows:
· Dividend yield - assumed to be nil because the Company has not declared or paid any dividends in prior years on ordinary shares
· Strike price - The initial conversion price of AUD 2.7976 per ordinary share
· Expected term - Judgement applied to assign probability to the various redemption and put options in the contract. The Group will be seeking to raise finance to progress the Vares project. Expected term of redemption calculated as 1.15 years from the valuation date.
· Expected volatility - Weekly volatility over the 1.15 years (60 weeks) was calculated as 74.65% prevailing on ASX as of the valuation date.
· Risk-free rate - Risk free yield obtained from Australian Treasury bond issues converted into continuous compound yields.
· Value of underlying common stock price - The closing price of ordinary shares AUD 2.33 on the valuation date on the ASX
Using the assumptions set out above, Black Scholes value of call option in hands of Bondholder is £3,045,213.
Sensitivity Analysis
Inputs to the Black Scholes model are based on management judgements regarding probabilities of future events. The results are sensitive to changes in key assumptions, namely the expected term of the bonds and the volatility of the Company's share price.
Sensitivity of the loan value to reasonably possible changes in the assumptions of expected term and volatility of the Company's share price are as follows:
|
Change in v olatility of Company's share price |
|||
50% |
Unchanged ( 74.65%) |
100% |
||
Change in e xpected t erm |
26 Weeks |
£ 2.15 m Decrease |
£1.73m Decrease |
£ 0.45 m Decrease |
Unchanged (60 weeks) |
£1. 28 m Decrease |
- |
£ 1.27 m Increase |
|
91 Weeks |
£ 0.67 m Decrease |
£ 0 . 89 m Increase |
£ 2.38 m Increase |
(In GBP) |
QRC Loan Payable |
At 30 June 2020 |
- |
Additions |
(14,956,849) |
Interest |
(105,515) |
Foreign Exchange gain |
321,464 |
Recognition of fair value embedded option |
3,045,213 |
At 31 December 2020 |
(11,695,687) |
Short term borrowings at 31 December 2020 are £105,515 (30 June 2020: £nil). Long term borrowings at 31 December 2020 are £11,590,172 (30 June 2020: £nil). Derivative liabilities as at 31 December 2020 are £3,045,213 (30 June 2020: £nil).
8. Property, plant and equipment
Cost (In GBP) |
Land & Buildings |
Plant & Machinery |
Total |
30 June 2019 |
630,978 |
105,341 |
736,319 |
Additions |
97,989 |
139,554 |
237,543 |
Foreign exchange difference |
7,987 |
1,296 |
9,283 |
30 June 2020 |
736,954 |
246,191 |
983,145 |
Acquisition Assets |
- |
87,648 |
87,648 |
Additions |
29,037 |
61,827 |
90,864 |
Disposals |
- |
(9,378) |
(9,378) |
Foreign exchange difference |
(10,500) |
(2,649) |
(13,465) |
31 December 2020 |
755,491 |
383,639 |
1,139,130 |
Depreciation |
|||
30 June 2019 |
- |
15,191 |
15,191 |
Charge for the year |
14,481 |
38,164 |
52,645 |
Foreign exchange difference |
68 |
4,321 |
4,389 |
30 June 2020 |
14,549 |
57,676 |
72,225 |
Acquisition Assets |
0 |
70,004 |
70,004 |
Charge for the period |
6,769 |
29,388 |
36,157 |
Disposals |
- |
(6,054) |
(6,054) |
Foreign exchange difference |
(342) |
(2,323) |
(2,665) |
31 December 2020 |
20,976 |
148,691 |
169,667 |
Net Book Value |
|||
30 June 2019 |
630,978 |
90,150 |
721,128 |
30 June 2020 |
722,405 |
188,515 |
910,920 |
31 December 2020 |
734,516 |
234,948 |
969,464 |
The Group has three reporting segments and two operating locations which are Bosnia & Herzegovina and Serbia.
Split of Land and buildings net book value as follows:
|
Bosnia |
Serbia |
Corporate |
Total |
30 June 2019 |
630,978 |
N/A |
- |
630,978 |
30 June 2020 |
705,951 |
N/A |
16,454 |
722,405 |
31 December 2020 |
718,939 |
|
15,577 |
734,516 |
Split of Property Plant and equipment assets net book value as follows:
|
Bosnia |
Serbia |
Corporate |
Total |
30 June 2019 |
67,664 |
N/A |
22,487 |
90,151 |
30 June 2020 |
157,840 |
N/A |
30,675 |
188,515 |
31 December 2020 |
185,129 |
24,317 |
25,502 |
234,948 |
9. Exploration and evaluation assets
Cost (In GBP) |
Vares Silver Project in Bosnia |
Raska Project in Serbia |
Exploration & Evaluation Assets |
|
30 June 2019 |
4,055,997 |
- |
4,055,997 |
|
Additions |
5,048,523 |
- |
5,048,523 |
|
Foreign exchange difference |
49,522 |
- |
49,522 |
|
30 June 2020 |
9,154,042 |
- |
9,154,042 |
|
Acquisition (note 10) |
- |
24,456,506 |
24,456,506 |
|
Additions |
3,052,019 |
- |
3,052,019 |
|
Foreign exchange difference |
(63,870) |
|
(63,870) |
|
31 December 2020 |
12,142,191 |
24,456,506 |
36,598,697 |
|
|
Amortisation |
|
||
30 June 2019 |
84,787 |
- |
84,787 |
|
Charge for the year |
23,317 |
- |
23,317 |
|
Foreign exchange difference |
769 |
- |
769 |
|
30 June 2020 |
108,873 |
- |
108,873 |
|
Charge for the period |
11,469 |
- |
11,469 |
|
Foreign exchange difference |
(1,369) |
- |
(1,369) |
|
31 December 2020 |
118,973 |
- |
118,973 |
|
|
Net Book Value |
|
||
30 June 2019 |
3,971,210 |
- |
3,971,210 |
|
30 June 2020 |
9,045,169 |
- |
9,045,169 |
|
31 December 2020 |
12,023,218 |
24,456,506 |
36,479,724 |
Exploration and evaluation assets include amount of £24,456,506 added in the period in respect of Tethyan exploration rights for the TAOR d.o.o. Kremice licence (measured at historical cost £1,587,934) and Ras Metals d.o.o. licences Kizevak & Sastavci measured as the consideration paid for the combined Tethyan group minus the net book value of assets, being 22,868,571. The remaining exploration and evaluation assets are in respect of the Vares Silver Project concession, located in Bosnia & Herzegovina. The concession is 100% owned by Eastern Mining d.o.o. From 25 May 2020, the Vares Silver Project became subject to a minimum annual concession fee of €199,325 per annum. Concession fees are included in additions to exploration and evaluation assets and amortisation charged over the life of the concession granted. All other exploration and evaluation assets are not amortised until beginning of the production phase.
Additions during the period include BAM 481,800 paid to the Zenica-Doboj Canton following the award of the new concession area in October 2020 which adds some 32.12km2 of land in close proximity to the existing Rupice and Veovaca deposits of the Vares Project.
10. Acquisition note
On 11 May 2020, the Company entered into an agreement to acquire 100% of TSX-V listed Tethyan Resource Corp. (TSX-V:TETH) (Tethyan) via a plan of arrangement in British Columbia. The acquisition was finalised on 8 October 2020.
The Transaction confirms the enlarged Company as the leading Balkan polymetallic explorer and developer expanding the Company operations to the Raska region of Serbia by bringing the Kizevak & Sastavci projects into the group.
As part of the agreement the Company provided a secured convertible loan facility of €1.8 million to Tethyan was advanced. The funding provided to Tethyan is being used for confirmation and expansion drilling, geophysics, baseline environmental studies at the Raska project in Serbia and general working capital purposes.
Tethyan had entered into an option agreement with EFPP d.o.o. (EFPP) the holders of the Kizevak & Sastavci licences, first closing was completed on 14 May 2020 to acquire 10% equity in EFPP d.o.o. Immediately prior to the completion of the acquisition of Tethyan by the Company the Kizevak & Sastavci licences were spun out to a newly formed company Ras Metals d.o.o. (Ras) in which Tethyan also held a 10% equity interest, which had been a condition precedent to closing of Tethyan acquisition.
As at 31 December 2020 Tethyan continued to hold a 10% equity interest in Ras and EFPP with the option to acquire the remaining 90% equity in each.
On 23 February 2021, the Company completed the acquisition of the entire issued share capital of Ras, further details of which are provided in note 25, and also disposed of its 10% equity stake in EFPP for a nominal amount.
