TIDMCMET
RNS Number : 5391A
Capital Metals PLC
26 September 2022
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS STIPULATED
UNDER THE UK VERSION OF THE MARKET ABUSE REGULATION NO 596/2014
WHICH IS PART OF ENGLISH LAW BY VIRTUE OF THE EUROPEAN (WITHDRAWAL)
ACT 2018, AS AMED. ON PUBLICATION OF THIS ANNOUNCEMENT VIA A
REGULATORY INFORMATION SERVICE, THIS INFORMATION IS CONSIDERED TO
BE IN THE PUBLIC DOMAIN.
26 September 2022
Capital Metals plc
("Capital Metals" or the "Company")
Final Results for the Year Ended 31 March 2022
&
Notice of General Meeting
Capital Metals (AIM: CMET), a mineral sands company approaching
mine development stage at the Eastern Minerals project in Sri Lanka
(the "Project"), one of the highest-grade mineral sands projects
globally, is pleased to announce its final results for the
financial year ended 31 March 2022 (the "Year").
The Group's Annual Report and Accounts, along with the Company's
Notice of General Meeting ("GM"), which will be held to receive and
consider the Annual Report and Accounts, will be posted to
shareholders later today and will be available shortly on the
Group's website at www.capitalmetals.com . The GM will be held at
11:30 a.m. on 28 October 2022 at 48 Warwick Street, London, W1B
5AW.
Highlights:
-- Approval by the Coast Conservation and Coastal Resources
Management Department in Sri Lanka of Environmental Impact
Assessment
-- Executed drilling programme which delivered exceptional higher grades:
o All results from surface to a maximum of only 3.5m depth (with
an average depth 1.5m) ended in mineralisation
o +30% Total Heavy Minerals ("THM") and average grade of 19.37%
THM from 560 drill holes, compared to existing JORC resource grade
of 17.6%
-- Grant of additional Exploration Licence, providing a further
12 km of contiguous coverage over a total area of 24 km(2)
including the Oluvil Port
-- Cash balance of $1,776,000 at 31 March 2022
-- Continued work with local communities
Post Year End:
-- Completion of Development Study and Project Economics
demonstrating robust economics with a base case NPV of $155 million
and IRR of 56%
-- Grant of the first two Industrial Mining Licences ("IMLs")
Gregory Martyr, Chairman, commented:
"This has been an extremely busy period and we are delighted
that the activities undertaken led to the grant, in August 2022, of
the first two IMLs. The IMLs are a major step forward in enabling
the commencement of mining activities, and the advancement of
ongoing discussions with offtakers, debt providers and other
strategic funding parties.
The strong current and forecast prices for our minerals, coupled
with the clear potential for further expansion of our high-grade
resource, provides excellent potential to further enhance the
economics of the Project which are already compelling. We thank our
shareholders for their continuing support as we remain focused on
our objective of delivering sustainable value."
For further information, please visit www.capitalmetals.com or
contact:
Capital Metals plc Via Vigo Consulting
Michael Frayne (CEO)
James Mahony (CFO)
Vigo Consulting (Investor Relations) +44 (0)20 7390 0234
Ben Simons / Peter Jacob capitalmetals@vigoconsulting.com
SPARK Advisory Partners (Nominated
Adviser)
Neil Baldwin / James Keeshan +44 (0)20 3368 3554
WH Ireland Limited (Joint Broker)
Harry Ansell / Katy Mitchell +44 (0)20 7220 1666
Tavira Securities Limited (Joint
Broker)
Jonathan Evans / Oliver Stansfield +44 (0)20 7100 5100
About Capital Metals
Capital Metals is developing the Eastern Minerals Project in Sri
Lanka, approximately 220km east of Colombo. The Project is one of
the highest-grade mineral sands projects globally, with a current
JORC Resource of 17.2Mt with an average grade of 17.6% Total Heavy
Minerals, and potential for significant resource extension. In May
2022, a third-party Preliminary Economic Assessment ("PEA")
provided an NPV for the Project of US$155-235M based on existing
resources, with further identified optimisation potential. The PEA
outlined an attractive low funding requirement of US$37.3M, with
expansions funded through cashflows from the Project, which is
forecast to deliver US$645M of revenue and net operating cashflows
of US$391M.
CMET's goal is to become a high margin producer of mineral sands
for the international market, with a commitment to applying
best-in-class mining practices and bringing significant positive
benefits to Sri Lanka and the local community. We expect over 300
direct new jobs to be created and over US$100m in direct government
royalties and taxes to be paid.
For more information, visit our website www.capitalmetals.com
and follow us on social media:
LinkedIn: https://www.linkedin.com/company/capitalmetals/
Twitter: https://twitter.com/MetalsCapital
Chairman's Report
Welcome to the Annual Report for Capital Metals plc (the
"Company") for the financial year ended 31 March 2022 (the
"Year").
This has been an extremely busy period for the management and
Board of the Company and we are delighted that it culminated in the
grant in August 2022 by the Geological Survey and Mines Bureau of
the Government of Sri Lanka of the first two Industrial Mining
Licences ("IMLs") for the Eastern Minerals heavy mineral sands
project (the "Project"). The IMLs are a major step forward in
enabling the commencement of mining activities, in accordance with
the development plan outlined in the Preliminary Economic
Assessment completed in May 2022, and the advancement of ongoing
discussions with offtakers, debt providers and other strategic
funding parties.
We are grateful to the Sri Lankan authorities for their
cooperation, especially given the current economic and political
situation, and believe this represents a strong endorsement of the
Project and its future benefits to Sri Lanka. These IMLs are the
culmination of a rigorous approval process and importantly provide
a basis for the granting of further Industrial Mining Licences. I
would like to congratulate our management team in Sri Lanka and
thank those stakeholders working in the Sri Lankan government
departments for their continued assistance.
The Board and local management team are continuing to monitor
the economic and political developments in Sri Lanka and we are
encouraged by the announcement on 1 September 2022 by the
International Monetary Fund ("IMF") of a staff-level agreement to
support Sri Lanka's economic policies. The objectives of Sri
Lanka's new IMF-supported programme include the restoration of
macroeconomic stability and debt sustainability, while safeguarding
financial stability, stepping up structural reforms and unlocking
Sri Lanka's growth potential. As a future contributor of foreign
earnings and job creation opportunities from the Project, we look
forward to playing our part in that economic recovery.
Significant achievements in addition to the granting of the IMLs
during and after the Year under review include:
-- The drilling programme which commenced in October 2021 which
delivered exceptional higher grades. All results from surface to a
maximum of only 3.5m depth (with an average depth 1.5m) ended in
mineralisation. Exceptional high-grade results of +30% Total Heavy
Minerals ("THM") and average grade of 19.37% THM from 560 drill
holes, compared to the existing JORC resource grade of 17.6%,
indicating the potential for both volume and grade increases.
-- The approval by the Coast Conservation and Coastal Resources
Management Department in Sri Lanka ("CCD") of the Environmental
Impact Assessment in November 2021, which resulted in the issue of
a development activity permit covering the northern half of the
Project, paving the way for the approval of the IMLs.
-- The granting of an additional strategic Exploration Licence
in March 2022, which extends from the northern boundary of the
Project and provides a further 12 km of contiguous coverage over a
total area of 24 km2 including the Oluvil Port.
-- The completion of the Development Study and Project Economics
in May 2022 demonstrating robust economics with a base case NPV of
$155 million and IRR of 56%.
-- Continued work with the local communities and Sri Lanka as a
whole where we are increasingly seeing a growing awareness of the
positive economic and social benefits that the Project can
bring.
Looking forward, the team has been active in developing
exploration programmes to extend the high-grade resource, with
several identified potential areas that could be drilled to
increase the total resource. The Project currently has a JORC
Resource of 17.2 Mt with an average grade of 17.6% THM. Limited
sonic drilling so far undertaken offers a compelling indication of
deeper mineralisation, including assays of 26.3% and 26.6% THM at
respective depths of 14m and 8m. The Project's THM grades are some
of the highest in the global peer group. Less than 10% of the total
Project area has been drilled to date. Initial exploration also
suggests potential for significant mineralisation further inland.
Additional work is planned in due course for infill and step out
drilling. We are extremely excited about the potential to expand
our resource and we look forward to updating you on further
exploration activities over the coming year.
The Company has been closely involved in the community and
social development in the Ampara District of the Eastern Province
since it first started working there. To this end, we set about
funding a number of community projects including beach clean ups,
pre-school projects, water projects and COVID-19-related projects.
We are deeply committed to community programmes in the areas in
which we operate, not only to ensure that local communities share
in the benefits of future mining activity but also as part of the
Company's long-term social licence to operate.
The strong current and forecast prices for our minerals, coupled
with the clear potential for further expansion of our high-grade
resource, provides excellent potential to further enhance the
economics of the Project which are already compelling. Indeed, the
results of the Development Study and Preliminary Economic
Assessment announced in May 2022 confirmed the exceptional
economics of the Project even on price assumptions well below the
current market prices for our minerals, and before considering any
further upside from potential resource extensions. With the low
funding requirement of $37.3 million to reach positive cash flow in
the construction of the Project, we have a range of financing
options available to the Company, including offtake financing
structures and/or project debt, strategic partnering options, all
of which are the subject of ongoing discussions. Please refer to
the Going Concern Note 2.4.
We look forward to keeping shareholders updated with further
progress as we work with all stakeholders to bring the Project into
production in a timely manner. We would also like to thank our
shareholders for their continuing support as we remain focused on
our objective of delivering sustainable value.
Gregory Martyr
Chairman
23 September 2022
Strategic Report
The Directors of the Company present their Strategic Report on
the Group for the year ended 31 March 2022 .
Strategic approach
The Group's aim is to create value for shareholders through the
exploration and development of high grade mineral sands. The
Group's strategy is to continue to progress the development of the
Project in Sri Lanka towards production in the near future.
Organisation overview
The Group's business is directed by the Board and is managed on
a day-to-day basis by the Chief Executive Officer. The Board
monitors compliance with objectives and policies of the Group
through monthly performance reporting, budget updates and periodic
operational reviews.
The Board comprises of one Non-Executive Chairman, one Executive
Director and two Non-Executive Directors.
Review of business
During the year the work programme built on previous exploration
efforts continued and additional exploration licences were also
granted. Further financing was raised with the completion of a
Placing, raising a total of $1,641,000 through the placing of
16,666,666 Ordinary Shares.
Since the year end, the first two Industrial Mining Licences for
the Project were granted by the Geological Survey and Mines Bureau
as outlined in the Preliminary Economic Assessment which was
completed in May 2022.
Financial performance review
The loss of the Group for the year ended 31 March 2022 before
taxation amounts to $1,914,000 (31 March 2021: $7,886,000 ) .
The Board monitors the activities and performance of the Group
on a regular basis. The Board uses financial indicators based on
budget versus actual to assess the performance of the Group. The
indicators set out below will continue to be used by the Board to
assess performance over the period to 31 March 2023.
The three main KPIs for the Group are as follows. These allow
the Group to monitor costs and plan future exploration and
development activities:
KPI 2022 2021
-------------------------------------------------- ----------- -----------
Cash and cash equivalents $1,776,000 $1,797,000
-------------------------------------------------- ----------- -----------
Administrative expenses as a percentage of total
assets 18% 17%
-------------------------------------------------- ----------- -----------
Exploration costs capitalised during the period $490,000 $133,000
-------------------------------------------------- ----------- -----------
Cash has been used to fund the Group's operations and facilitate
its investment activities (refer to the Statements of Cash
Flows.
Administrative expenses are the expenses related to the Group's
ability to run the corporate functions to ensure they can perform
their operational commitments.
Exploration costs capitalised during the period consist of
exploration expenditure on the Group's exploration licences net of
foreign exchange rate movements.
Principal risks and uncertainties
The management of the business and the execution of the Group's
strategy are subject to a number of risks. The key business risks
affecting the Group are outlined below.
The Company continuously monitors its risk exposures and reports
to the Board on a regular basis. Risks are reviewed by management
and the Board, and appropriate processes are put in place to
monitor and mitigate them. If more than one event occurs, it is
possible that the overall effect of such events would compound the
possible adverse effects on the Group.
Exploration, evaluation and development risk
The exploration and mining business is controlled by a number of
global factors, principally supply and demand which in turn is a
key driver of global mineral prices; these factors are beyond the
control of the Group. Exploration is a high-risk business and there
can be no guarantee that any mineralisation discovered will result
in proven and probable reserves or go on to be an operating mine.
At every stage of the exploration process the projects are
rigorously reviewed to determine if the results justify the next
stage of exploration expenditure ensuring that funds are only
applied to high priority targets.
The principal assets of the Group comprising the mineral
exploration licences are subject to certain financial and legal
commitments. If these commitments are not fulfilled the licences
could be revoked. They are also subject to legislation defined by
the Government; if this legislation is changed it could adversely
affect the value of the Group's assets.
Dependence on key personnel
The Group and Company is dependent upon its executive management
team and various technical consultants. Whilst it has entered into
contractual agreements with the aim of securing the services of
these personnel, the retention of their services cannot be
guaranteed. The development and success of the Group depends on its
ability to recruit and retain high quality and experienced staff.
The loss of the service of key personnel or the inability to
attract additional qualified personnel as the Group grows could
have an adverse effect on future business and financial
conditions.
Uninsured risk
The Group, as a participant in exploration and development
programmes, may become subject to liability for hazards that cannot
be insured against or third party claims that exceed the insurance
cover. The Group may also be disrupted by a variety of risks and
hazards that are beyond control, including geological, geotechnical
and seismic factors, environmental hazards, industrial accidents,
occupational and health hazards and weather conditions or other
acts of God.
Funding risk
The only sources of funding currently available to the Group are
through the issue of additional equity capital in the parent
company or through bringing in partners to fund exploration and
development costs. The Company's ability to raise further funds
will depend on the success of the Group's exploration activities
and its investment strategy. The Company may not be successful in
procuring funds on terms which are attractive and, if such funding
is unavailable, the Group may be required to reduce the scope of
its exploration activities or relinquish some of the exploration
licences held for which it may incur fines or penalties.
Financial risks
The Group's operations expose it to a variety of financial risks
that can include market risk (including foreign currency, mineral
price and interest rate risk), credit risk, and liquidity risk. The
Group has a risk management programme in place that seeks to limit
the adverse effects on the financial performance of the Group by
monitoring levels of debt finance and the related finance costs.
The Group does not use derivative financial instruments to manage
interest rate costs and, as such, no hedge accounting is
applied.
Environmental risk
There may be unforeseen environmental liabilities resulting from
both future or historic exploration or mining activities, which may
be costly to remedy. In addition, potential environmental
liabilities as a result of unfulfilled environmental obligations by
the previous owners may impact the Group. If the Group is unable to
fully remedy an environmental problem, it may be required to stop
or suspend operations or enter into interim compliance measures
pending completion of the required remedy.
Environmental management systems are in place to mitigate
environmental risks, including the engagement of an independent and
multi-disciplinary team of consultants.
Government regulation, political and country risks
The Project is located in Sri Lanka, where the Group's
activities may be affected in varying degrees by political
stability, governmental regulations and economic stability. Any
changes in regulations or shifts in political attitudes in these
countries or any other countries in which the Group may operate are
beyond the control of the Group and may adversely affect its
operations.
The Group actively monitors political and regulatory
developments through its team of management, local partners,
consultants and advisors.
Environmental, Social and Governance
The Project has the potential to open significant new economic
opportunities in eastern Sri Lanka, and the Group's work with local
communities and commitment to ecologically sensitive production
procedures that ensures all mining areas are fully rehabilitated.
Some benefits to the local community from development of the
Project include:
-- New high-quality construction, mining and processing work for
local workers as well as demand for local contracting services. The
Group's construction, mining and processing work will employ local
workers, who will be trained and supported by local and foreign
mining experts. Demand for contractor services is expected to
create a multiplier effect benefiting the wider economy and
transferring skills/knowledge to the local work force.
-- Community initiatives include waste disposal programmes,
ongoing financial and logistical support for a new pre-school, new
drinking water infrastructure, sponsorship of female
entrepreneurship.
-- Full consultation with the local community on any potential
environmental impact from the Project, and commitment to
state-of-the-art mineral sands processing integrating land
rehabilitation into the mining process.
-- Potential to free up the port for the local fishing industry
and commercial shipping by removing the significant volume of sand
that has filled the port area due to the coastal currents
depositing sand in the harbour.
-- Taxes and royalties flowing from the Group's operations will
generate government revenues for reinvestment in Sri Lanka's
continued economic development.
-- The Country will also benefit from foreign direct investment
to bring the mine into production and export earnings from the sale
of the products into the international market.
The economic activity stimulated by the Project will be
complemented by the Group's ongoing engagement with the Eastern
Province's local community. The Company has already demonstrated
its commitment to the coastal environment in which it will operate
by organising beach cleaning programmes with community leaders,
including the Sivan temple at Thambiluvil, with the collected
plastic waste transported to the local council refuse centre for
ecological disposal.
For the past three years, the Group has sponsored a new
pre-school in the village of Umiri, currently supporting 15
students and two teachers, where residents have struggled for years
for the resources to secure a good education for their children.
