Final Results

RNS Number : 3190D

Xtract Resources plc

28 June 2021

 

For immediate release

 28 June 2020

Xtract Resources Plc

("Xtract" or the "Company")

Audited results for the 12 months ended 31 December 2020

The Board of Xtract Resources Plc ("Xtract" or the "Company") announces its audited financial results for the 12 months ended 31 December 2020. The 2020 Audited Annual Report and Accounts ("Accounts")  are in the process of being posted to shareholders and will be available together with this announcement on the Company's website  www.xtractresources.com .

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 as it forms part of UK Domestic Law by virtue of the European Union (Withdrawal) Act 2018 ("UK MAR").The person who arranged the release of this announcement on behalf of the Company was Joel Silberstein, Director.

Enquiries :

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

Corporate & Operational highlights

· Company agreed conditional acquisition of a 100% interest in the Bushranger Copper-Gold Project within the world-class Lachlan Fold Belt in New South Wales, Australia

· Completion of sale & purchase agreement to acquire 100% interest in the Bushranger Copper-Gold project in Australia for £1.25m was settled in new Xtract ordinary shares

· Bushranger Project has a JORC (2012) compliant Inferred Resource of 71Mt @ 0.44% Cu and 0.064g/t Au, with deposit widths and gold grades increasing down-plunge

· At Manica in Mozambique, two further mining contractor agreements were concluded post period end to develop the Guy Fawkes and Boa Esperanza hard rock gold deposits

· At the Eureka copper-gold project in Zambia, exploration pitting post period end encountered high grade sample suggesting there is potential to extend the known deposit to over 300m length

· Data integration at the historic high-grade Kalengwa mine site in Zambia confirms that much of the near-mine copper-silver potential remains to be adequately drill tested

· Total of £0.65 million (before expenses) raised through an equity placing

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

· Total of 19.38kg (equivalent to 620 ounces) of production attributable to Explorator (2019: 37.31kg (equivalent to 1,199 ounces)

Financial highlights

· Cash of £0.92m (2019: £0.36m)

· Net assets of £11.93m (2019: £10.78m)

· Revenue from gold sales of £1.73m (2019: £1.35m)

· Administrative and operating expenses of £2.09m (2019: £1.81m)

Dear Shareholder,

The period under review has been very positive, with the Company advancing its mission to be a major explorer with small scale mining operations.  The objective being to have meaningful income to explore any discovery, which has the potential to become a large-scale mining operation.  This balance of production and operation can mitigate the inevitable effect of dilution against discovery, since any discovery will require a large drilling budget to establish its value.

A major step for the Company was the acquisition of the Bushranger Copper-Gold project in NSW, Australia in late October 2020 and we commenced drilling on 16 December 2020.  We drilled 5 holes, all of which encountered considerable widths of copper mineralisation, with the first hole encountering 920m of continuous mineralisation.  Post balance sheet, we completed the programme, received some assay results, conducted a major geophysical programme and did some initial open pit modelling. 

The results of the geophysics have been extremely encouraging and the porphyry appears to be open in all directions, with particularly strong indications of mineralisation to the northwest and southeast at relatively shallow depths.  The Directors were extremely encouraged by the results of the initial programme and are planning a second drilling programme to commence early Quarter 3, 2021 for at least 20,000m.  We are currently modelling a potential open pit, based on previous drill holes and eagerly await the outcome of the modelling against more positive copper prices and mid-term projections. 

The Racecourse Project in the Lachlan Fold Belt has well surpassed our expectations and we look forward with anticipation to phase 2 of the drilling programme. 

In Zambia the period commenced with reconnaissance drilling and the results were extremely encouraging at Eureka, whilst the Kajevu programme showed only sporadic mineralisation.  We therefore decided to continue with Eureka and discontinue further work at Kajevu.  The Eureka project has continued to progress, and we are particularly pleased with the extension to the former open pit and the strike remains open.  It appears that the oxide mineralisation extends to at least 60m depth and there is sufficient ore to commence an open pit for concentrated ore supply to local processing facilities.  After the period under review, further drilling was carried out and in the region of the former open pit and very high copper results have been received.  Thus, future exploration will have a dual focus.  We will drill to extend the oxide open pit and we will drill deeper to test the continuity of the body into sulphides.  It has been postulated that Eureka may well be an IOCG deposit, and we will investigate that prognosis.  At the time of writing, we are moving drilling equipment to further test the extension of strike. 