Management performed an assessment and deemed that substantive control of the Tethyan Group, including Ras, was obtained on 8 October 2020. The acquisition of Tethyan was classified as an asset acquisition due to not meeting the definition of a business in line with IFRS 3. See Significant estimates note for further details.
Cost of Acquisition
Total cost of acquisition is measured as follows:
|
Consideration Value |
Shares issued |
£17,129,828 |
Share options issued |
£236,571 |
Warrants issued |
£2,797,086 |
Total equity consideration |
£20,163,485 |
Value of consideration payable under Ras Metals d.o.o. option |
£2,515,399 |
Total consideration to be paid |
£22,678,884 |
Adriatic has allotted 13,278,937 new ordinary shares pursuant to the Arrangement. The opening LSE share price on the acquisition date was £1.29 giving value of total shares issued £17,129,828.
Pursuant to the Arrangement, on Admission Adriatic will also issue 4,128,633 warrants and 469,779 options to Tethyan warrant holders and Tethyan option holders. Management used the Black-Scholes formula to determine the fair value of the warrants and options issued under IFRS 2. The following assumptions were used:
· Strike price & length of contract determined by each individuals option contracts
· Underlying price (£1.29) determined by the opening share price on date of transaction
· 82.3% volatility determined by 100 day LSE ADT1 volatility
· Risk free rate 0.01% used (on basis of short term UK gilt rate giving negative rates)
Fair value of options issued £236,571, fair value of warrants issued £2,797,086.
At any time within 12 months of the first closing, the Company may acquire the remaining 90% ownership stake in Ras Metals by:
· making a payment of €1,375 to the sellers of Ras;
· grant a 2% NSR over the licenses
· issue 664,000 shares of the Company to the sellers in four equal tranches every six months commencing on second closing; and
· make a EUR 500,000 payment on the two-year anniversary of the first closing.
With the exception of the 2% NSR grant over the licenses which can't be reliably estimated at this stage, the fair value of remaining consideration payable under Ras Option agreement was estimated at £2,515,399
Measurement of assets and liabilities
IFRS 10 requirement to record assets acquired at cost; cost is allocated over the group of assets at relative fair value. In the case of an asset acquisition (rather than business combination), the consideration equals the combined fair value of assets acquired. Consideration above the historical book value of assets should be recognised as an exploration and evaluation asset (representing the value of the rights contained within licenses acquired).
The Kremice and Kaznovice licenses were historically accounted for as an asset acquisition by the Tethyan Group when originally acquired. The fair value of the consideration paid was determined and allocated as to Exploration and evaluation assets of 250,000 EUR cash plus 12,000,000 shares issued in Tethyan, equating to £1,587,934. The net asset position of 100% owned Tethyan companies when acquired was (£189,687) which includes the aforementioned exploration and evaluation assets. The Kizevask & Sastavci licenses held by Ras Metals d.o.o. have been assigned the balancing value between Tethyan net assets (£189,687) and the total consideration payable £22,678,884, being £22,868,571. The combined exploration and evaluation assets capitalised totals £24,456,505.
Treatment of Ras Metals Option Agreement
The company recognises an investment for the fair value of the equity acquired (being 10% share of Ras Metals and 100% share of equity in all other Tethyan entities) totalling £2,097,170. The excess value of the transaction over the investment is recognised as a call option asset totalling £20,581,714. The fair value of the remaining consideration to be paid of £2,515,399 has been recognised as an option liability. When the option liability is paid the amount will be capitalised in exploration and evaluation assets and any difference arising from future foreign exchange movements will be recognised in the profit & loss.
|
|
Apportioned fair value to Ras Metals d.o.o. 10% owned |
£2,286,857 |
Total investment recognised in company accounts |
£2,097,170 |
Remaining fair value apportioned to 90% call option Ras Metals |
£20,581,714 |
Total Fair Value of Consideration to be paid |
£22,678,884 |
Net liability position of Tethyan 100% owned |
189,687 |
Exploration assets included within the net assets of Tethyan 100% owned entities |
£1,587,934 |
Total exploration and evaluation asset value |
£24,456,505 |
Asset Acquisition
The net cash used in the acquisition of subsidiaries and the provisional fair value of assets acquired and liabilities assumed on the acquisition date is detailed below:
|
Fair Value |
Cash and cash equivalents |
£311,964 |
Other receivables and prepayments |
£56,349 |
Property, plant and equipment |
£17,644 |
Exploration & evaluation asset |
£1,587,934 |
Accounts payable and accrued liabilities |
(£506,900) |
Related party borrowings |
(£1,640,838) |
Other Equity |
(£15,840) |
|
|
Total Assets acquired |
(£189,687) |
Management have determined there is no present access to returns in Ras Metals d.o.o. owing to the variable consideration included in the exercise price. As such the Group recognises a 90% non-controlling interest in Ras Metals d.o.o. totalling £2,515,399 measured as the balancing figure between the fair value of the acquisition, fair value of Tethyan assets acquired, the investment recognised in the company accounts.
Total assets acquired net of consolidation adjustments |
(£189,687) |
Investment eliminated for Group accounts |
(£2,097,170) |
Mining and intangible assets recognised on acquisition |
£24,456,505 |
Non-controlling Interest recognised |
£2,515,399 |
Total loss attributable to non-controlling interest post 8 October 2020 acquisition in the period totals (£519,111), combined with the amount recognised on acquisition of £2,515,399, the balance of non-controlling interest at 31 December 2020 was 1,996,288.
11. Accounts payable and accrued liabilities
(In GBP) |
31 December 2020 |
30 June 2020 |
Trade payables |
1,222,012 |
466,610 |
Accrued liabilities |
639,743 |
132,826 |
Other payables |
38,682 |
82,966 |
|
1,900,437 |
682,402 |
12. Right of use asset
Set out below are the carrying amounts of right-of-use assets recognised and the movements during the period:
(In GBP) |
Land & buildings |
30 June 2019 |
- |
Additions |
265,612 |
Amortisation |
(13,714) |
30 June 2020 |
251,898 |
Amortisation |
(15,549) |
31 December2020 |
236,349 |
The right of use asset relates to the new lease for the Group's head office. Under IFRS 16 this has been recognised as a right of use asset.
Set out below are the carrying amounts of lease liabilities and the movements during the year:
(In GBP) |
|
30 June 2019 |
- |
Additions |
265,612 |
Interest expense |
11,580 |
Payments |
(11,571) |
30 June 2020 |
265,621 |
Interest expense |
10,523 |
Payments |
(20,803) |
31 December2020 |
255,341 |
Of this amount, £35,609 is recognised as a current liability and the remainder £219,731 is shown within non-current liabilities.
The following are the amounts recognised in profit or loss:
Cost (In GBP) |
31 December 2020 |
30 June 2020 |
Depreciation expense of right-of-use assets |
15,549 |
13,714 |
Interest expense on lease liabilities |
10,523 |
11,580 |
Total amount recognised in profit or loss |
26,072 |
25,294 |
13. Financial instruments
IFRS 13 requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:
· Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
· Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).
· Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3)
Fair value is the amount at which a financial instrument could be exchanged in an arm's length transaction. Set out below are the financial instruments held at amortised cost and fair value through profit or loss and their fair value measurement hierarchy (excluding short term assets and liabilities).
See note referenced for further detail on inputs to fair value for each financial instrument.
As at 31 December 2020 |
Note |
At amortised cost | At fair value through profit or loss |
Total |
Fair Value |
Financial assets |
|
|
|
|
|
Cash and cash equivalents |
| 29,580,538 | - | 29,580,538 | N/A |
Other receivables and prepayments | 5 | 146,816 | - | 146,816 | N/A |
Total financial assets |
| 29,727,354 | - | 29,727,354 | - |
Financial liabilities |
| ||||
Accounts payable and accrued liabilities | 11 | 1,900,437 | - | 1,900,437 | N/A |
Borrowings | 7 | 11,695,687 |
| 11,695,687 | Level 3 |
Borrowings - derivative liability | 7 | - | 3,045,213 | 3,045,213 | Level 3 |
FV Option Liability -acquisition of Ras Metals | 10 | - | 2,515,399 | 2,515,399 | Level 3 |
Lease liabilities | 12 | 255,341 |
| 255,341 | Level 3 |
Total financial liabilities |
| 13,851,465 | 5,560,612 | 19,412,077 |
|
Net financial assets |
| 15,875,889 | (5,560,612) | 10,315,277 |
|
As at 30 June 2020 (In GBP) | Note |
At amortised cost | At fair value through profit or loss |
Total | Fair Value |
Financial assets |
|
|
|
|
|
Financial asset at fair value through profit and loss | 6 | - | 1,241,514 | 1,241,514 | Level 3 |
Cash and cash equivalents |
| 9,942,728 | - | 9,942,728 | N/A |
Other receivables and prepayments | 5 | 113,055 | - | 113,055 | N/A |
Total financial assets |
| 10,055,783 | 1,241,514 | 11,297,297 |
|
Financial liabilities |
| ||||
Accounts payable and accrued liabilities | 11 | 682,402 | - | 682,402 | N/A |
Lease liabilities | 12 | 265,621 | - | 265,621 | Level 3 |
Total financial liabilities |
| 948,023 | - | 948,023 |
|
|
|
|
|
|
|
Net financial assets |
| 9,107,760 | 1,241,514 | 10,349,274 |
|
14. Financial risk management
a Credit risk
Credit risk arises from the risk that a counter party will fail to perform its obligations. Financial instruments that potentially subject the Group to concentrations of credit risk consist of cash and cash equivalents and other receivables.
