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Cadence Minerals #KDNC – Amapá Operational Update, Placing to Raise £525,000 and Loan Note Restructuring

Cadence Minerals – Amapá Operational Update, Placing to Raise £525,000 and Loan Note Restructuring.

Highlights

  • Shipping of first iron ore is on target for late Q2 2020 / early Q3 2020
  • Shipment is planned via 45,000-tonne bulk carriers at a rate of 2 -3 every two months
  • Independent surveys of these iron ore stockpiles indicate that some 1.39 million tonnes of iron ore are available for export with a stockpile average Fe grade of approx. 62.14%
  • Principal local contractors are identified, and contracts are being finalised
  • Movement of the stockpile to public port is expected in July 2020
  • Cadence has agreed to fund initial working capital via a bridging loan to DEV Mineraço S.A., owner of the Amapá iron ore project (“DEV”) and has funded this via a placing of new ordinary shares to raise £525,000

Cadence Minerals (AIM/AQSE: KDNC; OTC: KDNCY) is pleased to announce that the Amapá iron ore project (“Amapá Project”) remains on target to commence the shipment of its stockpile of iron ore by the end of Q2 2020 or early Q3 2020.

DEV is engaging principal contractors and expects to be able to start the movement of the material to the public port in July 2020. DEV plans to ship directly to customers via 45,000-tonne bulk carriers at a rate of 2-3 loads every two months, dependent on port berth availability.

An independent survey of these stockpiles located at the port indicates that some 1.39 million tonnes (“Mt”) of iron ore in three stockpiles with a stockpile average Fe grade of approximately 62.14% are available for export.

DEV has identified that it will require start up working capital to begin operations and Cadence has agreed to fund these amounts, via a bridging loan bearing an annual interest rate of 18% and repayable over four months from the date of advance, which we expect to be in early May 2020.

To fund the bridging loan Cadence has raised £525,000 through the placing (“Placing”) of 8,749,998 new ordinary shares in the capital of the Company to new and existing investors at an issue price of 6 pence per share (“Placing Price”), representing approximately 20% discount to the closing mid-price on the day prior to this announcement. The majority of the net proceeds of this fundraise will be used for the start-up working capital required at the Amapá Project to begin the shipment of iron ore stockpiles.

About the Project

The Amapá Project was owned by Anglo American plc and Cliffs Natural Resources and consists of a large-scale iron ore mine, beneficiation plant, railway and private port. In 2012 the operation produced 6.1 Mt of iron ore concentrate and reported operating profits from their 70% ownership in the Amapá Project of US$120 million (100% – US$171 million). Before its sale in 2012, Anglo American valued its 70% stake at US$462m in its 2012 Annual Report (100% – US$600m).

As previously announced, the total historical mineral resource contains an estimated 348 Mt of ore @ 38.9% iron content (“Fe”). The ore is beneficiated at the mine to 65% Fe Pellet Feed and 62% Fe Spiral Concentrate. Based on available historic mine plans and an independent consultant review, it is expected that at full production the Amapá Project has a mine life of 14 years and at full capacity is targeting to produce up to 5.3 Mt of iron ore per annum.

Cadence Amapá Project stake

As mentioned in previous announcements there remains only one major precondition for Cadence to make its investment in the Amapá Project and release the sum of US$2.5 million currently held in escrow in a judicial trust account (“Escrow Monies”).

This precondition requires DEV to reach a settlement agreement with the secured bank creditors. On satisfaction of the prerequisites and the release of the Escrow monies, Cadence will become a 20% shareholder in the Amapá Project via our joint venture company which will own 99.9% of Dev.

Cadence’s rights over the Amapá Project have been formalised in the Judicial Restructuring Plan of DEV and ratified by the São Paulo Bankruptcy court. Dev officers have been appointed in the Judicial Restructuring Plan, with acceptance of creditors.

While we await the settlement with the secured bank creditors, The JV Partners will work with DEV to advance the restart of the Amapá Project using the proceeds of the iron ore, accelerating the production from the Amapá Project.

Funding Details

The Company entered into a placing agreement (“Placing Agreement”) with WH Ireland pursuant to which terms WH Ireland agreed to arrange the Placing. The Company has given certain customary warranties and indemnities under the Placing Agreement in favour of WH Ireland. Completion of the Placing is subject to the satisfaction of the conditions contained in the Placing Agreement including, but not limited to, Admission.

Your attention is drawn to the detailed terms and conditions of the Placing set out in the Appendix to this Announcement (which forms part of this Announcement).

The Appendix to this Announcement contains the detailed terms and conditions of the Placing and the basis on which investors agreed to participate in the Placing. The Placing has not been underwritten by WH Ireland. Placees are deemed to have read and understood this Announcement in its entirety, including the Appendix, and to have made their offer on the terms and subject to the conditions contained herein and to have given the representations, warranties, undertakings and acknowledgements contained in the Appendix to this Announcement.

The Placing Shares will be issued, credited as fully paid, and will rank pari passu with the existing Ordinary Shares in issue in the capital of the Company, including the right to receive all dividends and other distributions (if any) declared, made or paid on or in respect of such shares after the date of their issue.

Loan Note Restructuring

As announced on the 15 July and 1 August 2019 Cadence restructured its loan notes, reducing the interest rate and drawing down a further US$1.75 million which was used in part to fund our investment in the Amapá Project. Cadence has agreed with the loan note holders to convert US$300,000 into 3,995,000 new ordinary shares in the capital of the Company, and an issue price of 6 pence per share (“Conversion Shares”), subsequent to this conversion the balance of the loan notes will be approximately £2.303 million.

The Conversion Shares will be issued, credited as fully paid, and will rank pari passu with the existing Ordinary Shares in issue in the capital of the Company, including the right to receive all dividends and other distributions (if any) declared, made or paid on or in respect of such shares after the date of their issue. 

Admission and Settlement

Application will be made for the admission to trading on the AIM market (“AIM”) of London Stock Exchange plc (“LSE”) and to and the AQSE Growth Market (“AQSE”) operated by Aquis Exchange Plc for the Placing Shares and Conversion Shares (“Admission”). Admission is expected to occur on or around 7 May 2020. Following Admission, the Company will have 130,951,966 Ordinary Shares in issue. There are no shares held in treasury. The total voting rights in the Company is therefore 130,951,966 and Shareholders may use this figure as the denominator by which they are required to notify their interest in, or change to their interest in, the Company under the Disclosure Guidance and Transparency Rules. 

Cadence Chairman Andrew Suckling commented; “As we await final settlement with the bank creditors, our board took the decision that it was vital to commence shipment of iron ore as soon as possible. The enthusiasm shown by our JV partners in getting iron ore shipments underway promptly is also shared by the Cadence board, and in this regard I would like to thank shareholders, who have supported the placing to provide a bridging loan to make this possible.”

Cadence CEO Kiran Morzaria commented; “As we move ever closer to the Amapá restart, I am delighted that DEV are already at contract stage with several principal local contractors to commence the iron ore shipments and enter the operational phase of the asset. I now look forward to providing you all with further updates as operations gathers pace.”

 

For further information:

Cadence Minerals plc

+44 (0) 207 440 0647

Andrew Suckling

Kiran Morzaria

WH Ireland Limited (NOMAD & Broker)

+44 (0) 207 220 1666

James Joyce / James Sinclair-Ford

Harry Ansell / Daniel Bristowe

Novum Securities Limited (Joint Broker)

+44 (0) 207 399 9400

Jon Belliss

Qualified Person

Kiran Morzaria B.Eng. (ACSM), MBA, has reviewed and approved the information contained in this announcement. Kiran holds a Bachelor of Engineering (Industrial Geology) from the Camborne School of Mines and an MBA (Finance) from CASS Business School.

Forward-Looking Statements:

Certain statements in this announcement are or may be deemed to be forward-looking statements. Forward-looking statements are identified by their use of terms and phrases such as ”believe” ”could” “should” ”envisage” ”estimate” ”intend” ”may” ”plan” ”will” or the negative of those variations or comparable expressions including references to assumptions. These forward-looking statements are not based on historical facts but rather on the Directors’ current expectations and assumptions regarding the Company’s future growth results of operations performance future capital and other expenditures (including the amount. nature and sources of funding thereof) competitive advantages business prospects and opportunities. Such forward-looking statements reflect the Directors’ current beliefs and assumptions and are based on information currently available to the Directors.  Many factors could cause actual results to differ materially from the results discussed in the forward-looking statements including risks associated with vulnerability to general economic and business conditions competition environmental and other regulatory changes actions by governmental authorities the availability of capital markets reliance on key personnel uninsured and underinsured losses and other factors many of which are beyond the control of the Company. Although any forward-looking statements contained in this announcement are based upon what the Directors believe to be reasonable assumptions. The Company cannot assure investors that actual results will be consistent with such forward-looking statements.

The information contained within this announcement is deemed by the Company to constitute inside information under the Market Abuse Regulation (EU) No. 596/2014

WH Ireland Limited, which is a member of the London Stock Exchange, is authorised and regulated in the United Kingdom by the Financial Conduct Authority and is acting as financial adviser, nominated adviser and broker for the purposes of the AIM Rules for Companies.  WH Ireland Limited is acting exclusively for the Company in connection with the matters referred to in this Announcement and for no-one else and will not be responsible to anyone other than the Company for providing the protections afforded to its clients nor for providing any advice in relation to the contents of this Announcement or any transaction, arrangement or matter referred to herein. 

This Announcement is released by the Company and contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 (“MAR”), encompassing information relating to the Placing raising £525,000 and is disclosed in accordance with the Company’s obligations under Article 17 of MAR.

TERMS AND CONDITIONS OF THE PLACING

THE PLACING ANNOUNCEMENT (“ANNOUNCEMENT”) OF CADENCE MINERALS PLC (THE “COMPANY” OR “CADENCE” or “KDNC”) ACCOMPANIES THESE TERMS AND CONDITIONS AND THE INFORMATION CONTAINED IN THE ANNOUNCEMENT IS RESTRICTED AND IS NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN, INTO OR FROM A PROHIBITED JURISDICTION.

TERMS DEFINED IN THE ANNOUNCEMENT SHALL HAVE THE SAME MEANINGS IN THESE TERMS AND CONDITIONS, SAVE AS DEFINED OR PROVIDED FOR OTHERWISE.

IMPORTANT INFORMATION ON THE PLACING FOR INVITED PLACEES ONLY.

MEMBERS OF THE PUBLIC ARE NOT ELIGIBLE TO TAKE PART IN THE PLACING. THESE TERMS AND CONDITIONS SET OUT HEREIN ARE FOR INFORMATION PURPOSES ONLY AND ARE DIRECTED ONLY AT: (A) PERSONS IN MEMBER STATES OF THE EUROPEAN ECONOMIC AREA WHO ARE QUALIFIED INVESTORS AS DEFINED IN SECTION 86(7) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 AS AMENDED, (“QUALIFIED INVESTORS”) AS DEFINED IN ARTICLE 2(E) OF THE EU PROSPECTUS REGULATION (WHICH MEANS REGULATION (EU) 2017/1129) (THE “PROSPECTUS REGULATION”); AND (B) IN THE UNITED KINGDOM, QUALIFIED INVESTORS WHO ARE PERSONS WHO (I) HAVE PROFESSIONAL EXPERIENCE IN MATTERS RELATING TO INVESTMENTS AND ARE “INVESTMENT PROFESSIONALS” FALLING WITHIN ARTICLE 19(5) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005 (THE “ORDER”); (II) ARE PERSONS FALLING WITHIN ARTICLE 49(2)(A) TO (D) (“HIGH NET WORTH COMPANIES, UNINCORPORATED ASSOCIATIONS, ETC”) OF THE ORDER; AND (C) PERSONS OUTSIDE OF THE UNITED KINGDOM TO WHOM IT MAY OTHERWISE BE LAWFULLY COMMUNICATED IN COMPLIANCE WITH ALL APPLICABLE LAWS AND REGULATIONS OF THE STATE IN WHICH THEY ARE A NATIONAL AND/OR RESIDENT (ALL SUCH PERSONS TOGETHER BEING REFERRED TO AS “RELEVANT PERSONS”).

THE TERMS AND CONDITIONS SET OUT HEREIN MUST NOT BE ACTED ON OR RELIED ON BY PERSONS WHO ARE NOT RELEVANT PERSONS. ANY INVESTMENT OR INVESTMENT ACTIVITY TO WHICH THESE TERMS AND CONDITIONS SET OUT HEREIN RELATE IS AVAILABLE ONLY TO RELEVANT PERSONS AND WILL BE ENGAGED IN ONLY WITH RELEVANT PERSONS. THESE TERMS AND CONDITIONS DO NOT ITSELF CONSTITUTE AN OFFER FOR SALE OR SUBSCRIPTION OF ANY SECURITIES IN THE COMPANY. THE ANNOUNCEMENT IS NOT AN OFFER OF OR SOLICITATION TO PURCHASE OR SUBSCRIBE FOR SECURITIES IN THE UNITED STATES.

THE SECURITIES REFERRED TO HEREIN HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES, EXCEPT PURSUANT TO AN APPLICABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. NO PUBLIC OFFERING OF SECURITIES IS BEING MADE IN THE UNITED STATES. NEITHER THE U.S. SECURITIES AND EXCHANGE COMMISSION NOR ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES HAS APPROVED OR DISAPPROVED OF AN INVESTMENT IN THE SECURITIES OR PASSED UPON OR ENDORSED THE MERITS OF THE PLACING OR THE ACCURACY OR ADEQUACY OF THE CONTENTS OF THE ANNOUNCEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE IN THE UNITED STATES.

EACH PLACEE (BEING THE PERSON PROCURED BY WH IRELAND LIMITED (“WH IRELAND”)) TO SUBSCRIBE FOR PLACING SHARES SHOULD CONSULT WITH ITS OWN ADVISERS AS TO LEGAL, TAX, BUSINESS AND RELATED ASPECTS OF ANY INVESTMENT IN PLACING SHARES.

Persons who are invited to and who choose to participate in the Placing, by making (or on whose behalf there is made) an oral or written offer to subscribe for Placing Shares (the “Placees”), will be deemed to have read and understood the Announcement, including these Terms and Conditions, in its entirety and to be making such offer on the terms and conditions, and to be providing the representations, warranties, acknowledgements, and undertakings contained in these Terms and Conditions. In particular, each such Placee represents, warrants and acknowledges to WH Ireland and the Company that:

1.  it is a Relevant Person (as defined above) and undertakes that it will acquire, hold, manage or dispose of any Placing Shares that are allocated to it in that capacity; and

2.  in the case of any Placing Shares acquired by it as a financial intermediary, as that term is used in Article 5(1) of the Prospectus Regulation, (a) the Placing Shares acquired by it in the Placing have not been acquired on behalf of, nor have they been acquired with a view to their offer or resale to, persons in any Member State of the European Economic Area (the “EEA”) other than Qualified Investors or in circumstances in which the prior consent of WH Ireland has been given to the offer or resale; or (b) where Placing Shares have been acquired by it on behalf of persons in any member state of the EEA other than Qualified Investors, the offer of those Placing Shares to it is not treated under the Prospectus Regulation as having been made to such persons.

