Final Results for the year ended 30 June 2020
22 December 2020
GCM Resources plc
("GCM" or the "Company")
(AIM:GCM)
Final Results for the year ended 30 June 2020
GCM Resources plc announces the publication of its final audited results for the year ended 30 June 2020 (the "Annual Report and Accounts").
The Annual Report and Accounts will be posted to shareholders tomorrow. 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. The Company will be issuing the notice to convene the Annual General Meeting early in 2021.
For further information:
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GCM Resources plc Keith Fulton Finance Director +44 (0) 20 7290 1630
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Strand Hanson Limited Nominated Adviser and Broker Stuart Faulkner Rory Murphy James Dance +44 (0) 20 7409 3494 |
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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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GCM Resources Plc
Annual Report and Audited Financial Statements
For the year ended 30 June 2020
Executive Chairman's Statement
I am pleased to present the Company's Annual Report and Accounts for the year ended 30 June 2020 and to be able to detail some progress towards advancing the integrated coal mine and power project (the "Project") in Bangladesh, despite this period (and beyond) being dominated by global efforts to combat the Coronavirus pandemic. It's certainly been an extremely challenging time, and on behalf of the Board, I extend our appreciation for the patience and support of our shareholders.
Our efforts remain focussed on delivering returns on our shareholders' investment through delivering the Project. A key step in our Strategy to deliver the Project is for GCM and its development partners to obtain the Bangladesh Government's approval for a comprehensive Energy and Power Solution based on a 15 million tonne per annum captive coal mine in the Phulbari Coal Basin, feeding power plants with a combined capacity 6,000MW utilising highly energy-efficient Ultra-supercritical boiler technology.
The Board would note that "High efficiency, low emission" or HELE coal-fired power plant technology over the past decade has moved coal-fired power plant energy efficiency from circa 35% to 43-44% with the Ultra-supercritical technology and this trend is expected to continue over the next 5-years with "Advanced Ultra-supercritical plants" pushing energy efficiency towards 50% with greatly reduce emissions. The Board believes that this technological advance is highly relevant as it will happen within the decade timeframe that we expect the 6,000MW power plants to be installed for the Phulbari Coal and Power Project.
Our progress in this last Financial Year can be measured by the fact we leveraged our power plant joint-venture arrangements with Power Construction Corporation of China, Ltd. ("PowerChina") to establish in July 2019 a memorandum of understanding ("MOU") with China Nonferrous Metal Industry's Foreign Engineering and Construction Co., Ltd. ("NFC") and PowerChina for the formation of a strategic partnership jointly to develop the proposed Phulbari coal mine, being the paramount component of the Project.
Our project team in Bangladesh established data room access for NFC and provided support, over the remainder of 2019, as NFC undertook due diligence studies of the mine development plan. It was our belief that once these studies were completed, we would have been in a position by early 2020 to formalise a business relationship with NFC to develop, finance, operate and manage the Project's coal mine and thereby finalise and submit our proposal to the Bangladesh Government.
However, this timing couldn't have been worse as it coincided with Coronavirus outbreak in China and that government's imposed lockdowns which also affected the operations of NFC and PowerChina. Subsequently, other governments around the world also imposed long-term travel restrictions and lockdowns, including Bangladesh. Although this unforeseeable circumstance delayed the finalisation of arrangements under the MOU, we remained in close contact and the parties. Several MOU extensions were agreed, which ultimately culminated in a Framework Agreement being signed in October 2020 (outside the reporting period) with NFC for the coal mine development. I am delighted to report that not only have we now secured a strategic mine development partner, but also that PowerChina has reiterated its interest to have a higher participation in the Project as part of its involvement in the mine mouth integrated power plants. GCM and PowerChina have, therefore, agreed to continue with the original MoU, in the absence of NFC on the same terms and conditions as originally agreed, until 6 June 2021, providing sufficient time to determine how to include that interest within the Framework Agreement.
Key aspects of the Framework Agreement include:
· A joint venture entity being established and that NFC will acquire 5% in that entity from GCM;
· NFC shall facilitate the arrangement financing for the Project on acceptable, market-equivalent terms;
· NFC will in principle be appointed as the exclusive engineering, procurement, construction and commissioning contractor ("EPC") for the mine and a separate EPC framework agreement will be negotiated in due course; and
· A Joint Development Agreement to be agreed in due course regarding the next steps for developing the Project.
Other steps taken in Financial Year 2020 include:
· In September 2019, appointing DG Infratech Pte Ltd, a Bangladeshi controlled company, to provide the Company with advisory, management, lobbying and consultancy services focussed on achieving approval for and development of the Project's coal mine and associated power projects;
· In February 2020, securing the continuing support of Polo Resources Ltd by way of the extension of the loan agreement to ensure GCM's funding for a further 12 months;and,
· In June 2020, agreeing a two-year extension of the consulting agreement with Dyani Corporation, Ltd. to provide support in building relationships with Chinese State-owned enterprises.
Whilst Financial Year 2020 will be remembered for the Coronavirus Pandemic and negative effect it's had on business, I'm pleased that we not only maintained our business, but managed at least some progress. However, we remain disappointed to be into 2020 and still be waiting to deliver the Project's Proposal.
Fortunately, over the period of 2020, outside the reporting year the Bangladesh Government has successfully managed to get its country back into business, albeit face-face meetings are still being handled cautiously. Our team in Bangladesh is also functioning and we are working closely, with and taking advice from our local Consultant DG Infratech. Some careful preparations are still needed, given the scale of the Project and the fact that it involves several Government departments and approval processes. We do look forward to finally presenting the Project's Proposal, obtaining approval and being able to deliver the much-deserved benefits to the Bangladesh Government and its people, our shareholders and other stakeholders.
Finally, I would like to once again thank the shareholders and all our stakeholders, for your continued commitment and support for GCM and its prospects. I also extend my appreciation to the Board and staff for their hard work.
Datuk Michael Tang PJN
Executive Chairman
22 December 2020
Group Strategic Report
Strategy and business model
GCM Resources plc ("GCM") remains committed to a strategy of developing the Phulbari coal deposit as a captive, large-scale, open pit mining operation supporting 6,000MW of highly energy-efficient Ultra-Supercritical power generation (the "Project"). The power plants are planned to be developed in three stages, over a period of some ten years, in line with the available coal production as the mine steadily ramps-up to its nameplate production 15Mtpa.