Due to the nature of the business, the Company's exposure to credit risk arising from routine operating activities is currently inherently low. However, the Audit & Risk Committee considers the risks associated with new material counterparties where applicable to ensure the associated credit risk is of an acceptable level.
The Group's cash is held in major UK, Australian, Serbian and Bosnian financial institutions, and as such the Group is exposed to credit risks of those financial institutions. Under Standard & Poor's short-term credit ratings, the Group's cash balances are all held in institutions with either an A-1 or A-2 rating and as such are considered to have low credit risk.
The total carrying amount of cash and cash equivalents, other receivables and the fair value financial asset in respect of Tethyan Resource Corp. represents the Group's maximum credit exposure.
The Group's other receivables predominantly relate to value added tax receivables due from governments in the UK and Bosnia. These amounts are excluded from the definition of financial instruments in the accounts and in and event are considered to have low credit risk. Of the remaining other receivables and prepayments, any changes in management's estimate of the recoverability of the amount due will be recognised in the period of determination and any adjustment may be significant.
The Board of Directors, with input from the Audit & Risk Committee is ultimately responsible for monitoring exposure to credit risk on an ongoing basis and does not consider such risk to be significant at this time. As such, the Group considers all if its accounts financial assets to be fully collectible.
b Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they become due. The Group's approach to managing liquidity risk is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses.
The following table illustrates the contractual maturity analysis of the Group's gross financial liabilities based on exchange rates on the reporting date. Contractual gross financial liabilities, shown below, are undiscounted estimated cash outflows which were applicable includes estimated future interest payments.
As at 31 December 2020 (In GBP) |
Within 30 days | 30 daysto 6months | 6 to 12 months | Over 12 months |
Accounts payable and accrued liabilities | 2,172,496 | - | - | - |
Borrowings |
| 105,515 |
| 11,590,172 |
Derivative liability |
|
|
| 3,045,213 |
Lease liabilities | - | 17,805 | 17,805 | 219,731 |
| 2,172,496 | 123,320 | 17,805 | 14,855,116 |
As at 30 June 2020 (In GBP) |
Within 30 days |
30 daysto 6months |
6 to 12 months |
Over 12 months |
Accounts payable and accrued liabilities | 682,402 | - | - | - |
Lease liabilities | - | - | - | 369,745 |
| 682,402 | - | - | 369,745 |
c Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, commodity prices, and interest rates will affect the value of the Group's financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable limits, while maximising long term returns.
The Group conducts development and exploration projects in Bosnia. As a result, a portion of the Group's expenditures, other receivables, cash and cash equivalents, accounts payables and accrued liabilities are denominated in Bosnian Marks, Great Britain Pounds, Australian Dollars, US Dollars, and euros and are therefore subject to fluctuation in exchange rates.
As at 31 December 2020, a 10% change in the exchange rate between the Great Britain Pound and the Bosnian Mark and Serbian Dinar, which is a reasonable estimation of volatility in exchange rates, would have an approximate £0.1 million change to the Group's total comprehensive loss.
d Fair values
The fair value of cash, other receivables, accounts payable and accrued liabilities approximate their carrying values due to the short-term nature of the instruments.
Fair value measurements recognised in the statement of financial position subsequent to initial fair value recognition can be classified into Levels 1 to 3 based on the degree to which fair value is observable.
Level 1 - Fair value measurements are those derived from quoted prices in active markets for identical assets and liabilities.
Level 2 - Fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly, or indirectly.
Level 3 - Fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data.
The level 3 fair value for the loan receivable is disclosed in note 6.
There were no transfers between any levels of the fair value hierarchy in the current or prior years.
e Capital management
The Group's objectives in managing capital are to safeguard its ability to operate as a going concern while pursuing exploration and development and opportunities for growth through identifying and evaluating potential acquisitions of assets or businesses. The Company defines capital as the equity attributable to equity shareholders of the Company which at 31 December 2020 was £29,526,658 (30 June 2020: £20,895,753).
The Group sets the amount of capital in proportion to risk and corporate growth objectives. The Group manages its capital structure and adjusts it in light of changes in economic conditions and the risk characteristics of the underlying assets.
15. Equity
a Authorised share capital
The authorised share capital of the Company consists of an unlimited number of voting ordinary shares with a nominal value of £0.013355.
b Common shares issued
|
Shares | Share Capital (In GBP) | (Restated) |
30 June 2019 | 150,782,587 | 2,013,701 | 11,084,777 |
Issue of share capital | 25,083,400 | 334,989 | 13,015,388 |
Share issue costs | - | - | (797,655) |
Shares issued on exercise of options and performance rights | 3,975,000 | 53,087 | 690,457 |
30 June 2020 | 179,840,987 | 2,401,777 | 23,992,967 |
Issue of share capital | 5,276,595 | 70,469 | 6,129,531 |
Shares issued on acquisition of subsidiary | 13,278,937 | 177,340 | 16,952,489 |
Settlement placement | 4,830,156 | 64,507 | 4,791,547 |
Share issue costs |
| 0 | (1,598,603) |
Shares issued on exercise of options and performance rights | 4,350,000 | 58,093 | 203,817 |
31 December 2020 | 207,576,675 | 2,772,186 | 51,471,748 |
The average price paid for shares issued in the period was £1.06 per share (30 June 2020: £0.49 per share)
c Share options and performance rights
All share options and performance rights are issued under the Group's share option plan.
The following tables summarise the activities and status of the Company's share option plan as at and during the six months ended 31 December 2020
| Weighted average exercise price of options (A$) |
Number of options |
Number of performance rights |
Total options and performance rights |
30 June 2019 | 0.33 | 19,200,000 | - | 19,200,000 |
Issued | 1.19 | 4,000,000 | 6,560,000 | 10,560,000 |
Exercised | 0.42 | (3,225,000) | (750,000) | (3,975,000) |
Expired | 0.60 | (375,000) | (2,000,000) | (2,375,000) |
30 June 2020 | 0.46 | 19,600,000 | 3,810,000 | 23,410,000 |
Issued | 2.20 | 1,000,000 | 2,575,000 | 3,575,000 |
Acquired Tethyan Acquisition | 0.66 | 469,779 | - | 469,779 |
Exercised | 0.61 | (3,700,000) | (650,000) | (4,350,000) |
Expired | - | - | (2,000,000) | (2,000,000) |
31 December 2020 | 0.53 | 17,369,779 | 3,735,000 | 21,104,779 |
On exercise, holders of performance rights are required to pay £0.013355 for each performance right exercised, being the nominal value of one ordinary share.
Options and performance rights granted in the Period were valued using the Black-Scholes method (section f).
