Final Results and Notice of Annual General Meeting

RNS Number : 1836P

Xtract Resources plc

08 June 2020

 

For immediate release

 8 June 2020

Xtract Resources Plc

("Xtract" or the "Company")

Audited results for the 12 months ended 31 December 2019

Notice of Annual General Meeting

The Board of Xtract Resources Plc ("Xtract" or the "Company") announces its audited financial results for the 12 months ended 31 December 2019 The 2019 Audited Annual Report and Accounts ("Accounts") have been posted to shareholders and is available, together with this announcement, from the Company's website   www.xtractresources.com

The Accounts include the notice of annual general meeting (" AGM "). The AGM will be held at 7/8 Kendrick Mews, South Kensington, SW7 3HG on Tuesday 30 June 2020 at 3:00 p.m.

 In light of the UK Government's Stay at Home measures to contain COVID-19 (Stay at Home Measures), and utilising the powers given to the Board under Article 62 of the Company's Articles of Association (Articles), shareholders will not be permitted to attend the AGM in person but instead are being asked to cast their votes by proxy in advance of the meeting.

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014. The person who arranged the release of this announcement on behalf of the Company was Joel Silberstein, Director.

Enquiries :

Xtract Resources Plc	Colin Bird, Executive Chairman	[phone]
Beaumont Cornish (Nominated Adviser & Joint Broker)	Michael Cornish / Felicity Geidt	[phone]
	Email: [e-mail]
Novum Securities (Joint Broker)	Colin Rowbury	[phone]

Financial highlights

· Revenue from gold sales of £1.35m (2018: £0.89 m)

· Administrative and operating expenses of £1.81m (2018: £1.65m)

· Cash of £0.36m (2018: £0.44m)

· Net loss of £1.09m (2018: £0.74m)

· Net assets of £10.78m (2018: £10.71m)

Operational highlights

· Collaboration Agreement concluded with Mutapa Mining and Processing LDA for the mining and mineral processing of the Manica hard rock gold deposits in Mozambique

· Additional mining contractor agreement concluded with Huafei Gold Resources for the exploitation of alluvial gold deposits at Manica in Mozambique

· Total alluvial mining contractor gold production of 137.55kg (equivalent to 4,420 ounces) (2018: 187.93kg (equivalent to 6,042 ounces))

· Total of 37.31kg (equivalent to 1,199 ounces) attributable to Explorator (2018: 46.88kg (equivalent to 1,508 ounces)) 

Corporate highlights

· Memorandum of Agreement concluded with a consortium to jointly undertake exploration works on the copper / gold  small scale mining license 8370-HQ-SML at Kajevu, NW Province in Zambia

· Memorandum of Agreement concluded with KPZ International Ltd to enter into an Option Agreement for the Eureka project on the copper-gold small scale mining licence 22134-HQ-SML in Central Zambia  

· Memorandum of Agreement concluded with KPZ International Ltd to act as contractor for the  Kalengwa Processing project on the copper large scale mining license 24401-HQ-LEL

· Total of £1 million raised through an equity placing

Chairman's Statement

The period under review has been generally positive with the Company establishing a clear mission to be a small scale mine developer, coupled with quality exploration situations in Mozambique and Zambia and at the time of writing the report the Company has announced a new conditional acquisition in Australia.

During the period, the directors elected to balance small scale production with exploration and also to seek positions in Zambia for both production and exploration since the country has an excellent mining history with a transparent and supportive government.

The Company has elected to focus in all of its activities on copper and gold being exploration or production. The Company announced early February 2019 that it had acquired the Matrix project in Zambia, followed  by the acquisition of the Eureka project during early March 2019. Both these projects were drilled during the year and the results are reported in the Operations Report. Whilst the Matrix project did not meet our criteria, the Eureka project proved to be very exciting potentially large-scale project.

The alluvial project in Manica Mozambique, with our Chinese partners and during most of the year Nexus, proved to be challenging with variable production although we achieved a surplus of income over expenditure for every month during the period continuing to the date of writing this report.

We were advised during the first week of December 2019 by our partners Nexus that they wished to terminate the collaboration agreement. This termination was accepted and from the date of the termination our local company Explorator was entitled 100% instead of 50% of the attributable income from the contractual agreement.

At the commencement of this review period, we announced that Huafei Gold Resources Co Limitada were to be appointed as sole contractor for the entire alluvials held in the concession adjacent to the river.