The Kalengwa processing project received much test work ranging from rudimentary upgrading to building a leach process site.  The latter was somewhat hampered by leaching results and the prospect of prolonged rains interfering with a 12-month operation.  We are settled on an upgrading process for the tailings and are confident that we can produce a +10% material for transport to Copperbelt processing facilities.  Drilling was carried out south of the open pit and we are confident that we can conduct primary mining south of the pit without necessarily blasting, since the material seems amenable to scraping.  A primary operation together with the hard rock dumps, justifies sulphide processing circuit and this will form the second part of our Kalengwa processing operation.

The Manica Fairbride operation in Mozambique continued but was severely hampered by the excessive rains in Manica, with the area suffering the tail end of two cyclones.  Construction of equipment in South Africa continued but smaller items could not be transported to site, because of Covid-19 restrictions between the borders of South Africa and Mozambique.  At the time of writing, the tailings dams are complete, civil works are in progress, most equipment has been manufactured and we are confident for a third quarter 2021 start-up of operations. 

The delays at the Fairbride project motivated us to approach our partners to investigate the Guy Fawkes and Boa Esperanza projects with local contracting groups.  We engaged a group to work on the Guy Fawkes project, which is predominantly underground.  They have established entrances to the orebody and are blocking the upper levels out for stoping.  Currently, they are mining a deeper entrance to block out deeper levels, prior to commencing more productive stoping methods. 

The alluvials continue to produce modest results, and since the date of commencing operations, we have made a surplus of income over expenditure in the current year, despite very adverse operating conditions, which are essentially deep overburden and low grade.  We are optimistic for gold production for the third quarter of this year, when all operations are active. 

The second part of 2021 should be very exciting for the Company since we have high expectations for production income increasing and receiving positive results from our phase 2 drilling programme in Australia.  We have succeeded in keeping all operations progressing through the Covid-19 outbreak, while minimising disruption.

I thank all of my fellow directors and staff for their efforts and contributions during the period under review and the period thereafter and look forward to their patience and effort bringing rewards to our shareholders towards year end.

Colin Bird

Executive Chairman

Consolidated Income Statement

For the year ended 31 December 2020

	Note	Year ended 31 December 2020 £'000	Year ended 31 December 2019 £'000 (Restated)
Continuing operations
Revenue from gold sales		1,752	1,351
Direct operating		(1,006)	(795)
Other operating		(45)	(116)
Administration		(1,040)	(903)
Operating and administrative expenses Project expenses		(2,091)   (96)	(1,814)   (298)
Operating loss		(462)	(761)
Other gains and (losses)	6	(164)	(153)
Finance (cost)/income	11	(181)	(176)
(Loss) before tax	8	(807)	(1,090)
Taxation	12	(107)	-
(Loss) for the period		(914)	(1,090)
Attributable to:
Equity holders of the parent		(914)	(1,090)
Net (loss) per share
Basic (pence)	13	(0.20)	(0.30)
Diluted (pence)	13	(0.20)	(0.30)

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2020

	Group
	Year ended 31 December 2020 £'000	Year ended 31 December 2019 £'000
(Loss) for the year	(914)	(1,090)
Other comprehensive income:
Items that may be reclassified subsequently to profit and loss	-	-
Exchange differences on translation of foreign operations	(210)	41
Other comprehensive income/(loss) for the year	(210)	41
Total comprehensive (loss) for the year	(1,124)	(1,049)
Attributable to:
Equity holders of the parent	(1,124)	(1,049)