The Company and WH Ireland will rely upon the truth and accuracy of the foregoing representations, warranties, acknowledgements and undertakings. WH Ireland does not make any representation to any Placees regarding an investment in the Placing Shares referred to in the Announcement (including these Terms and Conditions).

This Announcement does not constitute an offer, and may not be used in connection with an offer, to sell or issue or the solicitation of an offer to buy or subscribe for Placing Shares in any jurisdiction in which such offer or solicitation is or may be unauthorised or unlawful and any failure to comply with these restrictions may constitute a violation of applicable securities laws in such jurisdiction. This Announcement and the information contained herein is not for publication or distribution, directly or indirectly, to persons in any jurisdiction in which it is unlawful to do so (“Prohibited Jurisdiction”). Persons (including, without limitation, custodians, nominees and trustees) into whose possession the Announcement and these Terms and Conditions may come are required by the Company to inform themselves about and to observe any restrictions of transfer of the Announcement. No public offer of securities of the Company is being made in the United Kingdom, the United States or elsewhere.

In particular, the Placing Shares referred to in the Announcement have not been and will not be registered under the Securities Act or any laws of or with any securities regulatory authority of any state or other jurisdiction of the United States, and may not be offered, sold, pledged or otherwise transferred within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and the securities laws of any state or other jurisdiction of the United States. No public offering of the Placing Shares or any other securities is being made in the United States. No money, securities or other consideration from any person inside the United States is being solicited pursuant to the Announcement or the Placing and, if sent in response to the information contained in the Announcement, will not be accepted. This Announcement is not an offer of securities for sale into the United States.

The Placing Shares have not been approved or disapproved by the US Securities and Exchange Commission, any state securities commission or other regulatory authority in the United States, nor have any of the foregoing authorities passed upon or endorsed the merits of the Placing or the accuracy or adequacy of the Announcement. Any representation to the contrary is a criminal offence in the United States.

The relevant clearances have not been, nor will they be, obtained from the securities commission of any province or territory of Canada; no prospectus has been lodged with or registered by the Australian Securities and Investments Commission or the Japanese Ministry of Finance; and the Placing Shares have not been nor will they be, registered under or offered in compliance with the securities laws of any state, province or territory of a Prohibited Jurisdiction. Accordingly, the Placing Shares may not (unless an exemption under the relevant securities laws is applicable) be offered, sold resold or delivered, directly or indirectly, in or into a Prohibited Jurisdiction.

Solely for the purposes of the product governance requirements contained within: (a) EU Directive 2014/65/EU on markets in financial instruments, as amended (“MiFID II”); (b) Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593 supplementing MiFID II; and (c) local implementing measures (together, the “MiFID II Product Governance Requirements”), and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any “manufacturer” (for the purposes of the Product Governance Requirements) may otherwise have with respect thereto, the Placing Shares have been subject to a product approval process, which has determined that the Placing Shares are: (i) compatible with an end target market of (a) retail investors, (b) investors who meet the criteria of professional clients and (c) eligible counterparties (each as defined in MiFID II); and (ii) eligible for distribution through all distribution channels as are permitted by MiFID II (the “Target Market Assessment”). Notwithstanding the Target Market Assessment, distributors should note that: the price of the Placing Shares may decline and investors could lose all or part of their investment; the Placing Shares offer no guaranteed income and no capital protection; and an investment in the Placing Shares is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom. The Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to the offer.

For the avoidance of doubt, the Target Market Assessment does not constitute: (a) an assessment of suitability or appropriateness for the purposes of MiFID II; or (b) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to the Placing Shares.

Each distributor is responsible for undertaking its own target market assessment in respect of the Placing Shares and determining appropriate distribution channels.

Persons (including, without limitation, nominees and trustees) who have a contractual or other legal obligation to forward a copy of these Terms and Conditions or the Announcement of which it forms part should seek appropriate advice before taking any action.

Terms defined elsewhere in the Announcement have the same meaning in these Terms and Conditions, unless the context requires otherwise.

Various dates referred to in the Announcement are stated on the basis of the expected timetable for the Placing. It is possible that some of these dates may be changed. The expected date for Admission is 7 May 2020 and, in any event, the latest date for Admission is 8 June 2020 (the “Long Stop Date”).

The Placing

WH Ireland has entered into a Placing Agreement with the Company under which WH Ireland has undertaken to use its reasonable endeavours to procure subscribers for the Placing Shares at the Placing Price, being 0.2 pence per Placing Share, on the terms and subject to the conditions set out in these Terms and Conditions. To the extent WH Ireland does not procure subscribers for Placing Shares as required, including those Placees procured by the Company, WH Ireland will not itself subscribe for such shares.

These Terms and Conditions give details of the terms and conditions of, and the mechanics of the participation of the Placees in, the Placing.

The Placing Shares will, when issued, be credited as fully paid and will rank pari passu in all respects with the existing Ordinary Shares in issue (“Existing Ordinary Shares”), including the right to receive all dividends and other distributions (if any) declared, made or paid on or in respect of the Existing Ordinary Shares after the date of issue of the Placing Shares.

WH Ireland and the Company reserve the right to scale back the number of Placing Shares to be allotted to any Placee in the event of an oversubscription under the Placing. WH Ireland and the Company also reserve the right not to accept offers for Placing Shares or to accept such offers in part rather than in whole.

Each Placee will be required to pay to WH Ireland, on the Company’s behalf, an amount equal to the product of the Placing Price and the number of Placing Shares that such Placee is required to be allotted in accordance with the terms set out in or referred to in these Terms and Conditions. Each Placee’s obligation to be allotted and pay for Placing Shares under the Placing will be owed to each of the Company and WH Ireland. Each Placee will be deemed to have read these Terms and Conditions in their entirety.

Neither WH Ireland nor or any shareholder, director, officer, employee or agent of WH Ireland or any of their group companies will have any liability (subject to applicable legislation and regulations) to Placees or to any person other than the Company in respect of the Placing.

Application for Admission to Trading on AIM

Application will be made to the LSE and AQSE for the Placing Shares to be admitted to trading on AIM. It is expected that Admission will take place at 8.00 am on 7 May 2020 (or such later date as may be agreed between the Company and WH Ireland, provided that such date is no later than 8 June 2020 (the “Long Stop Date”).

Participation in, and principal terms of, the Placing

Participation in the Placing is only available to persons who may lawfully be, and are, invited to participate in it by WH Ireland.

1.  WH Ireland is arranging the Placing as placing agent and broker of the Company.

2.  Participation in the Placing will only be available to persons who may lawfully be, and are, invited to participate by WH Ireland WH Ireland and its respective affiliates are entitled to acquire Placing Shares as principal.

3.  T he Company reserves the right to reduce or seek to increase the amount to be raised pursuant to the Placing, in its absolute discretion. The final allocations of the Placing Shares (including as to the identity of the Placees and the number of shares allocated to each Placee at the Placing Price) shall be determined by WH Ireland in their absolute discretion.

4.  Each Placee’s allocation will be confirmed to Placees orally, or by email, by WH Ireland and a trade confirmation or contract note will be dispatched as soon as possible thereafter (the “Contract Note”).  These Terms and Conditions will be deemed to be incorporated into the Contract Note. WH Ireland ‘s oral or emailed confirmation to such Placee will constitute an irrevocable and legally binding commitment upon such person (who will at that point become a Placee) in favour of WH Ireland and the Company, under which it agrees to subscribe for the number of Placing Shares allocated to it at the Placing Price on the terms and conditions set out in these Terms and Conditions (which are deemed to be incorporated in such trade confirmation or contract note) and in accordance with the Company’s articles of association (“Articles of Association”).

5.  Any acquisition of Placing Shares will be made on the terms and subject to the conditions in these Terms and Conditions and will be legally binding on the Placee on behalf of which it is made and, except with WH Ireland ‘s consent, will not be capable of variation or revocation after the time at which it is submitted. Each Placee will also have an immediate, separate, irrevocable and binding obligation, to pay WH Ireland (or as WH Ireland may direct) in cleared funds an amount equal to the product of the Placing Price and the number of Placing Shares for which such Placee has agreed to subscribe. Each Placee’s obligations will be owed to WH Ireland .

10.  Irrespective of the time at which a Placee’s allocation pursuant to the Placing is confirmed, settlement for all Placing Shares to be acquired pursuant to the Placing will be required to be made at the same time, on the basis explained below under “Settlement”.

11.  All obligations under the Placing will be subject to fulfilment of the conditions referred to below under “Conditions to the Placing” and to the Placing not being terminated on the basis referred to below under “Conditions to the Placing”.

12.  By participating in the Placing, each Placee agrees that its rights and obligations in respect of the Placing will terminate only in the circumstances described below and will not be capable of rescission or termination by the Placee.

13.  To the fullest extent permissible by law and the applicable rules of AIM, neither WH Ireland not any of its respective affiliates shall have any liability to Placees (or to any other person whether acting on behalf of a Placee or otherwise whether or not a recipient of these terms and conditions) in respect of the Placing. Each Placee acknowledges and agrees that the Company is responsible for the allotment of the Placing Shares to the Placees and WH Ireland shall not have any liability to the Placees for the failure of the Company to fulfil those obligations. In particular, neither WH Ireland nor any of its affiliates shall have any liability (including to the extent permissible by law, any fiduciary duties) in respect of the Placing.

14.  In making an investment decision, Placees must rely on their own examination of the Company and its prospects and the terms of the Placing, including the merit and risks involved in investing in the Placing Shares.

15.  Settlement will occur on a date to be advised but is expected to be on or around 7 May 2020 (“Closing Date”).

All such times and dates will be subject to amendment at WH Ireland’s discretion, except that in no circumstances will the date scheduled for Admission be later than the Long Stop Date.

No Prospectus

The Placing Shares are being offered to a limited number of specifically invited persons only and will not be offered in such a way as to require a prospectus in the United Kingdom or in any other jurisdiction. No offering document or prospectus has been or will be submitted to be approved by the Financial Conduct Authority, the LSE or any other regulatory body in relation to the Placing and Placees’ commitments in respect of Placing Shares will be made solely on the basis of the information contained in the Announcement and the terms and conditions contained in these Terms and Conditions.

Settlement

Settlement of transactions in the Placing Shares will take place inside the CREST system.

Settlement of transactions in the Placing Shares will, unless otherwise agreed, take place on a delivery versus payment basis within the CREST system administered by Euroclear UK and Ireland Limited (“CREST”).

The Company will procure the delivery of the Placing Shares to CREST accounts operated by WH Ireland for the Company and WH Ireland will enter its delivery (DEL) instructions into the CREST system. The input to CREST by each Placee of a matching or acceptance instruction will then allow delivery of the relevant Placing Shares to that Placee against payment.

The Company reserves the right to require settlement for and delivery of the Placing Shares (or a portion thereof) to any Placee in any form it requires if, in WH Ireland’s opinion, delivery or settlement is not possible or practicable within CREST or would not be consistent with the regulatory requirements in the Placee’s jurisdiction.

Following the close of the Placing, each Placee allocated Placing Shares in the Placing will be sent a trade confirmation or contract note stating the number of Placing Shares, the Placing Price and the subscription amount payable to be allocated to it and will be required to provide WH Ireland with funds sufficient to purchase such securities prior to the Closing Date.

Each Placee is deemed to agree that, if it does not comply with these obligations, the Company may sell any or all of the Placing Shares allocated to that Placee on such Placee’s behalf and retain from the proceeds, for the Company’s account and benefit, an amount equal to the aggregate amount owed by the Placee plus any interest due. The relevant Placee will, however, remain liable for any shortfall below the aggregate amount owed by it and may be required to bear any stamp duty or stamp duty reserve tax (together with any interest or penalties) which may arise upon the sale of such Placing Shares on such Placee’s behalf.

It is expected that settlement will take place on or about 7 May 2020 in CREST on a T+4 basis in accordance with the instructions set out in the trade confirmation. Settlement will be through WH Ireland against CREST ID: 601 A/C: WRCLT.

Following the close of the Placing, each Placee allocated Placing Shares in the Placing will be sent a trade confirmation(s) stating the number of Placing Shares to be allocated to it at the Placing Price and settlement instructions.

Each Placee agrees that it will do all things necessary to ensure that delivery and payment is completed in accordance with the applicable registration and settlement procedures, including if applicable, CREST rules and regulations and settlement instructions that it has in place with WH Ireland.

If the Placing Shares are to be delivered to a custodian or settlement agent, Placees should ensure that the trade confirmation is copied and delivered immediately to the relevant person within that organisation.

Trade date: 1 May 2020

Settlement date: 7 May 2020 (Electronic)

ISIN code for the Placing Shares: GB00BJP0B151

No UK stamp duty or stamp duty reserve tax should be payable to the extent that the Placing Shares are issued into CREST to, or to the nominee of, a Placee who holds those shares beneficially (and not as agent or nominee for any other person) within the CREST system and registered in the name of such Placee or such Placee’s nominee provided that the Placing Shares are not issued to a person whose business is or includes issuing depositary receipts or the provision of clearance services or to an agent or nominee for any such person.

The agreement to settle a Placee’s subscription (and/or the subscription of a person for whom such Placee is contracting as agent) free of stamp duty and stamp duty reserve tax depends on the settlement relating only to a subscription by it and/or such person direct from the Company for the Placing Shares in question. Such agreement assumes that the Placing Shares are not being subscribed for in connection with arrangements to issue depositary receipts or to transfer the Placing Shares into a clearance service. If there are any such arrangements, or the settlement relates to any other subsequent dealing in the Placing Shares, UK stamp duty or stamp duty reserve tax may be payable, for which neither the Company nor WH Ireland will be responsible, and the Placee to whom (or on behalf of whom, or in respect of the person for whom it is participating in the Placing as an agent or nominee) the allocation, allotment, issue or delivery of Placing Shares has given rise to such UK stamp duty or stamp duty reserve tax undertakes to pay such UK stamp duty or stamp duty reserve tax forthwith and to indemnify on an after-tax basis and to hold harmless the Company and WH Ireland in the event that the Company or WH Ireland has incurred any such liability to UK stamp duty or stamp duty reserve tax. If this is the case, each Placee should seek its own advice and notify WH Ireland accordingly.