At the time of writing this report, the Company is actively discussing bringing into production an alluvial operation on an additional licence nearby with other contractors. Similarly, we are in discussions to carry out some hard rock mining on areas where gold can be liberated by gravity matters or non-complex leaching. If these discussions are successful there should be a meaningful addition to overall gold production and financial contribution from the Manica project.

On 29 May 2019 we announced an agreement with Mutapa Mining and Processing LDA who had entered into agreement with a nearby owner of a crusher, ball-mill gravity circuit with the plan to advance the plant into a full CIL plant able to handle suitable oretypes which show good amenability to cyanide leaching. We in turn entered into a collaboration agreement to treat suitable ores types within the Manica concession with particular emphasis on the Fairbride deposit. The agreement provides for the Company receiving a 23% direct profit interest provided the gold price stays below US$1,250 per oz. Should the gold price drop below US$1,100, the benefits are reduced to a floor level of 20% against a formula.

On 15 July 2019 we concluded an agreement with KPZ International Limited for the treatment of the secondary material at Kalengwa, which arose as a result of high grade mining operation between 1970 and 1980. The Kalengwa open pit produced approximately 1.9  million tonnes at a grade of 9.4% copper with over 20% of the material grading in excess of 20% copper which was shipped for direct smelting at the then Chibulama operation. The agreement caters for the retreatment of the secondaries which include waste rock and in particular floatation tailings which grade at 1%. The open pit has hard rock extension potential at both extremities and is open to the east. This allows potential for future primary concurrent or sequential mining. We have carried out considerable test work during the period and are now in discussions to develop an operating project for optimum tailings and waste rock retreatment.

Prior to writing this report, the Company announced that it had conditionally acquired a 100% beneficial interest in the Bushranger project in the Lachlan Fold Belt in New South Wales Australia. This acquisition includes a partially explored porphyry which has JORC (2012) compliant inferred resource of some 71 million tonnes at 0.44% copper with 0.064 g/t gold. Drilling indicates that the gold values increase with depth as does the overall copper equivalent. The porphyry is open ended on strike and depth and presents immediate shareholder enhancement potential. In conjunction with the porphyry are a number of epithermal gold targets which have good indications of prospectivity.

Anglo American Corporation have a buy back option at certain levels of discovery or decision to mine. We look forward to advancing this project in the short-term.

The junior resource sector was generally subdued during the period under review with only modest financing taking place and IPO activity reduced to low volumes. This continued to the outbreak of COVID-19 leading to more uncertain times although some secondary financings were achieved during and up to the point of writing this statement. Against an uncertain climate the board are of the opinion that our portfolio is balanced and presents good opportunities for value accretion during the balance of this year and the mid-term.

I would like to take this opportunity to thank my fellow directors and management for their efforts during this difficult but progressive for the Company period.

Colin Bird

Executive Chairman

Consolidated Income Statement

For the year ended 31 December 2019

	Note	Year ended 31 December 2019 £'000	Year ended 31 December 2018 £'000
Continuing operations
Revenue from gold sales		1,351	892
Direct operating		(795)	(804)
Other operating		(116)	(103)
Administration		(903)	(746)
Operating and administrative expenses Project expenses		(1,814)   (298)	(1,653)   (147)
Operating loss		(761)	(908)
Other gains and (losses)	6	12	64
Finance (cost)/income	11	(341)	108
(Loss) before tax	8	(1,090)	(736)
(Loss) for the period		(1,090)	(736)
Attributable to:
Equity holders of the parent		(1,090)	(736)
Net (loss) per share
Basic (pence)	13	(0.30)	(0.20)
Diluted (pence)	13	(0.30)	(0.20)

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2019

	Group
	Year ended 31 December 2019 £'000	Year ended 31 December 2018 £'000
(Loss) for the year	(1,090)	(736)
Other comprehensive income:
Items that may be reclassified subsequently to profit and loss	-	-
Gains on revaluation of available-for-sale investment taken to equity	-	-
Exchange differences on translation of foreign operations	41	(37)
Other comprehensive income/(loss) for the year	41	(37)
Total comprehensive (loss) for the year	(1,049)	(773)
Attributable to:
Equity holders of the parent	(1,049)	(773)