Consolidated and Company Statements of Financial Position

As at 31 December 2020			Group		Company
	Note		As at 31 December 2020 £'000	As at 31 December 2019 £'000	As at 31 December 2020 £'000	As at 31 December 2019 £'000 (Restated)
Non-current assets
Intangible assets	14		11,978	10,318	438	-
Property, plant & equipment	15		19	24	-	-
Investment in subsidiary	16		-	-	9,823	8,533
Other financial assets			-	-	-	-
			11,997	10,342	10,261	8,533
Current assets
Trade and other receivables	19		147	167	285	758
Loans receivable	18		-	133	-	-
Inventories	20		8	117	-	-
Loans to group companies			-	-	2,426	2,514
Cash and cash equivalents			919	361	253	216
			1,074	778	2,964	3,488
Total assets			13,071	11,120	13,225	12,021
Current liabilities
Trade and other payables		22	1,051	336	362	147
Other payables		22	-	-	-	-
Current tax payable		22	93	-	-	-
Loans from group companies		22	-	-	11,483	11,450
			1,144	336	11,845	11,597
Net current assets/(liabilities)			(70)	442	(8,881)	(8,109)
Non-current liabilities
Other payables			-	-	-	-
Total liabilities			1,144	336	11,845	11,597
Net assets			11,927	10,784	1,380	424
Equity
Share capital		23	4,928	4,892	4,928	4,892
Share premium account			61,951	59,884	61,951	59,884
Warrant reserve		24	76	54	76	54
Share-based payments reserve		24	436	397	436	397
Fair Value reserve		24	-	-	-	-
Foreign currency translation reserve		24	66	276	-	-
Accumulated losses			(55,530)	(54,719)	(66,011)	(64,803)
Equity attributable to equity
holders of the parent			11,927	10,784	1,380	424
Total equity			11,927	10,784	1,380	424

 The financial statements of Xtract Resources Plc, registered number 5267047, were approved by the Board of Directors and authorised for issue. As permitted by Section 408 of the Companies Act 2006, the income statement of the parent company is not presented as part of these financial statements. The parent company's profit for the financial year is disclosed in Note 3. It was signed on behalf of the Company by:

Joel Silberstein

Director

25 June 2021

  C onsolidated Statement of Changes in Equity

Group

N o t e		Sha r e Capital £'00 0	Sha r e premium account £'00 0	W ar r a n t reserve £'00 0	Sha r e based payments reserve £'00 0	Fair value r e ser v e £'00 0	Foreign currency translation reserve £'000	Accumulated losses £'000		T o ta l Equity £'00 0
As at 1 January 2019 A s at 31 December 2016		4,874 3,355	58,926	450	298	- -	235		(54,076)	10,707
Comprehensive income C omp r ehensi v eincome
L o s sfortheyear		-	-	-	-	-	-		(1,090 )	(1,090 )
F o r e xcurrencytranslation
Dif f e r en c e s		-	-	-	-	-	41		-	41
Total comprehensive T o tal comprehensive
income for the year		-	-	-	-	-	41		(1,090 )	(1,049)
Issue of shares I s su eofshares		18	1,114	-	-	-	-		-	1,132
Share issue costs		-	(156)	-	-	-	-		-	(156)
E xpir yofwarrants		-	-	(447 )	-	-	-		447	-
Issue of share options	24	-	-	-	99	-	-		-	99
E x e r cis eofwarrants		-	-	-	-	-	-		-	-
I s su eofwarrants	24	-	-	51	-	-	-		-	51
As at 31 December 2019 A s at 31 December 2016		4,892 4,955	59,884	54	397	- -	276		(54,719)	10,784
Comprehensive income C omp r ehensi v eincome
L o s sfortheyear		-	-	-	-	-	-		(914 )	(914 )
F o r e xcurrency
t r ansl a tio ndifference		-	-	-	-	-	(210)		-	(210)
Total comprehensive T o tal comprehensive
income for the year		-	-	-	-	-	(210)		(914)	(1,124)
Issue of shares I s su eofshares	23	36	2,134	-	-	-	-		-	2,170
Sha r eissue costs		-	(67)	-	-	-	-		-	(67)
Issue of share options	24	-	-	-	142	-	-		-	142
Expiry of share options		-	-	-	-	-	-		-	-
I s su eofwarrants	24	-	-	22	-	-	-		-	22
As at 31 December 2020 A s at 31 December 2016		4,928 4,955	61,951	76	463	- -	66		(55,530)	11,927