In addition, Placees should note that they will be liable for any stamp duty and all other stamp, issue, securities, transfer, registration, documentary or other duties or taxes (including any interest, fines or penalties relating thereto) payable outside the UK by them or any other person on the subscription by them of any Placing Shares or the agreement by them to subscribe for any Placing Shares.

Placing Agreement

WH Ireland has entered into the Placing Agreement with the Company under which WH Ireland has agreed on a conditional basis to use its reasonable endeavours as agent of the Company to procure Placees at the Placing Price for the Placing Shares.

Conditions to the Placing

The Placing is conditional on, among other things:

1.  the Company having complied with its obligations and satisfying all conditions to be satisfied by them under the Placing Agreement or these Terms and Conditions which fall to be performed or satisfied on or prior to Admission;

 2.  the Placing Agreement not being terminated in accordance with its terms by WH Ireland 

3.  Admission taking place by the relevant time and date to be stated in the Announcement; and 

4.  the Placing Agreement becoming unconditional in all other respects.

If:

· any of the conditions contained in the Placing Agreement in relation to the Placing Shares are not fulfilled or waived (if capable of being waived) by WH Ireland by the respective time or date where specified (or such later time or date as the Company and WH Ireland may agree);

· any of such conditions becomes incapable of being fulfilled; or

· the Placing Agreement is terminated in the circumstances specified below,

the Placing in relation to the Placing Shares will lapse and the Placee’s rights and obligations hereunder in relation to the Placing Shares shall cease and terminate at such time and each Placee agrees that no claim can be made by the Placee in respect thereof.

WH Ireland   may, in its absolute discretion, upon such terms as it thinks fit, waive compliance by the Company with certain of the Company’s obligations in relation to the conditions in the Placing Agreement save that the certain conditions including the condition relating to Admission taking place may not be waived. Any such extension or waiver will not affect the Placees’ commitments as set out in the Announcement.

WH Ireland   reserves the right to waive or extend the time and or date for the fulfilment of any of the conditions in the Placing Agreement to a time no later than 8.00 a.m. on the Long Stop Date.

If any condition in the Placing Agreement is not fulfilled or waived by WH Ireland   by the relevant time, the Placing will lapse and each Placee’s rights and obligations in respect of the Placing will cease and terminate at such time.

Neither the Company nor WH Ireland   shall have any liability to any Placee (or to any other person whether acting on behalf of a Placee or otherwise) in respect of any decision it may make as to whether or not to waive or to extend the time and /or date for the satisfaction of any condition to the Placing nor for any decision they may make as to the satisfaction of any condition or in respect of the Placing generally and by participating in the Placing each Placee agrees that any such decision is within the absolute discretion of the Company and WH Ireland.

Termination

The Placing Agreement may be terminated by WH Ireland   at any time prior to Admission in certain circumstances including, among other things, following the Company failing to comply with its obligations under the Placing Agreement or the occurrence of certain force majeure events. The exercise of any right of termination pursuant to the Placing Agreement, any waiver of any condition in the Placing Agreement and any decision by WH Ireland   whether or not to extend the time for satisfaction of any condition in the Placing Agreement will be within the absolute discretion of WH Ireland. Following Admission, the Placing Agreement is not capable of rescission or termination in respect of the Placing.

The rights and obligations of the Placees shall terminate only in the circumstances described in these terms and conditions and will not be subject to termination by the Placee or any prospective Placee at any time or in any circumstances. By participating in the Placing, Placees agree that the exercise by WH Ireland   of any right of termination or other discretion under the Placing Agreement shall be within the absolute discretion of WH Ireland, and that WH Ireland need not make any reference to Placees and that it shall have no liability to Placees whatsoever in connection with any such exercise.

Offer personal

The offering of Placing Shares and the agreement arising from acceptance of the Placing is personal to each Placee and does not constitute an offering to any other person or to the public. A Placee may not assign, transfer, or in any other manner, deal with its rights or obligations under the agreement arising from the acceptance of the Placing, without the prior written agreement of WH Ireland   in accordance with all relevant legal requirements.

Payment default

A Placee’s entitlement to receive any Placing Shares under the Placing will be conditional on WH Ireland ‘s receipt of payment in full for such Placing Shares by the relevant time to be stated in the written confirmation referred to above, or by such later time and date as WH Ireland and the Company may in their absolute discretion determine, and otherwise in accordance with that confirmation’s terms.

If any Placee fails to make such payment by the required time for any Placing Shares:

(1)  the Company may release itself, and (if at its absolute discretion it decides to do so) will be released from, all obligations it may have to allot and/or issue any such Placing Shares to such Placee or at its direction which are then unallotted and/or unissued;

(2)   the Company may exercise all rights of lien, forfeiture and set-off over and in respect of any such Placing Shares to the full extent permitted under its Articles of Association or by law and to the extent that such Placee then has any interest in or rights in respect of any such shares;

(3)   the Company or WH Ireland may sell (and each of them is irrevocably authorised by such Placee to do so) all or any of such shares on such Placee’s behalf and then retain from the proceeds, for the account and benefit of the Company relating to (or where applicable and in relation to (iii) below only, WH Ireland ): (i) any amount up to the total amount due to it as, or in respect of, allotment monies, or as interest on such monies, for any Placing Shares, (ii) any amount required to cover any stamp duty or stamp duty reserve tax arising on the sale, and (iii) any amount required to cover dealing costs and/or commissions necessarily or reasonably incurred by it in respect of such sale; and

(4)   such Placee will remain liable to the Company and to WH Ireland for the full amount of any losses and of any costs which either of them may suffer or incur as a result of it (i) not receiving payment in full for such Placing Shares by the required time, and/or (ii) the sale of any such Placing Shares to any other person at whatever price and on whatever terms as are actually obtained for such sale by or for it. Interest may be charged in respect of payments not received by WH Ireland for value by the required time referred to above at the rate of two percentage points above the base rate of Barclays Bank plc.

Placees’ representations, warranties and undertakings to the Company and WH Ireland

By agreeing with WH Ireland to acquire Placing Shares under the Placing, each Placee (and any person acting on a Placee’s behalf) irrevocably acknowledges and confirms and represents and warrants and undertakes to, and agrees with, each of the Company and WH Ireland (in its capacity as placing agent) and each of its affiliates, in each case as a fundamental term of such Placee’s acceptance of its Placing participation and of the Company’s obligation to allot and/or issue any Placing Shares to it or at its direction, that:

(a)  it has read the Announcement in full, including these Terms and Conditions , and agrees to and accepts all the terms set out in the Announcement, including these Terms and Conditions and that its acquisition of the Placing Shares is subject to and based upon all the terms, conditions, representations, warranties, acknowledgements, agreements and undertakings and other information contained therein;

(b)  its rights and obligations in respect of the Placing will terminate only in the circumstances referred to in these Terms and Conditions and will not be subject to rescission or termination by it in any circumstances;

(c)  it accepts that the content of the Announcement is exclusively the responsibility of the Company and that neither WH Ireland n or any person acting on its respective behalf has or shall have any liability for any information, representation or statement contained in the Announcement or any information previously published by or on behalf of the Company and will not be liable for any Placee’s decision to participate in the Placing based on any information, representation or statement contained in the Announcement or otherwise;

(d)  the only information on which it is entitled to rely and on which such Placee has relied in committing itself to subscribe for the Placing Shares is contained in the Announcement and any information previously published by the Company by notification to a Regulatory Information Service, such information being all that it deems necessary to make an investment decision in respect of the Placing Shares and that it has neither received nor relied on any other information given or representations, warranties or statements made by any WH Ireland or the Company or their respective directors, employees, officers or agents  or any other person and neither of WH Ireland nor the Company, including employees or agents nor any person acting on behalf of any of WH Ireland or the Company will be liable for any Placee’s decision to accept an invitation to participate in the Placing based on any other information, representation, warranty or statement;

(e)  it has relied on its own investigation of the business, financial or other position of the Company in deciding to participate in the Placing;

(f)  it has not been, and will not be, given any warranty or representation in relation to the Placing Shares or to the Company or to any other member of its Group in connection with the Placing, other than (i) as included in the Announcement by the person(s) responsible for the Announcement, (ii) by the Company as included in this document, and (iii) by the Company to the effect that (1) the Announcement will comply with all relevant requirements of the AIM Rules for Companies at the time of its publication and (2) at the time that the Placee enters into a legally binding commitment to be allotted Placing Shares pursuant to the Placing the Company will not then be in breach of its obligations under the AIM Rules for Companies or applicable law to disclose publicly in the correct manner all such information as is required to be so disclosed by the Company;

(g)  it has not relied on any representation or warranty in reaching its decision to be allotted Placing Shares under the Placing, save as given or made by the Company as referred to in the previous paragraph;

(h)  it is not a client of WH Ireland in relation to the Placing and WH Ireland is not acting for it in connection with the Placing and will not be responsible to it in respect of the Placing for providing protections afforded to it or its clients under the rules of the FCA (the “FCA Rules”) or for advising it with regard to the Placing Shares and WH Ireland shall not be responsible to it or any other person for providing the protections afforded to its customers whether under the FCA Rules or otherwise, or for advising it or any other person in respect of or in connection with such arrangements. In addition any payment by it will not be treated as client money governed by the FCA Rules. It agrees that WH Ireland shall not be liable to it for any matter arising out of its role as placing agent or otherwise in connection with the Placing and that, where any such liability nevertheless arises as a matter of law, it will immediately waive any claim against WH Ireland which it may have in respect thereof;

(i)  it (or any person acting on its behalf) will pay the full allotment amount at the Placing Price as and when required in respect of all Placing Shares for which it is required to be allotted under its Placing participation and will do all things necessary on its part to ensure that payment for such shares and their delivery to it or at its direction is completed in accordance with the standing CREST instructions (or, where applicable, standing certificated settlement instructions) that it has or puts in place with WH Ireland , failing which the relevant Placing Shares may be placed with other placees or sold as WH Ireland may, in its sole discretion and without liability to such Placee decide, and it will remain liable for the shortfall below the net proceeds of such sale and the placing proceeds of the Placing Shares, and may be required to bear any stamp duty or stamp duty reserve tax which may arise upon the placing or sale of such Placee’s Placing Shares on its behalf;

(j)  its allocation (if any) of Placing Shares will represent a maximum number of Placing Shares which it will be entitled, and required, to be allotted, and that the Company and/or WH Ireland may call upon it to be allotted a lower number of Placing Shares (if any), but in no event in aggregate more than the aforementioned maximum;

(k)  it is entitled to be allotted Placing Shares under the laws of all relevant jurisdictions which apply to it and it has complied, and will fully comply, with all such laws (including where applicable, the Criminal Justice Act 1993 (“CJA”), Market Abuse Regulation EU No 596/2014 (“The Market Abuse Regulation”), money laundering and terrorist financing under the Anti-Terrorism, Crime and Security Act 2001, the Proceeds of Crime Act 2002, the Terrorism Act 2000, the Terrorism Act 2003, the Terrorism Act 2006, the Money Laundering Regulations 2007 and part VIII of the Financial Services and Markets Act 2000 (the “Regulations”)) and has obtained all governmental and other consents (if any) which may be required for the purpose of, or as a consequence of, such allotment, and it will provide promptly to WH Ireland such evidence, if any, as to the identity or location or legal status of any person which WH Ireland may request from it in connection with the Placing (for the purpose of complying with any such laws or ascertaining the nationality of any person or the jurisdiction(s) to which any person is subject or otherwise) in the form and manner requested by WH Ireland on the basis that any failure by it to do so may result in the number of Placing Shares that are to be allotted and/or issued to it or at its direction pursuant to the Placing being reduced to such number, or to nil, as WH Ireland may decide at its sole discretion;

(l)  unless paragraph (m) below applies, it has neither received nor relied on any inside information (for the purpose of and section 56 of the CJA) in relation to its participation in the Placing;

(m)  if it has received any inside information (for the purposes of the Market Abuse Regulation and section 56 of the CJA) in relation to the Company and its securities, it confirms that it has not: (a) dealt (or attempted to deal) in the securities of the Company; (b) encouraged, recommended or induced another person to deal in the securities of the Company; or (c) unlawfully disclosed inside information to any person, prior to the information being made publicly available;

(n)  that it has identified its clients in accordance with the Regulations and that it has complied fully with its obligations pursuant to the Regulations;

(o)  it has observed the laws of all requisite territories, obtained any requisite governmental or other consents, complied with all requisite formalities and paid any issue, transfer or other taxes due in connection with its application in any territory and that it has not taken any action which will or might result in the Company, or WH Ireland acting in breach of the regulatory or legal requirements of any territory in connection with the Placing, application for Placing Shares or the admission to AIM of the Placing Shares;

(p)  it will not distribute any press announcement relating to the Placing or any other offering material, directly or indirectly, in or into a Prohibited Jurisdiction;

(q)  it has complied and will comply with all applicable provisions of FSMA with respect to anything done or to be done by it in relation to any Placing Shares in, from or otherwise involving the United Kingdom and it has not made or communicated or caused to be made or communicated, and it will not make or communicate or cause to be made or communicated, any “financial promotion” in relation to Placing Shares in contravention of section 21 of FSMA;

(r)  it is a Relevant Person and it is acting as principal only in respect of the Placing or, if it is acting for any other person (i) it is duly authorised to do so, (ii) it is and will remain liable to the Company and/or WH Ireland for the performance of all its obligations as a Placee in respect of the Placing (regardless of the fact that it is acting for another person), (iii) it is both an “authorised person” for the purposes of FSMA and a “qualified investor” as defined at Article 2(E) of the Prospectus Regulation acting as agent for such person, and (iv) such person is either (1) a Qualified Investor or (2) its “client” (as defined in section 86(2) of FSMA) that has engaged it to act as his agent on terms which enable it to make decisions concerning the Placing or any other offers of transferable securities on his behalf without reference to him;

(s)  in the case of a Relevant Person who acquires any Placing Shares pursuant to the Placing acquired by it as a financial intermediary, as that term is used in Article 5(1) of the Prospectus Regulation, it represents and warrants that:

(i)  the Placing Shares acquired by it in the Placing have not been acquired on behalf of, nor have they been acquired with a view to their offer or resale to, persons other than Relevant Persons or in circumstances in which the prior consent of WH Ireland has been given to the offer or resale; or

(ii)  where Placing Shares have been acquired by it on behalf of persons in any member state of the EEA other than Relevant Persons, the offer of those Placing Shares to it is not treated under the Prospectus Regulation as having been made to such persons;

(t)  the Placee acknowledges that no offering document, admission document or prospectus has been, or will be, prepared in connection with the Placing and it has not received a prospectus, admission document or other offering document in connection therewith;

(u)  it has not and will not make any offer to the public of the Placing Shares for the purposes of section 102B FSMA;

