Final Results and Notice of AGM
19 Dec ember 20 22
GCM Resources plc
("GCM" or the "Company")
(AIM:GCM)
Final Results for the year ended 30 June 20 22
Notice of Annual General Meeting
GCM Resources plc announces the publication of its final audited results for the year ended 30 June 20 22 (the "Annual Report and Accounts") and that the Company's 20 22 Annual General Meeting will be held at 10.00 a.m. on Wednes day 18 January 20 23 , at QEII Centre, Broad Sanctuary, Westminster, London, SW1P 3EE .
The Annual Report and Accounts and the Notice of Annual General Meeting will be posted to shareholders today. Copies are available on request from the Company and will be available on the Company's website ( www.gcmplc.com ). The Annual Report & Financial Statements are also available on the 'Financial Reports' page of the Company's website.
For further information:
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GCM Resources plc Keith Fulton Finance Director +44 (0) 20 7290 1630 |
WH Ireland Ltd James Joyce Andrew De Andrade +44 (0) 20 7220 1666 |
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GCM Resources plc |
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Tel: +44 (0) 20 7290 1630 |
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info@gcmplc.com; www.gcmplc.com |
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Executive Chairman's Statement
The Board presents the Company's Annual Report and Accounts for the year ended 30 June 2022, covering a period that started with optimism as the world emerged from the Coronavirus Pandemic and business activity begun on a trajectory to normality, but quickly saw business confidence det er iorate over the second half of the reporting period as the effects of the Ukraine conflict kicked in.
The Project remains focused on its core asset, being the Phulbari coal mine capable of supporting some 6,600MW power generation, but also incorporates the option for up to 4,000MW associated power plant developments. The post-pandemic business revival saw a considerable rise in the Project's significance for Bangladesh, as energy prices hiked in response to demand outstripping supply and shipping costs following suit. During this period, compared to pre-pandemic levels, the coal price more than doubled and Liquified Natural Gas ("LNG") was up almost 10 times. Over the second half of the reporting year the Ukraine conflict exacerbated the energy supply - demand deficit resulting in a world-wide energy and power crisis. As a consequence, the Project's significance for Bangladesh in terms of energy cost and reliability of supply sky-rocketed. Furthermore, as Europe scrambles to shore up energy supplies, many of the Least Developed Countries ("LDC") found themselves unable to not only afford the enormous energy cost but also secure reliable energy supply.
Over the past decade, Bangladesh has demonstrated an ever-growing dependency on imported energy supplies. The world-wide energy and power crisis is now forecast to be protracted and has already become an enormous challenge for LDC economies. The Bangladesh Government reacted quickly and opted for an "Austerity Strategy", i.e., restricting the import of energy to take pressure off Foreign Exchange Reserves. The downside has been a reduction in business activity and slowing of the economy. At the same time, the local currency depreciated some 35% against the US Dollar, making imports in general and energy imports in particular even more expensive, leading to inflation and an ongoing significant rise in the cost of living.
There does now appear to be a growing awareness both in Government and civil society that over-dependence on imported energy to power industrial and economic development is inherently high risk and that a balance in energy supply between domestic and imported should be pursued. This was witnessed recently when the Bangladesh State Minister for the Ministry of Power, Energy, and Mineral Resources spoke at length in Parliament in response to questions regarding why extraction of the Country's domestic coal resources is lagging. The State Minister's lengthy response, as reflected on the Parliament Hansard, notes that open pit coal mining is only possible at Phulbari Coal reserve and cited the main concern remains the impact on farming. We view this as a very positive development and are confident that the Project's comprehensive "Agricultural Improvement Plan", developed within the scope of the Project's Environmental and Social Impact Assessment, will negate fears regarding impact on farming, particularly given that coal mining is a temporary change in land use and following coal extraction the mine void is backfilled with the land progressively rehabilitated and returned to agriculture.
Our team in Dhaka has made presentations at senior level of government to gain support for the Project and refine the Project Proposal. Feedback, which confirms the recent statements by the State Minister, has been encouraging with the Proposal now placing significant emphasis on government involvement, coal price and foreign reserve savings, agriculture improvement, water conservation, social management and assistance with enabling associated infrastructure such as rail upgrade. We are also being guided by our local Consultant Lobbyist on further refinements to the Proposal and timing for delivery.
During this last Financial Year, our team continued to work closely with development partner, Power Construction Corporation of China, Ltd. ("PowerChina"). Central to the discussions has been the Project Proposal and how to ensure the Government and People of Bangladesh, investors and shareholders will derive maximum benefit. To this end, on 6 December 2021, the MOU focused on coal mine development was extended for 12-months with the aim of defining the modality for PowerChina to become a Mine Development Partner, subject to the approval of PowerChina internal compliance and all other relevant regulatory agencies. Furthermore, on 11 March 2022, the power station Joint Venture Agreements with PowerChina for the initial 4,000MW (two 2,000MW Stages) were extended for two years to 15 March 2024.
Other steps taken in Financial Year 2022 include:
· On 31 August 2021, an MoU was signed with Sion Corporation of Japan, Versatech Energy Innovation Limited and AC Biode Co. Ltd for providing a suitable and effective environmental solution for the management of the fly-ash waste product that could be produced by the Project.
· On 2 March 2022, the Company successfully raised £2.13million through a placing (the "Placing") of 25,291,828 shares and a subscription for 16,171,777 shares of new ordinary 1p shares in the Company at a price of 5.14 pence per share, representing a discount of approximately 36.9% to the closing mid-market share price on 1 March 2022.
Outside the Reporting Period:
· On 22 August 2022, the Company announced that it had agreed a further extension of the consultancy agreement with DG Infratech Pte Ltd ("DGI"), a Bangladeshi controlled company, for an additional two years. DGI's prime role is to provide advisory and lobbying services in relation to the Company's business, namely to achieve project approval.
· On 12 December 2022, the Company announced that the MOU with PowerChina, focused on coal mine development, has been extended for a further 12-months to 6 December 2023.
Overarching Operating Enviromnent:
The United Nations Climate Change Conference COP26 occurred within the current reporting year and the recent COP27, just outside this period. There is no doubting Climate Change is occurring and the LDC are most vulnerable to extreme weather events, i.e., in general they lack the necessary specialist expertise, emergency response systems and financial resources to prepare for and deal with the aftermath of such events. However, while the Developed Countries are promoting a rapid move to "renewable energy" as a means to combat Climate Change, the reality is the LDC are, in the main, low Greenhouse Gas ("GHG") emitters and also are well behind in power consumption per capita and power generating capacity to drive industrial growth and economic development. In addition the current range of renewable energy, largely being solar and wind, are not suitable for base-load power which the LDC do struggle to provide. This is reinforced by the Developed World still largely being reliant on thermal energy for base-load power.
Bangladesh has maintained its stance regarding coal in its long-term energy mix with 11,775MW coal-fired power plants commissioned or in the pipeline. Progress is being made with: t he Payra 1,320MW Coal-fired Power Plant commissioned in 2019-20; the first unit (660MW) of the 1,320MW Rampal Coal-fired Power Plant to be commissioned in November this year and the second 660MW unit due next year; the 1,320MW Banshkhali Coal-fired Power Plant scheduled for commissioning in March 2023; with work on the Matabari 1,320MW Coal-fired Power Plant continuing.
We are confident the Project will become a key part of Bangladesh's "Energy Security and transition to Renewable Energy" and that the Phulbari coal mine will become a "Net Zero Carbon" or "Green Mine" operation through:
· Utilising electrically powered mining equipment;
· Developing a large-scale Solar Power Park (Carbon-Offsetting) within the Project area which would supply to the grid and also power the Phulbari mining operation; and
· Additional Carbon Offsetting through progressive development of an extensive forest plantation as part of the land rehabilitation plant.
Furthermore, utilsiing the high-energy Phulbari coal in power generation will potentially reduce Bangladesh's overall GHG emissions by up to 30% against current imported coal options as less Phulbari coal is consumed per kWh and coal transportation is vastly simplified, i.e., international shipping over long distances and lightering are both eliminated.
Finally, I thank our shareholders and stakeholders for their patience and support and provide assurance that we now have a robust Project Proposal that will assist the Bangladesh Government negate the effects of the long term energy crisis and provide some relief to exposure to the volatile world energy market. At the same time it encourages involvement by the Government, reinforcing its ownership of and benefits accruing from the strategically important Phulbari coal rsource.
Mohd. Najib Abdul Aziz
Non-Executive Chairman
19 December 2022
Group Strategic Report
Strategy and business model
GCM remains committed to its core strategy of developing the Phulbari coal deposit as a captive, large-scale, open pit mining operation supporting some 6,600MW of highly energy-efficient Ultra-Supercritical power generation. Over the reporting period this strategy has been enhanced to include installation of a large-scale Solar Power Park (up to 2,500MW) within the Project area, to be installed within the first two years of gaining land access; operating the Phulbari coal mine as a "Net Zero Carbon" or "Green Mine"; and participation modalities for Government.
GCM's strategy and business model is based on establishing partnerships with internationally renowned companies, specifically Chinese State-owned enterprises, to assist with obtaining the necessary government approvals and finance, and to be involved in construction and operation of the coal mine and possible power plants. Consultants are also employed to provide guidance and lobbying support both in Bangladesh and Internationally.
The business model relies on establishing a reliable domestic market for the Phulbari coal mine's full production. This is vital to underpin the Project's economic sustainability and is a prerequisite to obtaining project finance. In the past we have focused on a coal market solution with development partner, PowerChina, involving new power plants commissioned in stages to match the mine's ramp-up to 15Mtpa nameplate production. To this end, Joint Venture Agreements("JV's") remain in place covering 4,000MW, with the remaining coal mine production destined for the domestic market.