S tatement of Changes in Equity

Company

N o t e		Sha r e Capital £'00 0	Sha r e premium account £'00 0	W ar r a n t reserve £'00 0	Sha r e based payments reserve £'00 0	Fair value r e ser v e £'00 0	Foreign currency translation reserve £'000	Accumulated losses £'000		T o ta l Equity £'00 0
As at 1 January 2019		4,874	58,926	450	298	-	-		(64,398)	150
Other Comprehensive income Other C omp r ehensi v eincome
L o s sfortheperiod		-	-	-	-	-	-		( 852 )	( 852 )
Other comprehensive income		-	-	-	-	-	-		-	-
Total comprehensive T o tal comprehensive
income for the year		-	-	-	-	-	-		( 852 )	( 852 )
Issue of shares I s su eofshares		18	1,114	-	-	-	-		-	1,132
Share issue costs		-	(156)	-	-	-	-		-	(156)
E xpir yofwarrants	24	-	-	(447 )	-	-	-		447	-
E xpir yofshareoptions		-	-	-	-	99	-		-	-
I s su eofwarrants	24	-	-	-	51	-	-		-	-
As at 31 December 2019 A s at 31 December 2016		4,892	59,884	54	397	-	-		(64,803)	424
Other Comprehensive income Other C omp r ehensi v eincome
L o s sfortheperiod		-	-	-	-	-	-		( 1,131 )	( 1,131 )
Other comprehensive income		-	-	-	-	-	-		-	-
Total comprehensive T o tal comprehensive
income for the year		-	-	-	-	-	-		( 1,311 )	( 1,311 )
Issue of shares I s su eofshares	23	36	2,134	-	-	-	-		-	2,170
Sha r e issue costs		-	(67)	-	-	-	-		-	(67)
E xpir yof options		-	-	-	(103 )	-	-		103	-
Issue of share options	24	-	-	-	142	-	-		-	142
I s su eofwarrants	24	-	-	22	-	-	-		-	22
As at 31 December 2020 A s at 31 December 2017		4,928	61,951	76	463	-	-		(66,011)	1,381

Consolidated and Company Cash Flow Statement

			Group		Company
	Note		Y e ar ended 31 December 2020 £'000	Y e ar ended 31 December 2019 £'000	Y e ar ended 31 December 2020 £'000	Y e ar ended 31 December 2019 £'000
Net cash generated from/(used in) operating activities		25	189	(895)	(234)	(1,062)
Investing activities
Acquisition of subsidiary undertaking			36	-	(9)	-
Acquisition of intangible fixed assets		14	(287)	(76)	(176)	-
Acquisition of tangible fixed assets		15	-	(5)	-	-
Loans advanced to group companies		19	-	-	(213)	-
Net cash (used in)/from investing activities			(251)	(81)	(398)	-
Financing activities
Proceeds on issue of shares			636	895	636	895
Repayment of loans from group companies			-	-	33	-
Net cash (used in)/from financing activities			636	895	669	895
Net decrease in cash and cash equivalents			574	(81)	37	(167)
Cash and cash equivalents at beginning of year			361	442	216	383
Effect of foreign exchange rate changes			(16)	-	-	-
Cash and cash equivalents at end of year			919	361	253	216
Significant Non Cash movements

Notes to the Financial Statements

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

1.  General information

  Xtract Resources Plc is a Public Company limited by shares incorporated in England and Wales under the Companies Act 2006. The address of the registered office is 7/8 Kendrick Mews, South Kensington, London, SW7 3HG. The nature of the Group's operations and its principal activities are set out in the Strategic Report on pages 4 to 26.

The financial statements are presented in pounds sterling (£) which is the functional currency of the Company Foreign operations are included in accordance with the policies set out in note 3. These annual financial statements were approved by the board of directors on 25 June 2021.

 

2.   Adoption of new and revised Standards

 

Basis of accounting

The consolidated annual financial statements have been prepared in accordance with international accounting standards and in conformity with the Companies Act 2006. The consolidated annual financial statements have been prepared on the historical cost basis, as modified by financial assets measured at fair value through other comprehensive income. The principal accounting policies are set out below.

New standards, amendments and interpretations adopted by the Company

The Company has applied the following standards and amendments for the first time for its annual reporting period commencing 1 January 2020:

· Definition of Material - Amendments to IAS 1 and IAS 8;

· Definition of a Business - Amendments to IFRS 3;

· Interest Rate Benchmark Reform - Amendments to IFRS 9, IAS 39 and IFRS 7;

· Revised Conceptual Framework for Financial Reporting;

· Annual Improvements to IFRS Standards 2018-2020 Cycle; and COVID-19 related rent concessions - amendments to IFRS.