(v)  it agrees to be bound by the terms of the Articles of Association;

(w)  nothing has been done or will be done by it in relation to the Placing or to any Placing Shares that has resulted or will result in any person being required to publish a prospectus in relation to the Company or to any shares in the capital of the Company in accordance with FSMA or the UK Prospectus Rules or in accordance with any other laws applicable in any part of the European Union or the European Economic Area;

(x)  (i) it is not, and is not acting in relation to the Placing as nominee or agent for, a person who is or may be liable to stamp duty or stamp duty reserve tax in respect of any agreement to acquire (or any acquisition of) shares or other securities at a rate in excess of 0.5% (including, without limitation, under sections 67, 70, 93 or 96 of the Finance Act 1986 concerning depositary receipts and clearance services), and the allocation, allotment, issue and/or delivery to it, or any person specified by it for registration as holder, of Placing Shares will not give rise to a liability under any such section, (ii) the person whom it specifies for registration as holder of Placing Shares will be the Placee or the Placee’s nominee, and (iii) neither WH Ireland nor the Company will be responsible to it or anyone else for any liability to pay stamp duty or stamp duty reserve tax resulting from any breach of, or non-compliance, with this paragraph.  Each Placee and any person acting on behalf of such Placee agrees to participate in the Placing and it agrees to indemnify the Company and WH Ireland in respect of the same on the basis that the Placing Shares will be allotted to the CREST account or its affiliate or agent who will hold them as nominee on behalf of such Placee until settlement in accordance with its standing settlement instructions;

(y)  it will not treat any Placing Shares in any manner that would contravene any legal or regulatory requirement applicable in any territory or jurisdiction and no aspect of its participation in the Placing will contravene any legal or regulatory requirement applicable in any territory or jurisdiction in any respect or cause the Company or WH Ireland or their respective directors, officers, employees or agents to contravene any such legal or regulatory requirement in any respect and it has obtained all governmental and other consents which may be required under the laws of the applicable territory or jurisdiction;

(z)  if a Placee is a resident in the UK: i) it is a “qualified investor” within the meaning of Section 86(7) of FSMA; ii) it is a person of a kind described in Article 19 and/or Article 49 and/or 43 (2) of the Order and it understands that the information contained in these Terms and Conditions is only directed at any of the following: (A) persons falling within Article 19 of the Order having professional experience in matters relating to investments; (B) persons falling within Article 49 of the Order (including companies and unincorporated associations of high net worth and trusts of high value); or (C) persons to whom it would otherwise be lawful to distribute it; and that, accordingly, any investment or investment activity to which these Terms and Conditions relates is available to it as such a person or will be engaged in only with it as such a person;

(aa)  if a Placee is an investor located within a member state of the European Economic Area, it is a “Qualified Investor” within the meaning of Article 2(E) of the Prospectus Regulation;

(bb)  (applicable terms and expressions used in this paragraph have the meanings that they have in Regulation S made under the US Securities Act) (i) the Placing Shares have not been and will not be registered under the US Securities Act or under the securities laws of any State of or other jurisdiction within the United States, (ii) the Placing Shares will not be offered or sold, resold, or delivered, directly or indirectly, into or within the United States or to, or for the account or benefit of, any US person (as defined in Regulation S under the US Securities Act), (iii) it has not offered, sold or delivered and will not offer sell or deliver any of the Placing Shares to persons within the United States, directly or indirectly, (iv) neither it, its affiliates, nor any persons acting on its behalf, has engaged or will engage in any directed selling efforts with respect to the Placing Shares, (v) it will not be receiving Placing Shares with a view to resale in or into the United States, and (vi) it will not distribute this document or any offering material relating to Placing Shares, directly or indirectly, in or into the United States or to any persons resident in the United States;

(cc)  it is not and, if different, the intended beneficial owner of the Placing Shares allocated to it is not, and at the time the Placing Shares are acquired will not be, a resident or national of a Prohibited Jurisdiction or a corporation, partnership or other entity organised under the laws of a Prohibited Jurisdiction, and the Placing Shares have not been and will not be registered under the securities legislation of a Prohibited Jurisdiction and, subject to certain exceptions, may not be offered, sold, taken up, renounced or delivered or transferred, directly or indirectly, in or into a Prohibited Jurisdiction;

(dd)  the Placee has consented to receive information in respect of securities of the Company and other price-affected securities (as defined in FSMA) which makes it an “insider” for the purposes of Part V of FSMA and the Market Abuse Regulation, and it agrees not to deal in any securities of the Company until such time as the inside information (as defined in FSMA) of which it has been made aware has been made public for purposes of FSMA or it has been notified by WH Ireland or the Company that the proposed Placing will not proceed and any unpublished price sensitive information of which the Placee is aware has been publicly announced, and, other than in respect of its knowledge of the proposed Placing, it has neither received nor relied on any confidential price sensitive information concerning the Company or the Placing Shares;

(ee)  where the Placee is acquiring Placing Shares for one or more managed accounts, it represents and warrants that it is authorised in writing by each managed account: (a) to acquire the Placing Shares for each managed account; (b) to make on its behalf the representations, warranties, acknowledgments, undertakings and agreements in these Terms and Conditions ; and (c) to receive on its behalf any investment letter relating to the Placing in the form provided to it by WH Ireland ;

(ff)  WH Ireland may (at its absolute discretion) satisfy its obligations to procure Placees by itself agreeing to become a Placee in respect of some or all of the Placing Shares or by nominating any other WH Ireland person to do so;

(gg)  time is of the essence as regards its obligations under these Terms and Conditions ;

(hh)  each right or remedy of the Company and WH Ireland provided for in these Terms and Conditions is in addition to any other right or remedy which is available to such person and the exercise of any such right or remedy in whole or in part will not preclude the subsequent exercise of any such right or remedy;

(ii)  any document that is to be sent to it in connection with the Placing will be sent at its risk and may be sent to it at any address provided by it to WH Ireland :

(jj)  nothing in these Terms and Conditions will exclude any liability of any person (i) for any contents of the Announcement as a result of such person being responsible for such contents pursuant to the AIM Rules for Companies or applicable law or (ii) for fraud on its part, and all times and dates in these Terms and Conditions are subject to amendment at the discretion of WH Ireland except that in no circumstances will the date scheduled for Admission be later than the Long Stop Date;

(kk)  none of its rights or obligations in respect of the Placing is conditional on any other person agreeing to be allotted any Placing Shares under the Placing and no failure by any other Placee to meet any of its obligations in respect of the Placing will affect any of its obligations in respect of the Placing;

(ll)  it has substantial experience in evaluating and investing in shares of companies similar to the Company such that it is capable of evaluating the merits and risks of an investment in the Company, it has such knowledge and experience in financial and business matters as to be capable of protecting its own interests and evaluating the merits and risks of an investment in the Company and it is able to bear the economic risk of a complete loss of its investment in the Company;

(mm)  it has made an investigation of the pertinent facts relating to the operation of the Company to the extent it deems necessary in order to be fully informed with respect thereto;

(nn)  it will indemnify on an after tax basis and hold the Company and WH Ireland and their respective affiliates harmless from any and all costs, claims, liabilities and expenses (including legal fees and expenses) arising out of or in connection with any breach of the representations, warranties, acknowledgements, agreements and undertakings in these Terms and Conditions and further agrees that the provisions of these Terms and Conditions shall survive after completion of the Placing;

(oo)  WH Ireland does not have any duty to it similar or comparable to rules of “best execution”, “suitability” and “risk warnings” as set out in the Conduct of Business Sourcebook of the FCA;

(pp)  it accepts that it is not relying on WH Ireland to advise whether or not the Placing Shares are in any way a suitable investment for it;

(qq)  it is entitled to subscribe for or purchase the Placing Shares under the laws and regulations of all relevant jurisdictions which apply to it and that it has fully observed such laws and obtained all governmental and other consents which may be required thereunder and complied with all necessary formalities;

(rr)  it irrevocably appoints any director or employee of WH Ireland as its agent for the purpose of executing and delivering to the Company and/or its registrars any document on its behalf necessary to enable it to be registered as the holder of the Placing Shares being issued to it;

(ss)  it is not presently acting in concert, as defined in the City Code on Takeovers and Mergers, with any existing shareholder or other Placee;

(tt)  each right or remedy of the Company and WH Ireland provided for in these Terms and Conditions  is in addition to any other right or remedy which is available to such person and the exercise of any such right or remedy in whole or in part shall not preclude the subsequent exercise of any such right or remedy;

(uu)  none of its rights or obligations in respect of the Placing is conditional on any other person agreeing to acquire any Placing Shares under the Placing and no failure by any other Placee to meet any of its obligations in respect of the Placing shall affect any of its obligations in respect of the Placing;

(vv)  WH Ireland does not owe any fiduciary or other duties to any Placee in respect of any representations, warranties, undertakings or indemnities in the Placing Agreement; and

(ww)  the Placee agrees that the Company and WH Ireland will rely upon the truth and accuracy of the foregoing conformations, representations, warranties, acknowledgements undertakings and agreements which are given by each Placee (or persons acting on their behalf) to WH Ireland and the Company and are irrevocable.

Entire Agreement

The terms set out in the Announcement (including these Terms and Conditions) and the allocation of Placing Shares (including the subscription amount payable) as confirmed to a Placee, constitute the entire agreement to the terms of the Placing and a Placee’s participation in the Placing to the exclusion of prior representations, understandings and agreements between them. Any variation of such terms must be in writing.

Governing Law and Jurisdiction

The agreement arising out of acceptance of the Placing and any dispute or claim arising out of or in connection with the Placing or formation thereof (including non-contractual disputes or claims) shall be governed by and construed in accordance with the laws of England. Each Placee irrevocably agrees to submit to the exclusive jurisdiction of the courts of England to settle any claim or dispute that arises out of or in connection with the agreement arising out of acceptance of the Placing or its subject matter or formation (including non-contractual disputes or claims).

Daily Mail Stock Watch – Cadence Minerals

Mining investment group Cadence Minerals #KDNC surged after a court in Brazil ruled it can start shipping stockpiled iron ore.

Cadence and its joint venture partners are in talks with potential ore buyers.

The cash will be used on studies needed to reopen the Amapa mine, which was previously owned by Anglo American.

Shares in Cadence, whose chairman Andrew Suckling said the ruling brings Amapa ‘back to life’, jumped 73.9 per cent, or 2.4p, to 5.65p.

Link here to original article by Francesca Washtell

Cadence Minerals #KDNC – Amapá Iron Ore Project Given Court Approval to Commence Iron Ore Shipments

Highlights

In a significant development in Cadence’s Brazil’s iron ore interests:

  • Brazil’s Commercial Court of São Paulo has ruled that DEV Mineração S.A., owner of the Amapá iron ore project (“DEV”) can commence the shipment of the iron ore stockpiles situated at DEV’s wholly-owned port in Santana, Amapá, Brazil.
  • Independent surveys of these iron ore stockpiles indicate that some 1.39 Mt of iron ore in three stockpiles are available for immediate export with an average Fe grade of 62.12%.
  • Permission to export the iron ore was granted as a result of a petition filed by DEV supported by judicial trustee and creditors committee.
  • The net proceeds of the iron ore sales will primarily be used to pay labour and small creditor and to bring the Amapá iron ore project  (“Amapá Project”) back into production.
  • Iron ore exports are targeted to re-commence in the coming months.

Cadence Minerals (AIM/NEX: KDNC; OTC: KDNCY) advises that the Amapá Project has been granted permission by the Commercial Court of São Paulo (“Court”) to begin the shipment of its stockpile from the port of Santana, located in the Amapá Province of  Brazil.

Next Steps

DEV, with Cadence’s and Indo Sino’s (“JV Partners”) support, are liaising with local authorities to obtain the required licenses and permits to rapidly commence exports, and have already received federal authorisation to export the iron ore. In addition, the JV Partners are in detailed discussions with potential offtake partners and local contractors so that the Amapá Project can begin shipment as quickly as possible.

Currently, we estimate that the first shipment from the stockpile should be in late Q2, early Q3 of this year. These timelines are, of course, dependent on the ongoing and future impacts of COVID 19 on associated movement and activities.

An independent survey of these stockpiles located at the port indicates that some 1.39 million tonnes (“Mt”) of iron ore in three stockpiles with an average Fe grade of about 62.12% are available for export.

Cadence Amapá Project stake

As mentioned in previous announcements there remains only one major precondition for Cadence to make its investment in the Amapá Project and release the sum of US$2.5 million currently held in escrow in a judicial trust account (“Escrow Monies”).

This precondition requires DEV to reach a settlement agreement with the secured bank creditors. On satisfaction of the prerequisites and the release of the Escrow monies, Cadence will become a 20% shareholder in the Amapá Project via our joint venture company which will own 99.9% of Dev.

Cadence’s rights over the Amapá Project have been formalised in the Judicial Restructuring Plan of DEV and ratified by the São Paulo Bankruptcy court. Dev officers have been appointed in the Judicial Restructuring Plan, with acceptance of creditors.

While we await the settlement with the secured bank creditors, The JV Partners will work with DEV to advance the restart of the Amapá Project using the proceeds of the iron ore, accelerating the production from the Amapá Project.

About the Project

The Amapá Project was owned by Anglo American plc and Cliffs Natural Resources and consists of a large-scale iron ore mine, beneficiation plant, railway and private port.  In 2012 the operation produced 6.1 Mt of iron ore concentrate and reported operating profits from their 70% ownership in the Amapá Project of US$120 million (100% – US$171 million). Before its sale in 2012, Anglo American valued its 70% stake at US$462m in its 2012 Annual Report (100% – US$600m).

As previously announced, the total historical mineral resource contains an estimated 348 Mt of ore @ 38.9% iron content (“Fe”). The ore is beneficiated at the mine to 65% Fe Pellet Feed and 62% Fe Spiral Concentrate. Based on available historic mine plans and an independent consultant review, it is expected that at full production the Amapá Project has a mine life of 14 years and at full capacity is targeting to produce up to 5.3 Mt of iron ore per annum.

Court Petition

The permission to export the iron ore was granted by the Court, as a result of a petition filed by DEV and supported by the judicial trustees of DEV, KMPG Brazil and the creditors committee.

The Court ruled that DEV is permitted to export sufficient iron ore to realise a US$10 million profit from the Amapá stockpiles at the port (after the deductions of all logistical, regulatory, shipping and sale costs).

The first of the net revenues from the sale of the stocks shall be used to pay historic small and employee creditors (~US$2.5 m). Thereafter funds will be used to begin recommissioning studies on the asset including plant, railway and port and to start maintenance and monitoring of the current tailing dam facilities (~ US$ 6 m) and provide ongoing working capital and historic finance obligations.