The Group has worked in partnership with the local authority and
village council to furnish a village hall with new furniture,
stationery and equipment, and provides ongoing support through
building maintenance, payment of school staff salaries,
replenishment of school stationery, transportation, and the supply
of safe drinking water through drier months. The Group is currently
working with the village to provide long term drinking water
facilities.
The Group is working closely with local communities in the
Project area, to empower female entrepreneurs supplying furniture,
chairs, and other essentials for the Women's Rural Development
Society. Another initiative helps members of the Society and other
local women embrace sustainable agricultural practices through home
gardening and small-scale farming projects.
The Board and local management team are monitoring the economic
and political developments in Sri Lanka. The Board expects that
recent political changes should enable change to occur more rapidly
with increased international cooperation and an overriding
requirement to encourage foreign investment and job creation in the
country.
Environmentally sensitive mining
The Group is committed to pursuing a state-of-the-art mineral
sands mining process that will respect the coastline along which
the Project will operate.
The Project's commercial mineral sands will be extracted using
proven non-chemical processing methods. The proposed mining method
is staged mining of small 150m x 50m cells, with each cell
continuously rehabilitated after mining and then fully available
for alternative uses such as agriculture and tourism, or to remain
as a wilderness.
Well-regulated mineral sands programmes integrate land
rehabilitation into the mining process. The shallow depth of
mineral sands deposits allow them to be mined using conventional
surface mining methods including bulldozers, excavators and trucks.
Topsoil, subsoil and clay is removed and stockpiled separately to
allow it to be progressively returned after the mining process. The
mineral sand deposit is then removed from the ground and then
pumped as a slurry to a processing plant where the valuable heavy
minerals are separated from the sand. The waste sand (mostly
silica) is pumped back to the mining cell, where it is returned to
the ground. Subsoil and topsoil are then replaced and the land
rehabilitated back to its original use.
Directors' statement under section 172 (1) of the Companies Act
2006
The Companies (Miscellaneous Reporting) Regulations 2018 require
Directors to explain how they considered the interests of key
stakeholders and the broader matters set out in section 172(1) (a)
to (f) of the Companies Act 2006 ("S172") when performing their
duty to promote the success of the Company under S172. This
includes considering the interest of other stakeholders which will
have an impact on the long-term success of the company.
This S172 statement explains how the Directors have regard
to:
(a) the likely consequences of any decision in the long term,
(b) the interests of the Company's employees,
(c) the need to foster the Company's business relationship with
suppliers, customers and others,
(d) the impact of the Company's operations on the community and environment,
(e) the desirability of the Company maintaining a reputation for
high standards of business conduct, and
(f) the need to act fairly as between members of the Company.
The S172 statement focuses on matters of strategic importance to
the Company and the Group, and the level of information disclosed
is consistent with the size and the complexity of the business.
General confirmation of Directors' duties
The Board has a clear framework for determining the matters
within its remit and has approved Terms of Reference for the
matters delegated to its Committees. Certain financial and
strategic thresholds have been determined to identify matters
requiring Board consideration and approval. When making decisions,
each Director ensures that they act in good faith in the way most
likely to promote the Company's success for the benefit of its
members as a whole.
S172(1) (a) "The likely consequences of any decision in the long
term"
The application of the Section 172 (1) requirements can be
demonstrated in relation to some of the key decisions made during
the reporting period, including:
-- approval of the EIA and final permitting towards grant of
Industrial Mining Licence for the Project, which has subsequently
been granted post year end
-- an additional strategic exploration licence being granted
-- completion of equity financing raising $1,641,000 to further
the companies exploration program
-- commitment to an updated scoping and development study for the Project
-- commitment to developing an exploration strategy for the
Project towards increasing the overall resource and target of high
value areas of the Project
-- continued assessment of corporate overheads and expenditure
The Group is focused on the development of the Eastern Minerals
Project in Sri Lanka. The raising of new capital advances the
Company's objective, facilitating access to a significant and
globally respected financial market to raise funds from London's
deep pool of institutional and private investors, towards the
development of the Project, whilst providing important liquidity to
shareholders.
The EIA approval and grant of the IML, is a key milestone
towards the development of the Project and driving significant
further shareholder value.
The undertaking of an updated scoping and development study will
enhance the technical and economic understanding of the Project
towards progressing its commercial development and the significant
economic and social benefit to stakeholders.
Although the current resource is of sufficient size for
commercial mining operations, the Group is to develop an
exploration strategy towards increasing the size of the resource
and target of high value areas, enhance the economics of the
Project and drive further value to shareholders, as well as further
socio-economic benefits to stakeholders through increased
production. The undertaking of further significant drilling will be
subject to procuring sufficient further funding.
Management assesses overheads and expenditure on an ongoing
basis towards the most effective utilisation of funds to meet Group
business and strategic objectives to the benefit of
shareholders.
S172(1) (b) "The interests of the company's employees"
The Board recognises that the Company's employees are
fundamental and core to our business and delivery of our strategic
ambitions. The success of our business depends on attracting,
retaining and motivating employees. From ensuring that we remain a
responsible employer, from pay and benefits to our health, safety
and workplace environment, the Directors factor the implications of
decisions on employees and the wider workforce, where relevant and
feasible.
S172(1) the "The need to foster the company's business
relationships with suppliers, customers and others"
Delivering on our strategy to develop the Project requires
strong mutually beneficial relationships with suppliers, customers,
governments, and local partners. We aim to have a positive and
enduring impact on the communities in which we operate, including
engagement with local suppliers, and through payments to
governments in taxes and other fees. The Group values all of its
suppliers and aims to build strong positive relationships through
open communication and adherence to trade terms. The Group is
committed to being a responsible entity and doing the right thing
for its customers, suppliers and business partners.
S172(1) (d) "The impact of the company's operations on the
community and the environment"
As a mineral sands Group operating in Sri Lanka, the Board takes
seriously its ethical responsibilities to the communities and
environment in which it works. We abide by the local and relevant
UK laws on anti-corruption and bribery. The Group is committed to
following international best practice on environmental aspects of
our work and the development of the Project. We actively engage
with the local communities in order to ensure we maintain our
social licence to operate and develop the Project. Management and
employees conduct site visits and hold external stakeholder
engagements. Wherever possible, local communities are engaged in
the Group's activities and the development of the Project will
provide much needed employment and wider socio-economic benefits to
the local communities.
S172(1) (e) "The desirability of the company maintaining a
reputation for high standards of business conduct"
The Group aims to achieve the development of the Project in ways
which are economically, environmentally and socially responsible.
The Board periodically reviews and approves clear frameworks, such
as the Company's Code of Business Ethics, to ensure that its high
standards are maintained both within the Group and the business
relationships we maintain. This, complemented by the various ways
the Board is informed and monitors compliance with relevant
governance standards, help ensure its decisions are taken and that
the Group acts in ways that promote high standards of business
conduct.
S172(1) (f) "The need to act fairly as between members of the
company"
After weighing up all relevant factors, the Directors consider
which course of action best enables delivery of our strategy over
the long-term, taking into consideration the impact on
stakeholders. The Directors believe they have acted in the way they
consider most likely to promote the success of the Company for the
benefit of its members as a whole.
The Board is committed to maintaining good communication and
having constructive dialogue with its shareholders. The Company has
close ongoing relationships with key private shareholder, analysts
and brokers, providing the opportunity to discuss issues and
provide feedback at meetings with the Company. All shareholders are
encouraged to attend the Company's Annual General Meeting and any
general meetings held by the Company.
Outlook
The reporting period saw positive progress towards the major
milestones of the approval of the EIA and Industrial Mining
Licences, both of which have now been completed.
In common with many exploration and evaluation entities, the
Group will need to raise further funds within the next 12 months,
in order to meet its expected expenditures, and progress the Group
into the next phase of definitive feasibility, and then into
construction and finally into production. For further details
please see the going concern disclosure in Note 2.4.
We look forward to reporting on the next phase of the Project,
including the potential expansion of the Resource, as well as
further technical, engineering and economic studies towards
construction and bringing the Project into production.
Michael Frayne
Chief Executive Officer
23 September 2022
Directors' Report
The Directors present their Annual Report on the affairs of
Capital Metals plc together with the Financial Statements for the
year ended 31 March 2022.
Principal activities
The principal activity of the Group is the development of the
Eastern Minerals Project located in the Ampara District of the
Eastern Province of Sri Lanka.
Dividends
The Directors do not recommend the payment of a dividend for the
year (2021: Nil).
Directors & Directors' interests
The Directors who served during the year ended 31 March 2022 are
shown below and had, at that time the following beneficial
interests in the shares of the Company:
31 March 2022 31 March 2021
----------------------- -----------------------
Ordinary Options Ordinary Options
Shares Shares
-------------------- ----------- ---------- ----------- ----------
Gregory Martyr 4,582,746 1,500,000 4,582,746 1,500,000
-------------------- ----------- ---------- ----------- ----------
Michael Frayne 13,190,006 3,000,000 13,056,672 3,000,000
-------------------- ----------- ---------- ----------- ----------
Anthony Samaha (1) - - 347,881 1,500,000
-------------------- ----------- ---------- ----------- ----------
Geoffrey Brown (2) 26,447 500,000 26,447 500,000
-------------------- ----------- ---------- ----------- ----------
James Leahy 188,333 1,500,000 55,000 1,500,000
-------------------- ----------- ---------- ----------- ----------
Teh Kwan Wey - 500,000 - 500,000
-------------------- ----------- ---------- ----------- ----------
(1) Anthony Samaha resigned on 29 October 2021.
(2) Geoffrey Brown retired on 28 February 2022.
Further details on options can be found in Note 16 to the
Financial Statements.
Substantial shareholders
The substantial shareholders at 31 March 2022 are shown
below:
31 March 2022
------------------------
Holding Percentage
------------------------------------ ----------- -----------
Brent Holdings Limited 24,793,095 13.11
------------------------------------ ----------- -----------
Roman Resources Management Pty Ltd 14,423,869 7.63
------------------------------------ ----------- -----------
Stanton Investment Ltd 12,678,820 6.70
------------------------------------ ----------- -----------
KL-Kepong International Ltd 11,197,984 5.92
------------------------------------ ----------- -----------
Chulu Holding Pty Ltd 8,093,048 4.27
------------------------------------ ----------- -----------
Corporate responsibility
The Board is committed to ensuring good standards of corporate
governance in so far as practicable for a company of this size. The
London Stock Exchange has required all AIM companies to apply a
recognised corporate governance code. In connection with these
requirements, the Quoted Companies Alliance has published a new
Corporate Governance Code which the Company has adopted. The
Company has adopted and operates a share dealing code for Directors
and senior employees on substantially the same terms as the Model
Code appended to the Listing Rules of the UK Listing Authority.
Information in relation to the Corporate Governance of the Group is
contained within the Corporate Governance Report.
Environmental
The Group's operations are, and will be, subject to
environmental regulation (with regular environmental impact
assessments and evaluation of operations required before any
permits are granted to the Group) in the jurisdiction in which it
operates. Although the Group intends to be in compliance with all
applicable environmental laws and regulations, there are certain
risks inherent to its activities, such as accidental spills,
leakages or other circumstances, which could subject the Group to
extensive liability. Further, the Group may fail to obtain the
required approval from the relevant authorities necessary for it to
undertake activities which are likely to impact the environment.
The Group is unable to predict the effect of additional
environmental laws and regulations which may be adopted in the
future, including whether any such laws or regulations would
materially increase the Group's cost of doing business or affect
its operations in any area. No environmental breaches have been
notified by any governmental agency as at the date of this
report.
Health and safety
The Group operates a comprehensive health and safety programme
to ensure the wellness and security of its employees. The control
and eventual elimination of all work related hazards requires a
dedicated team effort involving the active participation of all
employees. A comprehensive health and safety programme is the
primary means for delivering best practices in health and safety
management. This programme is regularly updated to incorporate
employee suggestions, lessons learned from past incidents and new
guidelines related to new projects with the aim of identifying
areas for further improvement of health and safety management. This
results in continuous improvement of the health and safety
programme. Employee involvement is regarded as fundamental in
recognising and reporting unsafe conditions and avoiding events
that may result in injuries and accidents.
Employment policies and remuneration
The Company is committed to promoting policies which ensure that
high calibre employees are attracted, retained and motivated, to
ensure ongoing success for the business. Employees and those who
seek to work with the Company are to be treated equally regardless
of sex, marital status, creed, age, colour, race or ethnic
origin.
Directors' remuneration
The Group remunerates the Directors at a level commensurate with
the size of the Group and the experience of its Directors. The
Board has reviewed the Directors' remuneration and believes it
upholds the objectives of the Company and the Group with regard to
this issue.
Please refer to Note 19 for details of Directors'
remuneration.
Energy and carbon report
The Group is not required to report energy and emissions
information under The Companies (Directors' Report) and Limited
Liability Partnerships (Energy and Carbon Report) Regulations 2018,
given its size. The Group will review providing voluntary
disclosures in future reporting periods, where it continues to be
below the reporting thresholds.
Corporate and social responsibility
The Company maintains high, ethical standards in its business
activities. We act responsibly, promoting accountability as
individuals and as a company. We operate with ethics and fairness
and comply with all required rules and regulations.
The Company requires that in respect to all of it operations
there runs alongside this a comprehensive community engagement
plan. It is vital that we engage, listen and communicate
effectively with local communities, particularly when they begin
the process of planning new developments. Whilst the Company is
cognisant of its corporate social responsibilities, the Company
considers that it is not of the size to warrant a formal
policy.
Going concern
These financial statements have been prepared on the going
concern basis, as set out in Note 2.4.
The Directors have prepared cash flow forecasts for the period
ending 31 December 2023, which take into account the cost and
operational structure of the Group and Parent Company, planned
exploration and evaluation expenditure, licence commitments and
working capital requirements. These forecasts indicate that the
Group and parent Company's cash resources are not sufficient to
cover the projected expenditure for the period of 12 months from
the date of approval of these financial statements. These forecasts
indicate that the Group and Parent Company, in order to meet their
operational objectives, and expected liabilities as they fall due,
will be required to raise additional funds within the next 12
months.
Whilst the Directors are confident that they will be able to
secure the necessary funding, the current conditions do indicate
the existence of a material uncertainty that may cast doubt
regarding the applicability of the going concern assumption and the
auditors have made reference to this in their audit report. The
Directors are confident in the Company's ability to raise
additional funds as required, from existing and/or new investors,
within the next 12 months. Thus, they continue to adopt the going
concern basis of accounting preparing these financial
statements.
Directors' and Officers' indemnity insurance
The Company maintains a directors' and officers' liability
policy on normal commercial terms which includes third party
indemnity provisions.
Financial Risk Management Objectives
The Group's activities expose it to foreign currency, credit and
liquidity risks. The size of the Company means that it is
unnecessary and impractical for the Directors to delegate the
responsibility of monitoring financial risk management to a
sub-committee of the Board. Refer to Note 3.1 of the financial
statements, for further details.
Events after the reporting period
Events after the reporting period are set out in Note 26 to the
Financial Statements.
Future developments
Details of future developments for the Group are disclosed in
the Chairman's Report.
Provision of information to Auditor
So far as each of the Directors is aware at the time this report
is approved:
-- there is no relevant audit information of which the Company's auditor is unaware; and
-- the Directors have taken all steps that they ought to have
taken to make themselves aware of any relevant audit information
and to establish that the auditor is aware of that information.
Auditor
BDO LLP has signified its willingness to continue in office as
auditor.
This report was approved by the Board on 23 September 2022 and
signed on its behalf.
Michael Frayne
Chief Executive Officer
23 September 2022
STATEMENT OF DIRECTORS RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report
and the Financial Statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
are required to prepare the Group and Company financial statements
in accordance with UK adopted international accounting standards.
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Company and of the
profit or loss of the Group and Company for that period.
In preparing these Financial Statements, the Directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgments and accounting estimates that are reasonable and prudent;
-- state whether they have been prepared in accordance with UK
adopted international accounting standards subject to any material
departures disclosed and explained in the financial statements;
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the group and the
company will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's and
Group's transactions and disclose with reasonable accuracy at any
time the financial position of the Group and Company, and enable
them to ensure that the Financial Statements comply with the
Companies Act 2006. They are also responsible for safeguarding the
assets of the Group and Company, and hence for taking reasonable
steps for the prevention and detection of fraud and other
irregularities.
Website publication
The Directors are responsible for ensuring the annual report and
the financial statements are made available on a website. Financial
statements are published on the Company's website in accordance
with legislation in the United Kingdom governing the preparation
and dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity
of the Company's website is the responsibility of the Directors.
The Directors' responsibility also extends to the ongoing integrity
of the financial statements contained therein.
The Company is compliant with AIM Rule 26 regarding the
Company's website.
The Directors confirm that they have complied with the above
requirements in preparing the Financial Statements.
CORPORATE GOVERNANCE REPORT
The Company continues to be guided by the Quoted Companies
Alliance Corporate Governance Code. Throughout the past year, the
Company has complied with all aspects of the QCA Code and completed
periodic reviews of its charter in order to maintain the robustness
of its governance systems. No material issues were identified over
the past twelve months.