The amendments listed above did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods.

New standards and interpretations not yet adopted

A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2021 and have not been applied in preparing these financial statements. None of these are expected to have a significant effect on the financial statements of the Company.

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

The directors are evaluating the impact that these standards will have on the financial statements of the Group.

3.  Significant accounting policies

Basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and entities controlled by the Company (its subsidiaries). These consolidated financial statements are made up for the year ended 31 December 2020.

Subsidiaries are all entities (including structured entities) over which the Group has control.  The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

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

Business combinations

The group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquire and the equity interests issued by the group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The group recognises any non-controlling interest in the acquire on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest's proportionate share of the recognised amounts of acquiree's identifiable net assets.

Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisition-date fair value. Subsequent changes in such fair values are adjusted against the cost of acquisition where they qualify as measurement period adjustments (see below). All other subsequent changes in the fair value of contingent consideration classified as an asset or liability are accounted for in accordance with relevant IFRSs. Contingent consideration is classified either as equity or as a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value, with changes in fair value recognised in profit or loss.

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

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

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

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

Going concern

The operations of the Group have been financed through operating cash flows as well as through funds which have been raised from shareholders. As at 31 December 2020, the Group held cash balances of £0.90 million and an operating loss has been reported. Since November 2017, the Group has been generating revenues, from its Manica Alluvial operations, which have been covering the Manica operating costs and not the costs for the rest of the Group. The Directors anticipate net operating cash outflows for the Group for the next twelve months from the date of signing these financial statements.

During the first half of 2021, the Group raised a total of £10.5 million before expenses.

The Directors have assessed the working capital requirements for the forthcoming twelve months and have  undertaken assessments which have considered different scenarios based on a number of production forecasts until June 2022.

Upon reviewing those cash flow projections for the forthcoming twelve months, the directors consider that the Company is not likely to require additional financial resources in the twelve-month period from the date of approval of these financial statements to enable the Company to fund its current operations and to meet its commitments. The Group will continue to monitor corporate overhead costs on an ongoing basis.

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

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

Parent only income statement

Xtract Resources Plc has not presented its own income statement as permitted by section 408 of the Companies Act 2006. The loss for the year ended 31 December 2020 was £1,311k (2019: loss £852k).

Foreign currencies

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

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

Foreign currency differences arising on retranslation into an entity's functional currency are recognised in profit and loss.

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

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

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

Taxation

The tax expense comprises current and deferred tax.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Company's subsidiaries operate and generate taxable income.  Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation.  It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred tax

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

Intangible assets

Land acquisition rights and mine development costs

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

Intangible exploration and evaluation expenditure assets

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

Property, plant and equipment

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

The average life in years is estimated as follows:

Office and computer equipment  3-10

Plant and machinery  7-15

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

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

Impairment of tangible and intangible assets excluding goodwill

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

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

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

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

Financial instruments

Classification

The Group classifies its financial assets in the following categories: at amortised cost including trade receivables and other financial assets at amortised cost, at fair value through other comprehensive income. The classification depends on the purpose for which the financial assets were acquired.  Management determines the classification of its financial assets at initial recognition.

Trade receivables

Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. They are generally due for settlement within 30 days and are therefore all classified as current. Trade receivables are recognised initially at the amount of consideration that is unconditional, unless they contain significant financing components, in which case they are recognised at fair value. The group holds the trade receivables with the objective of collecting the contractual cash flows, and so it measures them subsequently at amortised cost using the effective interest method.

Fair values of trade receivables

Due to the short-term nature of the current receivables, their carrying amount is considered to be the same as their fair value.

Other financial assets at amortised cost

Classification of financial assets at amortised cost

The group and parent company classify its financial assets as at amortised cost only if both of the following criteria are met:

· the asset is held within a business model whose objective is to collect the contractual cash flows; and

· the contractual terms give rise to cash flows that are solely payments of principle and interest.

Other receivables

These amounts generally arise from transactions outside the usual operating activities of the group. Interest could be charged at commercial rates where the terms of repayment exceed six months. Collateral is not normally obtained. The non-current other receivables are due and repayable within three years from the end of the reporting period.

Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These are initially and subsequently recorded at fair value.  