Consolidated and Company Statements of Financial Position

As at 31 December 2019			Group		Company
	Note		As at 31 December 2019 £'000	As at 31 December 2018 £'000	As at 31 December 2019 £'000	As at 31 December 2018 £'000
Non-current assets
Intangible assets	14		10,318	10,285	-	-
Property, plant & equipment	15		24	19	-	-
Investment in subsidiary	16		-	-	8,533	8,533
Financial assets available for sale	17		-	-	-	-
			10,342	10,304	8,533	8,533
Current assets
Trade and other receivables	19		167	24	758	413
Loan receivable	18		133	318	-	-
Inventories	20		117	149	-	-
Cash and cash equivalents			361	442	216	383
			778	933	974	796
Total assets			11,120	11,237	9,507	9,329
Current liabilities
Trade and other payables		22	336	530	147	247
Interest bearing		22	-	-	-	-
Other payables		22	-	-	-	-
Amounts due to subsidiaries		22	-	-	8,936	8932
			336	530	9,083	9,179
Net current assets/(liabilities)			442	403	(8,109)	(8,383)
Non-current liabilities
Other payables			-	-	-	-
Provisions			-	-	-	-
Reclamation and mine closure provision			-	-	-	-
Total liabilities			336	530	9,083	9,179
Net assets			10,784	10,707	424	150
Equity
Share capital		23	4,892	4,874	4,892	4,874
Share premium account			59,884	58,926	59,884	58,926
Warrant reserve		24	54	450	54	450
Share-based payments reserve		24	397	298	397	298
Available-for-sale reserve		24	-	-	-	-
Foreign currency translation reserve		24	276	235	-	-
Accumulated losses			(54,719)	(54,076)	(64,803)	(64,398)
Equity attributable to equity
holders of the parent			10,784	10,707	424	150
Total equity			10,784	10,707	424	150

The financial statements of Xtract Resources Plc, registered number 5267047, were approved by the Board of Directors and authorised for issue. It was signed on behalf of the Company by:

Joel Silberstein

Director

  C onsolidated Statement of Changes in Equity

Group

N o t e		Sha r e Capital £'00 0	Sha r e premium account £'00 0	W ar r a n t reserve £'00 0	Sha r e based payments reserve £'00 0	A v ailabl e - for-sale reserve £'00 0	Foreign currency translation reserve £'000	Accumulated losses £'000		T o ta l Equity £'00 0
As at 1 January 2018		4,874	58,926	647	298	-	272		(53,537)	11,480
Comprehensive income
L o s sfortheyear		-	-	-	-	-	-		(736 )	(736 )
F o r e xcurrencytranslation
Dif f e r en c e s		-	-	-	-	-	(37)		-	(37)
R e v alu a tio nofavailable-
f o r -s al einvestments	17	-	-	-	-	-	-		-	-
Total comprehensive
income for the year		-	-	-	-	-	(37)		(736)	(773)
Issue of shares		-	-	-	-	-	-		-	-
Share issue costs		-	-	-	-	-	-		-	-
Sha r ebasedpaymentexpense	24	-	-	-	-	-	-		-	-
E xpir yofwarrants		-	-	(197)	-	-	-		197	-
Expiry of share options	24	-	-	-	-	-	-		-	-
E x e r cis eofwarrants		-	-	-	-	-	-		-	-
I s su eofwarrants	24	-	-	-	-	-	-		-	-
As at 31 December 2018		4,874	58,926	450	298	-	235		(54,076)	10,707
Comprehensive income
L o s sfortheyear		-	-	-	-	-	-		(1,090 )	(1,090 )
F o r e xcurrency
t r ansl a tio ndifference		-	-	-	-	-	41		-	41
Total comprehensive
income for the year		-	-	-	-	-	41		(1,090)	(1,049)
Issue of shares	23	18	1,114	-	-	-	-		-	1,132
Sha r eissue costs		-	(156)	-	-	-	-		-	(156)
E xpir yofwarrants		-	-	(447 )	-	-	-		447	-
Issue of share options	24	-	-	-	99	-	-		-	99
E x e r cis eofwarrants		-	-	-	-	-	-		-	-
I s su eofwarrants	24	-	-	51	-	-	-		-	51
As at 31 December 2019		4,892	59,884	54	397	-	276		(54,719)	10,784