As at 31 December 2020 |
|
|
|
| |
Grant date |
Options outstanding |
Exercise price | Weighted average remaining contractual life (Years) |
Expiry date |
Number exercisable |
27 April 2018 | 9,000,000 | A$0.20 | 2.5 | 1 July 2023 | 9,000,000 |
27 April 2018 | 1,900,000 | A$0.30 | 0.5 | 1 July 2021 | 1,900,000 |
27 April 2018 | 1,000,000 | A$0.40 | 0.5 | 1 July 2021 | 1,000,000 |
29 May 2018 | 1,000,000 | A$0.40 | 0.4 | 5 June 2021 | 1,000,000 |
29 November 2019 | 1,000,000 | A$1.00 | 1.9 | 28 November 2022 | 1,000,000 |
29 November 2019 | 2,000,000 | A$1.25 | 1.9 | 28 November 2022 | 2,000,000 |
8 October 2020 | 182,600 | GBP £0.88 | 0.6 | 16 August 2021 | 182,600 |
8 October 2020 | 27,666 | GBP £0.85 | 1.0 | 21 December 2021 | 27,666 |
8 October 2020 | 88,533 | GBP £1.06 | 1.9 | 5 December 2022 | 88,533 |
8 October 2020 | 29,880 | GBP £1.06 | 2.0 | 3 January 2023 | 29,880 |
8 October 2020 | 91,300 | GBP £1.80 | 3.2 | 28 February 2024 | 39,010 |
8 October 2020 | 24,900 | GBP £2.22 | 3.2 | 7 March 2024 | 2,490 |
8 October 2020 | 24,900 | GBP £1.20 | 3.6 | 19 August 2024 | 2,490 |
6 November 2020 | 1,000,000 | A$2.20 | 2.9 | 7 November 2023 | 1,000,000 |
| 17,369,779 |
|
|
| 17,272,669 |
As at 30 June 2020 |
|
|
|
|
|
Grant date |
Options outstanding |
Exercise price | Weighted average remaining contractual life (Years) |
Expiry date |
Number exercisable |
27 April 2018 | 9,000,000 | A$0.20 | 3.0 | 1 July 2023 | 9,000,000 |
27 April 2018 | 2,500,000 | A$0.30 | 1.0 | 1 July 2021 | 2,500,000 |
27 April 2018 | 3,100,000 | A$0.40 | 1.0 | 1 July 2021 | 3,100,000 |
29 May 2018 | 1,000,000 | A$0.40 | 0.9 | 5 June 2021 | - |
29 November 2019 | 1,000,000 | A$1.00 | 2.4 | 28 November 2022 | 1,000,000 |
29 November 2019 | 2,000,000 | A$1.25 | 2.4 | 28 November 2022 | 2,000,000 |
29 November 2019 | 500,000 | A$1.25 | 2.4 | 28 November 2022 | 500,000 |
29 November 2019 | 500,000 | A$1.25 | 2.4 | 28 November 2022 | - |
| 19,600,000 |
|
|
| 18,100,000 |
|
|
|
|
|
|
As at 31 December 2020 |
|
|
|
|
Grant date |
Performance rights outstanding | Weighted average remaining contractual life (Years) |
Expiry date |
Number exercisable |
29 November 2019 | 1,160,000 | 1.9 | 28 November 2022 | 410,000 |
12 June 2020 | 250,000 | 4.0 | 6 January 2025 | - |
6 August 2020 | 1,000,000 | 3.0 | 31 December 2023 | - |
6 August 2020 | 500,000 | 4.0 | 31 December 2024 |
|
18 November 2020 | 825,000 | 2.0 | 31 December 2022 | - |
| 3,735,000 |
|
| 410,000 |
As at 30 June 2020 |
|
|
|
|
Grant date |
Performance rights outstanding | Weighted average remaining contractual life (Years) |
Expiry date |
Number exercisable |
29 November 2019 | 1,310,000 | 2.4 | 28 November 2022 | - |
28 February 2020 | 2,000,000 | 0.1 | 31 July 2020 | - |
12 June 2020 | 250,000 | 3.5 | 6 January 2024 | - |
12 June 2020 | 250,000 | 4.5 | 6 January 2025 | - |
| 3,810,000 |
|
| - |
On exercise, holders of performance rights are required to pay £0.013355 for each performance right exercised, being the nominal value of one ordinary share.
There were no performance rights outstanding at 30 June 2019.
d Warrants reserve
Warrants were issued as part of Tethyan Resource Corp acquisition.
The following table presents changes in the Group's warrants reserve during the six months ended 31 December 2020:
(In GBP) | Share-based payment reserve |
30 June 2020 | - |
Issue of Warrants on acquisition of Tethyan | 4,128,633 |
31 December 2020 | 4,128,633 |
As at 31 December 2020 | |||||
Grant date |
Warrants outstanding |
Exercise price | Weighted average remaining contractual life (Years) |
Expiry date |
Number exercisable |
8 October 2020 | 413,642 | A$1.23 | 0.3 | 20 April 2021 | 413,642 |
8 October 2020 | 328,671 | A$1.23 | 0.5 | 29 June 2021 | 328,671 |
8 October 2020 | 527,800 | A$1.23 | 0.6 | 16 August 2021 | 527,800 |
8 October 2020 | 2,858,520 | A$0.88 | 3.1 | 30 January 2024 | 2,858,520 |
| 4,128,633 |
|
|
| 4,128,633 |
e Share-based payment reserve
The following table presents changes in the Group's share-based payment reserve during the six months ended 31 December 2020:
(In GBP) | Share-based payment reserve |
30 June 2019 | 1,714,826 |
Exercise of share options | (732,000) |
Expired options (1) | - |
Share-based payment expense | 3,443,359 |
30 June 2020 | 4,426,185 |
Exercise of share options | (1,173,926) |
Acquisition of subsidiary | 236,571 |
Share-based payment expense | 2,267,239 |
31 December 2020 | 5,756,069 |
(1) Expired in the same accounting period as they were granted.
f Share-based payment expense
During the year ended 31 December 2020; the Group recognised £2,267,239 (30 June 2020: £3,443,359) of share-based payment expense. The fair value of the share-based compensation was estimated on the dates of grant using the Black-Scholes option pricing model with the following weighted average assumptions:
For the year ended | 31 December 2020 | 30 June 2020 |
Risk-free interest rate | 0.01% | 2.01% |
Expected volatility (1) | 63.65% - 97.76% | 78.14% - 115.82% |
Expected life (years) | 0.85 - 4.41 | 0.42 - 5.18 |
Fair value per option | £0.55 - £1.29 | £0.39 - £0.68 |
(1) Expected volatility is derived from the Company's historical share price volatility.
With the exception of 1,000,000 options granted to non-executive directors during the year (30 June 2020: 3,000,000) that vested immediately, all options and performance rights have both market and non-market vesting conditions. Non-market vesting conditions include group and individual performance targets such as permitting milestones, exploration drilling rates or completion of business improvement projects. Details of the vesting condition relating to options and performance rights issued to executive Directors are included in the Remuneration Committee Report.
g Per share amounts
| 6 months ended | Year ended 30 June 2020 | |
Loss for the period attributable to owners of equity (In GBP) | 5,694,503 | 6,238,324 | |
Weighted average number of common shares for the purposes of basic loss per share | 190,619,399 |
168,915,249 | |
Weighted average number of common shares for the purposes of diluted loss per share | 213,827,441 |
185,645,660 | |
Basic loss per share (pence) | (2.99) | (3.69) | |
3,375,000 (30 June 2020: 5,160,000) options and performance rights have not been included in the calculation of diluted EPS because their exercise is contingent on the satisfaction of certain criteria that had not been met at 31 December 2020.
h Foreign Currency Translation Reserve
(In GBP) | Foreign Currency Translation Reserve |
30 June 2019 | 74,242 |
Other comprehensive income | 145,563 |
30 June 2020 | 219,805 |
Other comprehensive income | 5,775 |
31 December 2020 | 225,580 |
i Cash flow from financing activities
Net cash flow proceeds from the issue of ordinary shares in the period was £12,317,964 (30 June 2020: £13,296,266). Transaction costs arising from financing activities totals £1,447,201 (30 June 2020: £1,447,201).
16. Taxation
a Current taxation
The tax charge for the period comprises:
(In GBP) | 6 months ended | Year ended 30 June 2020 |
Current tax expense | - | - |
Prior year tax expense | 1,681 | - |
Overseas tax | - | - |
Deferred tax expense | - | - |
Adjustments to deferred tax liability | - | - |
Total tax expense | 1,681 | - |
The reasons for the difference between the actual tax charge for the period and the standard rate of corporation in the United Kingdom applied to loss for the year is as follows:
(In GBP) | 6 months ended | Year ended 30 June 2020 |
Loss before tax | 5,696,184 | 6,238,324 |
Expected income tax recovery at 19% (2019 - 19%) | 1,082,275 | 1,185,282 |
Expenses not deductible for tax purposes | 19,384 | (654,238) |
Different Tax rates applied in overseas jurisdictions | (46,601) | - |
Unrecognised taxable losses and timing differences | (1,055,058) | (531,043) |
Adjustment for under/(over) provision in previous periods | (1,681) | - |
Total income taxes | (1,681) | - |
b Deferred tax
The Group has no recognised deferred tax balance or gain/loss for the year ended 30 June 2020 or 2019 because of uncertainty regarding future taxable profits. As at 31 December 2020, the Group has, for tax purposes, non-capital losses available to carry forward to future years as follows:
(In GBP) | 31 December 2020 | 30 June 2020 | Expiry Date |
UK | 12,323,011 | 4,752,719 | Not applicable |
Bosnia | 1,417,043 | 1,258,100 | 5 years |
Serbia | 3,073,548 | - | 5 years |
Canada | 960,972 | - | 20 years |
| 17,774,574 | 6,010,819 |
|
The expiry of non-capital losses available to carry forward in Bosnia and Serbia is as follows:
(In GBP) |
| 31 December 2020 |
| Serbia | Bosnia |
Within one year | 514,525 | 108,477 |
1-2 years | 49,436 | 205,596 |
2-3 years | 653,104 | 220,180 |
3-4 years | 722,580 | 392,646 |
Within 5 years | 1,133,903 | 490,144 |
| 3,073,548 | 1,417,043 |
As a result of the Tethyan acquisition, Tethyan Resource Corp was acquired, this company is incorporated in Canada, non-capital losses available to carry forward to future years is £960,972 with year of expiry 2040.