DEV also filed a further petition which requested the release of R$400,000 (~US$78,000) currently held in a judicial account to be used for essential maintenance at the wholly-owned private port and the removal of the secured bank creditors liens (“Bank Liens”) over DEV and its assets. The Court ruled to release the funds. In addition, the Court has requested that the secured bank creditors reach an agreement with the JV Partners and DEV within 60 days or the Court might rule on the annulment of the Bank Liens and consider the banks as unsecured creditors. As unsecured creditors, the bank’s credit will be subject to restructuring plan limits and discounts and be paid from free cash flow from DEV, which may be over fifteen years.

Cadence Chairman Andrew Suckling commented; “The ruling from Brazil’s São Paulo court marks a significant milestone for the re-opening of the Amapá iron ore project and its long-term benefits for stakeholders and the region. I would like to put on record my sincere thanks and gratitude for the tireless efforts by Cadence management, IndoSino and DEV and advisors. This ruling brings the Amapá Project back to life.

Despite the severe disruption created by COVID-19, management has remained focused on delivering the Amapa project as planned, all the while supported by a robust iron ore market that continues to justify the opportunity. Regardless, our primary concern at this time has been to ensure the safety and wellbeing of all our staff, and it is my fervent hope that employees, shareholders, contractors and their families continue to remain safe and secure through this challenging time.”

Cadence CEO Kiran Morzaria commented; For Cadence, this a significant step forward for the redevelopment of the fully integrated Amapá iron ore project. We are truly entering the operational phase of the asset, and despite the current turbulent and volatile market conditions, the iron ore prices remain robust. The whole Cadence and JV team have been active in delivering an excellent outcome for Amapá.  

The shipment of the iron ore stockpile at the port of Santana will now trigger long overdue payments to hundreds of local ex-employees and small creditors. It will assist with funding the necessary recommissioning studies required to re-open the mine, which will, in turn, will rejuvenate the regional economy and provide significant employment, health and educational benefits for its people.”

Our Chairman has previously referred to Amapá as a “Company Changing” project for Cadence, and it is now on its way to deliver this goal. With this in mind, I now look forward to providing shareholders with further updates as the recommissioning process moves forward.”

– Ends –

For further information:

Cadence Minerals plc +44 (0) 207 440 0647
Andrew Suckling
Kiran Morzaria
WH Ireland Limited (NOMAD & Broker) +44 (0) 207 220 1666
James Joyce
James Sinclair-Ford
Novum Securities Limited (Joint Broker) +44 (0) 207 399 9400
Jon Belliss

 

Qualified Person

Kiran Morzaria B.Eng. (ACSM), MBA, has reviewed and approved the information contained in this announcement. Kiran holds a Bachelor of Engineering (Industrial Geology) from the Camborne School of Mines and an MBA (Finance) from CASS Business School.

Forward-Looking Statements:

Certain statements in this announcement are or may be deemed to be forward-looking statements. Forward-looking statements are identified by their use of terms and phrases such as “believe” “could” “should” “envisage” “estimate” “intend” ”may” “plan” “will” or the negative of those variations or comparable expressions including references to assumptions. These forward-looking statements are not based on historical facts but rather on the Directors’ current expectations and assumptions regarding the Company’s future growth results of operations performance future capital and other expenditures (including the amount. nature and sources of funding thereof) competitive advantages business prospects and opportunities. Such forward-looking statements reflect the Directors’ current beliefs and assumptions and are based on information currently available to the Directors.  Many factors could cause actual results to differ materially from the results discussed in the forward-looking statements including risks associated with vulnerability to general economic and business conditions competition environmental and other regulatory changes actions by governmental authorities the availability of capital markets reliance on key personnel uninsured and underinsured losses and other factors many of which are beyond the control of the Company. Although any forward-looking statements contained in this announcement are based upon what the Directors believe to be reasonable assumptions. The Company cannot assure investors that actual results will be consistent with such forward-looking statements.

Cadence Minerals #KDNC – Update on Investment in the Amapá Iron Ore Project, Brazil

Cadence Minerals (AIM/NEX: KDNC; OTC: KDNCY) is pleased to provide an update on its investment in the Amapá Iron Ore Project, Brazil.

The Amapá Project

The Amapá Project was owned by Anglo American plc and Cliffs Natural Resources and consists of a large-scale iron ore mine, beneficiation plant, railway and private port. Before its sale in 2012, Anglo American valued its 70% stake at US $462m in its 2012 Annual Report (100% US $600m). The Amapá Project is 99.9% owned by DEV Mineração S.A. (“DEV”).

Successful Reinstatement of Railway Concession

Following the approval of the judicial restructuring plan (“JRP”) announced on August 30th, 2019, Cadence along with its partners successfully negotiated the reinstatement of a life of mine railway concession. The grant of this railway concession was an incredible achievement and was announced on December 9th, 2019.

Satisfaction of Final Precondition

Currently, there remains only one major precondition for Cadence to make its investment in the Amapá Project, the sum of US$2.5 million currently held in escrow in a judicial trust account (“Escrow Monies”).

This precondition requires DEV Mineração S.A. (“Dev”) to reach a settlement agreement with the secured bank creditors. Since our last update, Cadence and our joint venture partners Indo Sino Pte. Ltd. (“Indo Sino”) have been in negotiations with the secured bank creditors and we have offered a settlement involving a discount on the amounts owned by Dev.

This settlement is intended to be paid from part of the proceeds from the sale of the iron ore stockpile currently held at Dev’s 100% owned port facility in Santana, Amapá. Alongside our partners, we continue to negotiate with the secured bank creditors, and we will update the market once a binding agreement is reached.

On satisfaction of the preconditions and the release of the Escrow monies, Cadence will become a 20% shareholder in the Amapá Project via our joint venture company which will own 99.9% of DEV. The Escrow Monies will then be used for the payment of former employees and small trade creditors. Once Cadence becomes a shareholder in the Amapá Project, the Government of Amapá will permit Dev to start operations on the asset including the shipment of iron ore from the port.

Cadence Non-Executive Chairman Andrew Suckling commented; “The remarkable progress made by Cadence management, Indo Sino and the Governor of Amapá and his team in bringing the Amapá Project back to life continues. We are moving ever closer to commencing the process of turning Amapá and it’s dormant potential into a key contributor to the regional economy, with all the employment, health and educational  benefits that will bring to this part of Brazil.”

Cadence CEO Kiran Morzaria commented; “Since securing the Railway concessions last December, we have worked tirelessly to reach a settlement with Dev’s secured bank creditors. It is my fervent belief that as referred to previously by our Chairman, Cadence is on the cusp of a company changing event – one that will create a long lasting store of value for our company and shareholders, as well as returning some prosperity to the Amapá region. I look forward to updating our board and investors on progress in the coming days and weeks.”

– Ends –

For further information:

Cadence Minerals plc +44 (0) 207 440 0647
Andrew Suckling
Kiran Morzaria
WH Ireland Limited (NOMAD & Broker) +44 (0) 207 220 1666
James Joyce
James Sinclair-Ford
Novum Securities Limited (Joint Broker) +44 (0) 207 399 9400
Jon Belliss

 

Qualified Person

Kiran Morzaria B.Eng. (ACSM), MBA, has reviewed and approved the information contained in this announcement. Kiran holds a Bachelor of Engineering (Industrial Geology) from the Camborne School of Mines and an MBA (Finance) from CASS Business School.

Forward-Looking Statements:

Certain statements in this announcement are or may be deemed to be forward-looking statements. Forward-looking statements are identified by their use of terms and phrases such as ‘‘believe’’ ‘‘could’’ “should” ‘‘envisage’’ ‘‘estimate’’ ‘‘intend’’ ‘‘may’’ ‘‘plan’’ ‘‘will’’ or the negative of those variations or comparable expressions including references to assumptions. These forward-looking statements are not based on historical facts but rather on the Directors’ current expectations and assumptions regarding the Company’s future growth results of operations performance future capital and other expenditures (including the amount. nature and sources of funding thereof) competitive advantages business prospects and opportunities. Such forward-looking statements reflect the Directors’ current beliefs and assumptions and are based on information currently available to the Directors.  Many factors could cause actual results to differ materially from the results discussed in the forward-looking statements including risks associated with vulnerability to general economic and business conditions competition environmental and other regulatory changes actions by governmental authorities the availability of capital markets reliance on key personnel uninsured and underinsured losses and other factors many of which are beyond the control of the Company. Although any forward-looking statements contained in this announcement are based upon what the Directors believe to be reasonable assumptions. The Company cannot assure investors that actual results will be consistent with such forward-lookingstatements.

Cadence Minerals (KDNC) Reinstatement of Critical Railway Concessions at the Amapá Iron Ore Project, Brazil.

 

Cadence Minerals (AIM/NEX: KDNC; OTC: KDNCY) is pleased to announce that, following the approval of the judicial restructuring plan (“JRP”) announced on August 30th 2019, along with its partners it has agreed with the State of Amapá the reinstatement of a life of mine railway concession (“Concessions”) between the Amapá iron ore mine (“Amapá” “Amapá Project”) and the port in Santana, State of Amapá, Brazil.

The Amapá Project

The Amapá Project was owned by Anglo American plc and Cliffs Natural Resources and consists of a large-scale iron ore mine, beneficiation plant, railway and private port. Before its sale in 2012, Anglo American valued its 70% stake at US $462m in its 2012 Annual Report (100% US $600m). The Amapá Project is 99.9% owned by DEV Mineração S.A. (“DEV”).

Details of Railway Concession

The reinstatement of the Concessions were agreed between Cadence, Indo Sino Pte. Ltd. (“Indo Sino”), and the government of Amapá, including the state secretary of transport, state secretary of planning, state secretary of the environment, attorney generals office and the office of the Governor of Amapá.

The Concessions are in force for the life of the mine. The Concessions allow DEV’s 100% owned subsidiary to operate the railway, for the primary purpose of the shipment of iron ore over 180 km from the mine to the private port in Santana. The railway will be maintained and improved to allow the eventual shipment of approximately 5.5 million tonnes of iron ore, along with providing a passenger and good service. The concessions also allows DEV to expand the capacity of the railway to transport other goods, should there be commercial demand.

Satisfaction of Precondition 

The reinstatement of the Concessions represents the satisfaction of one of the two principal preconditions for Cadence’s investment in the Amapá Project and the release of US$2.5 million currently held in escrow in a judicial trust account.

The second principle precondition is the release of security over The Amapá Project. Along with our partners, we continue to negotiate with the secured bank creditors to reach a settlement and release the security over the Amapá Project. Once the preconditions have been met, Cadence will own 20% of the Amapá iron ore project.

On satisfaction of this, the monies held in the judicial trust account will be released for the payment of former employees and small trade creditors. On the release of the monies, the Government of Amapá will permit DEV to ship the iron ore stockpile at the port, generating early revenue for the project.

Cadence Non-Executive Chairman Andrew Suckling commented; “To echo my previous comments, in my time working with commodity projects around the world, I have rarely if ever seen a lapsed mining project with this sort of potential. The reinstatement of the life of mine railway concession is the first key step toward rehabilitation of the Amapá Project, and I speak for our board and investors when I say that we expect this to be a Company changing event. Cadence and Indo Sino, along with the Governor of Amapá and his team of Government Officials have worked tirelessly to conclude this key step, and we are grateful for all they have achieved.”

In its previous life, Amapá’s output contributed significantly to the regional economy. It is important to consider the employment opportunities and funding for infrastructure, education and health that a rehabilitated mine will bring to this part of Brazil.”

Cadence CEO Kiran Morzaria commented; “Since the approval of the JRP in August, we have worked with Indo Sino and the Governor of Amapá to secure this first key step to bring Amapá back into production. Now we have secured the Railway concessions, once agreement has been reached with the Government of Amapá to release security over the project we can commence shipment of the iron ore stockpile. This will in turn provide approx US$ 60 million, which will be reinvested in the restart of the Amapá Project. I look forward to providing our board and investors with further progress updates.”
– Ends –
For further information:
Cadence Minerals plc
+44 (0) 207 440 0647
Andrew Suckling

Kiran Morzaria
WH Ireland Limited (NOMAD & Broker)
+44 (0) 207 220 1666
James Joyce

James Sinclair-Ford
Novum Securities Limited (Joint Broker)
+44 (0) 207 399 9400
Jon Belliss

Qualified Person
Kiran Morzaria B.Eng. (ACSM), MBA, has reviewed and approved the information contained in this announcement. Kiran holds a Bachelor of Engineering (Industrial Geology) from the Camborne School of Mines and an MBA (Finance) from CASS Business School.

Forward-Looking Statements:

Certain statements in this announcement are or may be deemed to be forward-looking statements. Forward-looking statements are identified by their use of terms and phrases such as ‘‘believe’’ ‘‘could’’ “should” ‘‘envisage’’ ‘‘estimate’’ ‘‘intend’’ ‘‘may’’ ‘‘plan’’ ‘‘will’’ or the negative of those variations or comparable expressions including references to assumptions. These forward-looking statements are not based on historical facts but rather on the Directors’ current expectations and assumptions regarding the Company’s future growth results of operations performance future capital and other expenditures (including the amount. nature and sources of funding thereof) competitive advantages business prospects and opportunities. Such forward-looking statements reflect the Directors’ current beliefs and assumptions and are based on information currently available to the Directors. Many factors could cause actual results to differ materially from the results discussed in the forward-looking statements including risks associated with vulnerability to general economic and business conditions competition environmental and other regulatory changes actions by governmental authorities the availability of capital markets reliance on key personnel uninsured and underinsured losses and other factors many of which are beyond the control of the Company. Although any forward-looking statements contained in this announcement are based upon what the Directors believe to be reasonable assumptions. The Company cannot assure investors that actual results will be consistent with such forward-looking statements.

Cadence Minerals #KDNC – Interim Results for the six months ended 30 June 2019

Cadence Minerals plc announces interim Results for the six months ended 30 June 2019

 

 

HIGHLIGHTS

·    Cadence entered into an investment agreement to acquire up to 27% of the Amapá iron ore mine, beneficiation plant, railway and private port.

·      Before its sale in 2012 Anglo American valued  (impaired) its 70% stake in the Amapá iron ore mine at  US $462m ( 100% US $600m).

·      During its operation, the mine generated an annual operating profit of up to U$171 million (100%).

·      The total historic mineral resource contains an estimated 348 million tonnes (“Mt”) of ore @ 38.9% iron content (“Fe”).

·    Macarthur Minerals (Cadence equity ownership approx. 9%) refocused efforts on their iron ore assets and secured a binding Life-Of-Mine Off-Take Agreement with Glencore International A.G

·    European Metals (Cadence equity ownership approx. 19%) published a pre-feasibility study for the production of lithium hydroxide, increasing the net present value of the project 105% to US$1.1 BN.