S tatement of Changes in Equity

Company

N o t e		Sha r e Capital £'00 0	Sha r e premium account £'00 0	W ar r a n t reserve £'00 0	Sha r e based payments reserve £'00 0	A v ailabl e - for-sale reserve £'00 0	Foreign currency translation reserve £'000	Accumulated losses £'000		T o ta l Equity £'00 0
As at 1 January 2018		4,874	58,926	647	298	-	-		(64,131)	614
Other Comprehensive income Other C omp r ehensi v eincome
L o s sfortheperiod		-	-	-	-	-	-		( 464 )	( 464 )
Other comprehensive income		-	-	-	-	-	-		-	-
R e v alu a tio nofavailable-
f o r -s al einvestments	17	-	-	-	-	-	-		-	-
Total comprehensive T o tal comprehensive
income for the year		-	-	-	-	-	-		(464)	(464)
Issue of shares I s su eofshares		-	-	- -	-	-	-		-	-
Share issue costs		-	-	-	-	-	-		-	-
E xpir yofwarrants	24	-	-	-	-	-	-		-	-
E xpir yofshareoptions		-	-	-	-	-	-		-	-
E x e r cis eofwarrants		-	-	(197)	-	-	-		197	-
I s su eofwarrants	24	-	-	-	-	-	-		-	-
As at 31 December 2018 A s at 31 December 2016		4,874	58,926	450	298	-	-		(64,398)	150
Other Comprehensive income Other C omp r ehensi v eincome
L o s sfortheperiod		-	-	-	-	-	-		( 852 )	( 852 )
Other comprehensive income		-	-	-	-	-	-		-	-
Total comprehensive T o tal comprehensive
income for the year		-	-	-	-	-	-		(852)	(852)
Issue of shares I s su eofshares	23	18	1,114	-	-	-	-		-	1,132
Sha r e issue costs		-	(156)	-	-	-	-		-	(156)
E xpir yofwarrants		-	-	(447 )	-	-	-		447	-
Issue of share options	24	-	-	-	99	-	-		-	99
E x e r cis eofwarrants	-	-	-	-	-	-	-		-	-
I s su eofwarrants	24	-	-	51	-	-	-		-	51
As at 31 December 2019 A s at 31 December 2017		4,892	59,884	54	397	-	-		(64,803)	424

Consolidated and Company Cash Flow Statement

			Group		Company
	Note		Y e ar ended 31 December 2019 £'000	Y e ar ended 31 December 2018 £'000	Y e ar ended 31 December 2019 £'000	Y e ar ended 31 December 2018 £'000
Net cash used in operating activities		25	(895)	(965)	(1,062)	(1,124)
Investing activities
Acquisition of subsidiary undertaking			-	-	-	-
Acquisition of intangible fixed assets		14	(76)	(69)	-	-
Acquisition of tangible fixed assets		15	(5)	(19)	-	-
Net cash (used in)/from investing activities			(81)	(88)	-	-
Financing activities
Proceeds on issue of shares			895	-	895	-
Proceeds from issue of warrants			-	-	-	-
Loan to Moz Gold			-	(160)	-	-
Loan to subsidiary			-	-	-	-
Net cash (used in)/from financing activities			895	(160)	895	-
Net decrease in cash and cash equivalents			(81)	(1,215)	(167)	(1,124)
Cash and cash equivalents at beginning of year			442	1,657	383	1,507
Effect of foreign exchange rate changes			-	-	-	-
Cash and cash equivalents at end of year			361	442	216	383
Significant Non Cash movements

Notes to the Financial Statements

Selected notes from the financial statements are set out below without amendment to the note reference. The full notes are contained in the Audited Annual Report and Accounts

1.  General information

Xtract Resources Plc is a Company incorporated in England and Wales under the Companies Act 2006. The address of the registered office is 7/8 Kendrick Mews, South Kensington, London, SW7 3HG. The nature of the Group's operations and its principal activities are set out in the Strategic Report on pages 4 to 17.

These financial statements are presented in Pound Sterling. Foreign operations are included in accordance with the policies set out in note 3.

2.  Adoption of new and revised Standards

New standards, amendments and interpretations adopted by the Group

No new or revised Standards and Interpretations have been required to be adopted, or are applicable in the current year to the Group, as standards, amendments and interpretations which are effective for the financial year beginning on 1 January 2019 are not material to the Group.

New standards, amendments and interpretations not yet adopted

At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements, were in issue but not yet effective for the year presented:

- IFRS 17 Insurance Contracts (effective date 1 January 2021)

There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.

1.  Significant accounting policies

Basis of accounting

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) adopted by the European Union. The financial statements have been prepared under the historical cost convention modified for certain items carried at fair value, as stated in the accounting policies. The principal accounting policies adopted are set out below.

Basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and entities controlled by the Company (its subsidiaries). These consolidated financial statements are made up for the year ended 31 December 2019.

Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the period are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Going concern

The operations of the Group have been financed through operating cash flows as well as through funds which have been raised from shareholders. As at 31 December 2019, the Group held cash balances of £361k and an operating loss has been reported. Since November 2017, the Group has been generating revenues, from its Manica Alluvial operations, which have been covering the Manica operating costs and not the costs for the rest of the Group. The Directors anticipate net operating cash outflows for the Group for the next twelve months from the date of signing these financial statements.