The Company is committed to maintaining the highest standards in
corporate governance throughout its operations and to ensure all of
its practices are conducted transparently, ethically and
efficiently. The Company believes scrutinising all aspects of its
business and reflecting, analysing and improving its procedures
will result in the continued success of the Company and deliver
value to shareholders. Therefore, and in accordance with the AIM
Rules for Companies (the "AIM Rules"), the Company has chosen to
formalise its governance policies by complying with the UK's Quoted
Companies Alliance Corporate Governance Code 2018 (the "QCA
Code").
The Board currently consists of four Directors: a Chief
Executive Officer, Non-Executive Chairman, and two Non-Executive
Directors ("NED"s). The Board considers that appropriate oversight
of the Company is provided by the currently constituted Board.
Corporate Governance Report
The QCA Code sets out 10 principles that should be applied.
These are listed below together with a short explanation of how the
Company applies each of the principles:
Principle One
Business Model and Strategy
The business objective of the Group is to successfully evaluate,
permit, finance and develop the Eastern Minerals Project in Sri
Lanka into a profitable mining operation in a socially and
environmentally responsible way. The Company's business model and
strategy are outlined in the strategic report commencing.
Principle Two
Understanding Shareholder Needs and Expectations
The Board is committed to maintaining good communications and
having constructive dialogue with its shareholders. Institutional
shareholders and analysts have the opportunity to discuss issues
and provide feedback at meetings with the Company. In addition, all
shareholders are encouraged to attend the Company's Annual General
Meeting and any other General Meetings that are held throughout the
year.
Investors also have access to current information on the Company
through its website www.capitalmetals.com and its Chief Executive
Officer, who is available to answer investor relations enquiries
at: info@capitalmetals.com . The Company provides regulatory,
financial and business news updates through the Regulatory News
Service in accordance with the AIM Rules for Companies.
Principle Three
Considering Wider Stakeholder and Social Responsibilities
The Board recognises that the long term success of the Group is
reliant upon the collective efforts of management, employees,
consultants, suppliers, regulators and other stakeholders. The
Board has put in place a range of processes and systems to ensure
that there is close oversight and contact with its key resources
and relationships, including ongoing two-way communication, control
and feedback processes to enable appropriate and timely
response.
As part of the Mining Licence application by the Group for the
Project in Sri Lanka, a detailed social impact assessment study was
undertaken, as well as a public stakeholder consultation process.
The results of this public consultation and engagement process have
been overall positive, with the Project receiving overall support
from relevant stakeholders.
Principle Four
Risk Management
The Board regularly reviews the risks to which the Group is
exposed and ensures through its meetings and regular reporting that
these risks are minimised as far as possible whilst recognising
that its business opportunities carry an inherently high level of
risk. The principal risks and uncertainties facing the Group at
this stage and in the foreseeable future are detailed in the Risk
Factors report of the Company's AIM Admission Document and updated
in the annual report and accounts, which are available on the
Company's website www.capitalmetals.com .
Principle Five
A Well Functioning Board of Directors
The Board's role is to agree the Company's long-term direction
and strategy and monitor achievement of key milestones against its
business objectives. The Board meets formally at least six times a
year for these purposes and holds additional meetings when
necessary to transact other business. The Board receives reports
for consideration on all significant strategic, operational and
financial matters.
The Board is comprised of a Chief Executive Officer (Michael
Frayne); a Non-Executive Chairman (Gregory Martyr) and two NEDs
(James Leahy and Teh Kwan Wey). Each member of the Board is
committed to spending sufficient time to enable them to carry out
their duties as a Director. The Board meets regularly throughout
the year as deemed appropriate formally and informally, in person
and by telephone.
The Company constantly keeps under review the constitution of
the Board and may seek to add more members as required as the
Company grows and develops.
The Board as a whole considers the NEDs to be independent of
management and free from any business or other relationship which
could materially interfere with the exercise of their independent
judgement.
The Board has implemented an effective committee structure to
assist in the discharge of its responsibilities. All committees of
the Board have written terms of reference dealing with their
authority and duties. Membership of the Audit, Remuneration and
Nominations Committees is comprised exclusively of Non-Executive
Directors. The Company Secretary acts as secretary to each of these
committees.
Details of the Directors' attendance at the Board and Board
committee meetings are set out below:
Board Meetings Nominations Audit committee
attended committee
Gregory Martyr 6/6 - 2/2
--------------- ------------ ----------------
Michael Frayne 6/6 - -
--------------- ------------ ----------------
Anthony Samaha (resigned 29 3/6 - -
October 2021)
--------------- ------------ ----------------
Geoffrey Brown (retired 28
February 2022) 5/6 1/1 -
--------------- ------------ ----------------
James Leahy 6/6 1/1 -
--------------- ------------ ----------------
Teh Kwan Wey 5/6 - 2/2
--------------- ------------ ----------------
Principle Six
Appropriate Skills and Experience of the Directors
The Board considers the current balance of sector, financial and
public market skills and experience which it embodies is
appropriate for the size and stage of development of the Company
and that the Board has the skills and requisite experience
necessary to execute the Company's strategy and business plan
whilst also enabling each Director to discharge their fiduciary
duties effectively. Biographies for each member of the Board is
provided on the Company's website www.capitalmetals.com .
All Directors, through their involvement in other listed
companies as well as the Company, including attendance at seminars,
forums and industry events and through their memberships of various
professional bodies, keep their skill sets up to date.
The Board reviews annually, and when required, the
appropriateness of its mix of skills and experience to ensure that
it meets the changing needs of the Company.
The Company has a professional Company Secretary in the UK who
assists the Chief Executive Officer in preparing for and running
effective Board meetings, including the timely dissemination of
appropriate information. The Company Secretary provides advice and
guidance to the extent required by the Board on the legal and
regulatory environment.
Principle Seven
Evaluation of Board Performance
Review of the Group's progress against the long-term strategy
and aims of the business provides a means to measure the
effectiveness of the Board. This progress is reviewed in Board
meetings held at least six times a year. The Chief Executive
Officer's performance is reviewed once a year by the Board and
measured against a definitive list of strategic targets set by the
Board.
The Company conducts periodic reviews of its Board succession
planning protocols which includes an assessment of the number of
Board members and relative experience of each Board member
vis-a-vis the Company's requirements given its stage of
development, with the goal of having in place an adequate and
sufficiently experienced Board at all times.
Principle Eight
Corporate Culture
The corporate culture of the Company is promoted throughout its
employees and consultants and is underpinned by compliance with
local regulations and the implementation and regular review and
enforcement of various policies including a Share Dealing Policy
and Code, Anti-Corruption and Anti-Bribery Policy, Matters Reserved
for the Board, Code of Business Ethics, Whistle Blowing Policy, and
Media and Communications Policy, so that all aspects of the Company
are run in a robust and responsible way.
The Board is aware that the culture set by the Board will impact
all aspects of the Group and the way that employees and consultants
behave. The exploration, evaluation and development of mineral
resources can have a significant impact and it is important that
the communities view the Group's activities positively. Therefore,
the importance of sound ethical values and behaviours is crucial to
the ability of the Group to successfully achieve its corporate
objectives.
Principle Nine
Maintenance of Governance Structures and Processes
The Board is responsible for setting the vision and strategy for
the Company to deliver value to the Company's shareholders by
effectively putting in place its business model.
The roles and responsibility of the Chief Executive Officer,
Non-Executive Chairman and other Directors are laid out below:
-- The Chief Executive Officer's primary responsibilities are
to: implement the Company's strategy in consultation with the
Board; take responsibility for the Company's projects in Sri Lanka;
run the Company on a day-by-day basis; implement the decisions of
the Board; monitor, review and manage key risks; act as the
Company's primary spokesman; communicate with external audiences
such as investors, analysts and media; and be responsible for the
administration of all aspects of the Company.
-- The Non-Executive Chairman's primary responsibilities are to:
lead the Board and to ensure the effective working of the Board; in
consultation with the Board, ensure good corporate governance and
set clear expectations with regards to the Company culture, values
and behaviour; set the Board's agenda and ensures that all
Directors are encouraged to participate fully in the
decision-making process of the Board and take responsibility for
relationships with the Company's professional advisers and major
shareholders.
-- The Company's NEDs participate in all Board level decisions
and play a particular role in the determination and articulation of
strategy. The Company's NEDs provide oversight and scrutiny of the
performance of the Executive Directors, whilst both constructively
challenging and inspiring them, thereby ensuring the business
develops, communicate and execute the agreed strategy and operate
within the risk management framework.
-- The Company Secretary is responsible for ensuring that Board
procedures are followed and applicable rules and regulations are
complied with.
The Board is supported by the audit, remuneration and
nominations committees as described below.
Audit Committee
The Audit Committee comprises Gregory Martyr (Chair) and Teh
Kwan Wey.
The Audit Committee reviews reports from management and from BDO
LLP, the Company's auditor, relating to the interim and annual
accounts and to the system of internal financial control.
The Audit Committee is responsible for assisting the Board's
oversight of the integrity of the financial statements and other
financial reporting, the independence and performance of BDO LLP,
the regulation and risk profile of the Company and the review and
approval of any related party transactions. The Audit Committee may
hold private sessions with BDO LLP without management present.
Further, the Audit Committee is responsible for making
recommendations to the Board on the appointment of BDO LLP and the
audit fee and reviews reports from management and BDO LLP on the
financial accounts and internal control systems used throughout the
Company.
The Audit Committee meets at least two times a year and is
responsible for ensuring that the Company's financial performance
is properly monitored, controlled and reported. The Audit Committee
is responsible for the scope and effectiveness of the external
audit and compliance by the Company with statutory and other
regulatory requirements.
The Audit Committee:
-- monitors in discussion with BDO LLP the integrity of the
financial statements of the Company, any formal announcements
relating to the Company's financial performance and reviews
significant financial reporting judgments contained in them;
-- reviews the Company's internal financial controls and reviews
the Company's internal control and risk management systems;
-- considers annually whether there is a need for an internal
audit function and makes a recommendation to the Board;
-- makes recommendations to the Board for it to put to the
shareholders for their approval in the general meeting, in relation
to the appointment, re-appointment and removal of BDO LLP and to
approve the remuneration and terms of engagement of BDO LLP;
-- reviews and monitors BDO LLP's independence and objectivity
and the effectiveness of the audit process, taking into
consideration relevant professional and regulatory
requirements;
-- develops and implements policy on the engagement of BDO LLP
to supply non-audit services, taking into account relevant external
guidance regarding the provision of non-audit services by BDO LLP;
and
-- reports to the Board, identifying any matters in respect of
which it considers that action or improvement is needed and making
recommendations as to the steps to be taken.
The Audit Committee also reviews arrangements by which the staff
of the Company and the Company may, in confidence, raise concerns
about possible improprieties in matters of financial reporting or
other matters and ensure that arrangements are in place for the
proportionate and independent investigation of such matters with
appropriate follow-up action.
Remuneration Committee
The Remuneration Committee comprises James Leahy (Chair) and
Gregory Martyr.
The Remuneration Committee is responsible for considering all
material elements of remuneration policy, the remuneration and
incentivisation of Executive Directors and senior management (as
appropriate) and to make recommendations to the Board on the
framework for executive remuneration and its cost. The role of the
Remuneration Committee is to keep under review the Company's
remuneration policies to ensure that the Company attracts, retains
and motivates the most qualified talent who will contribute to the
long-term success of the Company. The Remuneration Committee also
reviews the performance of the Chief Executive Officer and sets the
scale and structure of his remuneration, including the
implementation of any bonus arrangements, with due regard to the
interests of shareholders.
The Remuneration Committee is also responsible for reviewing the
terms of granting options by the Company, in particular, the price
per share and the application of the performance standards which
may apply to any grant, ensuring in determining such remuneration
packages and arrangements, due regard is given to any relevant
legal requirements, the provisions and recommendations in the AIM
Rules and The QCA Code.
The Remuneration Committee:
-- determines and agrees with the Board the framework or broad
policy for the remuneration of the Chief Executive Officer;
-- determines targets for any performance-related pay schemes operated by the Company;
-- ensures that contractual terms on termination and any
payments made are fair to the individual, the Company, that failure
is not rewarded and that the duty to mitigate loss is fully
recognised;
-- determines the total individual remuneration package of the
Chief Executive Officer, including bonuses, incentive payments and
share options;
-- is aware of and advises on any major changes in employees'
benefit structures throughout the Company;
-- ensures that provisions regarding disclosure, including
pensions, as set out in the (Directors' Remuneration Policy and
Directors' Remuneration Report) Regulations 2019, are fulfilled;
and
-- is exclusively responsible for establishing the selection
criteria, selecting, appointing and setting the terms of reference
for any remuneration consultants who advise the Remuneration
Committee.
Nominations Committee
The Nominations Committee comprises Gregory Martyr (Chair) and
James Leahy.
The Nominations Committee shall be responsible for considering
all criteria for new Executive and Non-Executive Director
appointments, including experience of the industry in which the
Company operates and professional background. Specifically, the
Nominations Committee:
-- is responsible for identifying and nominating for the
approval of the Board, candidates to fill Board vacancies as and
when they arise;
-- evaluates the balance of skills, knowledge, experience and
diversity of the Board and, in the light of this evaluation,
prepares a description of the role and capabilities required for a
particular appointment;
-- reviews annually the time required from the Non-Executive
Directors and assess whether each Non-Executive Director is
spending enough time to fulfil their duties;
-- considers candidates from a wide range of backgrounds;
-- gives full consideration to succession planning in the course
of its work, taking into account the challenges and opportunities
facing the Company, and the skills and expertise therefore needed
on the Board, reporting to the Board regularly;
-- regularly reviews the structure, size and composition
(including the skills, knowledge and experience) of the Board and
make recommendations to the Board with regard to changes;
-- keeps under review the leadership needs of the Company, both
executive and non-executive, with a view to ensuring the continued
ability of the Company to compete effectively in the
marketplace;
-- makes a statement in the annual report about its activities,
the process used for appointments and explains if external advice
or open advertising has not been used, the membership of the
Nominations Committee, number of Nominations Committee meetings and
attendance over the course of the year;
-- ensures that on appointment to the Executive and
Non-Executive Directors receive formal letters of appointment
setting out clearly what is expected of them in terms of time
commitment, committee service and involvement outside Board
meetings;
-- considers and makes recommendations to the Board about the
re-appointment of any Non-Executive Director at the conclusion of
their specified term of office or retiring in accordance with the
Company's Articles of Association; and
-- considers and make recommendations to the Board on any matter
relating to the continuation in office of any Director at any
time.
Principle Ten
Shareholder Communication
The Board is committed to maintaining good communication and
having constructive dialogue with its shareholders. The Company has
close ongoing relationships with key private shareholder, analysts
and brokers, providing the opportunity to discuss issues and
provide feedback at meetings with the Company.
The Company also provides regular updates on the progress of the
Company, detailing recent business and strategy developments, in
news releases which is available on the Company's website
www.capitalmetals.com. The Company's financial reports can also be
found on its website.
All shareholders are encouraged to attend the Company's Annual
General Meeting and any general meetings held by the Company. The
Company has elected to host its AGMs in London. The Directors
believe hosting the AGM in London will enhance engagement with the
Company's shareholders by making the meeting more accessible. The
Board is always open to receiving feedback from shareholders.
Communications should be directed to info@capitalmetals.com. The
Chief Executive Officer has been appointed to manage the
relationship between the Company and its shareholders and will
review and report to the Board on any communications received.
The Company also participates in various investor events
including conferences and presentation evenings, at which
shareholders can meet with management in person to answer queries,
provide information on current developments and to take into
consideration shareholder views and suggestions.
Gregory Martyr
Chairman
23 September 2022
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF CAPITAL METALS
PLC
Opinion on the financial statements
In our opinion:
-- the financial statements give a true and fair view of the
state of the Group's and of the Parent Company's affairs as at as
at 31 March 2022 and of the Group's loss for the year then
ended;
-- the Group financial statements have been properly prepared in
accordance UK adopted international accounting standards
-- the Parent Company financial statements have been properly
prepared in accordance with UK adopted international accounting
standards and as applied in accordance with the provisions of the
Companies Act 2006; and
-- the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
We have audited the financial statements of Capital Metals Plc
(the 'Parent Company') and its subsidiaries (the 'Group') for the
year ended 31 March 2022 which comprise the Consolidated &
Company statements of financial position, the Consolidated income
statement, the Consolidated statement of comprehensive income, the
Consolidated statement of changes in equity, the Company statement
of changes in equity, the Statements of cash flows, and notes to
the financial statements, including a summary of significant
accounting policies. The financial reporting framework that has
been applied in their preparation is applicable law and UK adopted
international accounting standards and, as regards the Parent
Company financial statements, as applied in accordance with the
provisions of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Independence
We remain independent of the Group and the Parent Company in
accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the FRC's
Ethical Standard as applied to listed entities, and we have
fulfilled our other ethical responsibilities in accordance with
these requirements.
Material uncertainty related to going concern
We draw attention to Note 2.4 to the financial statements, which
indicates that the Group and Parent company will need to raise
additional funding within twelve months from the date of approval
of financial statements. As stated in Note 2.4, these events or
conditions indicate that a material uncertainty exists that may
cast significant doubt on the Group and Parent Company's ability to
continue as a going concern. Our opinion is not modified in respect
of this matter.