GCM's business model involves forming Joint Venture Agreements with various internationally renowned companies, specifically Chinese State-owned enterprises, to assist with obtaining the necessary government approvals, the requisite financing and developing the coal mine and power plants. The business model also involves the use of consultants to provide crucial guidance and lobbying support both in Bangladesh and Internationally.
GCM believes it's strategy and business model which are aimed at gaining approval for and developing the Project are in line with Government of Bangladesh's Vision 2021-2041 objectives being to:
· Middle-income status by 2021 being the Country's "Golden Jubilee" year
· Higher-middle income status by 2031
· Developed Nation by 2041
The pathway to deliver these national development goals involves having an expansive supply of primary fuel capable of supporting an increasing supply of electricity necessary to stimulates industrial development, create jobs and drive economic growth. The resultant Energy and Power security will underpin economic sustainability required to meet Vision 2020-2041.
Fundamental elements of the Project include the 572 million tonne high-quality coal resource (JORC 2004 compliant), located in the Phulbari Coal Basin in North-West Bangladesh; the Company's contract with the Government of Bangladesh for "Exploration and Mining Coal in Northern Bangladesh"; the associated mining lease and exploration licences; and the already completed Definitive Feasibility Study for the mine, together with a comprehensive Environmental and Social Impact Assessment.
Although a Scheme of Development for mine development was submitted to the Government of Bangladesh in 2005 and still awaits approval, this document did not portray the mine as "captive" with an ultimate deliverable to the Government being 6,000MW of reliable, low-cost power. To this end, the Company's business model has developed significantly over time and the Project is now considered to comprise four integrated "Business Units", being the captive coal mine and the three 2,000MW power projects that will be commissioned in-line with the ramp-up to the nameplate 15Mtpa coal production. It is envisaged that the coal mine's viability will be underpinned by coal supply agreements with each of the three power projects and, in turn, the power projects' viability will be underpinned by the supply of reliable, competitively priced coal extracted from the Phulbari coal mine.
The Bangladesh Government remains committed to a rapid expansion of its energy sector, including the increase of coal-based power generation, and GCM equally remains committed to assist the Government meet its power sector needs. GCM's business model is to attempt to deliver Bangladesh's lowest coal-based power tariff, at a production rate that should make a significant positive impact on the country's industrial development and competitiveness in international markets.
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.
With the assistance of Hong Kong based Dyani Corporation Limited ("Dyani"), the Company developed close working relationships with the Chinese state-owned-enterprises China Gezhouba Group International Engineering Co Limited ("CGGC"), Power Construction Corporation of China Ltd ("PowerChina") and China Nonferrous Metal Industry's Foreign Engineering and Construction Co., Ltd. ("NFC"). This has delivered the following agreements and deliverables against GCM's strategy for delivering the Project:
· a Joint Development Framework Agreement and a Contract Framework Agreement with CGGC in relation to the construction of 2,000MW of mine-mouth power plants, being one of the required three phases (each being 2,000MW mine-mouth power generation); and
· Joint Venture Agreements with PowerChina for 4,000MW of mine-mouth power plants being the remaining two phases of the total 6,000MW power generation.
· Framework Agreement with NFC for developing the open pit coal mining operation based on the Phulbari coal basin's world class 572 million tonnes (JORC 2004 compliant) high quality thermal and semi-soft coking coal resource.
Power Proposal documents required by the Government for approval of the initial 4,000MW power plants have been prepared. Financial models confirm that using the Phulbari coal mine gives the ability to deliver a highly competitive power tariff, thereby achieving GCM's aim of delivering an efficient and logical use of the country's domestic coal resources, in the form of a low-cost, large-scale, power solution.
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 having established joint-venture arrangements with internationally renowned PowerChina for the delivery of 4,000MW of mine-mouth power plants (in two x 2,000MW Phases) as well as having completed Power Proposals, adhering to Bangladesh Power Development Board requirements, for both Phases. This combined with the 2,000W previously agreed with CGGC provided the necessary 6,000MW "power plant market" to take the full production from the captive Phulbari coal mine, thus ensuring economic sustainability of the Phulbari Coal and Power Project.
In July 2019, GCM entered into a memorandum of understanding ("MOU") with China Nonferrous Metal Industry's Foreign Engineering and Construction Co., Ltd. ("NFC") and PowerChina for the formation of a strategic partnership to jointly develop the proposed Phulbari coal mine. PowerChina's involvement is testament to the importance placed on the coal mine component of the Project.
Working under the MOU, GCM's Bangladesh project team worked with NFC to assist with their due diligence assessment of the Phulbari coal mine's feasibility study. This was successfully completed by early 2020 and the plan was to move to a form of Joint Venture arrangement for the mine development leading to an update the Project's Proposal and its delivery to the Bangladesh Government for approval.
Unfortunately, the Coronavirus pandemic struck and the world-wide travel restrictions combined with prolonged lockdowns disrupted the plan. From that point GCM and our strategic development partner had key staff locked-down in various parts of the world and it's only been from the latter part of 2020 (outside the reporting period) that countries such as China and Bangladesh have begun to return to normal, albeit still with some restrictions aimed at maintaining public health and safety.
With that return to business normality underway, GCM was able to enter into a Framework Agreement in October 2020 (outside the reporting period) with NFC for the coal mine development.
Although PowerChina did not participate in the Framework Agreement, they have expressed a desire for a significant participation in addition to their involvement in the power plants. To this end, GCM and PowerChina agreed to continue with the original MoU in the absence of NFC on the same terms and conditions until 6 June 2021, with the aim of defining that level of interest and providing for it within the Framework Agreement.
GCM recognises the need for consultants to provide crucial guidance and lobbying support both in Bangladesh and Internationally. To this end, in September 2019, it appointed DG Infratech Pte Ltd, a Bangladeshi controlled company with a portfolio of successful energy and power sector projects; and in June 2020 extended the consutancy agreement with Dyani Corporation, Ltd. to assist with Chinese State-owned enterprises.
The Company remains committed to ensuring the local community and local authorities remain fully informed on the Project. Our social licence untimately is built upon a successful relationship with the local community. Despite the onset of the Coronavirus Pandemic, we managed to keep highly trained staff residing at our field facilities and continued to support our team of Community Liaison Assistants selected to provide two-way communication with communities across the Project area. Through this team's considerable efforts, the Project's Resettlement Action Plan remains current.