While this business model essentially remains valid, we have made changes in emphasis with the 4,000MW proposed under the JV's with PowerChina now being an option in the Project Proposal. This was driven by the fact that there is already significant new coal-fired power plant capacity being developed by other parties (with the Government) which is rapidly evolving into a significant domestic market capable of absorbing the full Phulbari coal mine production. The Chinese President's address to the United Nations General Assembly on 22 September 2021 is also a consideration as it did cast doubt over China financing new coal-fired power projects outside of China. There has been no further clarification or follow-up policy statement and there is speculation that the definition of "new" may possibly not include power plants that were already at the planning stage. Certainly, the world-wide energy crisis has changed the power landscape with many countries reverting to coal-fired power, including many in the European block. Due to these circumstances, therefore, we consider the risk adverse option for the Project is to focus on supplying coal to other power plants in the first instance. This will be a 'Win - Win" as the Bangladesh Government would secure a high quality coal supply with reduced supply and cost risks and save billions of dollars on excessive coal tonnage imports and power generating costs.
GCM is confident its enhanced strategy and business model will deliver the project approval. The Project will: reduce the Country's exposure to the volatile energy market; deliver a long-term positive impact on Foreign Exchange Reserves; deliver the lowest coal-based energy price and cheapest electricity, underpinning expansion and competitiveness of industries, produce new higher paying jobs, and grow the economy. It potentially will be an economic "step-jump" for Bangladesh, supporting its move to become a Developing Country by 2026 and helping achieve its Vision 2041 to:
· End absolute poverty and to be graduated into higher middle-income status by 2031; and
· Eradicate poverty on way to becoming a developed nation by 2041
Progress in-line with the strategy
The Company delivered a "Feasibility Study and Scheme of Development" for the coal mine component of the Project in October 2005. This mine development proposal remains robust, having been fully evaluated through the Definitive Feasibility Study ("DFS"). The DFS combines over two hundred individual studies by a team of international and national experts, with a view to delivering a world-class mining project plan, based on proven international best mining practices. It includes a comprehensive Environmental and Social Impact Assessment ('ESIA").
With the assistance of Hong Kong based Dyani Corporation Limited ("Dyani"), the Company developed close working relationships with the Chinese state-owned-enterprises. Currently the following arrangements are in place to support GCM's strategy for delivering the Project:
· Joint Venture Agreements with PowerChina for 4,000MW of mine-mouth power plants; and
· MOU with PowerChina aimed at defining the modality for PowerChina to become a Mine Development Partner.
Power Proposal documents required by the Government for approval of the initial 4,000MW power plants have been prepared. Presentations have been made at senior level of government to galvanise support for the Project and refine the Proposal which has been expanded to include:
· Options for participation by Government;
· Significant benefits of supplying coal directly to the Government's sanctioned power plants;
· Large-scale Solar Power Park (up to 2,500MW) on the Project area within the first couple of years;
· "Green Mine" with Carbon Offsetting (including forest) resulting in Net Carbon Zero mining operation; and
· Very significant Green House Gas emission reduction of some 30% using Phulbari coal vs. Imported Coal
As GCM does not yet generate any revenue, the Board expects that the Group's operations will continue to be funded by a combination of equity and debt financing.
Continuing for the foreseeable future, the Company's cash expenditure is not expected to increase and, as far as possible, obligations to key stakeholders will be primarily satisfied by the issue of new ordinary shares in the capital of the Company ("Ordinary Shares"), to both incentivise those stakeholders and preserve cash.
Year in review
GCM began the reporting year w ith international business confidence growing as the world emerged from the Coronavirus Pandemic. However, Bangladesh continued with periods of restricted movement of people and closure of government and private business offices until mid-August 2021.
Despite these periods of restricted movement, GCM's Dhaka team managed to initiate discussions at senior level of government to gain support for the Project and refine the Proposal to better address concerns and needs of Government. The initial recommendation was to prepare a fact sheet comparing Phulbari coal with imported coal supporting power hubs at various strategic location throughout Bangladesh. The results were compelling with Phulbari's high energy coal enabling many billions of dollars of annual savings. These discussions continued throughout the reporting period and resulted in refinement of Project presentations and the Project Proposal. The GCM team was supported by its development partner, PowerChina, in various key meetings.
On 31 August 2021, GCM signed an MoU with a consortium of Sion Corporation of Japan, Versatech Energy Innovation Limited and AC Biode Co. Ltd for providing management of the Project's power plant fly-ash waste product. SION has developed a multifunctional material, CircuLite, which can be manufactured from fly-ash and would have wide application in Bangladesh for environmental pollution control and in agricultural for soil conditioning.
On 6 December 2021, the MOU with PowerChina, focused on coal mine development, was extended for 12-months. PowerChina has reiterated its desire to particpiate in the coal mine development and working under this MOU the parties aim to define the extent of this participation.
On 11 March 2022, the power station Joint Venture Agreements with PowerChina for the initial 4,000MW (two 2,000MW Stages) were extended for two years to 15 March 2024.
Outside the reporting period:
· On 22 August 2022, the Company agreed a further extension of the consultancy agreement with DG Infratech Pte Ltd ("DGI"), a Bangladeshi controlled company, for an additional two years. DGI's prime role is to provide advisory and lobbying services to facilitate delivery of the Project Proposal and gain project approval.
· On 12 December 2022, the Company announced that the MOU with PowerChina, focused on coal mine development, has been extended for a further 12-months to 6 December 2023.
The Project Proposal has been enhanced to address the concerns and needs of the Bangladesh Government and incorporate options for Government participation. Principal focus is obtaining Coal Supply Agreements for coal supply to existing and planned coal-fired power projects and to work with the Government on additional joint venture arrangements for coal transportation and marketing, infrastructure development and Industrial Mineral co-product marketing.
The Project Proposal also includes a large Solar Power Park within the Project area, which could be operational within the first two years of Project approval and supply power to the mine as well as the National Grid. The Project's Agricultural Improvement and Land Rehabilitation Plans also create significant additional Carbon Offsetting. The net result is the Project could have a Carbon Zero "Green Mine" and the Government could reduce its Greenhouse Gas Emissions (CO 2 ) by some 30% by using Phulbari's coal instead of imported.
GCM's field team are working closely with the local community and local authorities to ensure they remain fully informed on the Project. This field effort is bolstered by over 60 "Community Liaison Assistants" recruited from across the Project area. They are not employees but are members of the local community that assist with delivery of our messages and conveyance of community feedback.
The Board is pleased with its progress against its strategy of forming development partnerships covering coal mine and power plants and that it now has a holistic Project Proposal that addresses Government's needs and concerns, sets out options for Government participation, supplies coal for large-scale power generation through a "Green Mine" approach, saves the Country billions of dollars annually in Foreign Exchange and at the same time delivers GHG emissions reduction and significant renewable energy in the form of a large-scale Solar Park. The Proposal has been prepared based on feedback from senior level of Government. Timing of delivery of the Proposal for Government approval is being guided by our appointed local Consultant Lobbyist, DGI.
WH Ireland Limited remains our Nominated Advisor and Broker since their appointment on 11 January 2021. As part of the 'Placing and Subscription" fundraising completed on 2 March 2022, ETX Capital was appointed as a Joint Broker.
Finance review
The Group recorded a loss of £1,679,000 during the year ended 30 June 2022 compared to a loss of £1,874,000 during the previous year. The loss decreased from the comparative year principally due to a decrease in non-cash, share-based payments accrued in accordance with the Group's agreements with Dyani & DG in relation to pre-development expenditure. The decrease was from £809,000 in 2021 to £414,000 this year as a result of prior year milestone payment to the consultant being reached in 2021, but their continuing partnership allows the Group to continue its progress in-line with GCM's strategy of developing power generation as a new business stream, with no slow-down in pursuing continuing project progress.
The Group recorded a net increase in cash at the end of the year to £961,000 (2021: £717,000). Net cash used in operations for the year was £846,000 (2021: £326,000), cash used in investing activities was £520,000 (2021: £557,000), and cash inflow from financing was £1,610,000 (2021: £1,531,000).
The Group has continued its aim to maintain tight control of expenditure incurred during the year: Administrative expenses were up by 4.6% to £750,000 for the year ended 30 June 2022 (2021: £717,000) which included £30,000 non-cash expenditure, however, finance costs increased by 25.3% to £480,000 (2021: £383,000) as a result of the amended terms to the Polo Loan Facility both in the current and prior year. Capitalised expenditure in relation to the mine proposal was £563,000 for the year ended 30 June 2022 compared to £552,000 in the previous year.
To finance its operations during the year, GCM completed a successful Placing and Subscription in conjunction with ETX Capital & WH Ireland Ltd, raising Gross proceeds of £2,130,000 in March 2022. In addition, GCM continues to have available, the short-term loan facility with Polo Resources Limited ("Polo") (the "Polo Loan Facility"). The Polo Loan has not been increased or drawn down during the year and remains at a facility of £3,500,000, with £3,200,000 drawn to date. The terms of the loan facility were amended in March 2022 as part of the completed placing and subscriptions, such that the lender may request conversion by the issuance of new ordinary shares in the Company at 5.14 pence per share (being the Issue Price) subject to any necessary regulatory approvals. All other terms of the agreement remained unchanged. (See Note 12 for detailed terms).
As at the date of this report, the Company had drawn down £3,200,000 of the Polo Loan Facility and the Company currently has approximately £840,000 in available cash resources, which along with the remaining £300,000 of the Loan Facility the Director's believe will only be sufficient to fund the Company's cash requirements for the next seven months, assuming the Company's currently forecast cash costs. The Company is exploring other financing options, and is confident of securing additional funding by the end of June 2023 (the "Additional Funding").
Corporate Social Responsibility
Mining is not a 'one go' process like other large development projects. GCM's management team appreciates that the success of mining operations is underpinned by an ability to listen to the communities within which they operate, deal with their concerns, keep them fully informed, improve livelihoods and, not only minimise environmental impacts, but improve the local environment.
GCM is committed to developing the Project in accordance with highest international and national environmental and social standards as defined in:
· International Finance Corporation (World Bank) policies and standards;
· Equator Principles;
· Asian Development Bank's (ADB) Safeguard Policies ; and
· Prevailing policies and laws of Bangladesh.
GCM is also a signatory of UN Global Compact, the World's largest voluntary corporate responsibility initiative, and embraces the core values pertaining to human rights, labour standards, the environment and anti-corruption.