Our evaluation of the Directors' assessment of the Group and the
Parent Company's ability to continue to adopt the going concern
basis of accounting and our audit procedures in response to key
audit matter included the following:
-- We discussed with Directors their assessment of potential
risks and uncertainties associated with areas such as the Group's
operations, ability to secure funding that are relevant to the
Group's business model and operations. We formed our own assessment
of risks and uncertainties based on our understanding of the
business and mineral sands sector.
-- We obtained Directors' sensitivity analysis to determine the
point at which liquidity breaks and considered whether such
scenarios were reasonably possible.
-- We critically assessed Directors' base case cash flow
forecasts and the underlying key assumptions which have been
approved by the Board. In doing so, we considered factors such as
historical operating expenditure. We evaluated commitments under
the exploration licenses, reviewed board minutes and market
announcements for indications of additional cash requirements.
-- We discussed with management and the Board the Group's
strategy to access capital to fund its development plans. We
considered management's judgement that they had reasonable
expectation of securing necessary funding and the timing of such
funding requirement.
-- We reviewed and considered the adequacy of the going concern
disclosure within the financial statements in reference the
requirements of the financial reporting framework, our
understanding of the business, and the Directors assessment.
In auditing the financial statements, we have concluded that the
Directors' use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
Our responsibilities and the responsibilities of the Directors
with respect to going concern are described in the relevant
sections of this report.
Overview
99% of Group profit before tax
Coverage 99%of Group total assets
2022 2021
Going concern P P
Carrying value of P P
exploration assets
Key audit matters Accounting for the - P
reverse acquisition
Given that the reverse acquisition
was a one-off transaction in the prior
year, accounting for the reverse acquisition
is not considered to be a key audit
matter in the current year.
-----------------------------------------------
Group financial statements as a whole
Materiality
US$100,000 based on 1.5% of Total Assets.
-----------------------------------------------
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the
Group and its environment, including the Group's system of internal
control, and assessing the risks of material misstatement in the
financial statements. We also addressed the risk of management
override of internal controls, including assessing whether there
was evidence of bias by the Directors that may have represented a
risk of material misstatement.
In assessing the risk of material misstatement to the Group
financial statements, and to ensure we had adequate quantitative
coverage of significant accounts in the financial statements, our
Group audit scope focused on the Group's principal operating
locations being Sri Lanka (Eastern Minerals (Pvt) Limited and
Damsila Exports (Pvt) Limited) and the United Kingdom (Capital
Metals Plc) .
These were regarded as being significant components of the Group
and were subject to full scope audits based on their size and risk
characteristics.
The remaining components of the Group were considered non-
significant and these components were principally subject to
analytical review procedures.
The full scope audits and analytical review procedures in each
component were performed in the United Kingdom by the Group
engagement team.
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) that we identified, including those which had the greatest
effect on: the overall audit strategy, the allocation of resources
in the audit, and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
In addition to the matter described in the Material uncertainty in
relation to going concern section of our report, we have determined
the matter described below to be a key audit matter.
Key audit matter How the scope of our audit
addressed the key audit
matter
Carrying value As detailed in Note Our procedures in relation
of exploration 8, the carrying to Managements assessment
assets value of Exploration of the Carrying value of
and Evaluation Assets E&E assets included:
("E&E assets") amounted
to US$6.2 million * We reviewed Managements impairment review assessment
at 31 March 2022. and performed our own assessment of impairment
indicators in accordance with IFRS 6 in order to
Management are required determine whether their assessment was complete and
to assess each year in accordance with the requirements of the accounting
whether there are standard.
any potential impairment
triggers under IFRS
6 Exploration for
and Evaluation of * We evaluated Managements assessment of the Group's
Mineral Resources right to tenure over the Eastern Minerals Project
which would indicate licence area by reviewing licence agreements.
that the carrying
value of E&E assets
may not be recoverable.
* We challenged Managements expectation that the
As disclosed in industrial mining licence application ("IML") over
Notes 2.7, 4 and the DEL licence which had expired, will be obtained.
8, the impairment In doing so, we reviewed the IML applications and the
review of the carrying two IML's which was granted subsequent to the year
value of E&E assets end. We discussed with the Group's Sri Lankan
requires significant external solicitor on the likelihood of IML
judgment to be made applications not granted being received. We assessed
by Management. the solicitor's competence and independence.
Given the materiality
of the assets in
the context of the * We discussed with Managements and reviewed board
Group's statement minutes and press releases to assess the exploration
of financial position activity undertaken in the year, the results of
and the judgement exploration activity and the future plans for the
involved in making licence area, for indicators that the exploration
this assessment activity in the period have not led to the discovery
we consider this of commercially viable quantities of mineral
to be a key audit resources and the entity has decided to discontinue
matter. such activities in the project area, which would be
an indicator of impairment.
We also consider
appropriate disclosure
of the judgements
involved in Managements * We reviewed the planned works programme to determine
assessment is important if substantive expenditure is planned in each licence
to the understanding area to identify whether there were circumstances
of the financial whereby no further substantive expenditure was
statements and therefore planned, which would be an indicator of impairment.
adequacy of disclosure
is also considered
a key audit matter.
* We evaluated the adequacy of the Group's disclosures
in respect of the impairment assessment against the
requirements of the financial reporting framework.
Key observations:
Based on the work performed
we found Management's assessment
of the carrying value of
exploration assets to be
reasonable.
We found the disclosures
in the financial statements
to be appropriate.
-------------------------- ------------------------------------------------------------------------
Our application of materiality
We apply the concept of materiality both in planning and
performing our audit, and in evaluating the effect of
misstatements. We consider materiality to be the magnitude by which
misstatements, including omissions, could influence the economic
decisions of reasonable users that are taken on the basis of the
financial statements.
In order to reduce to an appropriately low level the probability
that any misstatements exceed materiality, we use a lower
materiality level, performance materiality, to determine the extent
of testing needed. Importantly, misstatements below these levels
will not necessarily be evaluated as immaterial as we also take
account of the nature of identified misstatements, and the
particular circumstances of their occurrence, when evaluating their
effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality
for the financial statements as a whole and performance materiality
as follows:
Group financial statements Parent company financial
statements
2022 2021 2022 2021
---------------- --------------- ----------------- ----------------
Materiality US$ 100,000 US$ 122,000 US$ 60,000 US$ 72,000
---------------- --------------- ----------------- ----------------
Basis for 1.5% of Total Assets 0.2% of Total assets
determining
materiality
--------------------------------- -----------------------------------
Rationale We consider total assets The Company is a holding
for the benchmark to be the most significant company which performs
applied determinant of the Group's fund raising activities
financial performance and incurs other administrative
used by the users of expenditure. As the
financial statements. strategic focus of the
Company is monetising
The Group has invested its asset base we have
significant sums on determined that an asset
its Exploration assets based materiality is
and these are considered the appropriate basis
to be the key value of materiality.
driver for the Group
as its assets are an
indicator of future
value to the users of
financial statements.
--------------------------------- -----------------------------------
Performance US$ 65,000 US$ 78,000 US$ 39,000 US$ 46,000
materiality
---------------- --------------- ----------------- ----------------
Basis for 65% of materiality based 65% of materiality based
determining on our assessment of on our assessment of
performance a number of factors a number of factors
materiality including the expected including the expected
total value of known total value of known
and likely misstatements and likely misstatements
(based on past experience), (based on past experience),
our knowledge of the our knowledge of the
group's internal controls group's internal controls
and management's attitude and management's attitude
towards proposed adjustments. towards proposed adjustments.
--------------------------------- -----------------------------------
Component materiality
We set materiality for each component of the Group based on a
percentage of between 60% and 70% (2021: 50% and 70%) of Group
materiality dependent on the size and our assessment of the risk of
material misstatement of that component. Component materiality
ranged from US$60,000 to US$70,000 (2021: US$60,000 to US$84,000)
In the audit of each component, we further applied performance
materiality levels of 65% (2021: 65%) of the component materiality
to our testing to ensure that the risk of errors exceeding
component materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them
all individual audit differences in excess of GBP2,000 (2021:
GBP2,000). We also agreed to report differences below this
threshold that, in our view, warranted reporting on qualitative
grounds.
Other information
The Directors are responsible for the other information. The
other information comprises the information included in the Annual
Report and Financial Statements other than the financial statements
and our auditor's report thereon. Our opinion on the financial
statements does not cover the other information and, except to the
extent otherwise explicitly stated in our report, we do not express
any form of assurance conclusion thereon. Our responsibility is to
read the other information and, in doing so, consider whether the
other information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit, or
otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are
required to determine whether this gives rise to a material
misstatement in the financial statements themselves. If, based on
the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report
that fact.
We have nothing to report in this regard.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work
performed during the course of the audit, we are required by the
Companies Act 2006 and ISAs (UK) to report on certain opinions and
matters as described below.
Strategic In our opinion, based on the work undertaken
report and in the course of the audit:
Directors' * the information given in the Strategic report and the
report Directors' report for the financial year for which
the financial statements are prepared is consistent
with the financial statements; and
* the Strategic report and the Directors' report have
been prepared in accordance with applicable legal
requirements.
In the light of the knowledge and understanding
of the Group and Parent Company and its environment
obtained in the course of the audit, we have
not identified material misstatements in the
strategic report or the Directors' report.
Matters We have nothing to report in respect of the following
on which matters in relation to which the Companies Act
we are required 2006 requires us to report to you if, in our
to report opinion:
by exception
* adequate accounting records have not been kept by the
Parent Company, or returns adequate for our audit
have not been received from branches not visited by
us; or
* the Parent Company financial statements are not in
agreement with the accounting records and returns; or
* certain disclosures of Directors' remuneration
specified by law are not made; or
* we have not received all the information and
explanations we require for our audit.
------------------------------------------------------------------------
Responsibilities of Directors
As explained more fully in the statement of Directors'
responsibilities the Directors are responsible for the preparation
of the financial statements and for being satisfied that they give
a true and fair view, and for such internal control as the
Directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the Directors are
responsible for assessing the Group's and the Parent Company's
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis
of accounting unless the Directors either intend to liquidate the
Group or the Parent Company or to cease operations, or have no
realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
Extent to which the audit was capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including
fraud is detailed below:
-- Holding discussions with Directors and Audit Committee and
considering any known or suspected instances of non-compliance with
laws and regulations or fraud;
-- Gaining an understanding of the laws and regulations relevant
to the Group and the Parent Company and the industry in which it
operates, through discussion with management and our knowledge of
the industry. These included the AIM rules, the financial reporting
framework, UK Companies Law, tax legislation and environmental
regulations in the UK and Sri Lanka;
-- Communicating relevant identified laws and regulations and
potential fraud risks to all engagement team members and remaining
alert to any indications of fraud or non-compliance with laws and
regulations throughout the audit;
-- Assessing the susceptibility of the Group's financial
statements to material misstatement, including how fraud might
occur by making enquiries of the Directors and the Audit Committee
during the planning and execution phases of our audit to understand
where they considered there to be susceptibility to fraud. We
believed the areas in which fraud might occur were in the
management override of controls.
In response our procedures included, but were not limited
to;
- Agreeing the financial statement disclosures to underlying supporting documentation;
- Addressing the risk of management override of internal
controls, including testing journals and evaluating whether there
was evidence of bias by the Directors that represented a risk of
material misstatement due to fraud;
- Assessing areas of the financial statements which include
judgement and estimates, as set out in Note 4 to the financial
statements and in our Key audit matters section above and evaluated
whether there was evidence of bias;
- Made of enquiries of Directors as to whether there was any
correspondence from regulators in so far as the correspondence
related to the financial statements;
- Reading minutes from board meetings of those charges with
governance to identify any instances of non-compliance with laws
and regulations and fraud.
Our audit procedures were designed to respond to risks of
material misstatement in the financial statements, recognising that
the risk of not detecting a material misstatement due to fraud is
higher than the risk of not detecting one resulting from error, as
fraud may involve deliberate concealment by, for example, forgery,
misrepresentations or through collusion. There are inherent
limitations in the audit procedures performed and the further
removed non-compliance with laws and regulations is from the events
and transactions reflected in the financial statements, the less
likely we are to become aware of it.
A further description of our responsibilities is available on
the Financial Reporting Council's website at:
www.frc.org.uk/auditorsresponsibilities . This description forms
part of our auditor's report.
Use of our report
This report is made solely to the Parent Company's members, as a
body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to
the Parent Company's members those matters we are required to state
to them in an auditor's report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Parent Company and the
Parent Company's members as a body, for our audit work, for this
report, or for the opinions we have formed.
Jack Draycott (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
23 September 2022
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC3051Financial).
CONSOLIDATED & COMPANY STATEMENTS OF FINANCIAL POSITION
For the year ended 31 March 2022
Group Company
--------------------------------------------------- ----------------------------
For the For the For the For the
year ended year ended year ended year ended
31 March 31 March 31 March 31 March
2022 2021 2022 2021
Note $ $ $ $
----------------------- ----- ------------- ------------------------------------ --- ------------- -------------
Non-Current Assets
Property, plant and
equipment 7 29,000 48,000 - -
Investment in
subsidiaries 9 - - 35,030,000 36,800,000
Loans to subsidiairies 10 - - 1,835,000 -
Exploration &
evaluation assets 8 4,556,000 6,178,000 - -
4,585,000 6,226,000 36,865,000 36,800,000
----------------------- ----- ------------- ------------------------------------ --- ------------- -------------
Current Assets
Loans to subsidiaries 10 - - - 1,195,000
Trade and other
receivables 11 36,000 115,000 65,000 112,000
Cash and cash
equivalents 12 1,776,000 1,797,000 1,603,000 1,706,000
----------------------- ----- ------------- ------------------------------------ --- ------------- -------------
1,812,000 1,912,000 1,668,000 3,013,000
----------------------- ----- ------------- ------------------------------------ --- ------------- -------------
Total Assets 6,397,000 8,138,000 38,533,000 39,813,000
----------------------- ----- ------------- ------------------------------------ --- ------------- -------------
Non-Current
Liabilities
Trade and other
payables 13 602,000 600,000 - -
----------------------- ----- ------------- ------------------------------------ --- ------------- -------------
602,000 600,000 - -
----------------------- ----- ------------- ------------------------------------ --- ------------- -------------
Current Liabilities
Trade and other
payables 13 724,000 707,000 101,000 95,000
----------------------- ----- ------------- ------------------------------------ --- ------------- -------------
724,000 707,000 101,000 95,000
----------------------- ----- ------------- ------------------------------------ --- ------------- -------------
Total Liabilities 1,326,000 1,307,000 101,000 95,000
----------------------- ----- ------------- ------------------------------------ --- ------------- -------------
Net Assets 5,071,000 6,831,000 38,432,000 39,718,000
----------------------- ----- ------------- ------------------------------------ --- ------------- -------------
Equity attributable to
owners
of the Parent
Share capital 15 6,062,000 6,019,000 6,062,000 6,019,000
Share premium 15 48,947,000 47,470,000 48,947,000 47,470,000
Other reserves 17 (35,507,000) (34,141,000) 37,414,000 38,521,000
Retained losses (14,431,000) (12,517,000) (53,991,000) (52,292,000)
Total Equity 5,071,000 6,831,000 38,432,000 39,718,000
----------------------- ----- ------------- ------------------------------------ --- ------------- -------------
The Company has elected to take the exemption under Section 408
of the Companies Act 2006 from presenting the Parent Company Income
Statement and Statement of Comprehensive Income. The loss for the
Company for the year ended 31 March 2022 was $1,699,000 (period
ended 31 March 2021: $1,634,000).