17. Exploration activities expensed
Exploration and evaluation expenditure incurred on licences where a JORC-compliant resource has not yet been established is expensed as incurred until sufficient evaluation has occurred in order to establish a JORC-compliant resource.
(In GBP) | 6 months ended | Year ended 30 June 2020 |
Exploration activities expensed | 798,028 | - |
18. General and administrative expenses
(In GBP) | 6 months ended | Year ended 30 June 2020 |
Wages and salaries | 616,278 | 350,526 |
Consultancy fees | 468,047 | 676,149 |
Cash remuneration in respect of qualifying services | 1,084,325 | 1,026,675 |
Professional fees | 313,760 | 1,051,354 |
Amortisation | 27,017 | 37,031 |
Depreciation | 36,157 | 52,645 |
Audit fee | 100,175 | 47,289 |
Marketing | 75,250 | 161,003 |
Stock exchange fees | 136,166 | 358,663 |
Other costs | 342,857 | 580,974 |
| 2,115,707 | 3,315,634 |
19. Finance income and expense
(In GBP) |
6 months ended |
Year ended 30 June 2020 |
Interest income | - | 50,366 |
Foreign exchange gain | - | 152,765 |
Finance income | - | 203,131 |
(In GBP) | 6 months ended | Year ended 30 June 2020 |
Interest Expense | 82,744 | - |
Interest expense on lease liabilities | 10,523 | 11,580 |
Foreign exchange loss | 103,772 | - |
Finance expense | 197,039 | 11,580 |
20. Segmental information
It is the opinion of the Directors that there are three reporting segments within the operations of the Group which are assessed when evaluation performance
Split of performance is below:
| Segmental Split |
|
|
|
| |||
(In GBP) | Six months ended 31 December 2020 | Year ended 30 June 2020 | ||||||
| Bosnia | Serbia | Corporate | Total | Bosnia | Corporate | Total | |
Exploration activities expenses | (5,015) | (793,013) | 0 | (798,028) | 0 |
| 0 | |
General and administrative expenses | (249,932) | (425,935) | (1,440,840) | (2,115,707) | (465,903) | (2,849,731) | (3,315,634) | |
Share-based payment expense | 0 |
| (2,267,239) | (2,267,239) |
| (3,443,360) | (3,443,360) | |
Other income |
|
| 4,816 | 4,816 |
| 6,131 | 6,131 | |
|
|
|
|
|
|
|
| |
Operating Loss | (254,947) | (1,217,948) | (3,703,263) | (5,176,158) | (465,903) | (6,286,960) | (6,752,863) | |
|
|
|
|
|
|
|
| |
Finance income |
|
| - | - |
| 203,131 | 203,131 | |
Finance expense |
|
| (197,039) | (197,039) |
| (11,580) | (11,580) | |
Revaluation of fair value asset |
|
| (322,987) | (322,987) |
| 322,987 | 322,987 | |
|
|
|
|
|
|
|
| |
Loss before tax | (254,947) | (1,217,948) | (4,223,289) | (5,696,184) | (465,903) | (5,772,422) | (6,238,325) | |
Tax charge | 0 | 0 | 1,681 | 1,681 |
| 0 | 0 | |
Loss after tax | (254,947) | (1,217,948) | (4,221,608) | (5,694,503) | (465,903) | (5,772,422) | (6,238,325) | |
(In GBP) | Period Ended 31 December 2020 | Year Ended 30 June 2020 |
| |||||
| Bosnia | Serbia | Corporate | Total | Bosnia | Corporate | Total | |
Exploration and evaluation assets additions capitalised | 3,052,019 | 24,456,506 | - | 27,456,506 | 5,048,523 | - | 5,048,523 | |
21. Related party disclosures
a Related party transactions
The Group's related parties include key management personnel, companies which have directors in common and their subsidiaries.
The Company engaged Swellcap Limited, a related party controlled by Paul Cronin to provide the Company with corporate office facilities and services, payments totalled £18,972 for the six months ended 31 December 2020 (30 June 2020: £34,622). Following the Company entering in to a lease for office premises in December 2019 the Company invoiced Swellcap Limited £4,816 for office facilities and services for the six months ended 31 December 2020 (30 June 2020: £6,131).
Balances outstanding with related parties was £13,899 at 31 December 2020 (30 June 2020: £nil)
Transactions with key management personnel are disclosed below.
b Key management personnel compensation
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group. Key management personnel are considered to be the Non-Executive Directors, the Chief Executive Officer and the Chief Financial Officer, their remuneration is presented below:
(In GBP) | 6 months ended | Year ended 30 June 2020 |
Board fees | 104,767 | 243,594 |
Consultancy fees | 172,991 | 539,629 |
Cash remuneration in respect of qualifying services | 277,758 | 783,223 |
Share based payments expense | 736,715 | 2,880,487 |
Social security costs | 15,030 | 16,835 |
| 1,029,503 | 3,680,545 |
Share based payments expense is stated at fair value at the time of grant using the Black-Scholes Option Pricing Model. Further details are available in note 15f of the accounts.
Consultancy fees above include the following amounts paid to related party companies controlled by key management personnel:
(In GBP) Related party |
Controlling party | 6 months ended | Year ended 30 June 2020 |
Swellcap Limited | Paul Cronin | 84,999 | 198,998 |
GPE Consulting Limited | Geoff Eyre | 87,992 | 80,830 |
Gumtree Limited | Sean Duffy | - | 72,718 |
There were no balances outstanding with related parties as at 31 December 2020 (30 June 2020: £nil).
22. Directors and employees
Employees of the Group are all employees including Directors, key management personnel and personnel in management positions engaged via management services contracts. The below information relates to all employees and all costs, including those capitalised.
(In GBP) | 6 months ended | Year ended 30 June 2020 |
Gross salaries | 724,217 | 416,930 |
Consultancy fees | 305,914 | 882,432 |
Cash remuneration in respect of qualifying services | 1,030,131 | 1,299,362 |
Social security costs | 80,813 | 62,407 |
Defined contribution pension cost | 2,306 | 2,975 |
Share based payments expense | 2,267,239 | 3,443,359 |
Total | 3,380,489 | 4,808,103 |
Average number of employees | 73 | 39 |
Average number of employees has increased to 73 in the period (30 June 2020 - 39 employees) due to increasing staff numbers as the Vares Project progresses as well as the acquisition of Tethyan group.
Share based payments expense is stated at fair value at the time of grant using the Black-Scholes Option Pricing Model. Further details are available in note 15f of the accounts.
Directors' remuneration totalled the following:
(In GBP) | 6 months ended | Year ended 30 June 2020 |
Board fees | 104,767 | 243,594 |
Consultancy fees | 84,999 | 386,081 |
Cash remuneration in respect of qualifying services | 189,766 | 629,675 |
Average number of Directors | 6 | 6 |
Additionally, the monetary value of directors' share awards that vested in the period, calculated as the number of awards vested multiplied by the share price on the vesting date less options exercise price or performance rights nominal value payable, was £66,244 (30 June 2020: £853,978) of which £66,244 relates to Non-Executive Directors (30 June 2020: £233,247).
The highest paid Director in the six months ended 31 December 2020 received cash remuneration, excluding notional gains on share options or performance rights, of £106,859 (30 June 2019: £238,897). The highest paid Director in the year ended 30 June 2020 received remuneration, inclusive of the monetary value of share awards that vested in the year, of £106,859 (30 June 2020: £858,889).