One of the Project's key success factors is the successful implementation of the Project's Resettlement Action Plan ("RAP"). This was prepared as part of the coal mine's comprehensive Environmental and Social Impact Assessment and involved several rounds of surveys covering families within and immediately adjacent to the Project Area. A demographic survey was also carried out in 2019 to update the population and household trends. GCM is committed to lift the amenity of its local community and will ensure the RAP will deliver:
· Full and fair compensation;
· Full compensation prior to displacement;
· Fairness, transparency and choice;
· Higher living standards (town/village sites improved amenities);
· Financial grants to enhance livelihoods;
· Training and preferential employment; and
· Support of farmers to enhance agricultural production.
GCM maintains facilities in the Project area and its resident field team is in close contact with the community and local authorities. Our communication strategy also involves over 60 Community Liaison Assistants ("CLA's"), recruited from across the Project Area. The strength of the CLA's comes from them also having their own communication networks, i.e., two-way communication is greatly enhanced. The Community feedback remains consistent: the majority want development of their area (rated as one of the poorest in Bangladesh); they want job opportunities; and above all they want a better life for their children.
The Project will deliver over 17,000 jobs directly and indirectly created as a consequence of the mine development alone. However, many thousands of additional jobs would come from having an expansive reliable power supply enabling new industrial development. One such industrial opportunity would come through industrial mineral co-products that can be extracted from the mine overburden material removed to access the coal. These co-products (in very large quantities) would become available soon after removal of overburden commences (several years ahead of coal extraction) and include clay for bricks and pottery, China Clay for ceramics, silica sand for glass manufacturing and a range of sand, gravels and rock aggregates for the construction industry. Conservative estimates of the value of these co-products amounts to some US$17 Billion over the life of the Project.
Risks and uncertainties
The predominant risks and uncertainties faced by the Company are set out below:
Political and economic - risk that the Company's new approach, being to establish the Phulbari open pit coal mine as captive to and packaged to either: (a) in the first instance, supply all or part of the Phulbari coal mine production to the Government's own power plants, supporting up to 6,600MW state-of-the-art highly energy efficient Ultra-Supercritical power plants, or (b) as a back-up option, supply all or in part of the Phulbari coal mine production to power plants developed by GCM and its Development Partner(s), is not approved by the Government of Bangladesh. However, the Project has also been enhanced with the addition of a large-scale Solar Power Park (supplying the mine and National Grid) and a range of Carbon Offsetting measures that would enable the coal mine to be Carbon Net Zero (a "Green Mine"). The use of Phulbari coal instead of imported coal would also reduce Bangladesh's Greenhouse Gas Emissions (CO 2 ) by some 30%, save the Government billions of dollars in Foreign Exchange and energy and power generation cost, and allow cheaper power to facilitate industrial expansion and boost competitiveness. The Board believes the protracted world-wide energy crisis has greatly enhanced the value of the Project to the Government and People of Bangladesh and improved the likelihood for approval. The Board also believes its strategy of maintaining experienced development partners is an attractive proposition for the Government and does provide the best opportunity for realising the huge benefits the Project is capable of delivering. The Company's Bangladesh team and appointed consultants / lobbyists maintain contact with Government officials to prepare for delivery of the expanded Proposal, however, it recognises that the timing of approval remains in the hands of the Government. The Company retains its right to seek legal redress in accordance with the terms of the Contract with the Government in the event approval is not ultimately forthcoming. Refer to Note 1 of the consolidated financial statements for further information.
Strategic - risk that the strategic partnership with the Chinese state-owned-enterprise PowerChina does not proceed, thus undermining the Company's strategy of presenting the Project as a captive coal mine with reliable market options for its full coal mine production and jeopardising the mine's economic sustainability. As explained in the "Political and economic risk" section, the Company has already expanded the Proposal to promote all or part of the Phulbari captive open pit coal mine production being sold in the first instance to the Government's own power plants, thus reducing or eliminating the dependency on having mine-mouth power plants as the sole market for the Phulbari coal. The current and prolonged world energy crisis with escalated coal and LNG prices (increasing pressure of Bangladesh's Foreign Exchange Reserves) also makes the proposition of the Government using Phulbari coal for its power plants much more attractive.
The Company has also taken steps to further reduce this risk through recent signed agreements and continuing dialogue with the development partner aimed at further strengthening the strategic partnership; and has in place incentive-based schemes with Dyani to enhance the relationships with the Chinese government organisations and with the Bangladeshi controlled entity, DGI, to assist with taking the Project through the government approval process to implementation. The Company's Bangladesh team is also working to prepare Government officials for delivery of the expanded Proposal.
Financing - risk that the Company will not be able to raise necessary funds as and when required to take the Project through the government approval process to implementation stage. The Directors are confident that the necessary funds will be obtained as and when required. For further details refer to the Directors' Report.
Commercial - risk that the Project's economic viability is undermined by sustained adverse movement of coal price and key cost elements. The current and prolonged world energy crisis with escalated coal and LNG prices makes the proposition of the Government using Phulbari coal for its power plants much more attractive. Analysts predict the supply/demand forces will support continuing high coal prices in the medium term, thus using Phulbari coal will give the Government some protection against supply and cost escalation risk and save billions of dollars in Foreign Exchange. To further reduce economic viability risk there will be a rise and cost provision for the coal mine with the coal supply agreements for the power plants. Bangladesh has several new power projects under construction and others in the pipeline with the full capacity set out in a recent Government report to be in excess of 10,000MW, i.e., some 40% more than can be supported by the Phulbari coal mine's full production.
Legal - risk that the mining lease and exploration licences are revoked. The Group continues to comply with all terms of the Contract with the Government for "Exploration and Mining of Coal in Northern Bangladesh" and is careful to ensure that all ongoing conditions of the Contract and the associated mining lease and exploration licences are met. GCM has received a recent comprehensive legal opinion that the Contract is enforceable under Bangladesh and International law.
Health and safety, social and environmental risks - The Group remains committed to developing the Project and meeting the highest international social and environmental standards as detailed in the Corporate Social Responsibility section within this Strategic Report.
Climate Change risk - Increased awareness and action against climate change will put pressure on governments and financing organisations to reduce exposure to fossil fuel related power generation. This could affect future Bangladeshi Government policy towards coal fired generation and limit funding appetite for the Project. Bangladesh is scheduled to officially become a developing country in 2026 as the UN committee recommended that the country should get five years, instead of three, to prepare for the transition due to the impact of Covid-19 on its economy. Until 2026, the country will continue to enjoy the trade benefits as an LDC. The Bangladesh Government has also recently adopted its Vision 2041 which aims to end absolute poverty and to be graduated into higher middle-income status by 2031 and eradicate poverty on way to becoming a developed nation by 2041.
Bangladesh has minimal emissions and is far behind the developed countries in terms of GDP and power generation per capita. Considering the year 2019 (immediately prior to the COVID pandemic and the worldwide economic slowdown) published figures indicate its contribution to the world's CO 2 production was some 0.25 percent, i.e. Bangladesh is not a significant emitter.
Vision 2041 identifies two fundamental energy and power sector pillars necessary to support the Vision: (i) Adopting a least-cost power generation expansion path; and (ii) Promoting supply of low-cost primary energy. To achieve this, it needs to steadily grow its power generation capacity (efficient low cost power) to drive industrial development and create sustainable new well-paying jobs. To this end, even if the Phulbari full coal production was consumed in over 6,000MW of power being generated in the year 2019, Bangladesh's contribution to the world's CO 2 production would still have been minimal at less than 0.35%.
The Bangladesh Government recognis es the importance of commercial fuel diversity for its power generation, however, it remains heavily reliant on imported fuels, which exposes the country to inherent world-market risks in terms of maintaining supply and controlling cost. The world-wide protracted energy crisis has raised serious questions over Bangladesh's dependence on imported energy products. It has forced the Government to adopt an austerity approach involving restricting energy imports and cutting back on power generation, principally driven by falling Foreign Exchange Reserves. Civil society and many political figures are now calling for a rapid move to develop the country's domestic coal land gas resources to ensure energy security and save on Foreign Exchange.
The Phulbari Project remains focused entirely on serving Bangladesh's domestic requirements, adhering to its policies and laws and supporting its development goals. The Project will assist Bangladesh achieve its NDC targets as it balances issues to achieve its Development goals. By using Phulbari's high quality coal high energy efficient low emission Ultra-Supercritical power plants the country will not only eliminate greenhouse emissions associated with coal shipping and handling, but importantly it will realise a large amount of clean coal technology produced power at tariffs that will make its industries more competitive. This will help drive Bangladesh economic development and ability to deal with the effects of climate change.
Board engagement with stakeholders
This section serves as our section 172 statement and should be read in conjunction with the rest of the Strategic Report and the Company's Corporate Governance Statement.
Section 172 of the Companies Act 2006 requires a Director of a company to act in the way he or she considers, in good faith, and would be most likely to promote the success of the company for the benefit of its members as a whole. In doing this, section 172 requires a Director to have regard, among other matters, to: the likely consequences of any decision in the long term; the interests of the company's employees; the need to foster the company's business relationships with suppliers, governments, local communities, and others; the impact of the company's operations on the community and the environment; the desirability of the company maintaining a reputation for high standards of business conduct; and the need to act fairly with members of the company.
The Directors uses its Board meetings as a mechanism for giving careful consideration to the factors set out above in discharging their duties under section 172.
Stakeholder engagement
Key stakeholder groups we engage with are listed below, together with an explanation of why we focus on them and how we engage them.
Employees
The success of the Group is dependent upon the hard work and dedication of all our employees. The Board ensures a continuing investment in existing employees who are supported through professional, technical and on-the-job training relevant to their functional areas, as well as other relevant role-specific training. The Board directs executives and senior managers to keep staff informed of the progress and development of the Company on a regular basis through formal and informal meetings and regular communications. In addition, the Board ensures funds are provided for regular events to encourage employee participation in local community initiatives.