The Financial Statements were approved and authorised for issue
by the Board of Directors on 23 September 2022 and were signed on
its behalf by:
Michael Frayne
Director
CONSOLIDATED INCOME STATEMENT
For the year ended 31 March 2022
For the For the
year ended year ended
31 March 31 March
2022 2021
Continued operations Note $ $
----------------------------------------------- ------ ------------ ------------
Administrative expenses 22 (1,194,000) (1,432,000)
Cost of acquiring listing - (5,454,000)
Share based payment charge 16 (721,000) (1,111,000)
Other gains 1,000 -
Operating loss (1,914,000) (7,997,000)
Finance income - 111,000
Loss before income tax (1,914,000) (7,886,000)
Income tax 20 - -
----------------------------------------------- ------ ------------ ------------
Loss for the year attributable to owners
of the Parent (1,914,000) (7,886,000)
----------------------------------------------- ------ ------------ ------------
Basic (Loss) Per Share attributable to owners
of the Parent during the period (expressed
in cent per share) 21 (0.36) (5.61)
----------------------------------------------- ------ ------------ ------------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 March 2022
For the For the
year ended year ended
31 March 31 March
2022 2021
$ $
--------------------------------------------------------- ---- ------------ -------------------------------------
Loss for the year (1,914,000) (7,886,000)
Other Comprehensive Income:
Items that may be subsequently reclassified
to profit or loss
Foreign exchange on translation of foreign subsidiaries (2,100,000) 167,000
--------------------------------------------------------------- ------------ -------------------------------------
Other comprehensive profit/(loss) for the year,
net of tax (2,100,000) 167,000
--------------------------------------------------------------- ------------ -------------------------------------
Total Comprehensive Income attributable to owners
of the Parent (4,014,000) (7,719,000)
--------------------------------------------------------------- ------------ -------------------------------------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2022
Share Share Retained
capital premium Other reserves losses Total
Note $ $ $ $ $
----------
Restated balance
as at 1 April 2020 5,611,000 47,267,000 (43,514,000) (4,767,000) 4,597,000
------------------------------------ ---------- ------------ --------------- ------------- ------------
Loss for the year - - - (7,886,000) (7,886,000)
------------------------------------ ---------- ------------ --------------- ------------- ------------
Other comprehensive
income for the year
Items that may be
subsequently reclassified
to profit or loss
---------------------------- ------ ---------- ------------ --------------- ------------- ------------
Other comprehensive
income - - 167,000 - 167,000
------------------------------------ ---------- ------------ --------------- ------------- ------------
Total comprehensive
income/(loss) for
the year - - 167,000 (7,886,000) (7,719,000)
------------------------------------ ---------- ------------ --------------- ------------- ------------
Cancellation of options - - (136,000) 136,000 -
Reverse acquisition 360,000 - 5,880,000 - 6,240,000
Issue of share capital
for cash 47,000 2,795,000 - - 2,842,000
Costs of issue of
share capital - (299,000) - - (299,000)
Issue of share warrants - (2,320,000) 2,694,000 - 374,000
Issue of options - - 768,000 - 768,000
Issue of share capital
to settle CML convertible
bond interest 1,000 27,000 - - 28,000
Total transactions
with owners, recognised
directly in equity 408,000 203,000 9,206,000 136,000 9,953,000
Balance as at 31
March 2021 6,019,000 47,470,000 (34,141,000) (12,517,000) 6,831,000
------------------------------------ ---------- ------------ --------------- ------------- ------------
Balance as at 1
April 2021 6,019,000 47,470,000 (34,141,000) (12,517,000) 6,831,000
------------------------------------ ---------- ------------ --------------- ------------- ------------
Loss for the year - - - (1,914,000) (1,914,000)
------------------------------------ ---------- ------------ --------------- ------------- ------------
Other comprehensive
income for the year
Items that may be
subsequently reclassified
to profit or loss
Other comprehensive
loss - - (2,100,000) - (2,100,000)
------------------------------------ ---------- ------------ --------------- ------------- ------------
Total comprehensive
loss for the year - - (2,100,000) (1,914,000) (4,014,000)
------------------------------------ ---------- ------------ --------------- ------------- ------------
Issue of share capital
for cash 43,000 1,598,000 - - 1,641,000
Costs of issue of
share capital - (121,000) - - (121,000)
Share based payments - - 734,000 - 734,000
Total transactions
with owners, recognised
directly in equity 43,000 1,477,000 734,000 - 2,254,000
------------------------------------ ---------- ------------ --------------- ------------- ------------
Balance as at 31
March 2022 6,062,000 48,947,000 (35,507,000) (14,431,000) 5,071,000
------------------------------------ ---------- ------------ --------------- ------------- ------------
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2022
Share Share Retained
capital premium Other reserves Losses Total
Note $ $ $ $ $
Balance as
at 1 October
2020 5,611,000 47,242,000 (1,061,000) (50,658,000) 1,134,000
------------------------------ ---------- ------------ --------------- ------------- ------------
Loss for the
year - - - (1,634,000) (1,634,000)
------------------------------ ---------- ------------ --------------- ------------- ------------
Other comprehensive
income for the
year
Items that
may be subsequently
reclassified
to profit or
loss
---------------------- ------ ---------- ------------ --------------- ------------- ------------
Other comprehensive
loss - 511,000 - 511,000
------------------------------ ---------- ------------ --------------- ------------- ------------
Total comprehensive
income/(loss)
for the year - - 511,000 (1,634,000) (1,123,000)
------------------------------ ---------- ------------ --------------- ------------- ------------
Issue of shares
to acquire CML 360,000 - 35,634,000 - 35,994,000
Issue of share
capital for
cash 47,000 2,795,000 - - 2,842,000
Transaction
costs on issue
of share capital - (299,000) - - (299,000)
Issue of share
warrants - (2,295,000) 2,669,000 - 374,000
Issue of share
options - - 768,000 - 768,000
Issue of share
capital to settle
CML convertible
bond loan interest 1,000 27,000 - - 28,000
Total transactions
with owners,
recognised directly
in equity 408,000 228,000 39,071,000 - 39,707,000
Balance as
at 31 March
2021 6,019,000 47,470,000 38,521,000 (52,292,000) 39,718,000
------------------------------ ---------- ------------ --------------- ------------- ------------
Balance as
at 1 April 2021 6,019,000 47,470,000 38,521,000 (52,292,000) 39,718,000
------------------------------ ---------- ------------ --------------- ------------- ------------
Loss for the
year - - - (1,699,000) (1,699,000)
------------------------------ ---------- ------------ --------------- ------------- ------------
Other comprehensive
income for the
year
Items that
may be subsequently
reclassified
to profit or
loss
---------------------- ------ ---------- ------------ --------------- ------------- ------------
Other comprehensive
loss - - (1,841,000) - (1,841,000)
------------------------------ ---------- ------------ --------------- ------------- ------------
Total comprehensive
loss for the
year - - (1,841,000) (1,699,000) (3,540,000)
------------------------------ ---------- ------------ --------------- ------------- ------------
Issue of share
capital for
cash 43,000 1,598,000 - - 1,641,000
Transaction
costs on issue
of share capital - (121,000) - - (121,000)
Share option
expense - - 734,000 - 734,000
Total transactions
with owners,
recognised directly
in equity 43,000 1,477,000 734,000 - 2,254,000
------------------------------ ---------- ------------ --------------- ------------- ------------
Balance as
at 31 March
2022 6,062,000 48,947,000 37,414,000 (53,991,000) 38,432,000
------------------------------ ---------- ------------ --------------- ------------- ------------
STATEMENTS OF CASH FLOWS
For the year ended 31 March 2022
Group Company
-------------------------- --------------------------
Year ended Year ended Year ended Year ended
31 March 31 March 31 March 31 March
2022 2021 2022 2021
Note $ $ $ $
-------------------------------------- ------ ------------ ------------ ------------ ------------
Cash flows from operating
activities
(Loss) before income tax (1,914,000) (7,886,000) (1,699,000) (1,634,000)
Adjustments for:
Depreciation 7 9,000 19,000 - 2,000
Share based payments 16 721,000 1,111,000 721,000 768,000
Deemed reverse acquisition
expense - 5,454,000 - -
Foreign exchange 105,000 165,000 5,000 -
Interest received - (1,000) - -
Interest expense - 45,000 - -
Waiver of loans owed - (110,000) - -
Changes in working capital:
(Increase)/Decrease in trade
and other receivables 11 73,000 48,000 40,000 (45,000)
Increase/(Decrease) in trade
and other payables 22,000 (442,000) 13,000 (12,000)
Net cash used in operating
activities (984,000) (1,597,000) (920,000) (921,000)
-------------------------------------- ------ ------------ ------------ ------------ ------------
Cash flows from investing
activities
Purchase of property plant
and equipment 7 (6,000) - - -
Disposal of property, plant
and equipment 7 4,000 - - -
Cash expenditure on exploration
and evaluation activity 8 (490,000) (133,000) - -
Loan to subsidiaries - - (640,000) (1,195,000)
Interest received - 1,000 - -
-------------------------------------- ------ ------------ ------------ ------------ ------------
Net cash used in investing
activities (492,000) (132,000) (640,000) (1,195,000)
-------------------------------------- ------ ------------ ------------ ------------ ------------
Cash flows from financing
activities
Proceeds from issue of share
capital 15 1,641,000 2,842,000 1,641,000 2,842,000
Transaction costs of share
issue 15 (121,000) (299,000) (121,000) (299,000)
Cash acquired in reverse acquisition - 938,000 - -
Proceeds from borrowings - 33,000 - -
Repayment of borrowings - (204,000) - -
Interest paid - (26,000) - -
Net cash generated from financing
activities 1,520,000 3,284,000 1,520,000 2,543,000
-------------------------------------- ------ ------------ ------------ ------------ ------------
Net increase/(decrease) in
cash and cash equivalents 44,000 1,555,000 (40,000) 427,000
Cash and cash equivalents
at beginning of year 1,797,000 114,000 1,706,000 1,172,000
Exchange gain on cash and cash
equivalents (65,000) 128,000 (63,000) 107,000
-------------------------------------- ------ ------------ ------------ ------------ ------------
Cash and cash equivalents
at end of year 12 1,776,000 1,797,000 1,603,000 1,706,000
-------------------------------------- ------ ------------ ------------ ------------ ------------
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2022
1. General information
The principal activity of Capital Metals plc (the 'Company') and
its subsidiaries (together the 'Group') is the exploration and
development of the Eastern Minerals Project located in the Ampara
District of the Eastern Province of Sri Lanka. The Company's shares
are listed on AIM of the London Stock Exchange. The Company is
incorporated and domiciled in England.
The address of its registered office is Suite 1, 15 Ingestre
Place London, W1F 0DU.
2. Summary of significant Accounting Policies
The principal Accounting Policies applied in the preparation of
these Consolidated Financial Statements are set out below. These
Policies have been consistently applied to all the periods
presented, unless otherwise stated.
2.1. Basis of preparation of Financial Statements
These financial statements have been prepared in accordance with
International Financial Standards and UK adopted international
accounting standards in conformity with the requirements of the
Companies Act 2006. The Financial Statements have also been
prepared under the historical cost convention, except as modified
for assets and liabilities recognised at fair value on business
combination.
The Financial Statements are presented in US Dollars rounded to
the nearest dollar. The functional currency of the Company is Pound
Sterling.
The preparation of financial statements in accordance with the
applicable financial reporting framework requires the use of
certain critical accounting estimates. It also requires management
to exercise its judgement in the process of applying the Accounting
Policies. The areas involving a higher degree of judgement or
complexity, or areas where assumptions and estimates are
significant to the Consolidated Financial Statements are disclosed
in Note 4.
Prior year reverse acquisition
On 13 January 2021, the Company completed a reverse acquisition
of Capital Metals Limited, a company registered in the British
Virgin Islands. Further information about this transaction is
disclosed in Note 6.
Although the transaction resulted in Capital Metals Limited
becoming a wholly owned subsidiary of the Company, the transaction
constitutes a reverse takeover in accordance with Rule 14 of the
AIM Rules for Companies as the previous shareholders of Capital
Metals Limited own a substantial majority of the Ordinary Shares of
the Company and the executive management of Capital Metals Limited
became the executive management of Capital Metals Plc, previously
Equatorial Palm Oil Plc.
Being a reverse takeover, the legal subsidiary, Capital Metals
Limited was treated in consolidation as the accounting acquirer and
the legal parent company, Capital Metals Plc, was treated as the
accounting subsidiary.
The comparative period for the Group was the year ended 31 March
2021 and included the results of Capital Metals Limited and its
subsidiaries only.
2.2. New and amended standards
(a) New and amended standards adopted by the Group and
Company
A number of new and amended standards and interpretations issued
by the International Accounting Standards Board (IASB) have become
effective for the first time for financial periods beginning on (or
after) 1 April 2021 and have been applied by the Company and Group
in these financial statements. None of these new and amended
standards and interpretations had a significant effect on the
Company or Group because they are either not relevant to the
Company or Group's activities or require accounting which is
consistent with the Company or Group's current accounting
policies.
ii) New standards, amendments and interpretations in issue but
not yet effective or not yet endorsed and not early adopted
There are a number of standards, amendments to standards, and
interpretations which have been issued by the IASB that are
effective in future accounting periods and which have not been
adopted early.
2.3. Basis of Consolidation
These consolidated financial statements comprise the financial
statements of Capital Metals Plc and its subsidiaries as at 31
March 2022. Subsidiaries are fully consolidated from the date on
which control is transferred to the Group and cease to be
consolidated from the date on which control is transferred out of
the Group. Control exists where the company has the power to govern
the financial and operating policies of an entity so as to obtain
benefits from its activities. Where subsidiaries follow differing
accounting policies from those of the Group, those accounting
policies have been adjusted to align with those of the Group.
Inter-company balances and transactions between Group companies are
eliminated on consolidation, though foreign exchange differences
arising on inter-company balances between subsidiaries with
differing functional currencies is recognised in profit or
loss.
2.4. Going concern
These financial statements have been prepared on the going
concern basis. The Group's business activities, together with the
factors likely to affect its future development, performance and
position are set out in the Chairman's Statement and the Strategic
Report.
As at 31 March 2022, the Group had cash and cash equivalents of
$1,776,000. The Directors have prepared cash flow forecasts to 31
December 2023, which take account of the cost and operational
structure of the Group and Parent Company, planned exploration and
evaluation expenditure, licence commitments and working capital
requirements. These forecasts indicate that the Group and Parent
Company's cash resources are not sufficient to cover the projected
expenditure for the period for a period of 12 months from the date
of approval of these financial statements. These forecasts indicate
that the Group and Parent Company, in order to meet their
operational objectives, and meets their expected liabilities as
they fall due, will be required to raise additional funds within
the next 12 months.
In common with many exploration and evaluation entities, the
Company will need to raise further funds within the next 12 months
in order to meet its expected liabilities as they fall due, and
progress the Group into definitive feasibility and then into
construction and eventual production of revenues. The Directors are
confident in the Company's ability to raise additional funds as
required, from existing and/or new investors, within the next 12
months. The Company has demonstrated its access to financial
resources, as evidenced by the successful completion of a Placing
in February 2022 with an equity raising of GBP1,250,000
($1,641,000).
Given the Group and Parent Company's current cash position and
its demonstrated ability to raise capital, the Directors have a
reasonable expectation that the Group and Parent Company has
adequate resources to continue in operational existence for the
foreseeable future.
Notwithstanding the above, these circumstances indicate that a
material uncertainty exists that may cast significant doubt on the
Group and Parent Company's ability to continue as a going concern
and, therefore, that the Group and Parent Company may be unable to
realise their assets or settle their liabilities in the ordinary
course of business. As a result of their review, and despite the
aforementioned material uncertainty, the Directors have confidence
in the Group and Parent Company's forecasts and have a reasonable
expectation that the Group and Parent Company will continue in
operational existence for the going concern assessment period and
have therefore used the going concern basis in preparing these
consolidated and Parent Company financial statements.
2.5. Segment reporting
An operating segment is a group of assets and operations engaged
in providing products or services that are subject to risks and
returns that are different from those of other business
segments.
The Directors are of the opinion that the Group comprises a
single activity being the exploration and evaluation of mineral
sand resources in one geographical area in Sri Lanka. As such the
financial information of the segment is the same as that set out in
the primary statements.
2.6. Foreign currencies
(a) Functional and presentation currency
Items included in the Financial Statements of each of the
Group's entities are measured using the currency of the primary
economic environment in which the entity operates (the 'functional
currency'). The functional currency of the UK parent entity is
Pound Sterling, the functional currency of the BVI subsidiaries is
US Dollars and the functional currency of the Sri Lankan
subsidiaries is Sri Lankan Rupee. The Financial Statements are
presented in US Dollars which is the Group's presentation
currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions or valuation where such items are re-measured. Foreign
exchange gains and losses resulting from the settlement of such
transactions and from the translation at period-end exchange rates
of monetary assets and liabilities denominated in foreign
currencies are recognised in the income statement.
(c) Group companies
The results and financial position of all the Group entities
(none of which has the currency of a hyperinflationary economy)
that have a functional currency different from the presentation
currency are translated into the presentation currency as
follows:
-- assets and liabilities for each period end date presented are
translated at the period-end closing rate;
-- income and expenses for each Income Statement are translated
at average exchange rates (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on
the transaction dates, in which case income and expenses are
translated at the dates of the transactions); and
-- all resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the
translation of the net investment in foreign entities, and of
monetary items receivable from foreign subsidiaries for which
settlement is neither planned nor likely to occur in the
foreseeable future, are taken to other comprehensive income. When a
foreign operation is sold, such exchange differences are recognised
in the Income Statement as part of the gain or loss on sale.
2.7. Intangible assets
Exploration and evaluation assets
Exploration and evaluation assets include the cost of
acquisition, exploration, determination of resources and
recoverable reserves, technical studies, economic feasibility
studies and all technical and administrative overheads directly
associated with these assets, where a mineral deposit has
development potential.
Exploration and evaluation assets which are acquired are
recognised at fair value. Capitalised exploration and evaluation
expenditure is recorded and held at cost.
The Group performs an impairment test on the exploration and
evaluation assets when specific facts and circumstances indicate an
impairment test is required, including:
i) the Group's right to explore in an area has expired, or will
expire in the near future without renewal;
ii) no further exploration or evaluation is planned or budgeted for;
iii) a decision has been taken by the Board to discontinue
exploration and evaluation in an area due to the absence of a
commercial level of reserves; and
iv) sufficient data exists to indicate that the book value will
not be fully recovered from future development and production.