Financial assets at fair value through other comprehensive income

Classification of financial assets at fair value through other comprehensive income

Financial assets at fair value through other comprehensive income (FVOCI) comprise an investment held. These are carried in the statement of financial position at fair value. Subsequent to initial recognition, changes in fair value are recognised in the statement of other comprehensive income.

Financial liabilities

Trade and other payables

Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method.

Loans to/(from) Group companies

These include loans to and from subsidiaries are recognised initially at fair value plus direct transaction costs.

Loans to Group companies are classified as financial assets at amortised cost. Loans from Group companies are classified as financial liabilities measured at amortised cost.

Inter-company loans are interest bearing.

Cash and Cash Equivalents

  Cash and cash equivalents in the statement of financial position comprise cash at banks and on hand and short term highly liquid deposits with a maturity of three months or less.  

Offsetting Financial Instruments

Financial assets and liabilities are offset and the net amount reported in the Statement of Financial Position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the company or the counterparty.

Invetory

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

Share-based payments

Goods or services received or acquired in a share-based payment transaction are recognised when the goods or as the services are received. A corresponding increase in equity is recognised if the goods or services were received in an equity-settled share-based payment transaction or a liability if the goods or services were acquired in a cash-settled share based payment transaction.

When the goods or services received or acquired in a share-based payment transaction do not qualify for recognition as assets, they are recognised as expenses.

For equity-settled share-based payment transactions the goods or services received and the corresponding increase in equity are measured, directly, at the fair value of the goods or services received provided that the fair value can be estimated reliably.

If the fair value of the goods or services received cannot be estimated reliably, or if the services received are employee services, their value and the corresponding increase in equity, are measured, indirectly, by reference to the fair value of the equity instruments granted.

Vesting conditions, which are not market, related (i.e. service conditions and non-market related performance conditions) are not taken into consideration when determining the fair value of the equity instruments granted. Instead, vesting conditions which are not market related shall be taken into account by adjusting the number of equity instruments included in the measurement of the transaction amount so that, ultimately, the amount recognised for goods or services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest. Market conditions, such as a target share price, are taken into account when estimating the fair value of the equity instruments granted. The number of equity instruments are not adjusted to reflect equity instruments which are not expected to vest or do not vest because the market condition is not achieved.

If the share-based payments granted do not vest until the counterparty completes a specified period of service, Group accounts for those services as they are rendered by the counterparty during the vesting period, (or on a straight- line basis over the vesting period).

If the share-based payments vest immediately the services received are recognised in full.

Employee benefits

Short-term employee benefits

The cost of short-term employee benefits, (those payable within 12 months after the service is rendered, such as paid vacation leave and sick leave, bonuses, and non-monetary benefits such as medical care), are recognised in the period in which the service is rendered and are not discounted.

The expected cost of compensated absences is recognised as an expense as the employees render services that increase their entitlement or, in the case of non- accumulating absences, when the absence occurs.

The expected cost of profit sharing and bonus payments is recognised as an expense when there is a legal or constructive obligation to make such payments as a result of past performance.

 

 

Share-capital and equity

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Share Capital

Share capital represents the amount subscribed for shares at nominal value.

Share Premium

The share premium account represents premiums received on the initial issuing of the share capital. Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits.

Share-Based Payment Reserve

The share-based payment reserve represents the cumulative amount which has been expensed in the statement of comprehensive income in connection with share-based payments, less any amounts transferred to retained earnings on the exercise of share options.

Warrant Reserve

The warrant reserve presents the proceeds from issuance of warrants, net of issue costs. Warrant reserve is non-distributable and will be transferred to share premium account upon exercise of warrants.

 

Finance Income

Finance income comprises interest income. Interest income is recognised as it accrues in profit or loss, using the effective interest method.

Revenue recognition

Revenue is recognised to the extent it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable, excluding discounts, rebates and sales tax or duty. Revenue from sales of gold dore bars, is recognised when control of the products has transferred, that is, when the products are delivered to the customer.  A receivable is recognised when the goods are delivered, since this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.