The Directors have assessed the working capital requirements for the forthcoming twelve months and have undertaken assessments which have considered different scenarios based on a number of production forecasts until June 2021.

Upon reviewing those cash flow projections for the forthcoming twelve months, the directors consider that the Company is likely to require additional financial resources in the twelve-month period from the date of approval of these financial statements to enable the Company to fund its current operations and to meet its commitments. Furthermore, the Group incurs corporate overhead costs on an ongoing basis. In the going concern review, the Group has reviewed further cash savings which may be made if required.

The Directors would then expect for the funds to be raised through further equity fund raising which has been successfully achieved in prior years. As is common with early producing companies, the Company raises finance for its activities in discrete tranches to finance its activities for limited periods only and further funding will be required from time to time to finance those activities. Further funding will not be required for the Manica Hard Rock collaboration agreement which was signed on 29 May 2019.

Nevertheless, after making enquiries and considering the uncertainties described above, the directors have a reasonable expectation that the Company has adequate ability to raise resources to continue in operational existence for the foreseeable future. The Directors therefore continue to adopt the going concern basis of accounting in preparing the annual financial statements.

Parent only income statement

Xtract Resources Plc has not presented its own income statement as permitted by section 408 of the Companies Act 2006. The loss for the year ended 31 December 2019 was £852k (2018: loss £464k).

Business combinations

Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquire. Acquisition-related costs are recognised in profit or loss as incurred.

Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisition-date fair value. Subsequent changes in such fair values are adjusted against the cost of acquisition where they qualify as measurement period adjustments (see below). All other subsequent changes in the fair value of contingent consideration classified as an asset or liability are accounted for in accordance with relevant IFRSs. Changes in the fair value of contingent consideration classified as equity are not recognised.

Where a business combination is achieved in stages, the Group's previously-held interests in the acquired entity are re-measured to fair value at the acquisition date (i.e. the date the Group attains control) and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss, where such treatment would be appropriate if that interest were disposed of.

The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 (2008) are recognised at their fair value at the acquisition date.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see below), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date.

The measurement period is the period from the date of acquisition to the date the Group obtains complete information about facts and circumstances that existed as of the acquisition date and is subject to a maximum of one year.

Foreign currencies

The individual financial statements of each Group Company are maintained in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each Group Company are expressed in Pound Sterling, which is the functional currency of the Company, and the presentational currency for the consolidated financial statements.

In preparing the financial statements of the individual companies, transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the date of transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity.

On the disposal of a foreign operation (i.e. a disposal of the Group's entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, loss of joint control over a jointly controlled entity that includes a foreign operation, or loss of significant influence over an associate that includes a foreign operation), all of the accumulated exchange differences in respect of that operation attributable to the Group are reclassified to profit or loss.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. The Group has elected to treat goodwill and fair value adjustments arising on acquisitions before the date of transition to IFRSs as Sterling denominated assets and liabilities

Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

Deferred tax

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the year when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Intangible assets

Land acquisition rights and mine development costs

The costs of land acquisition rights in respect of mining projects and mine development are capitalised as intangible assets. These costs are amortised over the expected life of mine to their residual values using the units-of-production method using estimated proven and probable mineral reserves.

Intangible exploration and evaluation expenditure assets

The costs of exploration properties and leases, which include the cost of acquiring prospective properties and exploration rights, are capitalised as intangible assets. Exploration and evaluation expenditure is capitalised within exploration and evaluation properties until such time that the activities have reached a stage which permits a reasonable assessment of the existence of commercially exploitable reserves when they are transferred to tangible assets. Capitalised exploration and evaluation expenditure is assessed for impairment in accordance with the indicators of impairment as set out in IFRS 6 Exploration for and Evaluation of Mineral Reserves. In circumstances where a property is abandoned, the cumulative capitalised costs relating to the property are written off in the year. Capitalised exploration costs are not amortised.

Property, plant and equipment

Tangible fixed assets represent mining plant and equipment, office and computer equipment and are recorded at cost, net of accumulated depreciation. Depreciation is provided on all tangible fixed assets at rates calculated to write off the cost or valuation of each asset on a straight-line basis over its expected useful life, which is calculated on either a fixed period or the expected life of mine using the unit of production method, as appropriate.

The average life in years is estimated as follows:

Office and computer equipment	3-10
Plant and machinery	7-15

Until they are brought into use, fixed assets and equipment to be installed are included within assets under construction and are not depreciated.