If any such facts or circumstances are noted, the Group, as a
next step, perform an impairment test in accordance with the
provisions of IAS 36 "Impairment of Assets". In such circumstances,
the aggregate carrying value of the exploration and assets is
compared against the expected recoverable amount of the
cash-generating unit. The recoverable amount is the higher of value
in use and the fair value less costs to sell. Management considers
all licences relating to the Project to represent one asset when
undertaking their impairment assessment.
2.8. Investments in subsidiaries
Investments in Group undertakings are stated at cost, which is
the fair value of the consideration paid, less any impairment
provision.
2.9. Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated
depreciation and any accumulated impairment losses. Depreciation is
provided on all property, plant and equipment to write off the cost
less estimated residual value of each asset over its expected
useful economic life on a straight line basis at the following
annual rates:
Computer & office equipment - 3 years
Motor vehicles - 4 years
Field equipment - 5 years
Drilling equipment - 10 years
Furniture & fittings - 5 years
Subsequent costs are included in the asset's carrying amount or
recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item
will flow to the Group and the cost of the item can be measured
reliably. The carrying amount of the replaced part is derecognised.
All other repairs and maintenance are charged to the income
statement during the financial period in which they are
incurred.
The assets' residual values and useful lives are reviewed, and
adjusted if appropriate, at the end of each reporting period.
An asset's carrying amount is written down immediately to its
recoverable amount if the asset's carrying amount is greater than
its estimated recoverable amount. If an impairment review is
conducted following an indicator of impairment, assets which are
not able to be assessed for impairment individually are assessed in
combination with other assets within a cash generating unit.
Gains and losses on disposal are determined by comparing the
proceeds with the carrying amount and are recognised within 'Other
(losses)/gains' in the Income Statement.
2.10. Impairment of non-financial assets
Assets that have an indefinite useful life, for example,
intangible assets not ready to use, and goodwill, are not subject
to amortisation and are tested annually for impairment. Property,
plant and equipment is reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not
be recoverable. An impairment loss is recognised for the amount by
which the asset's carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset's fair value less
costs to sell and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash flows (cash generating units).
Non-financial assets that suffered impairment are reviewed for
possible reversal of the impairment at each reporting date.
2.11. Financial assets
(a) Recognition and measurement
Management determines the classification of its financial assets
at initial recognition, the classification of which depends on the
purpose for which the financial assets were acquired.
Financial assets are classified in four categories:
i) amortised cost;
ii) fair value through other comprehensive income ("FVOCI") with
gains or losses recycled to profit or loss on derecognition;
iii) FVOCI with no recycling of gains or losses to profit or loss on derecognition; and
iv) fair value through profit or loss ("FVTPL").
Financial assets are classified 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 contractual cash flows; and
-- the contractual terms give rise to cash flows that are solely
payments of principal and interest
The Group's financial assets comprise cash and receivables which
are classified as financial assets at amortised cost. The Company's
financial assets comprise cash and loans to subsidiaries, which are
classified as financial assets at amortised cost.
The Company accounts for loan receivables at amortised cost as
the objective is to hold these assets in order to collect
contractual cash flows and the contractual cash flows are solely
payments of principal and interest. After classification as
amortised cost, the financial assets are initially measured at fair
value plus directly attributable transaction costs, and
subsequently measured at amortised cost using the effective
interest method, less provision for impairment.
Financial assets are derecognized when the rights to receive
cash flows from the assets have expired or have been transferred,
and the Group has transferred substantially all of the risks and
rewards of ownership.
(b) Impairment
Impairment provisions for loans to subsidiaries are recognised
based on a forward-looking expected credit loss model. The
methodology used to determine the amount of the provision is based
on whether there has been a significant increase in credit risk
since initial recognition of the financial asset.
For those where the credit risk has not increased significantly
since initial recognition of the financial asset, twelve month
expected credit losses along with gross interest income are
recognised. For those for which credit risk has increased
significantly, lifetime expected credit losses along with the gross
interest income are recognised. For those that are determined to be
credit impaired, lifetime expected credit losses along with
interest income on a net basis are recognised.
2.12. Financial liabilities
Financial liabilities are obligations to pay cash or other
financial assets and are recognised when the Group becomes a party
to the contractual provisions of the instrument.
All financial liabilities are initially recognised at fair value
and subsequently measured either as:
-- amortised cost using the effective interest method, with
interest-related charges recognised as an expense in the income
statement; or
-- financial liabilities measured at FVTPL, re-measured at
subsequent reporting dates to fair value through the income
statement.
During the reporting period, the Group's financial liabilities
comprised trade and other payables, deferred consideration payable,
loans and convertible bonds. The trade and other payables, and
loans, are classified at amortised cost.
The deferred consideration payable in respect of the acquisition
of the Project is treated as a financial liability measured at
FVTPL.
The convertible bonds were assessed to contain an embedded
derivative conversion feature and the Group elected to treat the
entire instrument as a financial liability measured at FVTPL.
A financial liability is derecognised only when the obligation
is extinguished, that is, when the obligation is discharged or
cancelled or expires.
2.13. Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand.
2.14. Equity
Equity comprises the following:
-- "Share capital" represents the nominal value of the Ordinary shares;
-- "Share Premium" represents consideration less nominal value
of issued shares and costs directly attributable to the issue of
new shares;
-- "Other reserves" represents the capital contribution reserve,
deferred share reserve, merger reserve, foreign currency
translation reserve, reverse acquisition reserve and share option
and warrant reserve where;
o "Merger reserve" represents the difference between the fair
value of an acquisition and the nominal value of the shares
allotted in a share exchange;
o "Foreign currency translation reserve" represents the
translation differences arising from translating the financial
statement items from functional currency to presentational
currency;
o "Reverse acquisition reserve" represents a non-distributable
reserve arising on the acquisition of Capital Metals Limited;
o "Share option and warrant reserve" represents share options
and warrants awarded by the group;
o Capital contribution reserve - represents capital contributed
by one or more of the members without taking shares in return or
creating a debt.
o Deferred share reserve - represents shares to be issued upon
certain conditions being met.
o "Retained earnings" represents retained losses.
2.15. Share capital, share premium and deferred shares
Ordinary shares are classified as equity. 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
provided there is sufficient premium available. Should sufficient
premium not be available placing costs are recognised in the Income
Statement.
Deferred shares are classified as equity. Deferred shares
represent shares to be issued upon certain conditions being met.
The holders of deferred shares do not have any right to receive
written notice of or attend, speak or vote at any general meeting
of the Company. As regards income, on any dividend or other
distribution of the Company, the holders of deferred shares shall
be entitled to payment in priority to any dividend or distribution
to the holders of any other class of shares in the Company, GBP1 in
aggregate. Upon any capital distribution of the Company (including
upon winding up), the holders of the deferred shares shall be
entitled to payment in priority to any distribution to the holders
of any other class of shares in the Company, GBP1 in aggregate. The
deferred shares may be cancelled by the Company at any time at its
determination for no payment and without obtaining sanction of such
holders.
2.16. Share based payments
The Group has granted options over its unissued share capital to
certain Directors, management, employees and consultants as part of
their remuneration. The fair value of options granted in respect of
services provided, is measured at the grant date and recognised as
an expense over the vesting period, with a corresponding increase
in the Share warrants and options reserve.
The fair value of the share options and warrants are determined
using the Black Scholes valuation model or Monte Carlo analysis, as
appropriate, t aking into account the terms and conditions upon
which the warrants or options were issued or granted.
Non-market vesting conditions are included in assumptions about
the number of options that are expected to vest. The total expense
or charge is recognised over the vesting period, which is the
period over which all of the specified vesting conditions are to be
satisfied. At the end of each reporting period, the entity revises
its estimates of the number of options that are expected to vest
based on the non-market vesting conditions. It recognises the
impact of the revision to original estimates, if any, in the Income
Statement or equity as appropriate, with a corresponding adjustment
to a separate reserve in equity.
When the options are exercised, the Group issues new shares. The
proceeds received, net of any directly attributable transaction
costs, are credited to share capital (nominal value) and share
premium when the options are exercised.
2.17. Taxation
No current tax is yet payable in view of the losses to date.
Deferred tax is recognised for using the liability method in
respect of temporary differences arising from differences between
the carrying amount of assets and liabilities in the consolidated
financial statements and the corresponding tax bases used in the
computation of taxable profit. However, deferred tax liabilities
are not recognised if they arise from the initial recognition of
goodwill; deferred tax is not accounted for if it arises from
initial recognition of an asset or liability in a transaction other
than a business combination that at the time of the transaction
affects neither accounting nor taxable profit or loss.
In principle, deferred tax liabilities are recognised for all
taxable temporary differences and deferred tax assets (including
those arising from investments in subsidiaries), are recognised to
the extent that it is probable that taxable profits will be
available against which deductible temporary differences can be
utilised.
Deferred income tax assets are recognised on deductible
temporary differences arising from investments in subsidiaries only
to the extent that it is probable the temporary difference will
reverse in the future and there is sufficient taxable profit
available against which the temporary difference can be used.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in except where the Group is
able to control the reversal of the temporary difference and it is
probable that the temporary difference will not reverse in the
foreseeable future.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred tax assets and
liabilities relate to income taxes levied by the same taxation
authority on either the same taxable entity or different taxable
entities where there is an intention to settle the balances on a
net basis.
Deferred tax is calculated at the tax rates (and laws) that have
been enacted or substantively enacted by the statement of financial
position date and are expected to apply to the period when the
deferred tax asset is realised or the deferred tax liability is
settled.
Deferred tax assets and liabilities are not discounted.
3. Financial risk management
3.1. Financial risk factors
The Group's activities expose it to a variety of financial
risks: market risk (foreign currency risk), credit risk and
liquidity risk. The Group's overall risk management programme
focuses on the unpredictability of financial markets and seeks to
minimise potential adverse effects on the Group's financial
performance. None of these risks are hedged.
Risk management is carried out by the management team under
policies approved by the Board of Directors.
Market risk
(a) Foreign currency risk
The Group operates internationally and is exposed to foreign
exchange risk arising from various currency exposures, primarily
with respect to the Sri Lankan Rupee (LKR), Australian Dollar (AUD)
and the British Pound Sterling (GBP or GBP). Foreign exchange risk
arises from future commercial transactions, recognised assets and
liabilities and net investments in foreign operations.
The Group negotiates all material contracts for activities in
relation to its subsidiaries in either LKR, AUD or USD. The Group
does not hedge against the risks of fluctuations in exchange rates.
The volume of transactions is not deemed sufficient to enter into
forward contracts as most of the foreign exchange movements result
from the retranslation of inter company loans. The Group has
sensitised the figures for fluctuations in foreign exchange rates,
as the Directors acknowledge that, at the present time, the foreign
exchange retranslations have resulted in rather higher than normal
fluctuations and is predominantly due to the exceptional nature of
the LKR exchange rate in the current economic climate.
As at 31 March 2022, the exposure of the Group to foreign
exchange rates is summarised as follows:
Group Group Company Company
2022 2021 2022 2021
Cash and cash equivalents $'000 $'000 $'000 $'000
US Dollar 167 131 7 119
Sri Lankan Rupee 13 79 - -
Pound Sterling 1,596 1,587 1,596 1,587
----- ----- ------- -------
1,776 1,797 1,603 1,706
Other receivables
US Dollar - - - -
Sri Lankan Rupee - 3 - -
Pound Sterling 23 17 8 96
----- ----- ------- -------
23 20 8 96
----- ----- ------- -------
1,799 1,817 1,611 1,802
----- ----- ------- -------
As at 31 March 2022, if Sterling had gained or lost 10 per cent.
against the USD, the impact on comprehensive loss would have been
as follows:
Group Group Company Company
2022 2021 2022 2021
Impact on comprehensive loss $'000 $'000 $'000 $'000
+10% GBP/USD 162 160 160 237
-10% GBP/USD (162) (160) (160) (237)
----- ----- ------- -------
As at 31 March 2022, if the Sri Lankan Rupee had gained or lost
10 per cent. against the USD, the impact on comprehensive loss
would have been as follows:
Group Group Company Company
2022 2021 2022 2021
Impact on comprehensive loss $'000 $'000 $'000 $'000
+10% LKR/USD 1 8 - -
-10% LKR/USD (1) (8) - -
----- ----- ------- -------
Credit risk
Credit risk is the risk of financial loss to the Group if a
counterparty to a financial instrument fails to meet its
contractual obligations.
Credit risk relating to the Group's financial assets which
comprise principally cash and cash equivalents, arises from the
potential default of counterparties. The credit risk on liquid
funds is limited because the counterparties are reputable banks
with high credit ratings assigned by international credit-rating
agencies.
The carrying amount of financial assets represents the maximum
credit exposure, which at the reporting date was:
Group Group Company Company
2022 2021 2022 2021
$'000 $'000 $'000 $'000
Cash and bank balances 1,776 1,797 1,603 1,706
Trade and other receivables 28 19 57 16
Loan to subsidiaries - - 1,835 1,195
----- ----- ------- -------
1,804 1,816 3,495 2,917
----- ----- ------- -------
The expected credit risk for both the Group and the Company was
assessed as not material.
Liquidity risk
In keeping with similar sized mineral exploration groups, the
Group's continued future operations depend on the ability to raise
sufficient working capital through the issue of equity share
capital or debt. The Directors are reasonably confident that
adequate funding will be forthcoming with which to finance
operations. Controls over expenditure are carefully managed.
With exception to deferred taxation, financial liabilities are
all due within one year.
3.2. Capital risk management
The Directors consider the Group's capital to comprise of share
capital and reserves stated on the statement of financial position.
The Group manages its capital to ensure the Group will be able to
continue on a going concern on a long term basis while ensuring the
optimal return to shareholders and other stakeholders through an
effective debt and equity balance. No changes were made in the
objectives, policies and processes during the current or previous
year.
The share capital, including share premium, and reserves
totalling $5,071,000 (2021: $6,831,000) provides the majority of
the working capital required by the Group. Management reviews the
capital structure and makes adjustment to it in the light of
changes in economic conditions.
4. Critical accounting estimates and judgements
The preparation of the Financial Statements requires management
to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amount of expenses during the period. Actual results may
vary from the estimates used to produce these Financial
Statements.
Estimates and judgements are regularly evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances.
Items subject to such estimates and assumptions, that have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial years,
include but are not limited to:
Impairment of intangible assets - exploration and evaluation
costs
Management make the judgement as to which costs are directly
associated with the exploration and evaluation assets and are to be
capitalised, including the allocation of applicable salary and
overhead costs.
Exploration and evaluation costs have a carrying value at 31
March 2022 of $4,556,000 (31 March 2021 $6,178,000) Such assets
have an indefinite useful life as the Group 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 2.7 . Each exploration project is subject to an annual review
by either a consultant or senior company 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.
DEL Licence (EL168/R/4) expired on 31 October 2020, but is
subject to the Group's First IML Application, which has not been
granted at the reporting date but subsequently granted post year
end. It is noted that the IML's granted post year end were for
select areas within license EL168/R/4 and there remains areas
within this license which are not covered by an IML.
Whilst there is no certainty that the remaining IML's will be
granted, management are of the judgement that there is a reasonable
expectation given the Group received approval for two IML's post
year end and based on the ongoing discussions with the Geological
Survey and Mines Burea that the remaining IMLs will be approved in
due course. Given this judgement it was deemed that no impairment
test was required to be performed. Should the Group not be
successful with the remaining IML applications, then Directors
would expect to consider an impairment of the E&E assets.
Intercompany loans
At 31 March 2022 management reassessed the recovery profile of
the Parent Company loans granted to subsidiaries and noted the
updated project development timetable would mean that it is
unlikely that repayments from subsidiaries would commence in the
next 12 months and accordingly the loans have been classified as
non-current receivables in the current year.
Prior year reverse acquisition
Management measured the cost of the equity-settled transactions
by reference to the fair value of the equity instruments at the
measurement date, being the date of completion of the reverse
acquisition. The placing price was 12 pence per share and the
closing price on re-admission of the Company on 13 January 2021 was
20 pence per share. It was Management's judgement that the closing
price of 20 pence per share was considered to be the most
appropriate value and therefore it was applied in valuing the
investment in Capital Metals Limited at GBP26,400,000
($35,994,000), and in the reverse acquisition accounting for the
fair value of the shares deemed to have been issued by Capital
Metals Limited of GBP4,563,000 ($6,221,000), which resulted in
$5,454,000 being expensed as the deemed cost of acquiring the
listing in the prior year.
Share based payment transactions
Management measured the cost of equity-settled transactions by
reference to the fair value of the equity instruments at the date
at which they are granted. The fair value of shares was determined
by the share price at the date of grant. The fair value of options
and warrants was determined using Monte Carlo simulations and the
Black-Scholes model respectively. Management estimated the number
of options that are expected to vest based on the non-market
vesting conditions. The valuation of these options and warrants
involved making a number of critical estimates relating to price
volatility, future dividend yields, expected life of the options
and forfeiture rates. These assumptions are described in more
detail in Note 16.
5. Segment information
The Directors are of the opinion that the Group comprises a
single activity being the exploration and evaluation of mineral
sand resources in one geographical area in Sri Lanka. As such the
financial information of the segment is the same as that set out in
the primary statements.