Government Agencies & Local Communities
The Group operates in the regulated mining sector in Bangladesh. The Board ensures the Company adopts a positive focus on maintaining productive relations with local communities and all levels of government. As a result, the Chief Executive Officer and Chief Operating Officer regularly conduct consultations with multi-levels of government agencies to ensure that all regulatory approvals and permits remain in good order. Development of local community improvement programmes are undertaken with consultation of local government and community representatives in order to maintain positive and productive relationships necessary to advance the Phulbari project.
As a mining exploration Group, the Board takes seriously its ethical responsibilities to the communities and environment in which it works. Wherever possible, local communities are engaged in the geological operations & support functions required for field operations. The regions in which the Group operates have native title laws. The Company is respectful of native title rights and engages proactively with local communities. In addition, we are careful to manage the environmental obligations of our work, and in particular undertake site rehabilitation programmes, and prepare mine management plans, in accordance with local laws and regulations. Our goal is to meet or exceed standards, in order to ensure we maintain our social licence to operate from the communities with which we interact.
Contractors & Suppliers
Our proposed Joint Venture associates, consultants and suppliers are key business partners, and the quality of goods and services we receive are essential to supporting operations and to enhance the project process with our goal to successfully submit our project proposal to the Bangladesh Government for approval.
During the year, the Board committed significant resources into fostering improved relationships with our key partners. As directed by the Board, management collaborates and continually works with our partners and the full supply chain, sharing best practice and seeking out synergies to improve.
Lender
For the entire reporting period the Chairman, CEO and FD, on behalf of the Board have been in regular contact with its lender. An extension to the loan agreement was agreed during the year, which enabled the Group to continue on a stable financial platform.
Investors
Investors are considered key stakeholders, and consequently investor relations are a focus area for Directors. Where possible the Board engages investors on Group performance following project updates and results announcements with face-to-face meetings or scheduled calls. Over the past year however these consultations have been severely impacted by the legal & country specific restrictions placed upon Directors given the world economic climate under the Covid-19 pandemic.
On behalf of the Board,
Datuk Michael Tang PJN
Chief Executive Officer
19 December 2022
Consolidated Financial Statements
Consolidated Statement of Comprehensive Income
For year ended 30 June
|
|
Notes |
2022 |
2021 |
|
|
|
£000 |
£000 |
|
|
|
|
|
|
Operating expenses |
|
|
|
|
Pre-development expenditure |
16 |
(414) |
(809) |
|
Exploration and evaluation costs |
|
(35) |
35 |
|
Administrative expenses |
|
(750) |
(717) |
|
|
|
|
|
|
Operating loss |
3 |
(1,199) |
(1,491) |
|
|
|
|
|
|
|
|
|
|
|
Finance costs |
|
(480) |
(383) |
|
|
|
|
|
|
Loss before tax |
|
(1,679) |
(1,874) |
|
|
|
|
|
|
|
|
|
|
|
Taxation |
6 |
- |
- |
|
|
|
|
|
|
Loss for the year |
|
(1,679) |
(1,874) |
|
|
|
|
|
|
Other comprehensive income |
|
- |
- |
|
|
|
|
|
|
Total comprehensive expense for the year |
|
(1,679) |
(1,874) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share |
|
|
|
|
Basic (pence per share) |
7 |
(1.1p) |
(1.5p) |
|
Diluted (pence per share) |
7 |
(1.1p) |
(1.5p) |
Consolidated Statement of Changes in Equity
For year ended 30 June
|
|
Share capital |
Share premium account |
Share based payments not settled |
Accumulated losses |
Total |
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
|
|
|
|
|
|
|
|
Balance at 1 July 2020 |
11,256 |
53,534 |
1,706 |
(29,079) |
37,417 |
|
|
|
|
|
|
|
|
Total comprehensive loss |
- |
- |
- |
(1,874) |
(1,874) |
|
Share issuances |
792 |
2,155 |
(1,938) |
- |
1,009 |
|
Share issuance costs |
- |
(78) |
- |
- |
(78) |
|
Shares to be issued |
- |
- |
809 |
- |
809 |
|
Share based payments |
- |
- |
6 |
- |
6 |
|
|
|
|
|
|
|
|
Balance at 30 June 2021 |
12,048 |
55,611 |
583 |
(30,953) |
37,289 |
|
|
|
|
|
|
|
|
Total comprehensive loss |
- |
- |
- |
(1,679) |
(1,679) |
|
Share issuances |
447 |
2,086 |
(372) |
- |
2,161 |
|
Share issuance costs |
- |
(121) |
- |
- |
(121) |
|
Shares to be issued |
- |
- |
414 |
- |
414 |
|
Share based payments |
- |
- |
17 |
- |
17 |
|
|
|
|
|
|
|
|
Balance at 30 June 2022 |
12,495 |
57,576 |
642 |
(32,632) |
38,081 |
Consolidated Balance Sheet Company number 04913119
As at 30 June
|
|
Notes |
2022 |
2021 |
|
|
|
£000 |
£000 |
|
|
|
|
|
|
Current assets |
|
|
|
|
Cash and cash equivalents |
|
961 |
717 |
|
Other receivables |
8 |
436 |
13 |
|
|
|
|
|
|
Total current assets |
|
1,397 |
730 |
|
|
|
|
|
|
Non-current assets |
|
|
|
|
Property, plant and equipment |
|
3 |
8 |
|
Right of use assets |
13 |
19 |
59 |
|
Intangible assets |
9 |
42,742 |
42,179 |
|
|
|
|
|
|
Total non-current assets |
|
42,764 |
42,246 |
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
44,161 |
42,976 |
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
Payables |
11 |
(1,369) |
(1,422) |
|
Lease liabilities |
13 |
(27) |
(40) |
|
|
|
|
|
|
Total current liabilities |
|
(1,396) |
(1,462) |
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
Lease liabilities |
13 |
(1) |
(22) |
|
Borrowings |
12 |
(4,683) |
(4,203) |
|
Total non-current liabilities |
|
(4,684) |
(4,225) |
|
|
|
|
|
|
Total liabilities |
|
(6,080) |
(5,687) |
|
|
|
|
|
|
|
|
|
|
|
Net assets |
|
38,081 |
37,289 |
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
Share capital |
14 |
12,495 |
12,048 |
|
Share premium account |
14 |
57,576 |
55,611 |
|
Other reserves |
14 |
642 |
583 |
|
Accumulated losses |
|
(32,632) |
(30,953) |
|
|
|
|
|
|
Total equity |
|
38,081 |
37,289 |
These financial statements were approved by the Board of Directors and were signed on their behalf by:
Keith Fulton
Executive Director
19 December 2022
Consolidated Cash Flow Statement
For year ended 30 June
|
|
|
2022 |
2021 |
|
|
|
£000 |
£000 |
|
|
|
|
|
|
Cash flows from/(used in) operating activities |
|
|
|
|
(Loss) before tax |
|
(1,679) |
(1,874) |
|
|
|
|
|
|
Adjusted for: |
|
|
|
|
Pre-development expenditure |
16 |
414 |
809 |
|
Finance costs |
|
480 |
383 |
|
Other non-cash expenses |
|
30 |
- |
|
|
|
|
|
|
|
|
(755) |
(682) |
|
Movements in working capital: |
|
|
|
|
(Increase)/Decrease in operating receivables |
(23) |
2 |
|
|
(Decrease)/Increase in operating payables |
(68) |
354 |
|
|
|
|
|
|
|
Cash used in operations |
|
(846) |
(326) |
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
(846) |
(326) |
|
|
|
|
|
|
|
|
|
|
|
Cash flows used in investing activities |
|
|
|
|
Payments for intangible assets |
|
(520) |
(557) |
|
|
|
|
|
|
Net cash used in investing activities |
|
(520) |
(557) |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
Issue of ordinary share capital |
|
1,731 |
1,009 |
|
Share issue costs |
|
(121) |
(78) |
|
Proceeds from borrowing |
|
- |
600 |
|
|
|
|
|
|
Net cash from financing activities |
|
1,610 |
1,531 |
|
|
|
|
|
|
|
|
|
|
|
Total increase in cash and cash equivalents |
|
244 |
648 |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at the start of the year |
|
717 |
69 |
|
|
|
|
|
|
Cash and cash equivalents at the end of the year |
|
961 |
717 |
Notes to the Consolidated Financial Statements
1. Accounting policies
GCM Resources plc is domiciled in England and Wales, was incorporated in England and Wales as a Public Limited Company on 26 September 2003 and admitted to the London Stock Exchange Alternative Investment Market ("AIM") on 19 April 2004.
The financial report was authorised for issue by the Directors on 19 December 2022, and the Consolidated Balance Sheet was signed on the Board's behalf by Keith Fulton.
Basis of preparation
The consolidated financial statements have been prepared in accordance with UK-adopted international accounting standards and applied in accordance with the Companies Act 2006. The accounting policies which follow set out those policies which apply in preparing the financial statements for the year ended 30 June 2022.
The functional and presentational currency of each of the entities in the Group is pounds sterling, and all values are rounded to the nearest thousand pounds (£000) except where otherwise indicated.
Political and economic risks - carrying value of intangible asset
The principal asset is in Bangladesh and accordingly subject to the political, judicial, fiscal, social and economic risks associated with operating in that country.
The Group's principal project relates to thermal coal and semi-soft coking coal, the markets for which are subject to international and regional supply and demand factors, and consequently future performance will be subject to variations in the prices for these products.
GCM, through its subsidiaries, is party to a Contract with the Government of Bangladesh which gives it the right to explore, develop and mine in respect of the licence areas. The Group holds a mining lease and exploration licences in the Phulbari area covering the prospective mine site. The mining lease has a 30-year term from 2004 and may be renewed for further periods of 10 years each, at GCM's option.
In accordance with the terms of the Contract, GCM submitted a combined Feasibility Study and Scheme of Development report on 2 October 2005 to the Government of Bangladesh. Approval of the Scheme of Development from the Government of Bangladesh is necessary to proceed with development of the mine. GCM continues to await approval.
The Group has received no notification from the Government of Bangladesh (the "Government") of any changes to the terms of the Contract. GCM has received legal opinion that the Contract is enforceable under Bangladesh and International law, and will consequently continue to endeavour to receive approval for development.