Of the total amount incurred as Directors remuneration, £nil (30 June 2020: £nil) remains in accounts payable and accrued liabilities on 31 December 2020.
23. Commitments and contingencies
The Group had no significant commitments as at 31 December 2020 (30 June 2020: £nil), other than the lease of the Group's head office disclosed in note 12 and annual concession fees disclosed in note 9.
24. Prior year adjustment
During the year ended 30 June 2020 (the comparative reporting period) the exercise of share options which had previously generated a cumulative share based payment expense of £732,000 within the share based payment reserve. On exercise the £732,000 cumulative charge was incorrectly transferred against the share premium account.
Under the provisions of the accounting standards and Companies act, when new shares are issued in connection with an employee share scheme, the share premium account will normally need to reflect only the cash subscribed for the shares. The amount recognised as a cumulative share based payment expense should be credited to a reserve other than share premium. The basis for this is that the services undertaken by the employee do not, as a matter of law, form part of the consideration received for the shares issued on exercise of the options.
The adjustment to the comparative figures for the year ended 30 June 2020 represents a change in classification within equity only. With a £732,000 decrease in the share premium account and an equal increase in retained earnings. There is no impact on the Group and Parent Company Net assets, profit or loss or cash flow statement for the year ended 30 June 2020.
25. Subsequent events
On 23 February 2021, the Company completed the acquisition of the entire issued share capital of Ras Metals d.o.o. (Ras) under an agreement held by Tethyan Resource Corp, a wholly owned subsidiary of the Company. The consideration paid for the remaining 90% of the shares in Ras that the Company did not already hold was EUR 1,365,000 in cash plus the allotment of 166,000 Ordinary shares of £0.013355 each in the Company. Additionally, deferred consideration of EUR 500,000 in cash, is payable on 14 May 2022, and 498,000 Ordinary shares in the Company that will be allotted in three equal tranches on or around 22 August 2021, 22 February 2022 & 22 August 2022.
AS AT 31 DECEMBER 2020
(In GBP) | Note | 31 December 2020 | (Restated) 30 June 2020 |
ASSETS |
|
|
|
Current assets |
|
|
|
Cash and cash equivalents |
| 27,983,443 | 9,577,188 |
Other receivables and prepayments | f | 5,118,660 | 139,261 |
Financial asset at fair value through profit and loss | j | - | 1,241,514 |
Total current assets |
| 33,102,103 | 10,957,963 |
Non-current assets | |||
Investment in subsidiaries | i | 17,324,405 | 11,021,333 |
Fair value option asset on acquisition | j | 20,581,714 | - |
Property, plant and equipment | g | 41,079 | 47,129 |
Right of use asset | o | 236,349 | 251,898 |
Total non-current assets |
| 38,183,547 | 11,320,360 |
Total assets |
| 71,285,650 | 22,278,323 |
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
Current liabilities |
|
|
|
Accounts payable and accrued liabilities | h | 3,740,393 | 314,047 |
Lease liabilities | p | 35,609 | 10,530 |
Option liability | j | 2,515,399 |
|
Borrowings | j | 105,515 |
|
Total current liabilities |
| 6,396,916 | 324,577 |
Non-current liabilities | |||
Lease liabilities | p | 219,731 | 255,091 |
Borrowings | j | 11,590,172 |
|
Derivative Liability | j | 3,045,213 |
|
Total non-current liabilities |
| 14,855,116 | 255,091 |
Total liabilities |
| 21,252,032 | 579,668 |
Shareholders' equity | |||
Share capital | l | 2,772,186 | 2,401,777 |
Share premium | l | 51,471,748 | 23,992,967 |
Share-based payment reserve | l | 5,756,069 | 4,426,185 |
Warrants reserve expense | l | 2,797,086 | - |
Retained earnings | l | (12,763,471) | (9,122,274) |
Total shareholders' equity |
| 50,033,618 | 21,698,655 |
Total liabilities and shareholders' equity |
| 71,285,650 | 22,278,323 |
See note 24 of the Consolidated Financial Statements for details of the restatement of the prior year comparatives.
The Company's loss after tax for the six months ended 31 December 2020 was £4,957,675 (year ended 30 June 2019: £5,782,084).
The Parent Company Financial Statements of Adriatic Metals PLC, registered number 10599833, were approved and authorised for issue by the Board of Directors on 30 March 2021 and were signed on its behalf by:
Paul Cronin Managing Director & Chief Executive Officer | Geoff Eyre Chief Financial Officer & Joint Company Secretary |
FOR THE SIX MONTHS ENDED 31 DECEMBER 2020
(In GBP) |
Note |
Number of shares |
Value |
(Restated) Share premium | Share-based payment reserve | Warrants Reserve |
(Restated) Retained earnings |
Total equity | ||
30 June 2019 |
| 150,782,587 | 2,013,701 | 11,084,777 | 1,714,826 | - | (4,072,190) | 10,741,114 | ||
|
|
| ||||||||
Loss for the year |
| - | - | - | - | - | (5,782,084) | (5,782,084) | ||
Total comprehensive loss |
| - | - | - | - | - | (5,782,084) | (5,782,084) | ||
Issue of share capital | 15 | 25,083,400 | 334,989 | 13,015,388 | - | - | - | 13,350,377 | ||
Share issue costs |
15 |
- |
- |
(797,655) |
- | - |
- |
(797,655) | ||
Exercise of options | 15 | 3,975,000 | 53,087 | 690,457 | (732,000) | - | 732,000 | 743,544 | ||
Issue of options | 15 | - | - | - | 3,443,359 | - | - | 3,443,359 | ||
30 June 2020 |
| 179,840,987 | 2,401,777 | 23,992,967 | 4,426,185 | - | (9,122,274) | 21,698,655 | ||
|
|
| ||||||||
Loss for the period |
| - | - | - | - | - | (4,957,675) | (4,957,675) | ||
Total comprehensive loss |
| - | - | - | - | - | (4,957,675) | (4,957,675) | ||
Issue of share capital | 15 | 5,276,595 | 70,469 | 6,129,531 | - | - | - | 6,200,000 | ||
Settlement Placement | 15 | 4,830,156 | 64,507 | 4,791,547 | - | - | - | 4,856,054 | ||
Share issue costs | 15 | - | - | (1,598,603) | - | - | 142,551 | (1,456,052) | ||
Exercise of options | 15 | 4,350,000 | 58,093 | 1,203,817 | (1,173,926) | - | 1,173,927 | 1,261,911 | ||
Issue of options | 15 | - | - | - | 2,267,239 | - | - | 2,267,239 | ||
Acquisition of subsidiary |
| 13,278,937 | 177,340 | 16,952,489 | 236,571 | 2,797,086 | - | 20,163,486 | ||
31 December 2020 |
| 207,576,675 | 2,772,186 | 51,471,748 | 5,756,069 | 2,797,086 | (12,763,471) | 50,033,618 | ||
See note 24 of the Consolidated Financial Statements for details of the restatement of the prior year comparatives.
See note t for details of the restatement of the prior year comparatives.
FOR THE SIX MONTHS ENDED 31 DECEMBER 2020
(In GBP) |
Note |
Six months ended 31 December 2020 | Year ended 30 June 2020 |
Cash flows from operating activities |
|
|
|
Loss for the period | e | (4,957,675) | (5,782,084) |
Adjustments for: | |||
Depreciation of property, plant and equipment | g | 6,969 | 16,946 |
Amortisation of right-of-use assets | o | 15,549 | 13,714 |
Share-based payment expense | l | 2,267,239 | 3,443,359 |
Finance income |
| - | (193,468) |
Finance expense |
| 134,504 | 11,580 |
Revaluation of fair value asset |
| 322,987 | (322,987) |
Changes in working capital items: | |||
Increase in other receivables and prepayments |
| (3,110,904) | (42,015) |
Increase in accounts payable and accrued liabilities |
| 3,407,207 | 211,350 |
Net cash used in operating activities |
| (1,914,124) | (2,643,605) |
Cash flows from investing activities: | |||
Investment in subsidiaries |
| (3,309,554) | (5,390,808) |
Purchase of property, plant and equipment |
| (919) | (48,789) |
Loan issued |
| (1,881,641) | (876,201) |
Interest received |
| - | 28,079 |
Net cash used in investing activities |
| (5,192,113) | (6,287,719) |
Cash flows from financing activities | |||
Issues of ordinary shares | l | 12,317,964 | 13,296,266 |
Transaction costs arising from financing activities | l | (1,447,201) |
|
Proceeds from loans and borrowings | q | 14,956,849 | - |
Interest paid on lease liabilities |
| (10,523) | (11,580) |
Net cash flows from financing activities |
| 25,817,089 | 13,284,686 |
Net increase in cash and cash equivalents |
| 18,710,852 | 4,353,362 |
Exchange (losses) / gains on cash and cash equivalents |
| (304,597) | 123,062 |
Cash and cash equivalents at beginning of the period |
| 9,577,188 | 5,100,764 |
Cash and cash equivalents at end of the period |
| 27,983,443 | 9,577,188 |
a. Corporate information
These Financial Statements represent the individual financial statements of Adriatic Metals PLC (the "Parent Company"), the parent company of the Adriatic Metals Group for the six months ended 31 December 2020.