6. Prior year reverse acquisition
On 13 January 2021 the Company acquired through a
share-for-share exchange the entire issued share capital of Capital
Metals Limited. The principal activity of Capital Metals Limited
and its subsidiaries is that of exploration, evaluation and
development of mineral sands resources in Sri Lanka. Capital Metals
Limited is incorporated in the British Virgin Islands.
In substance, the shareholders of Capital Metals Limited
acquired a controlling interest in the Company and the transaction
has therefore been accounted for as a reverse acquisition. As the
Company's activities prior to the transaction were purely the
maintenance of the AIM Listing, acquiring Capital Metals Limited
and raising additional equity finance to provide the necessary
funding for the operations of Capital Metals Limited, it did not
meet the definition of a business in accordance with IFRS 3 for the
purposes of these consolidated financial statements of the
Group.
Accordingly, in these consolidated financial statements, the
reverse acquisition did not constitute a business combination and
was accounted for in accordance with IFRS 2 "Share-based Payments".
Although the reverse acquisition is not a business combination, the
Company has become a legal parent and is required to apply IFRS 10
and prepare consolidated financial statements. The Directors have
prepared these consolidated financial statements using the reverse
acquisition methodology. The difference between the equity value
given up by the shareholders of Capital Metals Limited and the
share of the fair value of net assets gained is charged to the
statement of comprehensive income as a share-based payment on
reverse acquisition and represents in substance the cost of
acquiring an AIM listing.
In accordance with reverse acquisition accounting principles,
these consolidated financial statements represent a continuation of
the consolidated statements of Capital Metals Limited and
include:
-- The assets and liabilities of Capital Metals Limited (and its
subsidiaries) at their pre-acquisition carrying value amounts and
the results for both current and comparative years.
-- The retained earnings and other equity balances of the legal
subsidiary (accounting acquirer) before the business
combination.
-- The assets and liabilities of the Company as at 31 March 2021
and its results from 13 January to 31 March 2021.
-- the amount recognised as issued equity interests in the
consolidated financial statements determined by adding the issued
equity interest of the legal subsidiary (the accounting acquirer)
outstanding immediately before the business combination to the fair
value of the legal parent (accounting acquiree). However, the
equity structure (ie the number and type of equity interests
issued) reflects the equity structure of the legal parent (the
accounting acquiree), including the equity interests the legal
parent issued to effect the combination. Accordingly, the equity
structure of the legal subsidiary (the accounting acquirer) is
restated using the exchange ratio established in the acquisition
agreement to reflect the number of shares of the legal parent (the
accounting acquiree) issued in the reverse acquisition
-- Comparative information presented in those consolidated
financial statements also is retroactively adjusted to reflect the
legal capital of the legal parent (accounting acquiree).
On 13 January 2021 the Company issued 132,000,000 Ordinary
Shares to acquire the whole of the issued share capital of Capital
Metals Limited. The closing share price on re-admission on 13
January 2021 was 20 pence per share. Accordingly, the investment in
Capital Metals Limited was valued at GBP26,400,000 ($35,994,000).
As the Company is a UK registered company, section 612 of the
Companies Act 2006 (which deals with merger relief) applies, there
will be no legal share premium on the shares issued to effect the
combination, but the "premium" on the shares (that is, the
difference between the fair value of the consideration and the
nominal value of the shares) will be recorded as a "merger
reserve".
The fair value of the shares deemed to have been issued by
Capital Metals Limited (accounting acquirer) for Capital Metals Plc
(accounting subsidiary) was deemed to be GBP4,563,000 ($6,221,000)
being the entire issued Ordinary Shares of Capital Metals Plc of
22,813,876 at a price of 20 pence per share.
The fair value of the net assets of Capital Metals Plc at
acquisition was as follows:
$'000
Cash and cash equivalents 938
Receivables 157
Payables (328)
--------------------------- ------
Total net assets 767
--------------------------- ------
The difference between the deemed cost of $6,221,000 and the
fair value of the net assets acquired per above of $767,000
resulted in $5,454,000 being expensed within "deemed reverse
acquisition expenses" in accordance with IFRS 2, reflecting the
economic cost to Capital Metals Limited shareholders of acquiring a
listing.
The reverse acquisition reserve which arose from the reverse
takeover is made up as follows:
$'000
Pre-acquisition equity of Capital
Metals Plc (52,574)
Equity at acquisition of Capital
Metals Limited 7,672
Value of shares issued to acquire
Capital Metals Limited (35,993)
Deemed reverse acquisition expense 5,454
------------------------------------ ---------
Total reverse acquisition reserve (75,441)
------------------------------------ ---------
7. Property, plant and equipment
Group
Group Total
$
------------------------------- ------------
Cost
As at 31 March 2020 126,000
Exchange Differences (6,000)
Additions 1,000
Disposals (5,000)
As at 31 March 2021 116,000
------------------------------- ------------
As at 1 April 2021 116,000
Exchange Differences (37,000)
Additions 6,000
Disposals (4,000)
As at 31 March 2022 81,000
------------------------------- ------------
Depreciation
As at 31 March 2020 54,000
Charge for the year 19,000
Disposals (2,000)
Exchange differences (3,000)
------------------------------- ------------
As at 31 March 2021 68,000
------------------------------- ------------
As at 1 April 2021 68,000
Charge for the year 9,000
Disposals (4,000)
Exchange differences (21,000)
------------------------------- ------------
As at 31 March 2022 52,000
------------------------------- ------------
Net book value as at 31 March
2021 48,000
------------------------------- ------------
Net book value as at 31 March
2022 29,000
------------------------------- ------------
Depreciation expense of $9,000 (2021: $19,000) for the Group has
been charged in administration expenses.
8. Intangible assets
Intangible assets comprise exploration and evaluation costs. The
movement on the exploration and evaluation assets was as
follows:
Group
Exploration & Evaluation Assets
- Cost and Net Book Value $
--------------------------------- ------------
Cost
As at 31 March 2020 6,389,000
Additions 133,000
Exchange differences (344,000)
As at 31 March 2021 6,178,000
---------------------------------- ------------
Additions 490,000
Exchange differences (2,112,000)
As at 31 March 2022 4,556,000
---------------------------------- ------------
All exploration and evaluation assets relate to Group
subsidiaries and the Eastern Minerals Project in Sri Lanka.
The Directors undertook an impairment indicators review and none
were identified. In performing their review, the Directors noted
the following:
-- The EML Licence (EL199/R/4) was renewed for a period of 24 months until 23 January 2023.
-- DEL Licence (EL430) was issued for a period of 24 months until 13 March 2024.
-- Whilst the DEL Licence (EL168/R/4) expired on 31 October
2020, it was subject to the Group's First Industrial Mining Licence
("IML") application and the GSMB has represented to the Group that,
following the expiry of an exploration license, the Geological
Survey and Mines Burea in practice, allows the former exploration
license holder for a period of two years from the date of
expiry:
- Exclusive right over the former exploration license area to
submit further IMLs should the former license holder wish to do
so.
- Exclusivity over the former exploration license area by
refraining from accepting applications for any new exploration
licenses from third parties.
- The EIA was approved in November 2021.
- The IML was approved post year end in August 2022. Please refer to Note 26.
-- Significant further exploration and evaluation activity is
planned, including a drilling program on EL 199.
-- Mineral sands prices remain strong and the Group are
continuing off-take discussions following a number of approaches
from strategic and industrial groups.
It is noted the IML licenses granted post year end was for
select areas within licence EL168/R/4 and there remains areas
within this license which are not covered by an IML. Management are
of the judgement that there is a reasonable expectation given the
Group received approval for two IML's post year end and based on
the ongoing discussions with the Geological Survey and Mines Bureau
that the remaining IMLs will be approved in due course.
Following their assessment, the Directors concluded that no
impairment charge was required at 31 March 2022.
9. Investments in subsidiaries
Company
For the year ended For the
31 March 2022 year ended
31 March
2021
$ $
------------------------------ --------------------------- ------------
At beginning of period 36,800,000 -
Additions - 36,368,000
Impairment charge - -
Foreign exchange differences (1,770,000) 432,000
------------------------------ --------------------------- ------------
Investment at end of period 35,030,000 36,800,000
------------------------------ --------------------------- ------------
Investments in Group undertakings are stated at cost, which is
the fair value of the consideration paid, less any impairment
provision.
Subsidiaries
Proportion
Country of ordinary
of incorporation Company shares held
and place number Parent by the Group Nature
Name of subsidiary of business company (%) of business
-------------------- ------------------- ---------- ---------------- -------------- -------------------
Capital Metals British Virgin Capital
Limited Islands 1890161 Metals Plc 100% Holding company
-------------------- ------------------- ---------- ---------------- -------------- -------------------
Brighton Metals British Virgin Capital
Limited Islands 1893384 Metals Limited 100% Holding company
-------------------- ------------------- ---------- ---------------- -------------- -------------------
Redgate Lanka Brighton
(Pvt) Limited Sri Lanka 119784 Metals Limited 100% Holding/Investment
-------------------- ------------------- ---------- ---------------- -------------- -------------------
Damsila Exports Sri Lanka PV8591 Brighton 4% Exploration
(Pvt) Limited Metals Limited
Sri Lanka PV8591 Redgate 96% Exploration
Lanka (Pvt)
Limited
-------------------- ------------------- ---------- ---------------- -------------- -------------------
Eastern Minerals Sri Lanka PV81273 Brighton 1% Exploration
(Pvt) Limited Metals Limited
Sri Lanka PV81273 Redgate 99% Exploration
Lanka (Pvt)
Limited
-------------------- ------------------- ---------- ---------------- -------------- -------------------
Keynes Investment Brighton
(Pvt) Limited Sri Lanka 119760 Metals Limited 100% Dormant
-------------------- ------------------- ---------- ---------------- -------------- -------------------
All subsidiary undertakings are included in the
consolidation.
The proportion of the voting rights in the subsidiary
undertakings held directly by the parent company do not differ from
the proportion of ordinary shares held.
10. Loans to subsidiaries
Company
----------------------------------
For the year For the year
ended 31 March ended 31 March
2022 2021
$ $
------------------------------ ---------------- ----------------
At beginning of period 1,195,000 -
Additions 697,000 1,195,000
Foreign exchange differences (57,000) -
Loan at end of period 1,835,000 1,195,000
------------------------------ ---------------- ----------------
The fair value of all receivables is the same as their carrying
values stated above. The loans are non interest bearing and
repayable on demand.
The Directors have assessed that there is no expected credit
losses to recognise in respect of the loans to subsidiaries as at
the balance sheet date, based on their assessment of the recovery
strategies, which indicate that the Company would fully recover the
outstanding balance of the loans, given the effective interest rate
is Nil%.
At 31 March 2022 Management reassessed the recovery profile of
the Parent Company loans to Subsidiaries and note the updated
project development timetable would mean that it is unlikely that
repayments from subsidiaries would commence in the next 12 months
and accordingly the loans have been classified as non-current
receivables in the current year.
11. Trade and other receivables
Group Company
-------------------------- --------------------------
For the For the For the For the
year ended year ended year ended year ended
31 March 31 March 31 March 31 March
2022 2021 2022 2021
Current $ $ $ $
------------------- ------------ ------------ --- ------------ ------------
Trade receivables 15,000 16,000 57,000 16,000
Prepayments 13,000 2,000 - -
VAT receivable 8,000 96,000 8,000 96,000
Other receivables - 1,000 - -
------------------- ------------ ------------ --- ------------ ------------
Total 36,000 115,000 65,000 112,000
------------------- ------------ ------------ --- ------------ ------------
The fair value of all receivables is the same as their carrying
values stated above.
12. Cash and cash equivalents
Group Company
-------------------------- --------------------------
For the For the For the For the
year ended year ended year ended year ended
31 March 31 March 31 March 31 March
2022 2021 2022 2021
$ $ $ $
-------------------------- ------------ ------------ --- ------------ ------------
Cash at bank and in hand 1,776,000 1,797,000 1,603,000 1,706,000
-------------------------- ------------ ------------ --- ------------ ------------
All of the UK entities cash at bank is held with institutions
with high credit ratings. The Sri Lankan entities cash at bank is
held with institutions whose credit rating is unknown. $3,000 is
held as a fixed deposit by Damsila Exports Private Limited.
13. Trade and other payables
Group Company
-------------------------- --------------------------
For the For the For the For the
year ended year ended year ended year ended
31 March 31 March 31 March 31 March
2022 2021 2022 2021
$ $ $ $
------------------------------- ------------ ------------ --- ------------ ------------
Current
------------------------------- ------------ ------------ --- ------------ ------------
Trade payables 68,000 47,000 40,000 33,000
Accrued expenses 62,000 63,000 61,000 62,000
Other creditors - 2,000 - -
Social security and other - 1,000 - -
taxation
Deferred consideration 594,000 594,000 - -
------------------------------- ------------ ------------ --- ------------ ------------
Total current liabilities 724,000 707,000 101,000 95,000
------------------------------- ------------ ------------ --- ------------ ------------
Non-current
------------------------------- ------------ ------------ --- ------------ ------------
Deferred consideration 600,000 600,000 - -
Other payables 2,000 - - -
------------------------------- ------------ ------------ --- ------------ ------------
Total non-current liabilities 602,000 600,000 - -
------------------------------- ------------ ------------ --- ------------ ------------
Deferred consideration represents amounts payable in respect of
the acquisitions of Damsila Exports (Pvt) Limited and Eastern
Minerals (Pvt) Limited. The amounts fall due and payable upon
completion of certain milestones within the Group, being for each
of Damsila Exports (Pvt) Limited and Eastern Minerals (Pvt)
Limited: $625,000 in cash (recognised at 95% of face value) upon
completion of feasibility studies on the relevant project and
$750,000 in cash (recognised at 80% of face value) upon
commencement of first commercial production from the relevant
project. Management anticipates the completion of the feasibility
study to take place within 12 months of the balance date, and
accordingly the deferred consideration in respect of this milestone
is classified as a current liability.
At the reporting period end, the probability estimated for the
likelihood of completion of Tranche 2 and 3 was considered, and
management continue to estimate 95% probability for Tranche 2 and
80% probability for Tranche 3. If these estimates prove incorrect
then the amounts payable in respect of the acquisition may be
different to those stated within the financial statements. The
total deferred consideration payable if all milestones are achieved
would be $1,375,000 The value of deferred consideration payable as
at 31 March 2022 was $1,194,000.
14. Financial Instruments by Category
The notional amounts of financial assets and liabilities with a
maturity of less than one year (including trade and other
receivables, cash and cash equivalents and trade and other
payables) are assumed to approximate their fair value.
Group
31 March 2022 31 March 2021
Amortised Amortised
cost Total cost Total
Assets per Statement of Financial
Performance $ $ $ $
------------------------------------------------ ---------- ------------------ ------------- ---------
Trade and other receivables 15,000 15,000 20,000 20,000
Cash and cash equivalents 1,776,000 1,776,000 1,797,000 1,797,000
---------- ------------------ ------------- ---------
1,791,000 1,791,000 1,817,000 1,817,000
---------- ------------------ ------------- ---------
31 March 2022 31 March 2021
--------------------------
Fair value Fair value
through through
Amortised profit Amortised profit and
cost and loss Total cost loss Total
Liabilities per
Statement of Financial
Performance $ $ $ $ $ $
Trade and other
payables 130,000 - 130,000 113,000 - 113,000
Deferred consideration - 594,000 594,000 - 1,194,000 1,194,000
130,000 594,000 724,000 113,000 1,194,000 1,307,000
------------- ---------- ------- --------- ------------- -----------
Company
31 March 2022 31 March 2021
Amortised Amortised
cost Total cost Total
Assets per Statement of Financial
Performance $ $ $ $
Trade and other receivables (excluding
prepayments) 65,000 65,000 17,000 17,000
Loans to subsidiaries 1,835,000 1,835,000 1,195,000 1,195,000
Cash and cash equivalents 1,603,000 1,603,000 1,706,000 1,706,000
3,503,000 3,503,000 2,918,000 2,918,000
------------ --------- --------- ---------
31 March 2022 31 March 2021
Amortised Amortised
cost Total cost Total
Liabilities per Statement of
Financial Performance $ $ $ $
Trade and other payables 101,000 101,000 95,000 95,000
101,000 101,000 95,000 95,000
------------ -------- --------- ------
15. Share capital and premium
Group and Company Number of shares Share capital
---------------------- ----------------------
No. Nominal GBP $
value
--------------------- ------------ -------- ---------- ----------
Ordinary shares 189,103,432 0.0020 378,000 510,000
Deferred shares 356,277,502 0.0099 3,527,000 5,552,000
Total 545,380,934 3,905,000 6,062,000
--------------------- ------------ -------- ---------- ----------
Number of Share
Issued at 0.02 pence per Ordinary capital Share premium Total
share shares $ $ $
---------------------------------- ------------ --------- -------------- -----------
As at 31 March 2021 172,436,766 467,000 47,470,000 47,937,000
---------------------------------- ------------ --------- -------------- -----------
Issue of new shares - 9 February
2022 16,666,666 43,000 1,598,000 1,641,000
Cost of capital - 16 February
2022 - - (121,000) (121,000)
---------------------------------- ------------ --------- -------------- -----------
As at 31 March 2022 189,103,432 510,000 48,947,000 49,457,000
---------------------------------- ------------ --------- -------------- -----------
Deferred Shares (nominal value of 0.0099 Number of Deferred Share capital
pence per share) shares $
-------------------------------------------- ------------------- --------------
As at 31 March 2021 356,227,502 5,552,000
-------------------------------------------- ------------------- --------------
As at 31 March 2022 356,227,502 5,552,000
-------------------------------------------- ------------------- --------------
16. Share based payments
Options
The Company has established a share option scheme for Directors,
employees and consultants to the Group. Share options outstanding
and exercisable at the end of the period have the following expiry
dates and exercise prices:
Options
Grant Date Vesting Date Exercise Exercise Expiry Date 31 March 31 March
price price hurdle 2022 2021
------------ -------------- --------- -------------- ------------ ----------- -----------
13/01/2021 13/01/2021 12.0p 18.0p 13/01/2026 3,916,667 3,916,667
13/01/2021 13/07/2021 12.0p 18.0p 13/01/2026 3,916,667 3,916,667
13/01/2021 13/01/2022 12.0p 24.0p 13/01/2026 3,916,666 3,916,666
15/09/2021 15/09/2025 12.0p - 15/09/2025 500,000 -
12,250,000 11,750,000
--------------------------- --------- -------------- ------------ ----------- -------------
The Company and Group have no legal or constructive obligation
to settle or repurchase the options or warrants in cash.