The Board is pleased to have now delivered against its strategy of forming strategic joint venture partnerships covering power plants and coal mine in order to present the Project in a most credible Proposal for the Bangladesh Government's approval.
However, with the retrun to a "business as normal" trajectory underway in both Bangladesh and China, and with the involvement of our consultants / lobbyists, GCM and its partners to be in a position to submit the Proposal, gain the necessary approvals, implement the Project and finally unlock the Project's potentially enormous value for all stakeholders.
The Company received notice from Strand Hanson Limited, confirming that it had formally resigned as Nominated Adviser and Broker to the Company, with such resignation to take effect on 6 January 2021. The Company is in discussions with a potential replacement nominated adviser and broker and is currently undergoing the required due diligence process with the proposed party, targeting to complete the process prior to 6 January 2021.
Finance review
The Group recorded a loss of £1,515,000 during the year ended 30 June 2020 compared to a loss of £6,024,000 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 in relation to pre-development expenditure. The decrease was from £5,181,000 in 2019 to £420,000 this year, as a result of a number of milestone payments to consultants being reached in 2019, 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's recorded a net decrease in cash at the end of the year to £69,000 (2019: £385,000). Net cash used in operations for the year was £572,000 (2019: £427,000), cash used in investing activities was £366,000 (2019: £581,000), and cash inflow from financing was £622,000 (2019: £947,000).
The Group has continued its aim to maintain tight control of expenditure incurred during the year: Administrative expenses were up by 37.7% to £916,000 for the year ended 30 June 2020 (2019: £665,000) as a result of a one off consulting expense, however, finance costs reduced by 23% to £127,000 (2019: £164,000). Capitalised expenditure in relation to the mine proposal was £377,000 for the year ended 30 June 2020 compared to £613,000 in the previous year. Overall costs excluding pre-development expenditure increased by 29.9% to £1,095,000 from £843,000 in the prior year, as noted above.
To finance its operations during the year, on 3 February 2020, GCM agreed an amendment to the short-term loan facility with Polo Resources Limited ("Polo") (the "Polo Loan Facility"). The Polo Loan Facility was increased by £1,200,000 to £3,500,000 and provides that the lender has the option to convert all or part of the balance of the Polo Loan Facility at a conversion price of 11 pence per share, subject to Polo's maximum holding not exceeding 30% of the Company's enlarged share capital (See Note 12 for detailed terms).
As at the date of this report, the Company had drawn down £2,950,000 of the increased Polo Loan Facility and the Company currently has approximately £105,500 in available cash resources, which along with the remaining £550,000 of the Loan Facility the Director's believe will only be sufficient to fund the Company's cash requirements for the next six 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 January 2021(the "Additional Funding"). .
The Directors also note that, under the terms of the existing Polo Loan Facility, repayment in cash can be requested upon 90 days' notice or, alternatively, the balance converted to shares at 11 pence per share at Polo's sole election. The Company does not currently have secured funding arrangements in place to cover the repayment of the existing Polo Loan Facility or further potential expenditure which would be needed to advance the Project, therefore, should the the Additional Funding not materialise for any reason, or Polo requests repayment of the Polo Loan Facility, the Company would urgently need to secure additional capital in order to continue as a going concern, which may not be available on terms acceptable to the Board or on a workable timeframe.
Corporate Social Responsibility
GCM's vision, goal and planned actions are in line with the basic values of integrity and fairness for all stakeholders. For any large mining or development project to be successful it is crucial to develop and maintain a partnership with all concerned stakeholders, particularly at the local level.
The Company continues actively to engage with the local communities in and around the Project area, holding one-to-one meetings and group discussions, with the intention of achieving further social acceptance. This activity is being done by Company field staff utilising a select group of local grass-roots community liaison assistants. As the Company pursues strategic partners for the inclusion of mine mouth power plants together with the planned coal mine, it will ensure that a comprehensive environmental and social impact assessment (including a human rights impact assessment) is prepared covering both the mine and associated power plants. The Company has been working to update the population database and the number of potentially 'project affected people' and also has been undertaking a land price survey, to ensure the Project's Resettlement Plan remains current.
The Project will improve the economic and social well-being of people in the Project area and regular feedback through our field staff and community liaison assistants is that the majority want to see development and appreciate the job opportunities and other benefits that will be available. Around 17,000 jobs are expected to be directly and indirectly created as a consequence of developing the mine and associated infrastructure. However, work still needs to be done to estimate the number of additional jobs that would be created by the mine mouth power plants which is expected to be in the tens of thousands when downstream enabled industrial development is taken into account.
As part of GCM's water management and agriculture improvement plans, farms are expected to have year-round access to irrigation which combined with improved inputs and training is expected to increase agricultural output in the region. In this way the Project will make a contribution to the country's food security. Only one third of the mine footprint will be needed at any one time, allowing farming to continue prior to utilisation and after rehabilitation.
GCM has plan to resettle approximately 40,000 people, with 12,000 people moving to a new town extension and the remainder moving to new village sites or electing to use the opportunity to move to other areas in Bangladesh. This resettlement is to occur in six phases over a period of approximately 10 years from commencement of development. At this stage, it is expected that the construction of mine mouth thermal power plants will not require additional resettlement.
Detailed plans are in place to provide the local communities with new housing, religious centres, schools, health centres, electricity, reticulated water supply and improved sanitation. Compensation to those affected will, where appropriate, be a mix of measures such as long-term livelihood restoration support, replacement homes, retraining, employment and various financial assistance allowances. The Company intends to give local communities the opportunity to engage in any future planning process prior to implementation.
GCM further reiterates its commitment to developing the Project in accordance with the highest international and national environmental and social standards. The Company remains to be a signatory of the UN Global Compact, the world's largest voluntary corporate responsibility initiative, and is committed to complying with the social and environmental policies and standards of the International Finance Corporation (World Bank), the Equator Principles, the Asian Development Bank's (ADB) Safeguard Policies as well as the current policies and laws of Bangladesh.