Accordingly, the Directors believe that the Phulbari Coal and Power Project (the "Project") will ultimately receive approval, although the timing of approval remains in the hands of the Government. To enhance the prospects of the Project, GCM has engaged in a strategy to align the Project with the needs and objectives of the Government. This includes the option to supply coal to both the Government's commissioned and in the pipeline power plants, which total 11,755MW. The Government is seeking to grow its economy and deliver electricity at prices that will ensure competitiveness of its industries. The Group's strategy of developing the Phulbari coal deposit as a captive, large-scale, open pit mining operation supporting some 6,600MW of highly energy-efficient Ultra-Supercritical power generation will enable cheaper coal-fired electricity than imported coal options. This evolving strategy has been enhanced to include installation of a large-scale Solar Power Park (up to 2,500MW) within the Project area, to be installed within the first two years of gaining land access; operating the Phulbari coal mine as a "Net Zero Carbon" or "Green Mine"; and participation modalities for Government.
Until approval of the Scheme of Development from the Government of Bangladesh is received there is continued uncertainty over the recoverability of the intangible mining assets. The Directors consider that it is appropriate to continue to record the intangible mining assets at cost, however if for whatever reason the Scheme of Development is not ultimately approved the Group would impair all of its intangible mining assets, totalling £42,742,000 as at 30 June 2022.
Going concern
As at 30 June 2022, the Group had £961,000 in cash and £1,000 in net current assets. The directors and management have prepared a cash flow forecast to December 2023, which shows that the Group will require further funds to cover operating costs to advance the Phulbari Coal and Power Project and meet its liabilities as and when they fall due. Based on current forecasts, additional funding will need to be either raised from third parties or drawn down under the short-term loan facility with Polo Resources Limited ("Polo Loan Facility") by the end of June 2023, in order to meet current operating cost projections. The Directors also note that, under the amended terms of the existing Polo Loan Facility, the lender agreed not to serve a repayment request in cash for 5 years from the date of amended terms, 26 March 2021, or alternatively convert to shares at 5.14 pence per share at the lender's option (as amended on 1 March 2022). The Company does not currently have secured funding arrangements in place to cover this loan or further potential expenditure which may be needed to advance the Project and, accordingly, should Polo request repayment of the Polo Loan Facility, (under certain terms of the Loan Facility) GCM will need to raise funds in a short amount of time, which may not be available on terms acceptable to the Board or on a workable timeframe.
The Company currently has £300,000 available for drawdown under the Polo Loan Facility at the date of this report, and based on projected future cash expenditure, the remaining amount available for drawdown under the Polo Loan Facility at the date of this report is not expected to be sufficient to support the Company's operations for the twelve months from the date of this report. At the current run rates, along with the Company's existing cash resources, this is only expected to provide sufficient capital for the next seven months. The Company intends to explore alternative funding options over the second quarter of 2023, with the aim to complete and secure the necessary third-party funding by the end of June 2023.
In forming the conclusion that it is appropriate to prepare the financial statements on a going concern basis the Directors have made the following assumptions that are relevant to the next twelve months:
- Sufficient additional funding can be obtained for working capital purposes; and
- In the event that operating expenditure increases significantly as a result of successful progress with regards to the Phulbari Coal and Power Project, sufficient funding can be obtained.
While the Directors remain confident that necessary funds will be available as and when required, as at the date of this report these funding arrangements are not secured, the above conditions and events represent material uncertainties that may cast significant doubt over the Group's and Company's ability to continue as a going concern. The financial statements have been prepared on a going concern basis. The financial statements do not include the adjustments that would result if the Group and Company were unable to continue as a going concern.
Upon achieving approval of the Phulbari Coal and Power Project, significant additional financial resources will be required to proceed to development.
Use of judgements, estimates and assumptions
The preparation of the consolidated financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses.
The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of revision and future periods if the revision affects both current and future periods.
Intangibles
In assessing the recoverability of intangible assets, if an impairment trigger under IFRS 6 is identified then intangibles are tested for impairment. Management has identified impairment triggers to be the market capitalisation of the Company compared to the recognised amount on the balance sheet and the delay in obtaining approval of the Scheme of Development. To assess for recoverability, estimates are used to determine the expected net return on investment. The estimated return on investment takes into account estimated recoverable reserves, coal prices, development and production costs, capital investment requirements, discount rates and environmental and social costs among other things. Management has considered the estimated return on investment to be significantly higher than the current carrying value and therefore no impairment has been accounted for. The headroom in the value in use calculation compared to the carrying value is not sensitive to probable changes in the key underlying assumptions. Refer to "Political and economic risks - carrying value of intangible asset" section within Note 1 for further details in respect of the recoverability of intangible mining assets and the Board's judgement regarding the ultimate approval of the project being secured.
Power plant development costs
Power project expenditure is expensed as pre-development expenditure until it is probable that future economic benefits associated with the Project will flow to the Group and the costs can be measured reliably. To assess whether it is probable that future economic benefits will arise from the power plant development costs, management judgement was required and considered: objective evidence that the power plant is technically and economically feasible, and objective evidence that the appropriate authorities of the Government of Bangladesh have, or are likely to approve power plant development. All power project expenditure were accordingly expensed in the year.
Amendments to the short-term loan
Judgement was required in determining the accounting for the Group's short-term loan which was restructured during the current and prior year. The restructure was considered to represent a significant modification with the loan restructured to allow the lender the continuing right to convert the outstanding loan balance and accrued interest to new ordinary shares, but to defer the repayment period. Previous judgement was required in assessing whether the restructured facility represented a compound financial instrument in accordance with IAS32 Financial Instruments: Presentation or a prima facie on demand loan facility. Management concluded that as the loan has no maturity date and must be repaid within 14 days of receiving a request, it is in effect a rolling 14-day short term loan, however as a further amendment has been claused as such the lender would not serve a repayment request on the Borrower for 5 years from March 2021, the loan was reclassified in the prior year being classed as a non-current liability. Accordingly, the loan continues to be categorised as an on demand loan facility with no value attributed to the conversion feature and the loan carried forward at its face value.
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.
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.
Property, plant and equipment
Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Such cost includes costs directly attributable to making the asset capable of operating as intended.
Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. The estimated useful lives in the current and comparative periods are as follows:
· buildings 7 - 40 years
· plant and equipment 3 - 15 years
· vehicles 5 - 7 years
The residual value, the useful life and the depreciation method applied to an asset are reassessed at least annually.
Power project development costs
Power project expenditure is expensed as pre-development expenditure until it is probable that future economic benefits associated with the project will flow to the Group and the costs can be measured reliably. When it is probable that future economic benefits will flow to the Group, all costs associated with developing a power plant project are capitalised as power project expenditure within property, plant and equipment category of tangible non-current assets. The capitalised expenditure will include appropriate technical and administrative expenses but not general overheads. Power project assets are not depreciated until the asset is ready and available for use.
Intangible assets
Acquired intangible assets, are measured initially at cost and are amortised on a straight-line basis over their estimated useful lives.
Exploration and evaluation costs are capitalised as exploration and evaluation assets on an area of interest basis in accordance with IFRS 6. Costs such as geological and geophysical surveys, drilling and commercial appraisal costs, and other directly attributable costs of exploration and appraisal including technical and administrative costs, are capitalised as intangible exploration and evaluation assets.
Exploration and evaluation assets are only recognised if the rights of the area of interest are current and either:
(i) the expenditures are expected to be recouped through successful development and mining of the area of interest, or by its sale; or
(ii) activities in the area of interest have not reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves and active and significant operations in, or in relation to, the area of interest are continuing or planned for the future.
Exploration and evaluation assets are assessed for impairment if sufficient data exists to determine technical feasibility and commercial viability, and facts and circumstances suggest that the Group should test for impairment. In the event that there is an indicator of impairment, the Group performs an impairment test in accordance with its policy on impairment as stated below. For the purposes of impairment testing, exploration and evaluation assets are allocated to cash-generating units to which the exploration activity relates.
Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for impairment and then reclassified from intangible assets to mining property and development assets within property, plant and equipment.
Impairment
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating unit's fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. 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 assessments of the time value of money and the risks specific to the asset. Impairment losses of continuing operations are recognised in the income statement in those expense categories consistent with the function of the impaired asset.
An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset's revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.
Financial Instruments
Financial instruments are recognised when the Group becomes a party to the contractual provisions of the instrument and are subsequently measured at amortised cost.
Classification and measurement of financial assets
The initial classification of a financial asset depends upon the Group's business model for managing its financial assets and the contractual terms of the cash flows. The Group's financial assets are measured at amortised costs and are held within a business model whose objective is to hold assets to collect contractual cash flows and its contractual terms give rise on specified dates to cash flows that represent solely payments of principal and interest.
The Group's cash and cash equivalents and other receivables are measured at amortised cost. Other receivables are initially measured at fair value. The Group holds other receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortised cost.
Cash and cash equivalents
Cash includes cash on hand and demand deposits with any bank or other financial institution. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash which are subject to an insignificant risk of changes in value.
Impairment of financial assets
The Group recognises loss allowances for expected credit losses ("ECL's") on its financial assets measured at amortised cost. Due to the nature of its financial assets, the Group measures loss allowances at an amount equal to the lifetime ECLs. Lifetime ECLs are the anticipated ECLs that result from all possible default events over the expected life of a financial asset. ECLs are a probability-weighted estimate of credit losses.
Classification and measurement of financial liabilities
A financial liability is initially classified as measured at amortised cost or FVTPL. A financial liability is classified as measured at FVTPL if it is held-for-trading, a derivative or designated as FVTPL on initial recognition.
The Group's accounts payable, accrued liabilities and short-term debt are measured at amortised cost.
Accounts payable and accrued liabilities are initially measured at fair value and subsequently measured at amortised cost. Accounts payable and accrued liabilities are presented as current liabilities unless payment is not due within 12 months after the reporting period.
Short-term debt is initially measured at fair value, net of transaction costs incurred. Subsequently they are measured at amortised cost using the effective interest rate method. Short-term debt is classified as current when payment is due within 12 months after the reporting period.
The Group has no financial liabilities measured at FVTPL.