The fair value of the share options was determined using Black
Scholes and Monte Carlo valuation models. Black Scholes was used
for the options granted in September 2021 and Monte Carlo used for
the options granted in January 2021 given that these options had
specific market hurdles. The parameters used are detailed
below:
2021 Options 2022 Options
---------------- ------------------
Granted on: 13 January 2021 15 September 2021
Estimated Life (years) 5 years 4 years
Share price (pence per share) 19.05p* 9.75p
Risk free rate 1.05% 1.71%
Expected volatility 120% 47.88%
Total fair value ($000) 1,459,000 1,000
* This is the volume weighted average share price. In
determining the expected volatility, consideration is usually given
to the historical company volatility. However, given prior to 13
January 2021 the Company was operating as an investment vehicle, as
opposed to a mineral sands company, as such the future share price
volatility pattern of the Company, will be materially different
from the historic volatility. It has been deemed appropriate to use
the median 5-year monthly volatility of a basket of listed
comparable companies with exposure to mineral sands.
The expected volatility of the options granted during this
financial year is based on the median 4-year volatility of a basket
of listed comparable companies with exposure to mineral sands.
The risk-free rate of return is based on zero yield government
bonds for a term consistent with the option life.
A reconciliation of options granted over the year to 31 March
2022 is shown below:
31 March 2022 31 March 2021
-------------------------- --------------------------
Weighted Weighted
average average
exercise exercise
Number price (GBP) Number price (GBP)
-------------------------- ----------- ------------- ----------- -------------
Outstanding at beginning
of period 11,750,000 12.0p - -
Expired - - - -
Exercised - - - -
Granted 500,000 12.0p 11,750,000 12.0p
-------------------------- ----------- ------------- ----------- -------------
Outstanding as at period
end 12,250,000 11,750,000
-------------------------- ----------- ------------- ----------- ---------------
Exercisable at period
end 7,833,333 3,916,667
-------------------------- ----------- ------------- ----------- -------------
The tranche of 3,916,667 options only vests if the share price
hits a 100% premium to the exercise price and therefore given this
condition was not met at year end have been deemed not
exercisable.
The options outstanding at 31 March 2022 have a weighted average
contractual life of 3.8 years (2021: 4.8 years).
The options issued during the prior year were all granted on 13
January 2021 and vest in three tranches of one-third on 13 January
2021 ("Tranche 1"), one-third on 13 July 2021 ("Tranche 2") and
one-third on 13 January 2022 ("Tranche 3"). Tranche 1 and Tranche 2
have a market based vesting condition (i.e. the Company's shares
having traded any time following Admission at a 50% premium to the
exercise price). Tranche 3 has a market based vesting condition
(i.e. the Company's shares having traded any time following
Admission at a 100% premium to the exercise price).
During the period there was a charge of $721,000 (2021:
$768,000) in respect of share options.
Warrants
As at 31 March 2022, there were 18,275,904 warrants outstanding
by the Company (2021: 17,442,571).
Warrants
Exercise 31 March 31 March
Grant Date price Expiry Date 2022 2021
---------------- ---------- ------------- ---------- -----------
08/09/2020* GBP0.080 08/09/2023 250,000 250,000
13/01/2021** GBP0.080 13/01/2024 5,000,000 5,000,000
13/01/2021** GBP0.120 13/01/2024 833,333 833,333
13/01/2021** GBP0.156 13/01/2024 8,687,499 8,687,499
13/01/2021*** GBP0.156 13/01/2024 2,423,848 2,423,848
05/02/2021*** GBP0.156 13/01/2024 247,891 247,891
15/02/2022**** GBP0.075 15/02/2025 833,333 -
18,275,904 17,442,571
--------------------------- ------------------------ -----------
The fair value of the warrants was determined using the Black
Scholes model. The parameters used are detailed below:
2020 Warrants 2021 Warrants 2021 Warrants 2022 Warrants
-------------- -------------- -------------- --------------
Granted on: 8 September 13 January 5 February 15 February
2020 2021 2021 2022
Life (years) 3 years 3 years 3 years 3 years
Price at grant 13.2p 20.0p 18.5p 7.75p
Risk free rate 0.20% 0.46% 0.45% 1.71%
Volatility 75% 68.03% 72.53% 88.90%
---------------- -------------- -------------- -------------- --------------
*The estimated fair value of the 250,000 warrants granted on 8
September 2020 was assessed as $25,000, and charged to the share
premium account to recognise the cost of issuing the warrants. The
expected volatility was determined by reference to the historical
volatility of the Company's share price.
**The estimated fair value of the 14,520,832 warrants granted on
13 January 2021 to placing subscribers and advisers was assessed as
$2,295,000, which was charged to the share premium account to
recognise the cost of issuing the warrants.
***The estimated fair value of the 2,423,848 warrants granted on
13 January 2021, and the 247,891 warrants granted on 5 February
2021, to the former holders of CML convertible bonds was assessed
as $342,000 and $32,000 respectively. The assessed fair value of
these warrants was capitalised to the investment in CML within the
Company's accounts, and recognised as a share based payments
expense within the consolidated financial statements.
In determining the expected volatility, consideration is usually
given to the historical company volatility. However, given prior to
13 January 2021 the Company was operating as an investment vehicle,
as opposed to a mineral sands company, as such the future share
price volatility pattern of the Company, will be materially
different from the historic volatility. It has been deemed
appropriate to use the median 5-year monthly volatility of a basket
of listed comparable companies with exposure to mineral sands.
****The estimated fair value of the warrants granted on 15
February 2022 was assessed as $13,000, and charged to the share
premium to recognise the cost of issuing the warrants. The expected
volatility was determined by reference to the historical volatility
of the Company's share price.
17. Other reserves
Group
------------- ---------- ----------- ------------- ------------------------------------------
Share
warrants Foreign
Capital Deferred Reverse and currency
contribution share Merger acquisition options translation
reserve reserve reserve reserve reserve reserve Total
$ $ $ $ $ $ $
--------------- ------------- ---------- ----------- ------------- ----------- ------------ ---------------
At 31 March
2020 1,250,000 1,969,000 - (45,859,000) 281,000 (1,155,000) (43,514,000)
--------------- ------------- ---------- ----------- ------------- ----------- ------------ -------------
Other
comprehensive
income - - - - - 167,000 167,000
Cancellation
of options - - - 146,000 (282,000) - (136,000)
Reverse
acquisition - - 35,633,000 (29,728,000) (25,000) - 5,880,000
Issue of share
warrants - - - - 2,694,000 - 2,694,000
Issue of
options - - - - 768,000 - 768,000
--------------- ------------- ---------- ----------- ------------- ----------- ------------ -------------
At 31 March
2021 1,250,000 1,969,000 35,633,000 (75,441,000) 3,436,000 (988,000) (34,141,000)
--------------- ------------- ---------- ----------- ------------- ----------- ------------ -------------
At 1 April
2021 1,250,000 1,969,000 35,633,000 (75,441,000) 3,436,000 (988,000) (34,141,000)
--------------- ------------- ---------- ----------- ------------- ----------- ------------ -------------
Currency
translation
differences - - - - - (2,100,000) (2,100,000)
Share based
payments - - - - 734,000 - 734,000
At 31 March
2022 1,250,000 1,969,000 35,633,000 (75,441,000) 4,170,000 (3,088,000) (35,507,000)
--------------- ------------- ---------- ----------- ------------- ----------- ------------ -------------
Company
----------- ---------------------------------------------
Foreign
Share warrants currency
Merger and options translation
reserve reserve reserve Total
$ $ $ $
---------------------------------- ----------- --------------- ------------- -------------
At 30 September 2020 - 25,000 (1,086,000) (1,061,000)
---------------------------------- ----------- --------------- ------------- -------------
Other comprehensive income - - 511,000 511,000
Issue of shares to acquire
CML 35,634,000 - - 35,634,000
Issue of share warrants - 2,669,000 - 2,669,000
Issue of options - 768,000 - 768,000
---------------------------------- ----------- --------------- ------------- -------------
At 31 March 2021 35,634,000 3,462,000 (575,000) (38,521,000)
---------------------------------- ----------- --------------- ------------- -------------
At 1 April 2021 35,634,000 3,462,000 (575,000) (38,521,000)
---------------------------------- ----------- --------------- ------------- -------------
Currency translation differences - - (1,841,000) (1,841,000)
Share based payments - 734,000 - 734,000
At 31 March 2022 35,634,000 4,196,000 (2,416,000) (37,414,000)
---------------------------------- ----------- --------------- ------------- -------------
18. Employee benefit expense
Group Company
------------------------ ------------------------
Period Period
Year ended ended Year ended ended
31 March 31 March 31 March 31 March
2022 2021 2022 2021
Staff costs (excluding Directors) $ $ $ $
------------------------------------ ------------ ---------- --- ------------ ----------
Salaries and wages 10,000 6,000 - -
Social security costs - - - -
Other employment costs 5,000 3,000 - -
------------------------------------ ------------ ---------- --- ------------ ----------
15,000 9,000 - -
------------------------------------ ------------ ---------- --- ------------ ----------
The average monthly number of employees for the Group during the
year was 15 (period ended 31 March 2021: 13) and the average
monthly number of employees for the Company was 6 (period ended 31
March 2021: 6).
19. Directors' and Key Management remuneration
Salaries Share Year ended Year ended
& fees based payments 31 March 31 March
2022 2021
-------------------------------- -------- --------------- ---------- ----------
$ $ $ $
-------------------------------- -------- --------------- ---------- ----------
Executive Directors
Michael Frayne 205,000 - 205,000 380,000
Gregory Martyr 52,000 - 52,000 189,000
Anthony Samaha 57,000 - 57,000 156,000
Non-executive Directors
James Leahy 36,000 - 36,000 102,000
Geoffrey Brown 22,000 - 22,000 35,000
Teh Kwan Wey 20,000 - 20,000 36,000
Key Management
Iranga Dunuwille 62,000 - 62,000 138,000
Compensation for loss of office - - - 21,000
-------- --------------- ---------- ----------
454,000 - 454,000 1,057,000
-------- --------------- ---------- ----------
As at 31 March 2022, there were no directors receiving defined
contribution pension schemes benefits (2021: Nil).
Of the above costs, $37,000 (period ended 31 March 2021: $Nil)
has been capitalised in accordance with IFRS 6 as exploratory
related costs and are shown as an intangible addition in the
year.
Details of fees paid to Companies of which the Directors
detailed above are Directors have been disclosed in Note 24.
The remuneration of Directors and key management is determined
by the remuneration committee having regard to the performance of
individuals and market trends.
20. Income tax expense
No charge to taxation arises due to the losses incurred.
The tax on the Group's loss before tax, applicable to the losses
of the consolidated entities, is as follows:
Group
--------------------------
For the For the
year ended year ended
31 March 31 March
2022 2021
$ $
---------------------------------------------- ------------ ------------
Loss before tax (1,914,000) (7,886,000)
---------------------------------------------- ------------ ------------
Tax at the applicable rate of 19 % (2021: 19
% ) (364,000) (1,498,000)
Effects of:
Expenditure not deductible for tax purposes 138,000 1,309,000
Deferred tax asset not recognised 226,000 189,000
---------------------------------------------- ------------ ------------
Tax charge - -
---------------------------------------------- ------------ ------------
No deferred tax assets have been recognised in the year (2021:
nil).
The UK corporation tax throughout 2021 and 2022 was 19%.
The Company has tax losses of approximately $10,493,000 (31
March 2021: $9,300,000) available to carry forward against future
taxable profits.
21. Loss per share
Group
The calculation of the total basic loss per share of (0.36)
cents (2021: (5.61) cents) is based on the total comprehensive loss
attributable to equity holders of the parent company of $1,914,000
(2021: $7,886,000) and on the weighted average number of ordinary
shares of 531,043,035 (2021: 140,667,918) in issue during the
year.
In accordance with IAS 33, basic and diluted earnings per share
are identical for the Group as the effect of the exercise of share
options would be to decrease the earnings per share. Details of
share options that could potentially dilute earnings per share in
future periods are set out in Note 16.
22. Expenses by nature
Group
-------------------------
Year ended Year ended
31 March 31 March
2022 2021
$ $
---------------------------------------------- ------------ -----------
Director fees & employment tax contributions 355,000 382,000
Employee salaries 15,000 9,000
Audit 61,000 66,000
Accountancy 155,000 26,000
Exchange related costs 154,000 51,000
Professional & consultancy fees 219,000 171,000
Office expenses 91,000 44,000
Insurance 19,000 22,000
Depreciation 9,000 19,000
Travel & entertainment 24,000 19,000
Acquisition related costs 34,000 300,000
Other expenses 58,000 323,000
---------------------------------------------- ------------ -----------
Total administrative expenses 1,194,000 1,432,000
---------------------------------------------- ------------ -----------
Services provided by the Company's auditor and its
associates
During the year, the Group (including overseas subsidiaries)
obtained the following services from the Company's auditors and its
associates:
Group
-----------------------
Year
ended Year ended
31 March 31 March
2022 2021
$ $
------------------------------------------------- ---------- -----------
Fees payable to the Company's auditor and its
associates for the audit of the Parent Company
and Consolidated Financial Statements 61,000 66,000
23. Commitments
License commitments
Capital Metals plc through its subsidiaries owns two mineral
exploration licenses and two IMLs in Sri Lanka. These licences
include commitments to pay annual licence fees and minimum spend
requirements.
As at 31 March 2022 these are as follows:
Group
-------------------------------------
Group License Minimum
fees spend requirement Total
$ $ $
-------------------------------------------- -------- ------------------- ------
Not later than one year - - -
Later than one year and no later than five
years 54,000 54,000 54,000
-------------------------------------------- -------- -------------------
Total 54,000 54,000 54,000
24. Related party transactions
Loans to Group undertakings
Amounts receivable as a result of loans granted to subsidiary
undertakings are as follows:
Company
31 March 31 March
2022 2021
$ $
---------- ---------
Brighton Metals Limited 783,000 240,000
Capital Metals Limited 918,000 955,000
Damsila Exports Private Ltd 134,000 -
At 31 March 2022 1,835,000 1,195,000
These amounts are unsecured and repayable in US Dollars on
demand from the Company.
All intra Group transactions are eliminated on
consolidation.
Other transactions
The Group defines its key management personnel as the Directors
of the Company as disclosed in the Directors' Report.
Limerston Pty Limited, a limited company of which Michael Frayne
is a director, was paid a fee of $205,000 for the year ended 31
March 2022 (31 March 2021: $44,000) for the provision of corporate
management and consulting services to the Company. There was a
balance of $Nil owing at year end (31 March 2021: $Nil).
Santannos Limited, a limited company of which Anthony Samaha is
a director, was paid a fee of $17,000 for the year ended 31 March
2022 (31 March 2021: $49,000) for consulting services to the
Company. There was a balance of $Nil owing at year end (31 March
2021: $Nil).
Hogan's Bluff Capital Pty Ltd, a limited company of which Greg
Martyr is a director, was paid a fee of $53,000 for the year ended
31 March 2022 (31 March 2021: $95,000) for consulting services to
the Company. There was a balance of $Nil owing at year end (31
March 2021: $Nil).
KL-Kepong International Ltd, a limited company of which is fully
owned by Kuala Lumpur Kepong Berhad Ltd of which Teh Kwan Wey is an
employee of, was paid a fee of $20,000 for the year ended 31 March
2022 (31 March 2021: $Nil) for consulting services to the Company.
There was a balance of $Nil owing at year end (31 March 2021:
$Nil).
25. Ultimate controlling party
The Directors believe there is no ultimate controlling
party.
26. Events after the reporting date
On the 10 August 2022 the Geological Survey and Mines Bureau of
the Government of Sri Lanka granted the first two Industrial Mining
Licences for the Project.
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END
FR UVOKRUKUKUAR
(END) Dow Jones Newswires
September 26, 2022 02:01 ET (06:01 GMT)
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