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 being captive to and packaged with 6,000 MW of state-of-the-art highly energy efficient Ultra-Supercritical power plants (the "Project"), is not approved by the Government of Bangladesh. However, the Board has embarked on this strategy which involves bringing in strategic development partners for the coal mine and power plants as it believes this will be 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 has also endeavoured to reduce this risk by employing the services of credible consultants / lobbyists, 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-enterprises PowerChina and NFC do not proceed and thus undermining the Company's strategy of presenting the Project as a captive coal mine with 6,000MW power generation that would take sufficient thermal coal production to ensure the mine's economic sustainability. The Company has taken steps to further reduce this risk through recent signed agreements aimed at further strengthening these strategic partnerships; and by putting 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.
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 page 16.
Commercial - risk that the Project's economic viability is undermined by sustained adverse movement of coal price and key cost elements. To reduce this risk the Company has established the Project as an integrated coal mine and power development with Company and its strategic partners have equity positions in mine and power plants. In addition, there will be a rise and cost provision for the coal mine with the coal supply agreements for the power plants. While Bangladesh does have a couple of new power projects under construction and others in the pipeline, studies show a domestic coal solution remains economically very competitive to imported fuel options for large-scale power generation.
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 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. For further details refer to page 7.
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 a developing country with forecast energy demand expected to outstrip installed power in the next 10 years. Power generation from in-country coal reserves is seen as a key factor in meeting this expected supply gap. Coal remains a cheap and abundant primary energy supply for developing countries like Bangladesh and this was acknowledged by the Bangladesh Government Power Secretary recently, when he told the Thomson Reuters Foundation on 6 November 2019, that Bangladesh had no choice but to burn coal. He further said 'Bangladesh's economy is growing fast and it needs energy. Bangladesh's contribution to both climate change and greenhouse gas emission is very insignificant and with the intended coal use and coal fired power generation in next few decades, this contribution will remain insignificant compared to most other countries'. The Company will continue to monitor this risk in-line with developments in Government policy.
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 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
Executive Chairman
22 December 2020
Consolidated Financial Statements
Consolidated Statement of Comprehensive Income
For year ended 30 June
|
|
Notes |
2020 |
2019 |
|
|
|
£000 |
£000 |
|
|
|
|
|
|
Operating expenses |
|
|
|
|
Pre-development expenditure |
16 |
(420) |
(5,181) |
|
Exploration and evaluation costs |
|
(52) |
(14) |
|
Administrative expenses |
|
(916) |
(665) |
|
|
|
|
|
|
Operating loss |
3 |
(1,388) |
(5,860) |
|
|
|
|
|
|
|
|
|
|
|
Finance costs |
|
(127) |
(164) |
|
|
|
|
|
|
Loss before tax |
|
(1,515) |
(6,024) |
|
|
|
|
|
|
|
|
|
|
|
Taxation |
6 |
- |
- |
|
|
|
|
|
|
Loss for the year |
|
(1,515) |
(6,024) |
|
|
|
|
|
|
Other comprehensive income |
|
- |
- |
|
|
|
|
|
|
Total comprehensive expense for the year |
|
(1,515) |
(6,024) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share |
|
|
|
|
Basic (pence per share) |
7 |
(1.45p) |
(6.14p) |
|
Diluted (pence per share) |
7 |
(1.33p) |
(6.14p) |
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 2018 |
9,811 |
50,484 |
625 |
(21,540) |
39,380 |
|
|
|
|
|
|
|
|
Total comprehensive loss |
- |
- |
- |
(6,024) |
(6,024) |
|
Share issuances (net of costs)(1) |
53 |
13 |
- |
- |
66 |
|
Shares to be issued |
- |
- |
5,181 |
|
5,181 |
|
Share based payments |
- |
- |
29 |
- |
29 |
|
|
|
|
|
|
|
|
Balance at 30 June 2019 |
9,864 |
50,497 |
5,835 |
(27,564) |
38,632 |
|
|
|
|
|
|
|
|
Total comprehensive loss |
- |
- |
- |
(1,515) |
(1,515) |
|
Share issuances (net of costs)(1) |
1,392 |
3,037 |
(4,348) |
- |
81 |
|
Shares to be issued |
- |
- |
420 |
- |
420 |
|
Share based payments |
- |
- |
(201) |
- |
(201) |
|
|
|
|
|
|
|
|
Balance at 30 June 2020 |
11,256 |
53,534 |
1,706 |
(29,079) |
37,417 |
(1) refer to note 14 for further information on share issuances
Consolidated Balance Sheet Company number 04913119
As at 30 June
|
|
Notes |
2020 |
2019 |
|
|
|
£000 |
£000 |
|
|
|
|
|
|
Current assets |
|
|
|
|
Cash and cash equivalents |
|
69 |
385 |
|
Other receivables |
8 |
16 |
23 |
|
|
|
|
|
|
Total current assets |
|
85 |
408 |
|
|
|
|
|
|
Non-current assets |
|
|
|
|
Property, plant and equipment |
|
13 |
19 |
|
Right of use assets |
13 |
33 |
- |
|
Intangible assets |
9 |
41,627 |
41,250 |
|
|
|
|
|
|
Total non-current assets |
|
41,673 |
41,269 |
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
41,758 |
41,677 |
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
Payables |
11 |
(1,073) |
(702) |
|
Lease liabilities |
13 |
(27) |
- |
|
Borrowings |
12 |
(3,220) |
(2,343) |
|
|
|
|
|
|
Total current liabilities |
|
(4,320) |
(3,045) |
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
Lease liabilities |
|
(21) |
- |
|
Total non-current liabilities |
|
(21) |
- |
|
|
|
|
|
|
Total liabilities |
|
(4,341) |
(3,045) |
|
|
|
|
|
|
|
|
|
|
|
Net assets |
|
37,417 |
38,632 |
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
Share capital |
14 |
11,256 |
9,864 |
|
Share premium account |
14 |
53,534 |
50,497 |
|
Other reserves |
14 |
1,706 |
5,835 |
|
Accumulated losses |
|
(29,079) |
(27,564) |
|
|
|
|
|
|
Total equity |
|
37,417 |
38,632 |
Datuk Michael Tang PJN
Executive Chairman
22 December 2020
Consolidated Cash Flow Statement
For year ended 30 June
|
|
|
2020 |
2019 |
|
|
|
£000 |
£000 |
|
|
|
|
|
|
Cash flows from/(used in) operating activities |
|
|
|
|
(Loss) before tax |
|
(1,515) |
(6,024) |
|
|
|
|
|
|
Adjusted for: |
|
|
|
|
Pre-development expenditure |
16 |
420 |
5,181 |
|
Finance costs |
|
127 |
164 |
|
Other non-cash expenses |
|
18 |
20 |
|
|
|
|
|
|
|
|
(950) |
(659) |
|
Movements in working capital: |
|
|
|
|
Decrease in operating receivables |
7 |
13 |
|
|
Increase in operating payables |
371 |
219 |
|
|
|
|
|
|
|
Cash used in operations |
|
(572) |
(427) |
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
(572) |
(427) |
|
|
|
|
|
|
|
|
|
|
|
Cash flows (used in) investing activities |
|
|
|
|
Payments for property, plant and equipment |
|
- |
(2) |
|
Payments for intangible assets |
|
(366) |
(579) |
|
|
|
|
|
|
Net cash generated (used in) investing activities |
|
(366) |
(581) |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
Issue of ordinary share capital |
|
22 |
47 |
|
Proceeds from borrowing |
|
600 |
900 |
|
|
|
|
|
|
Net cash from financing activities |
|
622 |
947 |
|
|
|
|
|
|
|
|
|
|
|
Total (decrease) in cash and cash equivalents |
|
(316) |
(61) |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at the start of the year |
|
385 |
446 |
|
|
|
|
|
|
Cash and cash equivalents at the end of the year |
|
69 |
385 |
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 22 December 2020, and the Consolidated Balance Sheet was signed on the Board's behalf by Datuk Michael Tang PJN.