INVESTMENT REVIEW

Amapá, Iron Ore Mine (“Amapá”)

In June this year Cadence Minerals entered into a binding investment agreement (“the  Agreement”) with Indo Sino Pte. Ltd. (“Indo Sino”) to invest in and acquire up to a 27% interest in the former Anglo American plc (“Anglo American”) and Cliffs Natural Resources (“Cliffs”) Amapá iron ore mine, beneficiation plant, railway and private port (“Amapá Project”) owned by DEV Mineração S.A. (“Amapá”).

The Amapá Project is a large-scale iron open pit ore mine with associated rail, port and beneficiation facilities and commenced operations in December 2007. Production increased to 4.8 Mt and 6.1 Mt of iron ore concentrate product in 2011 and 2012 respectively.

A summary of the asset is as below:

·      Before its sale in 2012 Anglo American valued its 70% stake in the Amapá Project at US$866 million (100% 1.2 billion) and after impairment valued it at  US $462m in its 2012 Annual Report ( 100% US $600m)

·      During its operation, the mine generated an annual operating profit of up to U$171 million (100%)

·      The total historic mineral resource contains an estimated 348 million tonnes (“Mt”) of ore @ 38.9% iron content (“Fe”)

·      The ore is beneficiated to 65% Fe Pellet Feed and 62% Fe Spiral Concentrate

·      Based on available historic mine plans and an independent consultant review it is expected that at full production the Amapá Project has a mine life of 14 years and at full capacity is targeting to produce up to 5.3 Mt of Iron Ore per annum

·      Subject key preconditions being met, the planned shipment of a 1.39 million tonne stockpile is scheduled to commence in December 2019. It is estimated that these stockpiles have a net realisable value of approximately US$ 60 million, which will be reinvested in the restart of the Amapá Project

·      Potential for the mine and existing infrastructure to be brought to market swiftly with mining and processing anticipated to restart in 2021 subject to the grant of the necessary permits, regulatory consents and project financing.

To acquire its 27% interest, Cadence will invest US$ 6 million over two stages. The first stage is for 20% of the JV Co the consideration for which is US$2.5 million. The second stage of investment is for a further 7% of JV Co for a consideration of US$3.5 million. Should Indo Sino seek additional investors or an investment in the JV Co the agreement also provides Cadence with a first right of refusal to increase its stake to 49% in the JV Co.

Our investment is conditional on several key preconditions the first is the approval of the judicial restructuring plan (“JRP”), which was completed at the end of August. Once the remaining pre-conditions relating to the reinstatement of a concession on the railway licenses and bank creditor arrangements have been met, the US$2.5 million investment placed in the judicial trust account will be released, and Cadence will own 20% of the Amapá iron ore project. This will enable the start of the shipping of the iron stockpile.

The approval of the JRP and the fulfilment of the preconditions outlined above will result in Cadence’s and IndoSino’s joint venture company Pedra Branca Alliance Pte Ltd. (“PBA”) owning 99.9% of DEV Mineração S.A. (“Amapá”). DEV Mineração S.A. is the owner of the Amapá iron project.

Cadence’s next stage of investment will be a further investment of US$3.5 million on the grant of all operational and environmental licenses for the Amapá Project, at which point Cadence will own 27%.

As part of the JRP Amapá submitted an outline of an operational and financial plan that Amapá intends to implement to bring the project back into production, which included the following

·      The total initial estimate of capital investment of approximately US$168 million, of which it is estimated US$61 million will be spent on port rehabilitation and US$47 million to be spent on plant recommissioning.

·      Rehabilitation to be completed by the end of 2021 with new production in 2022. Full production by 2024 of 5.3 million tonnes (“Mt”) of iron ore per annum.

·      At full production and using US$61 per tonne of 62% Fe Amapá is forecast to have:

·      an average net revenue after shipping of US$266 million per annum,

·      and an average EBITDA of US$136 million per annum.

European Metals Holdings Limited (“EMH”)

Cadence has been investing in European Metals since June 2015. As of the date of this document, Cadence holds approximately 19% in the Cinovec deposit in the Czech Republic through a direct holding in the share capital of European Metals that owns 100 per cent of the exploration rights to the Cinovec lithium/tin deposit. The Cinovec lithium and tin deposit is located in the Krusne Hory mountain range. The deposit that straddles the border between Germany and the Czech Republic and in Germany, it is known as the Zinnwald deposit (50% owned by Bacanora Lithium Plc ). The district has an extensive mining history, with various metals having been extracted since the 14th Century.

During the period EMH made significant progress. Drilling continued at the site with five of the eight-hole programme completed; this drilling programme was carried out to define the first two years of mining within the Cinovec-south area. The results of this programme have either been in line with or exceeded, EMH’s expectations particularly with regard to the tin intercepts.

In addition to the drilling results, EMH published a pre-feasibility study on producing battery-grade lithium hydroxide for as an alternative to battery-grade lithium carbonate. The result significantly enhanced the forecast economics of the Cinovec Project:

Highlights of the study are: (all $ figures in this release are US Dollars and increases refer to the 2017 PFS Lithium Carbonate study):

·           Net estimated overall cost of production post-credits: $3,435 / tonne LiOH.H2O

·           Project Net Present Value (“NPV”) increases 105% to: $1.108B (post-tax, 8%)

·           Internal Rate of Return (“IRR”) was increased 37% to 28.8% (post-tax)

·           Total Capital Cost: $482.6M

·           Annual production of Battery Grade Lithium Hydroxide: 25,267 tonnes

·           Studies are based on only 9.3% of reported Indicated Mineral Resource and a mine life of 21 years processing an average of 1.68 Mtpa ore

·           The process used to produce lithium hydroxide allows for the staging of lithium carbonate and then lithium hydroxide production to minimise capital and startup risk and enables the production of either battery-grade lithium hydroxide or carbonate as markets demand

After the period end, EMH entered into an agreement with CEZ Group(“CEZ”), one of Central and Eastern Europe’s largest power utilities, to conditionally provide a EUR 2 million finance facility by way of a convertible loan. CEZ is currently conducting due diligence on the Company and Project. The successful outcome of the due diligence process could see CEZ become European Metals’ largest shareholder and co-development partner for the Cinovec Lithium/Tin Project through conversion of the convertible note and subsequent additional investment.

Macarthur Minerals (“Macarthur”)

Cadence holds approximately 9% of the equity in Macarthur. Macarthur has three iron ore projects in the Yilgarn region of Western Australia. The Company has also established multiple project areas in the Pilbara, Western Australia for conglomerate gold, hard rock greenstone gold and hard rock lithium. In addition, Macarthur Minerals has significant lithium brine interests in the Railroad Valley, Nevada, USA.

During the period Macarthur focused its efforts on its Iron Assets in Western Australia.

The main highlights for Macarthur over the period were:

·       Opened an up to US$6 million institutional convertible note offer to fund the production of a Bankable Feasibility Study on Macarthur iron ore projects

·       Binding Life-Of-Mine Off-Take Agreement with Glencore International A.G for the Lake Giles Iron Ore Project for approximately 4 mtpa for the first 10 years on project start up

·       Macarthur entered into exclusive negotiation agreement with Aurizon for rail haulage services for the Lake Giles Iron Ore Project

·       Infill drilling program planned for the Moonshine magnetite deposit

·       Engineering firm Engenium commissioned to revise NI 43-101 compliant technical report and refine operating and capital costs of the hematite and magnetite projects

·       Applications have been made for three additional prospective iron ore tenements. These were properties released by Cliffs Natural Resources and are adjacent to the iron ore operations of Mt Jackson and Deception Mines

Bacanora Lithium Plc (“Bacanora”)

At the period end Cadence owned less than one per cent of Bacanora’s equity and a 30% stake in the Mexalit S.A. de CV (“Mexalit”) joint venture which forms part of the Sonora Lithium Project in Northern Mexico.

Bacanora has two lithium development assets, the Sonora Lithium Project and the Zinnwald Lithium Project. Bacanora has a 50% interest in, and joint operational control, of the Zinnwald Lithium Project. Zinnwald represents a strategic asset located near a thriving market for lithium and energy products.

Bacanora’s principal asset is the Sonora Lithium Project in northern Mexico. The asset has Measured plus Indicated Mineral Resource estimate of over 5 million tonnes (‘Mt’) (comprising 1.9 Mt of Measured Resources and 3.1Mt of Indicated Resources) of lithium carbonate equivalent (‘LCE’) and an additional Inferred Mineral Resource of 3.7 Mt of LCE, Sonora is regarded as one of the world’s larger known clay lithium deposits.

Bacanora continued to progress the strategic investment by Ganfeng Lithium Co., Ltd. (“Ganfeng”) during the period and signed the investment agreement at the end of June 2019, the key terms of which were:

·           Cornerstone strategic investment of 29.99% in Bacanora for £14,400,091 by Ganfeng

·           Project level investment of 22.5% in Sonora Lithium Ltd , the holding company for the Sonora Lithium Project, for £7,563,649

·           Additional long-term offtake at a market-based price per tonne

·           Gangfeng will complete a review within six months of the EPC engineering design and capital costs of Sonora Lithium Project with a view to reducing costs and accelerating the timetable

·           Gangfeng will provide a plant and process commissioning team to assist Bacanora in delivering first production in 2021

At the time of publishing Ganfeng was awaiting final approval from Chinese authorities to make its investment.

Yangibana Rare Earth Project

Cadence owns a 30% free carried interest in the Yangibana North, Gossan, Hook, Kanes Gossan, Lions Ear and Bald Hill North rare earth projects in Western Australia. These projects form part of the larger Yangibana Rare Earth Project (“the Project”). The free carry is up to the commencement of the feasibility study.

A considerable amount of work over this period has been to define the geological resource and reserves, optimise the process flow, carry out detailed design and engineering work required for the setting up of a process plant, negotiations on equipment supply and no less crucial securing project finance. An early works permit was granted which allowed the initiation of infrastructure work and bring on-site a 340 rooms accommodation camp ready for occupation when mine construction commences.

On geology, there was a 34% increase in probable ore reserves to 10.35 million tonnes at 1.22% TREO including 0.43%Nd2O3+Pr6O11, supporting an initial 11 years operational life for the project based on the JORC certified resource of 21.7 million tonnes.

The current mine plan and production targets set out by the operator incorporates 10.35 million tonnes of Probable Ore Reserves, of which 1.96 million tonnes is part our joint venture asset, Yangibana North, which according to the operator’s production targets are scheduled to be mined from year 8 to year 14. These production targets include indicated mineral resources, hence the longer mine life.

Lithium Assets in Australia

In March this year Cadence announced that it has agreed to acquire three highly prospective assets in Australia that are in regions with proven high-grade lithium mineralisation. The mechanism to facilitate this acquisition was via varying binding investment agreements in place with Lithium Technologies Pty Ltd (“LT”) and Lithium Supplies Pty Ltd (“LS”) that Cadence entered on 11 December 2017 to acquire up to 100% of six prospective hard rock lithium assets in Argentina.

Highlights of the assets include:

·     The acquisition covers three projects – Picasso (Western Australia – WA), Litchfield (Northern Territories – NT) and Alcoota (NT) – that are located  in regions with proven lithium mineralisation and supportive mining infrastructure

·     The Picasso Project (license granted) is near Alliance Mineral Assets’ (ASX: A40; SGX: 40F; “AMA”) high-profile Bald Hill Mine in WA (note: AMA recently completed a 50:50 A$400m+ merger with delisted Tawawa Resources [ASX: TAW] & raised $40M to develop the  asset base)

·     Demonstrating exploration upside for Picasso, the Bald Hill Mine is producing a spodumene concentrate and has a JORC (2012) compliant mineral resource of 26.5Mt @ 0.96% Li2O; probable ore reserves at 11.3Mt @ 1.01% Li2O

Preliminary exploration work was concluded in April with positive results, and Cadence increased its stake from 4% to 24%. Early exploration work will begin soon to test and sample targets that have been identified during the preliminary exploration.

Other Investments

Cadence also retains equity positions in Sagon Resources Ltd (formerly Clancy Minerals Ltd) and Auroch Minerals Ltd. The latter being involved in base metal exploration in Australia, in particular, the Saints Nickel Project in Western Australia. Sagon Resources Ltd is currently exploring the Cummins Range Rare Earths Project.

FINANCIAL REVIEW

During the period, the Group made a loss before taxation of £0.28 million (30 June 2017: loss of £4.61 million). This was primarily due to an increase in the value on our portfolio, which offset administrative, financing and share of associated losses totalling £0.96 million.

There was a weighted basic loss per share of 0.003p (30 June 2017: loss per share 0.059p)  Foreign currency translation differences marginally decreased comprehensive loss for the period to £0.24 million (30 June 2017: total comprehensive loss of £4.66 million).

Administrative expenses decreased by £0.11 million compared to the same period last year; this decrease was driven by cost-cutting measures across the board.

The total assets of the group increased from £18.33 million at 31 December 2017 to £19.39 million. Of this amount, £2.33 million represent the market value of our available for sale investments at the period end. The reduction in the total assets is as a result of the decrease in the value of Bacanora equity, which was the primary driver for the reduction of available for sale asset value.

It is important to note that this does not include our investment in EMH. Our investment in EMH is classified as an investment in an associate and held at a value of £12.2 million. EMH is classified as such because we hold approximately 19% and Kiran Morzaria, the Chief Executive Officer of Cadence is also a Non-Executive Director of EMH.

Our borrowings of £3.71 million as at the 31 December 2017 reduced to £2.06 million by the end of the period as we paid back our convertible loans.