The cost of maintenance, repairs and replacement of minor items of tangible fixed assets are charged to the income statement as incurred. Renewals and asset improvements are capitalised. Upon sale or retirement of tangible fixed assets, the cost and related accumulated depreciation are eliminated from the financial statements. Any resulting gains or losses are included in the income statement.

Impairment of tangible and intangible assets excluding goodwill

At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. An intangible asset with an indefinite useful life is tested for impairment annually and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalue amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Financial instruments

Financial assets and financial liabilities are recognised in the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument.

Financial assets

All financial assets are recognised and derecognised on a trade date where the purchase or sale of a financial asset is under a contract whose terms require delivery of the financial asset within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs, except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value.

Financial assets are classified into the following specified categories: financial assets 'at fair value through profit or loss' (FVTPL), 'held-to-maturity' investments, 'available-for-sale' (AFS) financial assets and 'loans and receivables'. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Available-for-sale financial assets ('AFS')

Listed and unlisted equity instruments held by the Group that are traded in an active market are classified as being AFS and are stated at fair value. Gains and losses arising from changes in fair value are recognised in other comprehensive income and accumulated in the investments revaluation reserve with the exception of impairment losses that are recognised directly in profit or loss. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognised in the investment revaluation reserve is reclassified to profit or loss. The fair value of investments that are actively traded in organised financial markets is determined by reference to quoted market bid prices at the closure of business on the statement of financial position date. For investments where there is no active market, fair value is determined using valuation techniques. Such techniques include using recent arm's length market transactions, reference to the current market value, discounted cash flow analysis and option pricing models.

Dividends on AFS equity instruments are recognised in profit or loss when the Group's right to receive the dividends is established.

The fair value of AFS monetary assets denominated in a foreign currency is determined in the foreign currency and translated at the spot rate at the balance sheet date. Other foreign exchange gains and losses are recognised in other comprehensive income.

Financial assets at fair value through profit or loss

A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are also categorised as held for trading unless they are designated as hedges.

Assets in this category are classified as current assets if expected to be settle within 12 months, otherwise, they are classified as non-current.

Loans and receivables

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

Impairment of financial assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

For listed and unlisted equity instruments classified as AFS, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.

For all other financial assets objective evidence of impairment could include:

● significant financial difficulty of the issuer or counterparty; or

● default or delinquency in interest or principal payments; or

● it becoming probable that the borrower will enter bankruptcy or financial re-organisation.

For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group's past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 60 days, as well as observable changes in the national or local economic conditions that correlate with default on receivables.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

When an AFS financial asset is considered to be impaired, cumulative gains or losses previously recognised in other comprehensive income are reclassified to profit or loss in the period.

With the exception of AFS equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through the profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

In respect of AFS equity securities, impairment losses previously recognised in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognised in other comprehensive income.

De-recognition of financial assets

The Group de-recognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks or rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset, and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset, and also recognises a collateralised borrowing for the proceeds received.

Financial Liabilities

Initial recognition

Financial liabilities are recognised initially at fair value and in the case of interest-bearing loans and borrowings, net of direct transactions costs.

Financial liabilities are classified at initial recognition, as financial liabilities at fair value through profit and loss.

The group's financial liabilities include trade and other payables and interest-bearing loans and borrowings.

Financial liabilities at fair value through profit or loss

Financial liabilities at Fair Value through Profit or Loss ("FVTPL") include financial liabilities held for trading and financial liabilities designated upon initial recognition as at FVTPL.

Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term.

Gains and losses on liabilities held for trading are recognised in the statement of profit or loss and other comprehensive income.

Loans and borrowings and trade and other payables

Interest-bearing loans and borrowings and trade and other payables are measured at amortised cost using the Effective Interest Rate ("EIR") method. Gains and losses are recognised in the statement of profit and loss and other comprehensive income when the liabilities are derecognised, as well as through the EIR amortisation process.

Amortised cost is calculated by taking into account any discount or premium or costs that are integral part of EIR.

Derecognition

A financial liability is derecognised when the associated obligation is discharged or cancelled.

Inventory

Inventories consist of the Company's share of gold dore bars produced by the Alluvial Mining Contractors, which have been smelted and are available for further processing. All inventories are valued at the lower of cost of operations and net realisable value. Costs include cost, which are closely related to the overall alluvial operations including monitoring and compensation costs. Net Realisable value is the estimated future sales price of the product the Company is expected to realise after the product is processed and sold less costs to bring the product to sale. Where inventories have been written down to net realisable value, a new assessment is made in the following period. In instances where there has been change in circumstances which demonstrates an increase in the net realisable value, the amount written down will be reversed.