Basis of preparation
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union as they apply to the financial statements of the Group for the year ended 30 June 2020 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 2020.
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 are confident 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. The Government is seeking to rapidly expand the country's power generation, including the increase in coal fired power generation from the current 525MW to approximately 20,000MW.
The Group's strategy is to combine the planned coal mine with 6,000MW power plants in conjunction with large Chinese State-owned engineering enterprises. Over the last twelve months progress has been made in pursuit of this strategy as highlighted on page 4.
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 £41,622,000 as at 30 June 2020.
Going concern
As at 30 June 2020, the Group had £69,000 in cash and £4,235,000 in net current liabilities. The directors and management have prepared a cash flow forecast to December 2021, which shows that the Group will require further funds to cover operating costs to advance the Phulibari 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 January 2021, in order to meet current operating cost projections. The Directors also note that, under the terms of the existing Polo Loan Facility, repayment in cash can be requested upon 90 days' notice, or alternatively converted to shares at 11 pence per share at the lender's option. 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, 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.
On 3 February 2020, the Company confirmed the availability of an increase of the Polo Loan Facility by £1,200,000 to £3,500,000, to be spread in four quarterly instalments in advance. 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. The Company currently has £550,000 remaining to drawdown under the Polo Loan Facility, which, at current run rates, along with the Company's existing cash resources, is only expected to provide sufficient capital for the next six months. The Company intends to explore alternative funding options over the next two months, with the aim to complete and secure the necessary third party funding by the end of January 2021.
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:
- In the event that the short-term loan becomes payable, sufficient funding can be obtained; 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 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 was 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 balances 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 on page 29 for further details in respect of the recoverability of intangible mining assets and the boards 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 prior year. The restructure was considered to represent a significant modification with the loan restructured to allow the lender the right to convert the outstanding loan balance and accrued interest to new ordinary shares. 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 90 days of receiving a request, it is in effect a rolling 90-day short term loan. Accordingly the loan is 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.
The Group has one financial assets measured at FVOCI (Fair Value Through Other Comprehensive Income which was fully impaired in previous years . There has been no impact on the treatment of the financial assets measured at FVOCI on transition to IFRS9. The Group has no financial assets measured at FVTPL (Fair Value Through the Statement of Profit or Loss)
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.
Cash and cash equivalents
Cash and short-term deposits in the balance sheet comprise cash at banks and in hand.
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
There were a number of new and amended standards and interpretations during the year, below is a list of the new standards which impacted the Group:
|
|
Effective date |
Adoption date |
|
International Accounting Standards (IAS / IFRSs) |
|
|
|
IFRS 16 Leases |
1 January 2019 |
1 July 2019 |
|
IFRIC 23 Uncertainty over Income Tax Treatments |
1 January 2019 |
1 July 2019 |
|
Annual Improvements to IFRS 2015-17 Cycle |
1 January 2019 |
1 July 2019 |
The application of the new and amended standards and interpretations during the year did not have any impact on the accounting policies, financial position or performance of the Group, with the following noted below;
IFRS 16 Leases - Accounting policy from 1 July 2019 applied
Leased assets are capitalised on inception of the lease as right-of-use assets. A corresponding lease liability, representing the present value of the lease payments is also recognised and split between current and non-current liabilities accordingly.
The lease liability includes; fixed payments, variable lease payments dependent on an index or rate (initially measured using the index or rate on the lease commencement date) and in substance fixed payments. The variable aspect of variable payments are recognised when the rate or index takes effect resulting in an adjustment to the liability and right-of-use asset. Currently the Group's lease portfolio does not contain variable or in substance lease payments.
The discounted lease liability is calculated where possible using the interest rate implicit in the lease or where this is not attainable the incremental borrowing rate is utilised. The incremental borrowing rate is the rate the Group would have to pay to borrow the funds necessary to obtain a similar asset under similar conditions. The Group calculates the incremental borrowing rate using risk free rate of the country where the asset is held, adjusted for length of the lease and a risk premium.
Lease payments are allocated against the principal and finance cost. Finance costs, representing the unwinding of the discount on the lease liability are charged to the income statement to produce a constant periodic rate of interest on the remaining liability.
Right-of-use assets are measured at cost including; the discounted initial lease liability, lease payments made at or before the commencement date, any initial direct costs reduced any lease incentives received.