Where there is a modification to a financial liability, the financial original liability is de-recognised and a new financial liability is recognised at fair value in accordance with the Group's policy.
Other loans and borrowings
All loans and borrowings which are financial instruments are initially recognised at the present value of cash payable to the lender (including interest). After initial recognition they are measured at amortised cost using the effective interest rate method. The effective interest rate amortisation is included in finance costs in the income statement.
Income tax
Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised outside profit and loss, in which case it is recognised in other comprehensive income or directly in equity as appropriate.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements, with the following exceptions:
· where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss;
· in respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; and
· deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carried forward tax credits or tax losses can be utilised.
Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when the related asset is realised or liability is settled, based on tax rates and laws enacted or substantively enacted at the balance sheet date.
Foreign currency transactions
Transactions in currencies other than pounds sterling are recorded at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.
Share based payments
The cost of equity-settled transactions is measured by reference to the fair value at the date at which they are granted and is recognised as an expense over the vesting period, which ends on the date on which the recipients become fully entitled to the award. Fair value is determined using an appropriate pricing model. In valuing equity-settled transactions, no account is taken of any vesting conditions, other than conditions linked to the price of the shares of the Company (market conditions) or to conditions not related to performance or service (non-vesting conditions).
Where equity settled share based payments are made to non-employees the cost of equity-settled transactions is measured by reference to fair value of the goods or services received and measured at the date the entity obtains the goods or the counterparty renders the service.
Where the fair value of the goods or services received cannot be estimated reliably, the entity measures the goods or services received, and the corresponding increase in equity, indirectly, by reference to the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders service.
At each balance sheet date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period has expired and management's best estimate of the achievement or otherwise of non-market conditions, number of equity instruments that will ultimately vest or in the case of an instrument subject to a market condition or non-vesting condition, be treated as vesting as described above. This includes any award where non-vesting conditions within the control of the Group or the employee are not met. W here the equity-settled share based payment is directly attributable to exploration and evaluation activities, the movement in cumulative expense since the previous balance sheet date is capitalised, with a corresponding entry in equity. Otherwise, the movement in cumulative expense is recognised in the income statement, with a corresponding entry in equity.
Where the terms of an equity-settled award are modified or a new award is designated as replacing a cancelled or settled award, the cost based on the original award terms continues to be recognised over the original vesting period. In addition, an expense is recognised over the remainder of the new vesting period for the incremental fair value of any modification, based on the difference between the fair value of the original award and the fair value of the modified award, both as measured on the date of the modification. No reduction is recognised if this difference is negative.
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any cost not yet recognised in the income statement for the award is expensed immediately. Any compensation paid up to the fair value of the award at the cancellation or settlement date is deducted from equity, with any excess over fair value being treated as an expense in the income statement.
New standards and interpretations applied
The Group has adopted all of the amended standards and interpretations during the year that are relevant to its operations, none of which had a material impact on the financial statements.
New standards and interpretations not applied
IASB and IFRIC have issued a number of new standards and interpretations with an effective date after the date of these financial statements. These will be adopted in the period that they become mandatory, unless otherwise indicated. Information on the new standards which could impact the Group is presented below
|
|
Effective date |
Adoption date |
|
International Accounting Standards (IAS / IFRSs) |
|
|
|
Amendments to IAS 16 Property Plant and Equipment |
1 January 2022 |
1 January 2022 |
|
Amendments to IAS 37 Provisions, Contingent Assets and Contingent Liabilities |
1 January 2022 |
1 January 2022 |
|
Annual Improvements to IFRS 2018-20 Cycle |
1 January 2022 |
1 January 2022 |
|
Amendments to IFRS 3 Business Combinations - Reference to the Conceptual Framework |
1 January 2022 |
1 January 2022 |
|
Amendments to IAS 37 Onerous Contracts - Cost of Fulfilling a Contract |
1 January 2022 |
1 January 2022 |
|
Amendments to IFRS 16 - Leases: Covid 19 related rent concessions |
1 January 2022 |
1 January 2022 |
|
|
|
|
Based on the current and foreseeable operations, the adoption of the above standards and interpretations will not have a material impact on the Group's financial statements in the period of initial application.
2. Segment analysis
The Group operates in one segment being the exploration and evaluation of energy related projects. The only significant project within this segment is the Phulbari Coal and Power Project (the Project) in Bangladesh.
3. Operating loss
|
|
2022 £000 |
2021 £000 |
|
The operating loss is stated after charging: |
|
|
|
Directors' remuneration |
611 |
488 |
|
Other staff costs (1) |
10 |
7 |
|
Operating lease rentals (2) |
12 |
4 |
|
Depreciation of property, plant and equipment (3) |
- |
- |
(1) Other staff costs for 2022 financial year were £186,000 of which £10,000 was expensed in administrative expenses, £nil expensed in exploration and evaluation costs and £176,000 capitalised (2021 £7,000 expensed in administrative expenses, £nil expensed in exploration and evaluation costs and £360,000 capitalised).
(2) Operating lease rental costs for 2022 financial year were £20,000 of which £12,000 was expensed and £8,000 capitalised (2021: £44,000 of which £4,000 was expensed and £40,000 capitalised).
(3) Total depreciation for 2022 was £5,000 which was capitalised to intangibles (2021: £5,000 capitalised).
During the year Phulbari-related exploration and evaluation costs amounting to £35,000 were expensed in accordance with the Group's accounting policy on exploration and evaluation costs (2021: (credited) £35,000).
4. Auditor's remuneration
The Group paid the following amounts to its auditors in respect of the audit of the financial statements and for other services provided to the Group.
|
|
2022 £000 |
2021 £000 |
|
|
|
|
|
|
|
Audit of the group and company financial statements |
34 |
32 |
|
|
Audit of subsidiaries |
- |
- |
|
|
Total audit |
34 |
32 |
|
|
|
|
|
|
|
Total fees |
|
34 |
32 |
5. Amounts paid for Directors' services, and staff costs
|
|
|
2022 £000 |
2021 £000 |
|
Amounts paid for Directors' services |
|
|
|
|
Amounts paid for Directors' services |
611 |
488 |
|
The amounts paid for Directors' services during the year are disclosed in further detail in the Directors' Report . The aggregated remuneration of the highest paid director is £303,600 (2021: £303,600).
Staff costs
|
Wages and salaries (1) |
|
176 |
360 |
|
Social security costs |
10 |
7 |
|
|
|
|
|
|
|
|
|
186 |
367 |
(1) Excludes amounts paid for Directors' services.
|
The average monthly number of employees during the year was: |
2022 Number |
2021 Number |
|
|
|
|
|
|
|
Exploration and evaluation |
|
14 |
14 |
|
Administration |
|
3 |
3 |
|
|
|
|
|
|
|
|
17 |
17 |
6. Taxation
Reconciliation of the tax charge in the income statement
|
|
2022 £000 |
2021 £000 |
|
|
|
|
|
Loss on ordinary activities before tax |
(1,679) |
(1,874) |
|
|
|
|
|
UK corporation tax @ 19% (2022) and 19% (2021) |
(319) |
(356) |
|
|
|
|
|
Unrecognised deferred tax assets during the year |
301 |
351 |
|
Non-deductible expenditure |
18 |
5 |
|
|
|
|
|
Total tax (credit)/expense reported in the income statement |
- |
- |
Unrecognised deferred tax assets
|
|
2022 £000 |
2021 £000 |
|
Deferred tax asset |
|
|
|
Tax losses carried forward |
4,411 |
4,110 |
|
Impairment |
891 |
891 |
|
Other |
1 |
1 |
|
|
|
|
|
|
5,303 |
5,002 |
|
|
|
|
|
Less: deferred tax assets de-recognised |
(5,303) |
(5,002) |
|
|
|
|
|
|
- |
- |
At 30 June 2022 tax losses for which a deferred tax asset was not recognised amounted to £23,216,000 (2021: £21,701,000). Deferred tax assets are only recognised at UK Corporation Tax Rate of 19% (2021: 19%) should it become more likely than not that taxable profit or timing differences, against which they may be deducted, will arise.
7. Loss per share
|
|
|
|
2022 |
2021 |
|
|
|
|
£000 |
£000 |
|
|
|
|
|
|
|
(Loss) for the year |
|
|
(1,679) |
(1,874) |
|
|
|
|
|
|
|
|
|
|
Thousands |
Thousands |
|
Weighted average number of shares |
|
|
|
|
|
Basic and diluted weighted average number of shares |
151,246 |
121,733 |
||
|
|
|
|
|
|
|
(Loss) per share |
|
|
|
|
|
Basic (pence per share) |
|
|
(1.1p) |
(1.5p) |
|
Diluted (pence per share) |
|
|
(1.1p) |
(1.5p) |
There are 9,300,000 potentially dilutive options, and 702,333 warrants along with 2,927,532 potentially dilutive shares to be issued at 30 June 2022 which are not included in the calculation of diluted earnings per share because they were anti ‑ dilutive for the period as their conversion to Ordinary Shares would decrease the loss per share.
8. Other Receivables
|
|
|
2022 £000 |
2021 £000 |
|
Current |
|
|
|
|
Prepayments |
29 |
9 |
|
|
Other receivables |
|
7 |
4 |
|
Share Capital Unpaid (1) |
|
400 |
- |
|
|
|
|
|
|
|
|
436 |
13 |
(1) The Company received full receipt of the outstanding funds for the share subscription on 5 July 2022.
9. Intangible assets
|
|
Exploration & evaluation expenditure |
Mineral rights |
Total
|
|
|
£000 |
£000 |
£000 |
|
|
|
|
|
|
At 1 July 2020 |
40,480 |
1,147 |
41,627 |
|
Additions - exploration & evaluation |
552 |
- |
552 |
|
|
|
|
|
|
At 30 June 2021 |
41,032 |
1,147 |
42,179 |
|
Additions - exploration & evaluation |
563 |
- |
563 |
|
|
|
|
|
|
Cost and net book value at 30 June 2022 |
41,595 |
1,147 |
42,742 |
|
|
|
|
|
|
Cost and net book value at 30 June 2021 |
41,032 |
1,147 |
42,179 |
|
|
|
|
|
The mineral rights will be amortised over the licence period (including extensions) once commercial production commences at the Phulbari Coal and Power Project.