Share-based payments

Equity-settled share-based payments to certain Directors, employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. The fair value excludes the effect of non-market based vesting conditions. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 26.

The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest and adjusted for the effect of non-market-based vesting conditions.

Finance Income

Finance income comprises interest income (including available-for-sale financial assets). Interest income is recognised as it accrues in profit or loss, using the effective interest method.

Operating Leases

Operating lease payments are recognised as an operating expense in the income statement on a straight-line basis over the lease term.

Finance Leases

Leases of property, plant and equipment where the group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease's commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments.

Each lease payment is allocated between the liability and finance charges. The corresponding rental obligations, net of finance charges, are included in the finance lease obligation. The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Non-current assets under finance leases are depreciated over the useful life of the asset, under the reasonable expectation that the group will obtain ownership of the leased asset at the end of the lease term.

Reclamation cost and mine closure provision

The Group records a liability and corresponding asset for the present value of the estimated costs of legal and constructive obligations for future site reclamation and closure where the liability is probable and reasonable estimate can be made of the obligation. The estimated present value of the obligation is reassessed on an annual basis or where new material information becomes available. Increases or decreases to the obligation usually arise due to change in legal or regulatory requirements, the extent of environmental remediation required, methods of reclamation, cost estimates, or discount rates. The present value is determined based on current market assessments of the time value of money using discount rates specific to the country in which the reclamation site is located and is determined as the risk- free rate of borrowing approximated by the yield on sovereign debt for that country, with a maturity approximating the end of mine life.

Revenue recognition

Revenue is recognised to the extent it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable, excluding discounts, rebates and sales tax or duty. Revenue from sales of gold dore bars, is recognised when the significant risks and rewards of ownership have been transferred, which is considered to occur when title passes to the customer. This occurs when the concentrate is physically transferred on the date of shipment. Interest is recognised in profit and loss, using the effective interest rate method.

Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the Executive Chairman who is responsible for allocating resources and assessing performance of the operating segments.

4.  Critical accounting judgements and key sources of estimation uncertainty

In the application of the Group's accounting policies, which are described in note 3, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

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 the revision and future periods if the revision affects both current and future periods.

The following are the critical judgements that the Directors have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in the financial statements.

Available for sale investments

The Group reviews the fair value of its unquoted equity instruments at each statement of financial position date. This requires management to make an estimate of the fair value of the unquoted securities in the absence of an active market, which has mainly been established by use of recent arm's length transactions, as adjusted by a discount, where required. Uncertainty also exists due to the early stage of development of certain of the investments. The fair value of available for sale investments at 31 December 2019 is determined to be £Nil (2018: £Nil). Further details are given in note 17 .

Impairment of intangible assets and investments

The assessment of intangible assets for any indications involves judgement. If an indication of impairment, as defined in IFRS 6 or IAS 36 as appropriate, exists, a formal estimate of recoverable amount is performed, and an impairment loss recognised to the extent that carrying amount exceeds recoverable amount. Recoverable amount is determined as the higher of fair value less costs to sell and value in use. The calculation of recoverable amount requires an estimation of the value in use of the cash-generating units to which the intangible assets are allocated. 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 for which the estimates of future cash flows have not been adjusted.

Estimates in determining the life of the mines (LOM)

The LOM is determined from development plans based on mine management's estimates and includes total mineral reserve and a portion of the mineral resource. These plans are updated from time to time and take into consideration the actual current cost of extraction, as well as certain forward projections. These projections are reviewed by the board.

Estimates in determining inventory value

Net realisable value tests are performed at the reporting date and represent the estimated future sales price of the product the entity expects to realise when the product is sold less costs to bring the product to sale. Ore stockpiles are measured by estimating the number of tonnes added and removed from the stockpile and are assessed primarily through surveys and assays.

Share-based payments

The estimation of share-based payment costs requires the selection of an appropriate valuation model and consideration as to the inputs necessary for the valuation model chosen. The Group has made estimates as to the volatility of its own shares, the probable life of options granted and the time of exercise of those options. The model used by the Group is the Black-Scholes model.

Fair value of derivative financial instruments

The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques.