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 IFRS 3 Business Combinations |
1 January 2020 |
1 July 2020 |
|
Amendments to IAS 1 and IAS 8 Definition of Material |
1 January 2020 |
1 July 2020 |
|
Amendments to IAS 16 Property Plant and Equipment |
tbc |
tbc |
|
Amendments to IAS 37 Provisions, Contingent Assets and Contingent Liabilities |
tbc |
tbc |
|
Annual Improvements to IFRS 2018-20 Cycle |
tbc |
tbc |
|
|
|
|
tbc: still subject to EU endorsement
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
|
|
2020 £000 |
2019 £000 |
|
The operating loss is stated after charging: |
|
|
|
Directors' remuneration |
391 |
457 |
|
Other staff costs (1) |
6 |
17 |
|
Operating lease rentals (2) |
11 |
15 |
|
Depreciation of property, plant and equipment (3) |
- |
- |
(1) Other staff costs for 2020 financial year were £399,000 of which £6,000 was expensed in administrative expenses, £nil expensed in exploration and evaluation costs and £393,000 capitalised (2019: £17,000 expensed in administrative expenses, £nil expensed in exploration and evaluation costs and £397,000 capitalised).
(2) Operating lease rental costs for 2020 financial year were £80,000 of which £11,000 was expensed and £69,000 capitalised (2019: £76,000 of which £15,000 was expensed and £61,000 capitalised).
(3) Total depreciation for 2020 was £6,000 which was capitalised to intangibles (2019: £5,000 capitalised).
During the year Phulbari-related exploration and evaluation costs amounting to £52,000 were expensed in accordance with the Group's accounting policy on exploration and evaluation costs (2019: £14,000).
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.
|
|
2020 £000 |
2019 £000 |
|
|
|
|
|
|
|
Audit of the financial statements |
32 |
35 |
|
|
Audit of subsidiaries |
- |
4 |
|
|
Total audit |
32 |
39 |
|
|
|
|
|
|
|
Total fees |
|
32 |
39 |
5. Amounts paid for Directors' services, and staff costs
|
|
|
2020 £000 |
2019 £000 |
Amounts paid for Directors' services |
|
|
|
|
Amounts paid for Directors' services |
391 |
457 |
|
The amounts paid for Directors' services during the year are disclosed in further detail in the Directors' Report on page 16. The aggregated remuneration of the highest paid director is £303,600.
Staff costs
|
Wages and salaries(1) |
|
393 |
397 |
|
Social security costs |
6 |
17 |
|
|
|
|
|
|
|
|
|
399 |
414 |
(1) Excludes amounts paid for Directors' services.
|
The average monthly number of employees during the year was: |
2020 Number |
2019 Number |
|
|
|
|
|
|
|
Exploration and evaluation |
|
14 |
14 |
|
Administration |
|
3 |
4 |
|
|
|
|
|
|
|
|
17 |
18 |
6. Taxation
Reconciliation of the tax charge in the income statement
|
|
2020 £000 |
2019 £000 |
|
|
|
|
|
(Loss) on ordinary activities before tax |
(1,515) |
(6,024) |
|
|
|
|
|
UK corporation tax @ 19% (2020) and 19% (2019) |
(288) |
(1,145) |
|
|
|
|
|
Unrecognised deferred tax assets during the year |
297 |
1,094 |
|
Non-deductible expenditure |
(9) |
51 |
|
|
|
|
|
Total tax expense reported in the income statement |
- |
- |
Unrecognised deferred tax assets
|
|
2020 £000 |
2019 £000 |
|
Deferred tax asset |
|
|
|
Tax losses carried forward |
3,760 |
3,464 |
|
Impairment |
891 |
891 |
|
Other |
1 |
1 |
|
|
|
|
|
|
4,652 |
4,356 |
|
|
|
|
|
Less: deferred tax assets de-recognised |
(4,652) |
(4,356) |
|
|
|
|
|
|
- |
- |
At 30 June 2020 tax losses for which a deferred tax asset was not recognised amounted to £19,792,000 (2019: £18,229,000). Deferred tax assets are only recognised 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
|
|
|
|
2020 |
2019 |
|
|
|
|
£000 |
£000 |
|
|
|
|
|
|
|
(Loss) for the year |
|
|
(1,515) |
(6,024) |
|
|
|
|
|
|
|
|
|
|
Thousands |
Thousands |
|
Weighted average number of shares |
|
|
|
|
|
Basic and diluted weighted average number of shares |
104,676 |
98,177 |
||
|
|
|
|
|
|
|
(Loss) per share |
|
|
|
|
|
Basic (pence per share) |
|
|
(1.45p) |
(6.14p) |
|
Diluted (pence per share) |
|
|
(1.33p) |
(6.14p) |
There are 9,300,000 potentially dilutive options along with 6,098,283 potentially dilutive shares to be issued at 30 June 2020 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
|
|
|
2020 £000 |
2019 £000 |
|
Current |
|
|
|
|
Prepayments |
12 |
21 |
|
|
Other receivables |
|
4 |
2 |
|
|
|
|
|
|
|
|
16 |
23 |
9. Intangible assets
|
|
Exploration & evaluation expenditure |
Mineral rights |
Total
|
|
|
£000 |
£000 |
£000 |
|
|
|
|
|
|
At 1 July 2018 |
39,490 |
1,147 |
40,637 |
|
Additions - exploration & evaluation |
613 |
- |
613 |
|
|
|
|
|
|
At 30 June 2019 |
40,103 |
1,147 |
41,250 |
|
Additions - exploration & evaluation |
377 |
- |
377 |
|
|
|
|
|
|
Cost and net book value at 30 June 2020 |
40,480 |
1,147 |
41,627 |
|
|
|
|
|
|
Cost and net book value at 30 June 2019 |
40,103 |
1,147 |
41,250 |
|
|
|
|
|
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 |
2020 |
2019 |
|
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
|
|
|
2020 £000 |
2019 £000 |
|
|
|
|
|
|
Trade payables |
527 |
304 |
|
|
Related party accrued payable |
546 |
248 |
|
|
Transaction costs payable |
- |
150 |
|
|
|
|
|
|
|
|
|
1,073 |
702 |
Refer to note 20 for details of the related party accrued payable.
12. Borrowings
|
|
|
2020 £000 |
2019 £000 |
|
Short-term loan from related party |
|
|
|
|
Balance as at 1 July |
2,343 |
1,279 |
|
|
Loan instalments drawndown |
600 |
900 |
|
|
Interest charges |
277 |
164 |
|
|
|
|
|
|
|
Balance as at 30 June |
|
3,220 |
2,343 |
Refer to note 20 for details of the short-term loan from related party.