The exploration and evaluation expenditure will have an indefinite useful life until approval is obtained for the Phulbari Coal and Power Project. At that time, the asset will be transferred to mining property and development assets within property, plant and equipment in accordance with accounting policy.
10. Investments
Principal undertakings
Investments in which the Group holds 20% or more of the nominal value of any class of share capital are as follows:
|
|
Country of |
Ownership interest |
|
|
|
Incorporation |
2022 |
2021 |
|
Subsidiaries |
|
|
|
|
South African Coal Limited |
England and Wales |
100% |
100% |
|
Asia Energy Corporation Pty Limited |
Australia |
100% |
100% |
|
Asia Energy Corporation (Bangladesh) Pty Limited |
Australia |
100% |
100% |
|
Asia Energy (Bangladesh) Pvt Ltd |
Bangladesh |
100% |
100% |
|
|
|
|
|
|
Fair Value Through Other Comprehensive Income |
|
|
|
|
Peoples Telecommunication and Information Services Ltd (PeoplesTel) |
Bangladesh |
37% |
37% |
The investment in PeoplesTel has been accounted for as financial asset at Fair Value Through Other Comprehensive Income as GCM does not have significant influence. The investment was fully impaired during the year ended 30 June 2010.
11. Payables
|
|
|
2022 £000 |
2021 £000 |
|
|
|
|
|
|
Trade payables |
575 |
579 |
|
|
Related party accrued payable |
794 |
843 |
|
|
|
|
|
|
|
|
|
1,369 |
1,422 |
Refer to note 20 for details of the related party accrued payable.
12. Borrowings (Non-current liabilities)
|
|
|
2022 £000 |
2021 £000 |
|
Loan from related party |
|
|
|
|
Balance as at 1 July |
4,203 |
3,220 |
|
|
Loan instalments drawndown |
- |
600 |
|
|
Interest charges |
480 |
383 |
|
|
|
|
|
|
|
Balance as at 30 June |
|
4,683 |
4,203 |
Refer to note 20 for details of the loan from related party.
The Company on 1 March 2022, as part of the completed placing and subscriptions, amended the terms of the loan facility, such that the lender may request conversion by the issuance of new ordinary shares in the Company at 5.14 pence per share (being the Issue Price) subject to any necessary regulatory approvals. All other terms of the agreement remained unchanged.
The Company on 26 March 2021, as part of the completed placing, extended and amended the terms of the loan facility provided by Polo Resources Limited (the "Facility") of which, as was announced on 7 January 2021, there is £300,000 of the initial £3.5 million facility remaining undrawn. The lender has agreed that it will not serve a repayment request on the company for 5 years from the date of the agreement replacing the previous provision that it was payable on demand with 90 days' notice. The Company and Polo Resources Limited have agreed an increase in the interest rate from 12% to 15% per annum rising by 1.5% on the third anniversary and by a subsequent 1.5% on each anniversary thereafter. Furthermore, the lender may request conversion by the issuance of new ordinary shares in the Company at 7.5 pence per share (being the Issue Price) subject to any necessary regulatory approvals. The Company may elect to repay all or part of the outstanding loan at any time giving 60 days' notice and with the agreement of Polo Resources Limited. Any share issue to the Lender is conditional upon the Lender's interest, together with the interest of any parties with which it is in concert, remaining below 30% of the Company's issued capital. All other principal terms of the loan facility remain unchanged. Refer page 39 for details of Management judgement used in accounting for the loan amendment.
13. Leases and Commitments
Right of use assets
The statement of financial position shows the following amounts relating to leases:
|
|
|
2022 £000 |
2021 £000 |
|
|
|
|
|
|
Buildings |
|
19 |
59 |
|
Vehicles |
- |
- |
|
|
|
|
|
|
|
|
|
19 |
59 |
Lease liabilities
|
|
|
2022 £000 |
2021 £000 |
|
Classified as; |
|
|
|
|
Current |
|
27 |
40 |
|
Non-current |
1 |
22 |
|
|
|
|
|
|
|
|
|
28 |
62 |
The interest expense incurred on lease liabilities was £3,000 (2021: £6,000), and capitialised in accordance with the Group's policy on exploration and evaluation assets. Cash outflows in respect of right of use assets were £47,000 (2021: £49,000).
Other commitments
In addition, under the terms of the Prospecting License agreement with the Bangladesh authorities for contract licence areas B, G and H respectively, an annual fee of 500 Taka (£4.49 at year-end exchange rate) is payable for each hectare within the licence area. The Group currently leases 5,480 hectares within these licence areas. The licence has a 30 year term from 2004 and may be renewed for further periods of 10 years each, at GCM's option.
14. Issued share capital
|
|
|
Ordinary Shares Thousands |
Deferred A Shares Thousands |
Total share capital £000 |
|
Allotted, called up and fully paid: |
|
|
|
|
|
At 1 July 2020 |
|
112,560 |
- |
11,256 |
|
Shares issued |
|
6,022 |
- |
602 |
|
Total pre capital reorganisation |
|
118,582 |
- |
11,858 |
|
|
|
|
|
|
|
Capital reorganisation (see below) |
|
118,582 |
118,582 |
- |
|
Shares issued |
|
19,011 |
- |
190 |
|
|
|
|
|
|
|
At 30 June 2021 |
|
137,593 |
118,582 |
12,048 |
|
|
|
|
|
|
|
Shares issued |
|
44,712 |
- |
447 |
|
|
|
|
|
|
|
At 30 June 2022 |
|
182,305 |
118,582 |
12,495 |
Share issues
On 8 September 2020, 6,021,621 shares were issued to consultants in accordance with the terms of the their agreements, at prices from 14p to 26.5p, for a total non cash consideration of £1,276,873.
On 1 April 2021, 13,446,661 shares were issued on completion of a successful placing at a price of 7.5p, raising gross cash proceeds of £1,008,500.
On 7 May 2021, 5,564,591 shares were issued to consultants in accordance with the terms of the their agreements, at prices from 10.25p to 18p, for a total non cash consideration of £661,638.
On 1 March 2022, 25,291,828 placing shares and 16,171,777 subscription shares were issued on the completion of a successful fund raise at 5.14p per share, raising gross cash proceeds of £2,130,000.
On 7 April 2022, 3,248,740 shares were issued to consultants and a director in accordance with the terms of their agreements, at prices from 4.25p to 18p, for total non cash consideration of £402,000.
Capital reorganisation
On 25 February 2021 at the Annual General Meeting the shareholders approved the sub-division of the existing ordinary shares of 10p each into new ordinary shares of 1p each and deferred A shares of 9p each. The rights attached to the new ordinary shares are in all material aspects the same as the rights attaching to the existing ordinary shares.
Ordinary shares have the right to receive dividends as declared and, in the event of winding up the Company, to participate in the proceeds from sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company.
The Deferred Shares have no voting rights and do not carry any entitlement to attend general meetings of the Company; nor will they be admitted to AIM or any other market. They carry only a priority right to participate in any return of capital to the extent of £1 in aggregate over the class. In addition, they carry only a priority right to participate in any dividend or other distribution to the extent of £1 in aggregate over the class. In each case a payment to any one holder of Deferred Shares shall satisfy the payment required. The Company will be authorised at any time to effect a transfer of the Deferred Shares without reference to the holders thereof and for no consideration pursuant to and in accordance with the Act. Accordingly, the Deferred Shares will, for all practical purposes, be valueless and it is the Board's intention, at an appropriate time, to have the Deferred Shares cancelled, whether through an application to the Companies Court or otherwise in accordance with the Act.
Reserves
Share capital
The balance held in share capital relates to the nominal net proceeds on issue of the Company's equity share capital, comprising £0.01 ordinary shares, and £0.09 deferred A shares.
Share premium account
The share premium account represents the premium received over the nominal value of ordinary shares on issue of the Company's equity. The share premium account has been reduced by expenditure associated with issuing shares such as listing costs.
Other reserves
This reserve records the fair value of conditional shares awarded but not settled, and consultants service payments to be also settled by way of share issues.
|
|
|
|
2022 £000 |
2021 £000 |
|
|
|
|
|
|
|
Share based payments not settled |
|
|
642 |
583 |
|
|
|
|
|
|
|
|
|
|
642 |
583 |
15. Notes supporting statement of cashflows
Cash and cash equivalents for the purposes of the statement of cash flows comprises:
|
|
|
2022 £000 |
2021 £000 |
|
|
|
|
|
|
Cash at bank available on demand |
961 |
717 |
|
|
|
|
|
|
|
|
|
961 |
717 |
Non-cash transactions from financing activities are shown in the reconciliation of liabilities from financing transactions:
|
|
|
|
|
Current loans and borrowings |
Total |
|
|
|
|
|
£000 |
£000 |
|
|
|
|
|
|
|
|
Balance at 1 July 2020 |
|
|
|
3,220 |
3,220 |
|
Cash flows |
|
|
|
600 |
600 |
|
Non-cash flows: Interest accrued |
|
|
|
383 |
383 |
|
|
|
|
|
|
|
|
Balance at 30 June 2021 |
|
|
|
4,203 |
4,203 |
|
|
|
|
|
|
|
|
Balance at 1 July 2021 |
|
|
|
4,203 |
4,203 |
|
Cash flows |
|
|
|
- |
- |
|
Non-cash flows: Interest accrued |
|
|
|
480 |
480 |
|
|
|
|
|
|
|
|
Balance at 30 June 2022 |
|
|
|
4,683 |
4,683 |
16. Significant non-cash transactions
The significant non-cash transactions during the year were as follows:
· £414,000 of expenses were incurred by consultants for their services. The consulting payment included £300,000 (2,142,857 shares at 14p per share) as payment for a retainer, and £114,000 (2,581,818 shares at 18p & 4.125p per share) for a second consultant retainer. These retainer fee shares which had not been issued to the consultants at year end have been included in other reserves for shares to be issued.