Adriatic Metals PLC (the Company or the parent) is a public company limited by shares and incorporated in England & Wales. The registered office is located at Ground Floor, Regent House, 65 Rodney Road, Cheltenham, GL50 1HX.
b. Basis of preparation
i) Statement of compliance
These Parent Company Financial Statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively "IFRS") adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union ("EU") applied in accordance with the provisions of the Companies Act 2006.
IFRS is subject to amendment and interpretation by the International Accounting Standards Board ("IASB") and the IFRS Interpretations Committee, and there is an ongoing process of review and endorsement by the European Commission.
The Parent Company Financial Statements were authorised for issue by the Board of Directors on 30 March 2021.
ii) Basis of measurement
These Financial Statements have been prepared on a historical cost basis, except for certain financial instruments that have been measured at fair value.
The presentation currency of these Financial Statements is Great Britain pounds ("GBP"). The functional currency of the Company is deemed to be the GBP under IAS 21.
iii) Going concern
Refer to accounting policies in note 3 of the notes to the Consolidated Financial Statements.
c. Accounting policies
In addition to the accounting policies in note 3 of the notes to the Consolidated Financial Statements, the following accounting policies are relevant only to the Parent Company Financial Statements.
i) Investments in subsidiaries
Unlisted investments are carried at cost, being the purchase price, less provisions for impairment. Additional consideration paid when subscribing for new shares, which is the primary mechanism used for funding the subsidiary, are made via capital contributions and recorded as additions to investments in subsidiaries.
d. Critical accounting estimates and judgements
The preparation of the Parent Company's Financial Statements in accordance with IFRS requires management to make certain judgements, estimates, and assumptions about recognition and measurement of assets, liabilities, income and expenses. The actual results are likely to differ from these estimates. In addition to the critical accounting estimates and judgements in note 4 of the Consolidated Financial Statements, the following information about the significant judgements, estimates, and assumptions that have the most significant effect on the recognition and measurement of assets, liabilities, income and expenses that are relevant only to the Parent Company Financial Statements are discussed below.
i) Value of investments in subsidiaries
The Parent Company, investments in subsidiary, which are made via capital contributions, are reviewed for impairment if events or changes indicate that the carrying amount may not be recoverable. When a review for impairment is conducted, the recoverable amount is assessed by reference to the net present value of expected future cash flows of the relevant generating unit or disposal value if higher. No impairment indicators were identified in the six months ended 31 December 2020.
e. Loss for the period
The Parent Company has taken advantage of the exemption under section 408 (3) of the Companies Act 2006 and thus has not presented its statement of comprehensive income in these Parent Company Financial Statements. The Parent Company's loss after tax for the period is £4,957,675 (Year ended 30 June 2020 - £5,782,084).
f. Other receivables and prepayments
Other receivables contain amounts receivable for VAT, prepaid expenses and deposits paid. All receivables are held at cost less any provision for impairment. A provision for impairment is made where there is objective evidence that the receivable is irrecoverable. All receivables are due within one year.
(In GBP) | 31 December 2020 | 30 June 2020 |
Other receivables | - | 17,063 |
Prepayments and deposits | 70,415 | 47,203 |
Taxes recoverable | 98,072 | 74,995 |
Amounts receivable from subsidiaries (note m) | 4,950,173 | - |
| 5,118,660 | 139,261 |
g. Property, plant and equipment
Cost (In GBP) | Land & Buildings | Plant and machinery | Total |
30 June 2019 | - | 26,454 | 26,454 |
Additions | 17,425 | 27,405 | 44,830 |
30 June 2020 | 17,425 | 53,859 | 71,284 |
Additions | - | - | - |
31 December 2020 | 17,425 | 53,859 | 71,284 |
Depreciation | |||
30 June 2019 | - | 3,968 | 3,968 |
Charge for the period | 970 | 19,217 | 20,187 |
Disposals | - | - | - |
30 June 2020 | 970 | 23,185 | 24,155 |
Charge for the period | 878 | 6,091 | 6,969 |
31 December 2020 | 1,848 | 29,276 | 31,124 |
Net Book Value | |||
30 June 2019 | - | 22,486 | 22,486 |
30 June 2020 | 16,455 | 30,674 | 47,129 |
31 December 2020 | 15,577 | 25,502 | 41,079 |
h. Accounts payable and accrued liabilities
(In GBP) | 31 December 2020 | 30 June 2020 |
Trade payables | 238,940 | 233,058 |
Accrued liabilities | 405,205 | 74,474 |
Other payables | 14,570 | 6,515 |
Amounts payable to subsidiaries (note m) | 3,081,678 | - |
| 3,740,393 | 314,047 |
i. Investments in subsidiaries
The breakdown of the investments in subsidiaries is as follows:
Cost (In GBP) | Eastern Mining d.o.o. | Tethyan Resource Corp. | Total |
30 June 2019 | 5,623,315 | - | 5,623,315 |
Additions | 5,398,018 | - | 5,398,018 |
30 June 2020 | 11,021,333 | - | 11,021,333 |
Additions | 4,205,902 | 2,097,170 | 6,303,072 |
31 December 2020 | 15,227,235 | 2,097,170 | 17,324,405 |
The list of subsidiaries of the Company is presented in note 3a of the notes to the consolidated financial statements.
j. Financial Instruments
The Company's financial assets and liabilities are classified as follows:
As at 31 December 2020 | Note |
At amortised cost | At fair value through profit or loss |
Total |
Financial assets |
| - | - | - |
Related Party Receivables | m | 1,868,495 |
| 1,868,495 |
FV Option Asset on acquisition | r |
| 20,581,714 | 20,581,714 |
Cash and cash equivalents |
| 27,983,443 |
| 27,983,443 |
Other Receivables and prepayments | f | 70,416 |
| 70,416 |
Total financial assets |
| 29,922,354 | 20,581,714 | 50,504,068 |
Financial liabilities | ||||
Accounts payable and accrued liabilities | h | 658,715
|
| 658,715 |
Borrowings | q | 11,695,687 |
| 11,695,687 |
Derivative Liability | q |
| 3,045,213 | 3,045,213 |
FV Option Liability on acquisition | r |
| 2,515,399 | 2,515,399 |
Lease liabilities | p | 255,340 |
| 255,340
|
Total financial liabilities |
| 12,609,742 | 5,560,612 | 18,170,354 |
Net financial assets |
| 17,312,612 | 15,021,102 | 32,333,714 |
As at 30 June 2020 |
|
At amortised cost |
At fair value through profit or loss |
Total |
Financial assets |
|
|
|
|
Cash and cash equivalents |
| 9,577,188 | - | 9,577,188 |
Other receivables | f | 139,261 | - | 139,261 |
Financial asset at fair value through profit and loss | n | - | 1,241,514 | 1,241,514 |
Total financial assets |
| 9,716,449 | 1,241,514 | 10,957,963 |
Financial liabilities | ||||
Accounts payable and accrued liabilities | h | 314,047 | - | 314,047 |
Lease liabilities | p | 265,621 | - | 265,621 |
Total financial liabilities |
| 579,668 | - | 579,668 |
Net financial assets |
| 9,136,781 | 1,241,514 | 10,378,295 |
k. Financial Risk Management
The Company is exposed to risks that arise from its use of financial instruments. The principle financial instruments used by the Company, from which financial risk arises, are set out in note k. The types of risk exposure the Company is subjected during the year are as follows:
i) Credit risk
The credit risk that the Parent Company is exposed to, and the mitigation thereof, is substantially the same as that of the Group as a whole. Further details are provided in note 13 of the notes to the Consolidated Financial Statements.
ii) Liquidity Risk
The liquidity risk that the Parent Company is exposed to, and the mitigation thereof, is substantially the same as that of the Group as a whole. Further details are provided in note 13 of the notes to the Consolidated Financial Statements.