On 31 January 2020 the existing short-term loan facility of £2.3 million with Polo Resources Limited was increased by £1.2 million. Prior to this amendment, the principal terms of the loan were: a loan facility of up to £2.3 million to be repaid within 90 days upon request and attracting an interest rate of 12% per annum. The revised terms provided for an increase in the loan facility amount by £1.2 million, to £3.5 million. The £1.2 million is being drawn down by the Company in equal quarterly instalments of £300,000. The Lender has the right to convert the outstanding loan balance and accrued interest to new ordinary shares of 10p each at a price of 11p per ordinary share within 14 days upon request. 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 31 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:
|
|
|
2020 £000 |
On IFR16 transition £000 |
|
|
|
|
|
|
Buildings |
|
29 |
87 |
|
Vehicles |
4 |
12 |
|
|
|
|
|
|
|
|
|
33 |
99 |
Lease liabilities
|
|
|
2020 £000 |
On IFR16 transition £000 |
|
Classified as; |
|
|
|
|
Current |
|
27 |
51 |
|
Non-current |
21 |
48 |
|
|
|
|
|
|
|
|
|
48 |
99 |
The Group in accordance with IFRS16 used the modified retrospective approach and the transition date of 1 July 2019 as disclosed above.
The interest expense incurred on lease liabilities was £5,000, and capitialised in accordance with the Group's policy on exploration and evaluation assets. Cash outflows in respect of right of use assets were £66,000.
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 (£4.90 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. Authorised and issued share capital
|
|
2020 Thousands |
2019 Thousands |
2020 £000 |
2019 £000 |
|
Authorised |
|
|
|
|
|
Ordinary shares of 10p each |
200,000 |
200,000 |
20,000 |
20,000 |
|
|
|
|
|
|
|
Allotted, called up and fully paid |
|
|
|
|
|
At 1 July |
98,639 |
98,114 |
9,864 |
9,811 |
|
Shares issued |
13,921 |
525 |
1,392 |
53 |
|
|
|
|
|
|
|
At 30 June |
112,560 |
98,639 |
11,256 |
9,864 |
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.
On 3 December 2018, 100,000 shares were issued to a former director, on their resignation in lieu of services at a price of 17.9p per share.
On 25 June 2019, 425,000 shares were issued to former director on the exercising of their share options at a price of 11p per share for a total of £46,750.
On 23 January 2020, 13,721,354 shares were issued to consultants in accordance with the terms of the their agreements, at prices from 14p to 38.25p, for a total non cash consideration of £4,347,635.
On 15 April 2020, 200,000 shares were issued to former director on the exercising of their share options at a price of 11p per share for a total of £22,000.
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 £0.10 ordinary 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 which have not yet been settled. Refer note 17 for basis of valuation.
|
|
|
|
2020 £000 |
2019 £000 |
|
|
|
|
|
|
|
Share based payments not settled |
|
|
1,706 |
5,835 |
|
|
|
|
|
|
|
|
|
|
1,706 |
5,835 |
15. Notes supporting statement of cashflows
Cash and cash equivalents for the purposes of the statement of cash flows comprises:
|
|
|
2020 £000 |
2019 £000 |
|
|
|
|
|
|
Cash at bank available on demand |
69 |
385 |
|
|
|
|
|
|
|
|
|
69 |
385 |
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 2018 |
|
|
|
1,279 |
1,279 |
|
Cash flows |
|
|
|
900 |
900 |
|
Non-cash flows: Interest accrued |
|
|
|
164 |
164 |
|
|
|
|
|
|
|
|
Balance at 30 June 2019 |
|
|
|
2,343 |
2,343 |
|
|
|
|
|
|
|
|
Balance at 1 July 2019 |
|
|
|
2,343 |
2,343 |
|
Cash flows |
|
|
|
600 |
600 |
|
Non-cash flows: Interest accrued |
|
|
|
277 |
277 |
|
|
|
|
|
|
|
|
Balance at 30 June 2020 |
|
|
|
3,220 |
3,220 |
16. Significant non-cash transactions
The significant non-cash transactions during the year were as follows:
· £420,000 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 £120,000 (666,667 shares at 18p per share) for a second consultant retainer. These retainer fee shares had not been issued to the consultants at year end and have been included in other reserve for shares to be issued.
17. Share based payments
The (credit)/charge for share based payments during the year is shown in the following table:
|
|
|
|
2020 £000 |
2019 £000 |
|
(Credited)/charged to intangibles |
|
|
|
|
|
Conditional shares |
|
(201) |
29 |
|
|
|
|
|
|
|
|
|
|
|
(201) |
29 |
Options
The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during the year.
|
|
2020 Options Thousands |
2020 WAEP |
2019 Options Thousands |
2019 WAEP |
|
|
|
|
|
|
|
At 1 July |
9,500 |
£0.11 |
9,925 |
£0.11 |
|
Exercised during the year |
(200) |
(£0.11) |
(425) |
(£0.11) |
|
|
|
|
|
|
|
Outstanding at 30 June |
9,300 |
£0.11 |
9,500 |
£0.11 |
|
|
|
|
|
|
|
Exercisable at 30 June |
9,300 |
£0.11 |
9,500 |
£0.11 |
The options outstanding at 30 June 2020 have an exercise price of £0.11 (2019: £0.11) and a weighted average contractual life of 3.9 years (2019: 0.9 years), including those granted options whose term was extended during the year. At a weighted average share price on the date of exercise of £0.14, 200,000 options were exercised during the year. The 9,300,000 options in issue at 31 May 2020, had their expiry date extended to 31 May 2024.
Conditional shares scheme
GCM has a conditional share scheme for Directors, employees, associates, consultants and contractors. Ordinary shares will be issued for nil 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:
|
|
|
|
2020 Thousands |
2019 Thousands |
|
|
|
|
|
|
|
At 1 July |
|
|
313 |
313 |
|
Conditional shares lapsed |
|
|
(103) |
- |
|
At 30 June |
|
|
210 |
313 |
The grant details of the conditional shares outstanding as at 30 June 2020 are as follows:
|
|
|
|
Share price at grant date £ |
Conditional shares Thousands |
|
Grant date |
|
|
|
|
|
25 August 2005 |
|
|
£6.32 |
60 |
|
9 March 2006 |
|
|
£4.99 |
30 |
|
46 July 2009 |
|
|
£0.84 |
140 |
|
|
|
|
|
|
|
|
|
|
|
230 |
The cumulative cost recognised in equity in relation to the conditional shares as at 30 June 2020 is £453,000 (2019: £654,000) 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 decrease in the cost of conditional shares of £201,000 for the year ended 30 June 2020 is directly attributable to the Phulbari Coal and Power Project, and a review of eligibility of recipients during the year, and accordingly credited against amounts capitalised to intangibles on this basis (2019: charge £29,000).