17. Share based payments
The charge/(credit) for share based payments during the year is shown in the following table:
|
|
|
|
2022 £000 |
2021 £000 |
|
Charged/(credited) to intangibles |
|
|
|
|
|
Conditional shares |
|
17 |
6 |
|
|
|
|
|
|
|
|
|
|
|
17 |
6 |
Share Warrants
During the year ended 30 June 2022, the Company granted 30,000 warrants to subscribe for ordinary shares (2021: 672,333). No warrants were exercised or lapsed during the year (2021: nil). As at 30 June 2022, 702,333 warrants were in issue (2021: 672,333).
17. Share based payments (continued)
Options
The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during the year.
|
|
2022 Options Thousands |
2022 WAEP |
2021 Options Thousands |
2021 WAEP |
|
|
|
|
|
|
|
At 1 July |
9,300 |
£0.11 |
9,300 |
£0.11 |
|
Exercised during the year |
- |
- |
- |
- |
|
|
|
|
|
|
|
Outstanding at 30 June |
9,300 |
£0.11 |
9,300 |
£0.11 |
|
|
|
|
|
|
|
Exercisable at 30 June |
9,300 |
£0.11 |
9,300 |
£0.11 |
The options outstanding at 30 June 2022 have an exercise price of £0.11 (2021: £0.11) and a weighted average contractual life of 1.9 years (2021: 2.9 years), including those granted options whose term was extended during the year. No options were exercised during the year.
Conditional shares scheme
GCM has a conditional share scheme for Directors, employees, associates, consultants and contractors. Ordinary shares will be issued for nil cash consideration, conditional upon the Group achieving milestones including approval by the Government of Bangladesh of the Scheme of Development for the Phulbari Coal and Power Project. The awards granted are classified as equity-settled, and therefore the fair value is determined by reference to the share price at the date of the grant, as required by IFRS 2.
Movement in non-vested conditional shares:
|
|
|
|
2022 Thousands |
2021 Thousands |
|
|
|
|
|
|
|
At 1 July |
|
|
210 |
210 |
|
Conditional shares lapsed |
|
|
- |
- |
|
At 30 June |
|
|
210 |
210 |
The grant details of the conditional shares outstanding as at 30 June 2022 are as follows:
|
|
|
|
Share price at grant date £ |
Conditional shares Thousands |
|
Grant date |
|
|
|
|
|
25 August 2005 |
|
|
£6.32 |
40 |
|
9 March 2006 |
|
|
£4.99 |
30 |
|
46 July 2009 |
|
|
£0.84 |
140 |
|
|
|
|
|
|
|
|
|
|
|
210 |
The cumulative cost recognised in equity in relation to the conditional shares as at 30 June 2022 is £476,000 (2021: £459,000) after taking into account:
· Expected timeframe for milestones to be achieved
· Probability of successful completion of milestones
· The conditional shares awarded to employees are subject to their employment at the time milestones are reached
The increase in the cost of conditional shares of £17,000 for the year ended 30 June 2022 is directly attributable to the Phulbari Coal and Power Project, and accordingly capitalised to intangibles on this basis (2021: expensed £6,000).
18. Financial Instruments
The Group holds cash as a liquid resource to fund the obligations of the Group.
The Group's strategy for managing cash is to maximise interest income whilst ensuring its availability to match the profile of the Group's expenditure. This is achieved by regular monitoring of interest rates and periodic review of expenditure forecasts.
The Group has a policy of not hedging and therefore takes market rates in respect of foreign exchange risk; however it does review its currency exposures on a regular basis. The Group has no significant monetary assets or liabilities that are denominated in a foreign currency.
The financial liabilities of the Group include trade payables and a short-term loan from a related party. Trade payables are recognised at fair value on initial recognition and subsequently measured at amortised cost. The short-term loan was recognised based on the present value of cash payable to the lender. As the short-term loan is payable within 12 months, the present value of the cash payable was equal to the principal value of the loan.
Interest rate risk
The interest rate maturity profile of the financial assets of the Group is as follows:
|
|
|
|
2022 £000 |
2021 £000 |
|
Floating rate - within 1 year |
|
|
|
|
|
Cash and cash equivalents |
|
|
- |
- |
Other interest bearing financial instruments which are subject to fixed rate interest charges are the Group's borrowings as disclosed in Note 12.
Other financial instruments of the Group which are non-interest bearing and are therefore not subject to interest rate risk, are, non-interest-bearing cash and cash equivalents as at 30 June 2022 was £961,000 (2021: £717,000).
Credit risk
The Group considers the credit ratings of banks in which it holds funds in order to manage exposure to credit risk and counterparty risk. Funds are held in banks with credit ratings ranging from AAA -AA. The maximum credit risk at 30 June 2022 was as follows:
|
|
|
|
2022 £000 |
2021 £000 |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
961 |
717 |
Liquidity risk
The Group ensures that it has sufficient cash to meet all its commitments when required, through equity and short term loan funding, please refer to the accounting policiesfor further detail. The table below summarises the contractual maturity profile of the Group's financial liabilities as at 30 June 2022 and 2021.
|
|
Within 30 days £000 |
1 to 3 months £000 |
3 to 12 months £000 |
2 - 5 years
£000 |
Total & Carrying value £000 |
|
2022 |
|
|
|
|
|
|
Payables |
1,296 |
1 |
72 |
- |
1,369 |
|
Lease liabilities |
3 |
9 |
15 |
1 |
28 |
|
Borrowings |
- |
- |
- |
4,683 |
4,683 |
|
|
1,299 |
10 |
87 |
4,684 |
6,080 |
|
|
|
|
|
|
|
|
2021 |
|
|
|
|
|
|
Payables |
1,281 |
86 |
55 |
- |
1,422 |
|
Lease liabilities |
3 |
7 |
30 |
22 |
62 |
|
Borrowings |
- |
- |
- |
4,203 |
4,203 |
|
|
1,284 |
93 |
85 |
4,225 |
5,687 |
Currency risk
The Group has no significant monetary assets or liabilities that are denominated in a foreign currency.
Fair values of financial assets and liabilities
|
|
Financial instrument classification |
Book value |
Fair value |
||
|
|
2022 £000 |
2021 £000 |
2022 £000 |
2021 £000 |
|
|
Financial assets |
|
|
|
|
|
|
Cash and cash equivalents |
Amortised cost |
961 |
717 |
961 |
717 |
|
Receivables |
Amortised cost |
436 |
13 |
436 |
13 |
|
|
|
|
|
|
|
|
Financial liabilities |
|
|
|
|
|
|
Creditors |
Amortised cost |
1,369 |
1,422 |
1,369 |
1,422 |
|
Borrowings |
Amortised cost |
4,683 |
4,203 |
4,683 |
4,203 |
Management have assessed that the fair value of cash, current receivables and current payables approximate their carrying amounts due to the short-term maturities of these instruments.
19. Contingent liabilities
Royalty
The Group is obliged to pay Deepgreen Minerals Corporation Pty Limited US$1 per tonne of coal produced and sold from the Phulbari mine. The Directors are of the opinion that a provision is not required in respect of these matters, as coal has not yet been produced at Phulbari.
Consultant success fees
The Group is obliged to pay a consultant, DG Infratech PTE. Limited, success fees conditional upon achieving key milestones relating to the advancement of the proposed Phulbari Coal and Power Project, in North-West Bangladesh. As at 30 June 2022 the outstanding milestones were as follows:
Success Fee - Coal Project's Scheme of Development
· a one-time fee equal to 5% of Issued Capital, to be paid within five business days following GCM'S receipt of the written approval of the Coal Project's Scheme of Development.
Success Fee - Power Plants
· a one-time fee equal to 2% of Issued Capital, to be paid within five business days following GCM'S receipt of the written approval in respect of each group of Power Plants.
Success Fee - Commencement of Development
· a one-time fee equal to 4% of Issued Capital, to be paid within five business days following GCM'S commencement of development of the Coal Project.
The Directors are of the opinion that a provision is not required in respect of these success fees, as the milestones had not been met as at 30 June 2022.
20. Related Party Transactions
Key management personnel
|
|
|
|
2022 £000 |
2021 £000 |
|
|
|
|
|
|
|
Short-term benefits |
|
643 |
651 |
|
|
Share based payments |
|
|
39 |
1 |
|
|
|
|
|
|
|
|
|
|
682 |
652 |
Related party loan
GCM is beneficiary to a £3.5 million loan facility from its largest shareholder, with a current interest rate of 15% per annum. As at 30 June 2022 the Group had utilised £3.2 million of the loan facility (2021: £3,200,000) and an interest accrual of £1,483,000 (2021: £1,003,000). The terms of the loan were amended in March 2022 & March 2021, refer to note 12 of the Company Financial Statements. . Note Polo Resources Ltd is a related party by way of Michael Tang being a Director of both Companies.
Management services company
As disclosed in the Directors Report, for the year ended 30 June 2022, the remuneration for the services of Datuk Michael Tang PJN, Executive Chairman of the Company, was £303,600, which comprised of directors fees amounting to £6,000 (2021: £6,000) and management services of £297,600 paid to a management services company (2021: £297,600).
For the period September 2018 to March 2021 Datuk Michael Tang PJN offered to defer the payments due to his management services company until further notice in order to assist the Company. The total debt as a result of the deferment of £769,000 has not been paid and is being accrued accordingly
As at 30 June 2022 the amount owing to the management services company of Datuk Michael Tang PJN was £793,000 (2021: £843,000).
21. Events after the end of the reporting period
The following events took place subsequent to 30 June 2022, for which there has been no adjustment to the 30 June 2022 financial statements:
- On 22 August 2022, the Company agreed to a further extension of the consultancy agreement (the "Consultancy Agreement") with DG Infratech Pte Ltd, a Bangladeshi controlled company ("DGI" or the "Consultant"), for an additional two years, on similar terms as previously contracted.
- On 12 December 2022, the Company announced that the MOU with PowerChina, focused on coal mine development, has been extended for a further 12-months to 6 December 2023.
Th e information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 which is part of UK law by virtue of the European Union (withdrawal) Act 2018. Upon the publication of this announcement, this inside information is now considered to be in the public domain.
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