8.  Loss before taxation

Profit / (loss) from continuing operations and discontinued operations for the year has been arrived at after charging the following under administrative and operating expenses:

		Year ended 31 December 2019	Year ended 31 December 2018
	Note	£'000	£'000
Depreciation of property, plant and equipment	15	-	-
Amortisation of intangible fixed assets	14	-	-
Auditors remuneration	9	21	21
Directors remuneration	10	250	187
Share-based payments expense	26	98	-

13. (Loss) per share

The calculation of the basic and diluted earnings per share is based on the following data:

	Year ended 31 December 2019 £'000	Year ended 31 December 2018 £'000
(Loss) for the purposes of basic and diluted earnings per share (EPS) being:
Net (loss) for the year from continuing operation attributable to equity holders of the parent	(1,090)	(736)
	(1,090)	(736)
	Number of shares	Number of shares
W eighted average number of ordinary shares for purposes of basic EPS	438,508,052	350,560,684
Effect of dilutive potential ordinary shares-options and warrants	-	-
W eighted average number of ordinary shares for purposes of diluted EPS	438,508,052	350,560,684

In accordance with IAS 33, the share options and warrants do not have a dilutive impact on earnings per share, which are set out in the consolidated income statement. No shares have been issued since the year end.

22. Trade and other payables

	Group		Company
	As at	As at	As at	As at
	31 December 2019	31 December 2018	31 December 2019	31 December 2018
	£'000	£'000	£'000	£'000
Trade creditors and accruals	336	530	147	247
Amounts due to subsidiaries	-	-	8,936	8,932
Other payables	-	-	-	-
	336	530	9,083	9,179

30. Events after the balance sheet date

Issue of Equity

On 5 January 2020, the Company completed the issue of shares to KPZ International Ltd ("KPZ") on the terms as previously announced on 21 October 2019. The Company had informed KPZ that it intended to exercise its option to act as contractor for the Kalengwa Processing project on the copper large scale mining license number 24401-HQ-LEL located in the central part of Zambia. Under the Kalengwa Processing agreement, the Company had agreed to pay US$200,000 to KPZ on exercising its option to act as operator, to be settled through the issuance of 18,795,236 new ordinary shares an issue price of 0.8395p per share.

Bushranger Agreement

On 1 June  2020 the Company concluded a conditional Sale and Purchase Agreement (the "Acquisition Agreement") to acquire the entire issued share capital of ProsepectOre Ltd ("ProspectOre") for a total consideration of £1.25 million, to be satisfied in new Xtract ordinary shares. In addition to the Consideration Shares, the Company has agreed that on notification by the Seller, prior to Completion, to settle from existing cash resources, a maximum amount of A$200,000 (£108,000) in cash relating to outstanding liabilities of ProspectOre, primarily being the cost to acquire the Anglo Tenements as described above, and Director loans of A$25,000 (£13,500).

ProspectOre's assets principally comprise its rights, title and interest in the Bushranger Project and the Anglo Tenements. In the event that ProspectOre is unable to complete the share transfer pursuant to the Acquisition Agreement, the Acquisition will proceed by way of an Asset sale and ProspectOre has agreed to sell the Assets on completion.

Completion of the acquisition is subject to, and conditional upon, the satisfaction or waiver of a number of conditions precedent including:

(i) From the date of signing the agreement, a 30 day due diligence period enabling the Company, to verify that ProspectOre is the legal and beneficial owner of the Tenements or, in respect of the Anglo Exploration Tenements, hs a legally binding right to acquire such. In the event that the above condition is not satisfied, the Company will have the right to terminate the agreement.

(ii) In the event of an Asset sale, New South Wales Minister for Energy and the Environment approval of the sale and written consent from Anglo to the assignment of the ProspectOre's interest in the Anglo Acquisition Agreement by no later than the cut-off date, being 31 October 2020, or such later date agreed by the Company and ProspectOre. In the event that the above condition is not satisfied by such date, both parties will have the right to terminate.

(iii) In the event of a Share sale, New South Wales Minister for Energy and the Environment consent to the change in control of the seller no later than the cut-off date of 31 October 2020 or such later date agreed by the Company and ProspectOre.

(iv) Written approval no later the cut-off date of 31 October 2020, or such later date agreed by Xtract and ProspectOre, from the Foreign Investment Review Board that there is no objection under the Foreign Acquisitions and Takeovers Act 1975. In the event that the above condition is not satisfied, both parties will have the right to terminate.

Qualified Person

In accordance with AIM Note for Mining and Oil & Gas Companies, June 2009 ("Guidance Note"), Colin Bird, CC.ENG, FIMMM, South African and UK Certified Mine Manager and Director of Xtract Resources plc, with more than 40 years experience mainly in hard rock mining, is the qualified person as defined in the Guidance Note of the London Stock Exchange, who has reviewed the technical information contained in this press release.

ENDS

 

END

 

 

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