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:
|
|
|
|
2020 £000 |
2019 £000 |
|
Floating rate - within 1 year |
|
|
|
|
|
Cash and cash equivalents |
|
|
- |
15 |
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 2020 was £69,000 (2019: £370,000).
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 2020 was as follows:
|
|
|
|
2020 £000 |
2019 £000 |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
69 |
385 |
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 page 30 for further detail. The table below summarises the contractual maturity profile of the Group's financial liabilities as at 30 June 2020 and 2019.
|
|
Within 30 days £000 |
1 to 3 months £000 |
3 to 12 months £000 |
1 - 2 years
£000 |
Total & Carrying value £000 |
|
2020 |
|
|
|
|
|
|
Payables |
1,004 |
26 |
43 |
- |
1,073 |
|
Lease liabilities |
2 |
5 |
20 |
21 |
48 |
|
Borrowings |
- |
- |
3,220 |
- |
3,220 |
|
|
1,006 |
31 |
3,283 |
- |
4,341 |
|
|
|
|
|
|
|
|
2019 |
|
|
|
|
|
|
Payables |
358 |
29 |
315 |
- |
702 |
|
Borrowings |
- |
- |
2,343 |
- |
2,343 |
|
|
358 |
29 |
2,658 |
- |
3,045 |
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 |
||
|
|
2020 £000 |
2019 £000 |
2020 £000 |
2019 £000 |
|
|
Financial assets |
|
|
|
|
|
|
Cash and cash equivalents |
|
69 |
385 |
69 |
385 |
|
Receivables |
Amortised cost |
16 |
23 |
16 |
23 |
|
|
|
|
|
|
|
|
Financial liabilities |
|
|
|
|
|
|
Creditors |
Amortised cost |
1,073 |
702 |
1,073 |
702 |
|
Borrowings |
Amortised cost |
3,220 |
2,343 |
3,220 |
2,343 |
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, Dyani Corporation Limited, success fees conditional upon achieving key milestones relating to the advancement of the proposed 6,000MW coal fired power plant at the mine-mouth of the Phulbari Coal and Power Project, in North-West Bangladesh. As at 30 June 2020 the outstanding milestones were as follows:
Success Fee - Mine
· a one-time fee equal to 2% of Issued Capital, to be paid within five business days following the execution of an Acceptable MOU with a Strategic Partner in respect to the Mine; and
· a one-time fee equal to 3 % of Issued Capital, to be paid within five business days following the execution of an Acceptable Framework Agreement with a Strategic Partner in respect to the Mine; and
· a one-time fee equal to 4% of Issued Capital if an Acceptable Framework Agreement in respect to the Mine has been entered into, or 6% of Issued Capital if an Acceptable Framework Agreement with respect to the Mine has not been entered into, to be paid within five business days following the execution of an Acceptable Definitive Agreement with a Strategic Partner in respect to the Mine.
Success Fee - Power Plant 1
· Fee 1 - a one-time fee equal to 5% of the Issued Capital, to be paid within five business days following the execution of all Acceptable Definitive Agreements with a Strategic Partner in respect to Power Plant 1
Success Fee - Power Plant 3
· a one-time fee equal to 4% of Issued Capital, if an Acceptable Framework Agreement with respect to Power Plant 3 has been entered into, or 6% of Issued Capital if an Acceptable Framework Agreement with respect to Power Plant 3 has not been entered into, to be paid within five business days following the execution of all Acceptable Definitive Agreements with a Strategic Partner in respect to Power Plant 3.
Consultant success fees
The Group is also obliged to pay a consultant, DG Infratech PTE. Limited, success fees conditional upon achieving key milestones relating to the advancement of the proposed 6,000MW coal fired power plant at the mine-mouth of the Phulbari Coal and Power Project, in North-West Bangladesh. As at 30 June 2020 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 Develpment; and
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; and
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; and
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 2020.
20. Related Party Transactions
Key management personnel
|
|
|
|
2020 £000 |
2019 £000 |
|
|
|
|
|
|
|
Short-term benefits |
|
597 |
622 |
|
|
Termination benefits |
|
- |
41 |
|
|
Share based payments |
|
|
- |
12 |
|
|
|
|
|
|
|
|
|
|
597 |
675 |
Short-term related party loan
GCM is beneficiary to a £3.5 million short-term loan facility from its largest shareholder, with an interest rate of 12% per annum. As at 30 June 2020 the Group had utilised £2.6 million of the loan facility (2019: £2,000,000) and an interest accrual of £670,000 (2019: £343,000). The terms of the short-term loan requires repayment within 90 days of receiving notice from Polo Resource Limited. Refer to note 12. 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 2020, 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 (2019: £6,000) and management services of £297,600 paid to a management services company (2019: £297,600).
For the period September 2018 to June 2020 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 £546,000 has not been paid and is being accrued accordingly.
As at 30 June 2020 the amount owing to the management services company of Datuk Michael Tang PJN was £546,000 (2019: £248,000).
21. Post-balance sheet events
The following events took place subsequent to 30 June 2020, for which there has been no adjustment to the June 2020 financial statements:
- On 2 September 2020, the Company announced that it had issued 6,021,621 new ordinary shares to consultants in accordance with their consultancy agreements. Accordingly, the following consulting fees have been settled via the issuance of new Ordinary Shares:
o in lieu of Dyani Corporation Ltd's retainer fee for the period from 1 July 2019 to 30 June 2020, the Company will issue 2,142,856 new Ordinary Shares to Dyani;
o for the negotiation and finalisation of the second Joint Venture Agreement with PowerChina in respect to two plants of 1,000MW each, as announced on 15 March 2019 and settlement of which was deferred on 23 January 2020, a success fee will be awarded to Dyani, to be satisfied by the issue of 3,278,765 new Ordinary Shares; and
o in lieu of DG Infratech Pte Ltd's retainer fee for the period from 1 December 2019 to 31 August 2020, the Company will issue 600,000 new Ordinary Shares to DG.
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