During the period, our net cash outflow from operating activities was £0.52 million compared to £0.45 million during the same period last year. We invested £0.27 million in Amapá, as part of our due diligence and JRP costs and our financing costs were some £0.19 million. We disposed of £1.42 of our available for sale investments which predominantly was our Bacanora equity. These sales were used to pay back some £1.59 million of our convertible loan during the period. We raised some £1.30 million of equity during the period which after netting of the aforementioned costs and revenue from the sale of our equity stake yielded resulted in a cash balance at the end of the period of £0.54 million

 

For further information, please contact

Cadence Minerals plc

+44 (0) 207 440 0647

Andrew Suckling

Kiran Morzaria

WH Ireland Limited (NOMAD & Broker)

+44 (0) 207 220 1666

James Joyce

James Sinclair-Ford

Novum Securities Limited (Joint Broker)

+44 (0) 207 399 9400

Jon Belliss

 

 

CADENCE MINERALS PLC

STATEMENT OF COMPREHENSIVE INCOME

FOR THE PERIOD ENDED 30 JUNE 2019

 

Notes

Unaudited Period ended 30 June 2019

Unaudited Period ended 30 June 2018

Audited Year ended  31 December 2018

£’000

£’000

£’000

Income

Unrealised profit/(loss) on assets held for sale

1,118

(3,730)

(7,440)

Realised (loss)/profit on assets held for sale

(264)

105

(1,967)

Other income

4

48

140

858

(3,577)

(9,267)

Share based payments

(3)

(7)

Other administrative expenses

(672)

(785)

(1,559)

Total administrative expenses

(672)

(788)

(1,566)

Operating profit/(loss)

186

(4,365)

(10,833)

Share of associates losses

(274)

(182)

(555)

Finance cost

(197)

(59)

(377)

(Loss)/profit before taxation

(285)

(4,606)

(11,765)

 

 

 

Taxation

(Loss)/profit attributable to the equity holders of the Company

(285)

(4,606)

(11,765)

Other comprehensive income/(expenditure)

Foreign currency translation differences

47

(53)

(150)

Other comprehensive income/(expenditure) for the period net of tax

47

(53)

(150)

Total comprehensive expenditure for the period

(238)

(4,659)

(11,915)

Loss per share

Basic  (pence per share)

3

(0.003)

(0.059)

(0.150)

Diluted  (pence per share)

3

(0.003)

(0.051)

(0.145)

CADENCE MINERALS PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE PERIOD ENDED 30 JUNE 2019

 

Share capital

Share premium account

Share-based payment reserve

Hedging, Loan & Exchange reserves

Retained earnings

Total equity

£’000

£’000

£’000

£’000

£’000

£’000

Balance at 1 January 2018

1,202

27,552

3,178

337

(5,545)

26,724

Share based payments

3

3

Transfer on lapse of warrants

(132)

132

Transactions with owners

              –  

                –  

(129)

                –  

132

3

Foreign exchange

 –

 –

(53)

 –

(53)

Profit for the period

(4,606)

(4,606)

Total comprehensive loss for the period

              –  

                –  

              –  

(53)

(4,606)

(4,659)

Balance at 30 June 2018 (unaudited)

1,202

27,552

3,049

284

(10,019)

22,068

Share based payments

4

4

Transfer on lapse of warrants

(1,661)

1,661

On settlement of loan notes

(412)

(412)

Transactions with owners

              –  

                –  

(1,657)

(412)

       1,661

(408)

Foreign exchange

(97)

(97)

Loss for the period

(7,159)

(7,159)

Total comprehensive loss for the period

              –  

                –  

              –  

(97)

(7,159)

(7,256)

Balance at 31 December 2018

1,202

27,552

1,392

(225)

(15,517)

14,404

Issue of share capital

232

2,668

2,900

Costs of share issue

(105)

(105)

Transactions with owners

          232

         2,563

                –  

              –  

       2,795

Foreign exchange

 –

 –

47

 –

47

Loss for the period

(285)

(285)

Total comprehensive loss for the period

              –  

                –  

              –  

47

(285)

(238)

Balance at 30 June 2019 (unaudited)

1,434

30,115

1,392

(178)

(15,802)

16,961

 

 

 

 

 

 

 

 

 

 

 

CADENCE MINERALS PLC

STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2019

 

Unaudited

Unaudited

Audited

 30 June 2019

 30 June 2018

 31 December 2018

Assets

Notes

£’000

£’000

£’000

Non-current

Intangible assets

2,438

1,875

2,172

Investment in associate

12,170

12,918

12,483

14,608

14,793

14,655

Current assets

Trade and other receivables

1,919

461

315

Assets held for sale

2,330

9,946

2,895

Cash and cash equivalents

536

216

468

Total current assets

4,785

10,623

3,678

Total assets

19,393

25,416

18,333

EQUITY AND LIABILITIES

Current liabilities

Trade and other payables

372

290

223

Borrowings

2,060

3,058

3,706

Total current liabilities and total liabilities

2,432

3,348

3,929

Equity

Share capital

4

1,434

1,202

1,202

Share premium

30,115

27,552

27,552

Share based payment reserve

1,392

3,049

1,392

Hedging & Exchange reserve

(178)

284

(225)

Retained earnings

(15,802)

(10,019)

(15,517)

Total equity and liabilities

to owners of the company

16,961

22,068

14,404

Total equity and liabilities

19,393

25,416

18,333

CADENCE MINERALS PLC

CONSOLIDATED CASH FLOW STATEMENT

FOR THE PERIOD 30 JUNE 2019

 

Unaudited Period ended

Unaudited Period ended

Audited Year ended

30 June 2019

30 June 2018

 31 December 2018

£’000

£’000

£’000

Cash flows from operating activities

Operating profit/(loss)

186

(4,365)

(10,833)

Net realised/unrealised profit on assets held for sale

(854)

3,625

9,407

Equity settled share-based payments

3

7

Decrease/(increase) in trade and other receivables

(4)

261

407

Increase/(decrease) in trade and other payables

149

28

(39)

Net cash outflow from operating activities

(523)

(448)

(1,051)

Taxation

Cash flows from investing activities

Payments for investments in assets held for sale

(476)

(523)

Receipts on sale of assets held for sale

1,419

438

1,755

Receipts from sale of/(payments for) investments in associates

39

(50)

Investment in exploration costs

(266)

(100)

(325)

Net cash outflow from investing activities

1,192

(138)

857

Cash flows from financing activities

Proceeds from issue of share capital

1,300

Share issue costs

(105)

Net (loan repayments)/borrowings

(1,599)

(1,176)

(998)

Finance cost

(197)

(59)

(377)

Net cash inflow from financing activities

(601)

(1,235)

(1,375)

Net increase/(decrease) in cash and cash equivalents

68

(1,821)

(1,569)

Cash and cash equivalents at beginning of period

468

2,037

2,037

Cash and cash equivalents at end of period

536

216

468

 

NOTES TO THE INTERIM REPORT

FOR THE PERIOD ENDED 30 JUNE 2019

 

1 BASIS OF PREPARATION

 

The interim financial statements have been prepared in accordance with applicable accounting standards and under the historical cost convention.  The financial information set out in this interim report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The Group’s statutory financial statements for the year ended 31 December 2018 have been delivered to the Registrar of Companies. The auditor’s report on those financial statements was unqualified.

 

The principal accounting policies of the Group are consistent with those detailed in the 31 December 2018 financial statements, which are prepared in accordance with International Financial Reporting Standards (IFRSs), as adopted by the European Union.  IFRS16 – Leases has been adopted, but as the Group has no leases exceeding 12 months, this has had no impact.

 

GOING CONCERN

 

The Directors have prepared cash flow forecasts for the period ending 30 September 2019. The forecasts demonstrate that the Group has sufficient funds to allow it to continue in business for a period of at least twelve months from the date of approval of these financial statements. Accordingly, the accounts have been prepared on a going concern basis.

 

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

 

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

 

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results

 

2 SEGMENTAL REPORTING

 

An operating segment is a distinguishable component of the Group that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the Group’s chief operating decision maker to make decisions about the allocation of resources and assessment of performance and about which discrete financial information is available.

 

The chief operating decision maker reviews financial information for and makes decisions about the Group’s performance as a whole. The Group has not actively traded during the period.

 

Subject to further acquisitions the Group expects to further review its segmental information during the forthcoming financial year.

 

3 PROFIT PER SHARE 

 

The calculation of the loss per share is based on the loss attributable to ordinary shareholders divided by the weighted average number of shares in issue during the period.

 

Unaudited

Unaudited

Audited

six months ended

six months ended

year ended

30 June 2019

30 June 2018

31 December 2018

£’000

£’000

£’000

(Loss)/profit on ordinary activities after tax (£’000)

(285)

(4,606)

(11,765)

Weighted average number of shares for calculating basic loss/profit per share

  8,335,217,332

  7,851,440,338

  7,851,440,338

Share options and warrants exercisable

     280,000,000

  1,259,575,345

     280,000,000

Weighted average number of shares for calculating diluted loss/profit per share

  8,615,217,332

  9,111,015,683

  8,131,440,338

Basic loss per share (pence)

(0.003)

(0.059)

(0.150)

Diluted loss per share (pence)

(0.003)

(0.051)

(0.145)

 

4 SHARE CAPITAL

 

Unaudited

Unaudited

Unaudited

30 June 2019

30 June 2018

30 June 2018

£’000

£’000

£’000

Allotted, issued and fully paid

173,619,050 deferred shares of 0.24p (30 June 2018 and 31 December 2018: 173,619,050)

417

417

417

10,172,652,446 ordinary shares of 0.01p (30 June 2018 and 31 December 2018: 7,851,440,338)

                  1,017

                      785

                      785

                  1,434

                  1,202

                  1,202

 

Cadence Minerals (KDNC) Results for the year ended 31 December 2018

Cadence Minerals (AIM/NEX: KDNC; OTC: KDNCY) is pleased to announce its final results for the year ended 31 December 2018. A copy of full results will be made available on the Company’s website from today at http://www.cadenceminerals.com/

CHAIRMAN’S STATEMENT

For the year ended 31 December 2018

The year for Cadence can be characterized by consolidation and cost-cutting. The board has continued to support our investee companies whilst also identify new opportunities. This approach has been both a course of prudence and patiently waiting for the right opportunity. Cadence has continued to review and evaluate a number of projects globally whilst continuing to focus on our existing investments.

There has been increasing downward pressure on the Lithium price and therefore the global sector, mostly due to expectations that supply is increasing. We are waiting to see this actually play out, and Cadence still subscribes to the belief in an increase globally in electric vehicle demand and electric storage. This will underpin the demand for lithium, cobalt, nickel and rare earth elements.

The recent announcement of Cadence involvement in The Amapa Iron Ore project (“Amapa”) fits precisely with the company’s strategy of searching for stakes in assets that are currently unlisted but can provide excellent returns. We plan to divert and re deploy some of the profits from earlier stakes into bigger stakes just like this one.  Cadence believes the Amapa Iron Ore opportunity to be transformational at a critical time in the Iron Ore market.

The introduction of the American Mineral Act in May 2019 by US Senator Murkowski highlights the increasing focus on the sectors Cadence specializes in. Our principal investments in Yangibana North project, Clancy and San Luis Argentina fit this vision of strategic metals perfectly.

We have continued to witness consolidation in the Industry and Cadence congratulates Bacanora Lithium Plc (“Bacanora”) on the recent interest and involvement of Gangfeng. This will support and hopefully accelerate the route to operation and eventual production. Whilst our equity stake is lower our JV interest just became increasingly valuable.

The Board of Cadence have increasing confidence in the potential for Macarthur Minerals (“MMS”) and European Metal Holdings (“EMH”) to accelerate in the coming months and provide significant returns. The news of an off take arrangement with Glencore for MMS was a significant milestone to production. EMH continue on a careful and considered path to operation and success.

Cadence fully believes are prospects are growing and we have weathered a very difficult period and are embarking on an exciting phase with the investment into the Iron Ore market. Whilst witnessing real progress at our investee companies.

We continue to view the opportunities Cadence is focused upon with confidence and excitement. We will support projects to production and continue to evaluate new projects. However there will be a real focus on the huge potential we see in Amapa Iron Ore.

The directors would like to thank our shareholders, staff and consultants for their continued support.

Andrew Suckling

Non Executive Chairman

29 May 2019

CHIEF EXECUTIVE OFFICER’S REVIEW

Cadence’s portfolio of investments is well spread along the development curve from early exploration to pre-construction and, by our assessment, these investments have the right cost structure and scale to potentially be significant contributors to their respective supply chains and represent a substantial return on investment.

One of the investments identified in the middle of 2018 and consummated in May 2019 was a non-binding heads of terms to invest in and acquire up to a 27% (for US$6 million) interest in the former Anglo American plc and Cliffs Natural Resources Amapá iron ore mine, beneficiation plant, railway and private port.

Prior to its sale in 2012 Anglo American valued its 70% stake in the Amapá Project at US$866 million (100% 1.2 billion) and after impairment at US$462m in its 2012 Annual Report ( 100% US$600m) and during its operation the mine generated an annual operating profit of up to U$171 million (100%).

It is rare in our industry to have the opportunity to be able to invest in such a project and we believe this project provides us with a potentially transformative asset for our Company. The Amapá Project gives Cadence the potential for an exceptional return on investment (ROI) in the run-up to full production and an opportunity to become a significant shareholder in a mid-tier iron ore producer.

Of our other investments of note, was the progress that European Metals Holdings have made during the year. It has improved roast recoveries in their lab test work, received approvals to carry out both geotechnical drilling and definitive feasibility study drilling. Also, European Metals Holdings commenced a revised pre-feasibility study to produce lithium hydroxide. Given the pricing and demand for this compound, we would hope to see an improvement in the economics of the projects.

During the year Macarthur Minerals Limited focused its efforts on the early exploration of its gold, nickel and lithium projects in Western Australia. However, at the end of the year and after the year-end Macarthur Minerals Limited focused on its substantial Iron Ore Projects in the Yilgarn Region of Australia securing Glencore International as an offtake and funding partner of the project.

At projects level Bacanora Lithium Plc continued to make progress during the year. However, as a result of market volatility in the lithium markets, Bacanora decided not to proceed with the equity portion of its project financing. It is continuing the front-end engineering design of the project and has drawn down US$25 million of its US$150 million debt facility. After the year-end Bacanora announced that it had entered non-binding heads of terms with Ganfeng Lithium Co., Ltd, the world third largest lithium compounds producer. The heads terms included the subscription for a 29.99% interest in Bacanora, in addition to an initial 22.5% direct interest in the Sonora Lithium Project with an option to increase up to 50% of the Project. In also included an additional long-term offtake for the project.

Strategy

Cadences’ strategy has evolved significantly since 2014. Its focus during this year is to invest in earlier stage exploration projects or assets that are in distressed situations. This is typically where the largest return is obtained for relatively low levels of investment capital. The risk associated with investing in any resource projects at these stages is high, therefore, and to mitigate this risk, our goal from the outset is to obtain a deep fundamental understanding of the asset, its potential economics, operating and legal environment and its management team.

By doing so, we can eliminate many of the potential investments that we review during the year and fund projects that we believe will deliver value to our shareholders. We look to fund projects via earning in, at solely our option, and if possible, look to incentivise our joint venture partners via equity in Cadence against deliverables that will add value. Importantly we also take an active approach to our investments by being part of the management team and enshrining our minority shareholder protections in joint venture agreements.

During the 12 months, we reviewed numerous projects and completed two after the year-end. The first was adding several prospective lithium assets (exploration licenses) via our investment in Lithium Supplies and Lithium Technologies and the second was our heads of terms to acquire 27% of the Amapá iron ore mine, beneficiation plant, railway and private port.