Segment reporting

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

4. Critical accounting judgements and key sources of estimation uncertainty

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

The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

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

  Financial Assets Fair Value through Comprehensive Income 

The Group reviews the fair value of its unquoted equity instruments at each statement of financial position date. This requires management to make an estimate of the fair value of the unquoted securities in the absence of an active market, which has mainly been established by use of recent arm's length transactions, as adjusted by a discount, where required. Uncertainty also exists due to the early stage of development of certain of the investments.

Impairment of intangible assets

The assessment of intangible assets for any indications involves judgement. Such assets have an indefinite useful life as the Company has a right to renew exploration licences and the asset is only amortised once extraction of the resource commences. Management tests for impairment annually whether exploration projects have future economic value in accordance with the accounting policy stated in Note 14. Each exploration project is subject to an annual review by either a consultant or a geologist to determine if the exploration results returned during the period warrant further exploration expenditure and have the potential to result in an economic discovery. This review takes into consideration long term metal prices, anticipated resource volumes and supply and demand outlook. In the event that a project does not represent an economic exploration target and results indicate there is no additional upside a decision will be made to discontinue exploration; an impairment charge will then be recognised in the Income Statement.

Share-based payments

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

8.  Expenses by nature

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

		Year ended 31 December 2020	Year ended 31 December 2019
	Note	£'000	£'000
Depreciation of property, plant and equipment	15	-	-
Amortisation of intangible fixed assets	14	-	-
Inventory		97	(43)
Auditors remuneration	9	29	21
Directors remuneration	10	314	250
Share-based payments expense	26	122	98

13. (Loss) per share

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

	Year ended 31 December 2020 £'000	Year ended 31 December 2019 £'000
(Loss) for the purposes of basic and diluted earnings per share (EPS) being:
Net (loss) for the year from continuing operation attributable to equity holders of the parent	(914)	(1,090)
	(914)	(1,090)
	Number of shares	Number of shares
W eighted average number of ordinary shares for purposes of basic EPS	487,748,658	383,652,633
Effect of dilutive potential ordinary shares-options and warrants	-	-
W eighted average number of ordinary shares for purposes of diluted EPS	487,748,658	383,652,633

In accordance with IAS 33, the share options and warrants do not have a dilutive impact on earnings per share, which are set out in the consolidated income statement. 

22. Trade and other payables

	Group		Company
	As at	As at	As at	As at
	31 December 2020	31 December 2019	31 December 2019	31 December 2018
	£'000	£'000	£'000	£'000
Trade creditors and accruals	1,051	336	362	147
Amounts due to subsidiaries	-	-	11,483	11,450
Current tax payable	93	-	-	-
	1,144	336	11,845	11,597

32. Ultimate controlling party

The Directors believe there is no ultimate controlling party.

33. Events after the balance sheet date

Issue of Equity

On 21 January 2021, the Company announced that it conditionally raised £5 million following the placement of 111,111,111 new Ordinary Shares of 0.02p each at 4.5p per share.

On 2 February 2021, the Company announced that it has received notice to exercise warrants over 2,000,000 ordinary shares of 0.02p each in the Company at an exercise price of 1.85p per Ordinary Share.

On 2 February 2021, the Company agreed to settle a corporate creditor through the issuance 2,103,152 new ordinary shares at an issue price of 5.03p per Ordinary Share.

On 5 March 2021 the Company received notice to exercise options over 5,000,000 ordinary shares of 0.02p each in the Company at an exercise price of 1.85p per Ordinary Share.

On 17 March 2021 the Company received notice to exercise options over 2,000,000 ordinary shares of 0.02p each in the Company at an exercise price of 1.25p per Ordinary Share.

On 19 April 2021 the Company announced that it had conditionally raised £5.5 million following the placement of 98,214,286 new Ordinary Shares of 0.02p each at 5.6p per share.

On 21 May 2021 the Company received notice to exercise warrants over 1,625,000 ordinary shares of 0.02p each in the Company at an exercise price of 1.20p per Ordinary Share.

Award of Share Options

On 24 February 2021, the Company awarded 24,800,000 new options over ordinary shares. 16,000,000 New Options were awarded to Directors and a further 8,800,000 New Options were awarded to employees, consultants and officers of the Company.

The New Options vest and are exercisable immediately on award, with an exercise price of 10.00p. The New Options will lapse five years after the date of the award.

Qualified Person

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

ENDS

 

END

 

 

FR SEMSUAEFSEIM