The following table illustrates the contractual maturity analysis of the Company's gross financial liabilities based on exchange rates on the reporting date.
As at 31 December 2020 |
Within 30 days | 30 daysto 6months | 6 to 12 months | Over 12 months |
Accounts payables and accrued liabilities | 658,716 | - | - | - |
Borrowings | - | 105,515 | - | 11,590,172 |
Derivative Liability |
| - |
| 3,045,213 |
Lease liabilities | - | 17,805 | 17,805 | 219,731 |
| 658,716 | 123,320 | 17,805 | 14,855,116 |
|
|
|
|
|
As at 30 June 2020 |
Within 30 days | 30 daysto 6months | 6 to 12 months | Over 12 months |
Accounts payable and accrued liabilities | 314,047 | - | - | - |
Lease liability | - | - | - | 369,745 |
| 314,047 |
|
| 369,745 |
iii) Market risk
The market risk that the Parent Company is exposed to, and the mitigation thereof, is substantially the same as that of the Group as a whole. Further details are provided in note 14 of the notes to the Consolidated Financial Statements.
As at 31 December 2020, a 10% change in the exchange rate between the Great Britain Pound and the Australian Dollar, which is a reasonable estimation of volatility in exchange rates, would have an approximate £0.6 million change to the Parent Company's total comprehensive loss.
iv) Fair values
The fair value of cash, other receivables, and accounts payable and accrued liabilities and joint venture obligation approximate their carrying values due to the short-term nature of the instruments.
Fair value measurements recognised in the Statement of Financial Position subsequent to initial fair value recognition can be classified into Levels 1 to 3 based on the degree to which fair value is observable.
Level 1 - Fair value measurements are those derived from quoted prices in active markets for identical assets and liabilities.
Level 2 - Fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly, or indirectly.
Level 3 - Fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data.
The level 3 fair value for the convertible loan asset is disclosed in note 6 of the Consolidated Financial Statements. There were no transfers between any levels of the fair value hierarchy in the current period or prior years.
l. Equity
The movements in share capital, share premium, share based payment reserve, warrants reserve are as detailed in note 15 of the notes to the Consolidated Financial Statements. There are no differences between this and the Parent Company's transactions.
m. Related party disclosures
The Company's related parties include key management personnel, companies which have directors in common and its subsidiaries. Transactions with its Directors and key management personnel and transactions with companies which have directors in common during the period have been disclosed in note 21 of the notes to the Consolidated Financial Statements.
The Company had the following related-party balances and transactions during the six months ended 31 December 2020 and the year ended 30 June 2020.
(In GBP) |
| Six months ended 31 December 2020 | Year ended | At 31 December 2020 | At 30 June 2020 |
Subsidiary |
Nature of transaction |
Transaction amount |
Transaction amount | Balance owed by / (owed to) | Balance owed by / (owed to) |
Eastern Mining d.o.o. | Trading | 3,081,678 | - | 3,081,678 | - |
Eastern Mining d.o.o. | Capital contribution | 4,205,902 | 5,398,018 | (3,081,678) | - |
Tethyan Resources Corp. | Loan | 1,518,929 | - | 1,632,007 | - |
Tethyan Resources Limited | Loan | 236,488 | - | 236,488 | - |
Tethyan Resources Jersey | Loan | 55,700 | - | - | - |
Intercompany loan receivables are assessed for impairment at period end. Intercompany loans were made to fund both corporate costs and exploration projects undertaken by subsidiaries. In company subsidiaries other than Eastern Mining (who hold a JORC resource), exploration expenditure is expensed as incurred and not capitalised, as a result these companies net asset position is lower than their loans payable to the company and not recoverable in the short term. Company policy is to impair intercompany loans provided to fund corporate costs but not to impair intercompany loans provided to fund exploration projects on the basis that these exploration projects will add additional long term value. Management will assess for any impairment indicators on an ongoing basis.
n. Financial assets at fair value through profit and loss
The movements in Financial assets at fair value through profit and loss are as detailed in note 6 of the Consolidated Financial Statements. There are no differences between this and the Parent Company's transactions.
o. Right of use asset
The movements in right of use asset are as detailed in note 12 of the Consolidated Financial Statements. There are no differences between this and the Parent Company's transactions.
p. Lease liabilities
The movements in lease liabilities are as detailed in note 12 of the Consolidated Financial Statements. There are no differences between this and the Parent Company's transactions.
q. Borrowings and Derivative Liability
The movements in external loans and imbedded derivative liability are as detailed in note 7 of the Consolidated Financial Statements. There are no differences between this and the Parent Company's transactions.
r. Fair Value of Option Asset and Liability
The movements in fair value of option asset and fair value of option liability are as detailed in note 10 of the Consolidated Financial Statements. The Company may acquire the remaining 90% ownership stake in Ras Metals d.o.o. The excess value of the Tethyan transaction over the investment recorded is recognised as a call option asset totalling £20,581,714. Value of remaining consideration payable under Ras Option agreement being £2,515,399 held as a call liability.
These balances are eliminated in the Consolidation Group accounts which includes Ras Metals d.o.o.
s. Commitments
Commitments relating to the Parent Company have been disclosed in note 23 of the Consolidated Financial Statements.
t. Subsequent events
Subsequent events relating to the Parent Company have been disclosed in note 25 of the Consolidated Financial Statement
**ends**
Market Abuse Regulation Disclosure
The information contained within this announcement is deemed by Adriatic (LEI: 549300OHAH2GL1DP0L61) to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. The person responsible for arranging and authorising the release of this announcement on behalf of Adriatic is Paul Cronin, Managing Director and CEO.
For further information please visit www.adriaticmetals.com, @AdriaticMetals on Twitter, or contact:
Adriatic Metals PLC |
|
Paul Cronin / Thomas Horton | Tel: +44 (0) 7866 913207 |
|
|
Tavistock Communications Limited |
|
Charles Vivian | Tel: +44 (0) 7977 297903 |
Edward Lee | Tel: +44 (0) 7736 220565 |
Gareth Tredway | Tel: +44 (0) 7785 974264 |
|
|
The Capital Network |
|
Julia Maguire/Lelde Smits | Tel: +61 2 8999 3699 |
ABOUT ADRIATIC METALS
Adriatic Metals Plc (ASX:ADT, LSE:ADT1) is a precious and base metals explorer and developer that owns the world-class Vares Silver Project in Bosnia & Herzegovina and the Raska Project in Serbia.
The Vares project's captivating economics and impressive resource inventory have attracted Adriatic's highly experienced team, which is expediting exploration efforts to expand the current JORC resource. Results of a recent pre-feasibility study announced on 15 October 2020 indicate a post-tax NPV8% of US$1,040 million and IRR of 113%. Leveraging its first-mover advantage, Adriatic is rapidly advancing the project into the development phase and through to production with significant cornerstone investment of US$28 million from Queen's Road Capital Investment and EBRD.
There have been no material changes to the assumptions underpinning the forecast financial information derived from the production target in the 15 October 2020 announcement and these assumptions continue to apply. There have been no material changes to the assumptions and technical parameters on the updated Mineral Resource Estimate announced on 1 September 2020 and these assumptions continue to apply.
Adriatic Metals acquired TSX-V listed Tethyan Resource Corp in 2020, to advance the former Kizevak and Sastavci polymetallic mines in the Raska District, southern Serbia.
DISCLAIMER
Forward-looking statements are statements that are not historical facts. Words such as "expect(s)", "feel(s)", "believe(s)", "will", "may", "anticipate(s)", "potential(s)"and similar expressions are intended to identify forward-looking statements. These statements include, but are not limited to statements regarding future production, resources or reserves and exploration results. All of such statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally beyond the control of the Company, that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements. These risks and uncertainties include, but are not limited to: (i) those relating to the interpretation of drill results, the geology, grade and continuity of mineral deposits and conclusions of economic evaluations, (ii) risks relating to possible variations in reserves, grade, planned mining dilution and ore loss, or recovery rates and changes in project parameters as plans continue to be refined, (iii) the potential for delays in exploration or development activities or the completion of feasibility studies, (iv) risks related to commodity price and foreign exchange rate fluctuations, (v) risks related to failure to obtain adequate financing on a timely basis and on acceptable terms or delays in obtaining governmental approvals or in the completion of development or construction activities, and (vi) other risks and uncertainties related to the Company's prospects, properties and business strategy. Our audience is cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof, and we do not undertake any obligation to revise and disseminate forward-looking statements to reflect events or circumstances after the date hereof, or to reflect the occurrence of or non-occurrence of any events.