Outlook

The future remains very exciting for the Company. Our key investments, European Metals Holdings, Macarthur Minerals, the Amapa project and Bacanora have all started the current financial year well and appear to be progressing towards production. We will continue to review our investments in our investee companies, with regular meetings with management. Importantly we will continue to examine the market perception of lithium and if required, ensure we limit our exposure to further downside in our equity positions.

 

LITHIUM MARKET REVIEW

In the early part of 2018, we saw several negative forecasts for pricing, based erroneously on the “wave” of supply from current expansion and several other assets forecast to come online; these analysts still fail to understand the industry. In making this forecast, they have applied some of the most optimistic factors to construction and commissioning and applied a linear approach to growth curves, which for a disruptive technology such as EV’s, is inappropriate.

Our forecast suggests that there could be up to 800kt lithium compound demand by 2025. The big caveat to this is that supply comes online in time and projects gets financed. It is the latter point that Cadence sees as the largest constraint to EV adoption. In essence, there is a pipeline of projects which would allow the penetration of EV’s of 25%. However the vast majority of these do not have financing in place, by our estimates there is some US$15 billion to be invested to hit production targets and in addition given the timelines to production it seems unlikely that there will be enough supply to deliver 800kt of lithium per annum by 2025, which will mean continued supply constraints.

We continue to see plenty of evidence demand growth; Benchmark Mineral Intelligence is now tracking 49 battery mega-factories, up from just 2 back in 2014. The combined planned capacity of these plants is 658 GWh. To put that into perspective the total lithium-ion cell demand in 2017 was estimated at 100 GWh.

By most of the measures in supply and demand dynamics, whether it be constrained supply chains, strong product pricing or build out capacity for the product, the long-term outlook for lithium and lithium compounds remains strong.

When we look at pricing over the period, several detractors will point to the drop in the price of Lithium compounds in China. The reality is that Chinese pricing was influenced in part by brine projects in China needing to sell below battery grade lithium carbonate to fund operations. To us, the most representative pricing of battery grade lithium carbonate is from South America where pricing continued to increase over the year and currently trades between US$13,000 and US$15,000 per tonne of battery grade lithium carbonate.

 

INVESTMENT REVIEW

The lithium sector 2018 was marked by some analysts forecasting a wave of supply of lithium compounds and a long term softening in the lithium price. These forecasts, which we fundamentally disagree with, has meant the market performance of many lithium stocks has been poor.

The lithium market has softened considerably during the year with the Global X lithium ETF dropping by 30% over the twelve months to December 2018, with some lithium developers and producers dropping up to 71% over the same period.

Our investments were not immune to this softening, and our principle two investments in Bacanora Lithium and European Lithium reduced in price by 77% and 56% respectively. This, in turn, was reflected in our share price performance, which reduced by 62% over the period.

Table 1: Absolute Return Figures

31/12/2017

30/06/2018

31/12/2018

Original Purchase (Book Value) (GB£ ,000)

11,345

11,104

9,648

 Mark to Market Equity Value (GB£ ,000)

24,869

14,005

7,131

Absolute Return on Equity (%)

119%

26%

-26%

Global X Lithium & Battery Tech Returns (%)

51%

27%

7.1%

European Metals Holdings Limited (“European Metals”)

Cadence has been investing in European Metals since June 2015. As of the date of this document, Cadence holds approximately 19% in the Cinovec deposit in the Czech Republic through a direct holding in the share capital of European Metals that owns 100 per cent of the exploration rights to the Cinovec lithium/tin deposit. The Cinovec lithium and tin deposit is located in the Krusne Hory mountain range. The deposit that straddles the border between Germany and the Czech Republic and in Germany, it is known as the Zinnwald deposit (50% owned by Bacanora Lithium Plc ). The district has an extensive mining history, with various metals having been extracted since the 14th Century.

Summary of Activities

At an operational level, there were substantial progress made in the development of the Cinovec Lithium Project. Of particular note was the improvement in lithium recoveries announced in March, which was increased to 95%. In addition, European Metals continued to work on the pilot scale beneficiation work, this work along with the improved lithium recoveries meant European Metals was able to report increased lithium production from 20,800 tpa to 22,500 tonnes per annum. This is likely to improve cash margins on the project by approximately 10%.

European Metals also reported that the optimised reagent mix developed during the test work as compared to that reported in the PFS resulted in the elimination of all high-cost inputs to the roast predicted previously. The use of low-cost waste gypsum from local power plants as a roasting reagent not only enhances the economics of the project but is a significant positive environmental outcome for the region.

Moreover, European Metals has commenced work on an update of the Preliminary Feasibility Study (“PFS”) to model the production of higher value lithium hydroxide due to its increasing use in lithium-ion batteries. The updated PFS included a process flowsheet whereby battery grade lithium hydroxide may be precipitated directly from the roast and water leach steps.

•              Further advancements made in the development of the Cinovec Project and reported at that time include:

•              A total of 13 drill holes for a total drilled length of 3,386 metres had been permitted.

•              The first four geotechnical drill holes at the proposed site of the mine portal had been completed.

•              Testing of the revised lithium hydroxide product flowsheet had commenced on schedule.

•              In November 2018, European Metals provided a project update highlighting further significant advancements to the Cinovec Project, including the following highlights:

•              The planned diamond drilling resource campaign has commenced.

•            A total of eight resource drill holes will be completed during this campaign with the first hole already completed.

•              Geophysical logging of the first four geotechnical drill holes at the proposed mine portal site has been completed.

•              A further five geotechnical drill holes are planned once resource drilling has been completed

Macarthur Minerals Limited (“Macarthur”)

In March 2016 Cadence made a strategic investment in Macarthur (TSX-V: MMS) which was followed up by further investments in October 2016 and May 2017. As of the date of this document, Cadence holds approximately 9.8% of Macarthur.

Summary of Activities

•              Macarthur made progress across several of its projects during the year; however, after the year-end, it became clear that Macarthur’s focus would be its iron ore assets in Australia. Hence is announced an option agreement over its lithium and gold tenement in the Pilbara Region of Western Australia allowing Fe Limited to earn in up to 75% of these projects over three years, for consideration and earn in value of A$4.6 million.

•              Western Australian Iron Ore Projects

Although during the reporting period much of the focus was on the rest of Macarthur Minerals’ portfolio, it became clear that after the year-end Macarthur was focusing on the development of its iron ore projects.

In March 2019 they announced a US$ 6 million private placing to complete the Moonshine Magnetite and Ularring Haematite Iron Ore Bankable Feasibility Study (“BFS”) in Western Australia.

Macarthur owns 100% of the Moonshine Magnetite Project, with an Inferred and Indicated Mineral Resource Estimate consisting of 1,316 million tonnes (Mt) @ 30.1% Iron (Fe). Initial metallurgical test work from core at Moonshine indicated that a very high-grade iron ore product ranging from 68.5%-69.1% Fe, can be achieved as an export quality target.

The Inferred Mineral Resource estimate for the Moonshine Magnetite Project was initially prepared by CSA Global Pty Ltd (NI43-101 Technical Report filed December 17, 2009, titled “NI43-101 Technical Report on Lake Giles Iron Ore Project: Western Australia”) and was updated by Snowden Mining Industry Consultants (NI43-101 Technical Report filed March 25, 2011, titled “Macarthur Minerals Limited: Moonshine and Moonshine North Prospects, Lake Giles Iron Project, Western Australia, NI43-101 Technical Report – Preliminary Assessment”).

After the year end Macarthur has rapidly progressed the development of these iron ore assets, including the entering a ten year Iron Ore Off-Take Agreement for the Lake Giles project with Glencore Internation A.G. Glencore also agreed to participate in the US$6 million private placing, via a convertible loan note of US$2 million.

Bacanora Lithium Plc (“Bacanora”)

Cadence, as of the date of this document holds an interest in Bacanora through a direct equity holding of approximately 1.7%, and a 30% stake in the joint venture interests in each of Mexalit S.A. de CV (“Mexalit”) and Megalit S.A. de CV (“Megalit”). Mexalit forms part of the Sonora Lithium Project. Bacanora is a London-listed lithium asset developer and explorer (AIM: BCN).

Bacanora’s has two key projects under development. The first is the Sonora Lithium Project in Northern Mexico and the second is the Zinnwald Lithium Project in southern Saxony, Germany.

Sonora Lithium Project

The Sonora Lithium Project consists of ten contiguous concessions covering 97,389 hectares. Two of the concessions (La Ventana, La Ventana 1) are owned 100% by Bacanora through its wholly-owned subsidiary Minera Sonora Borax S.A de C.V. (“MSB”). El Sauz, El Sauz 1, El Sauz 2, Fleur and Fleur 1 concessions are owned by, Mexilit S.A. de C.V. (“Mexilit”) (which is owned 70% by Bacanora and 30% by Cadence). These concessions are located approximately 190 kilometres northeast of the city of Hermosillo, in Sonora State, Mexico. They are roughly 170 kilometres south of the border with Arizona, USA. The San Gabriel and Buenavista concessions are owned by Minera Megalit S.A. de C.V. (“Megalit”) (which is owned 70% by Bacanora and 30% by Cadence). The asset has Measured plus Indicated Mineral Resource estimate of over 5 million tonnes (‘Mt’) (comprising 1.9 Mt of Measured Resources and 3.1Mt of Indicated Resources) of lithium carbonate equivalent (‘LCE’) and an additional Inferred Mineral Resource of 3.7 Mt of LCE, Sonora is regarded as one of the world’s larger known clay lithium deposits.

Key Operational Highlights on the Sonora Project are as follows:

·      Published its Feasibility Study (“FS”) on the project. The FS targeted a two-stage open-pit operation, reaching 35,000 tonnes (t) of lithium carbonate (Li2CO3) per annum (“tpa”) in year four.

o  The FS has a pre-tax NPV of US$1.25 billion and an IRR of 26%. The capital and working capital costs of the first stage of production (17,500 t of Li2CO3 per annum) is estimated to be US$460 million.

o  Under our estimation, The FS mine plan currently has some 12% of the plant feed being mined from the 30% joint venture areas owned by Mexalit.

·      US$240 million secured as part of the Sonora Lithium Project financing package to construct an initial 17,500tpa lithium carbonate operation

o  US$150 million senior debt facility with RK Mine Finance, a leading provider of finance for resources companies,

o  US$65 million conditional equity commitment from the State General Reserve Fund of Oman (“SGRF”),

o  US$25 million conditional equity commitment from Bacanora’s offtake partner, Hanwa Co., LTD (“Hanwa”).

In July Bacanora elected not to proceed with a further US$100 equity placing, citing current volatility in global commodities markets.

Subsequent to the year-end Bacanora secured a proposed strategic investment by Ganfeng Lithium Co., Ltd, the world third largest lithium compounds producer, highlights of the proposed investment include:

·      Proposed cornerstone strategic investment at both the corporate and Sonora Lithium Project level,

·      Includes subscription for a 29.99% interest in Bacanora, in addition to an initial 22.5% direct interest in the Sonora Lithium Project with an option to increase up to 50% of the Project,

·      Additional long-term offtake for both Stage 1 and Stage 2 lithium production,

·      Gangfeng Lithium would assist Bacanora in the finalisation of the EPC engineering design and the subsequent construction and commissioning of Sonora Lithium Project,

·      The strategy would be in place to ensure project timetable of the first production in 2021.

Zinnwald Lithium Project

On 21 February 2017 Bacanora announced the acquisition of a 50% interest in, and joint operational control of, the Zinnwald Lithium Project (“Zinnwald”) in southern Saxony, Germany from SolarWorld AG (“SolarWorld”).

Bacanora holds 50% interest in a jointly controlled entity, Deutsche Lithium GmbH, which operates the Zinnwald Project located in southern Saxony, Germany, adjacent to the border of the Czech Republic and within 5 kilometres of the towns of Altenberg and Freiberg. The Company acquired its interest in February 2017 for a cash consideration of €5 million and an undertaking to contribute up to €5 million toward the costs of completion of a feasibility study, which is anticipated to be completed during the second quarter of 2019.

Bacanora has an option to acquire the remaining 50% of the jointly controlled entity, alone or together with any reasonably acceptable third party within 24 months for €30 million. If Bacanora does not exercise this right within the above-stated timeframe, then SolarWorld has the right but not the obligation to purchase the Company’s 50% interest for €1.

Key Operational Highlights on the Zinnwald  Project are as follows:

·      Ongoing work towards a Feasibility Study (‘FS’) into a battery grade lithium product operation at Zinnwald on track for completion in Q2 2019,

·       NI 43-101 compliant upgraded measured and indicated resource of 124,974 tonnes of contained lithium for Zinnwald issued in.

·      September 2018. This is a 30% increase from the previous measured and indicated PERC resource estimate of 96,200 tonnes,

·       First production of lithium fluoride (‘LiF’) samples with over 99% purity from concentrates at Zinnwald – provides proof of concep,t

·      That battery grade lithium products can be produced.

Details of Cadence’s ownership

Cadence owns approximately 1.7% of Bacanora. The Sonora Lithium Project is comprised of the following lithium properties.

·      La Ventana, La Ventana 1, and Megalit concessions, which are 100 per cent owned by Minera Sonora Borax S.A. de C.V.(“MSB”), a wholly-owned subsidiary of Bacanora; Cadence, through its approximate direct interest of 1.7% of Bacanora, has an indirect interest in these concessions of 1.7%.

·      El Sauz, El Sauz 1, El Sauz 2, Fleur and Fleur 1 concessions, which are held by Mexilit S.A. de C.V. (“Mexilit”). Cadence has a 30% direct interest in Mexalit through its Joint Venture with Bacanora, and when combined with Cadence’s direct interest of approximately 1.7% in Bacanora, has a total economic interest in Mexalit of 30%.

Cadence also owns a 30% direct interest in The Megalit, Buenavista, and San Gabriel concessions, which are held by Megalit S.A de C.V (“Megalit”) which when combined with Cadences’ direct interest of approximately 1.7% in Bacanora, has a total economic interest in Megalit of 30%.These areas are not part of the mining plans of the Sonora Lithium Project and have not been assessed in sufficient detail to provide a 43-101 compliant Mineral Resource Estimate.

Lithium Technologies Pty Ltd & Lithium Supplies Pty Ltd (“LT” & “LS)

In December 2017 Cadence announced that it had executed binding investment agreements to acquire up to 100% of six prospective hard rock lithium assets in Argentina via LT & LS.

These projects are collectively known as the San Luis Project and Consist of claims over 55,773 hectares for six exploration permits within the known spodumene bearing pegmatite fields in San Luis Province, Central Argentina. The pegmatite fields of San Luis have an important record of producing mica, beryl, spodumene, tantalite (tantalum oxide), columbite (niobium oxide), and recently potassium feldspar, albite and quartz. Historic mines outside of the claims have produced lithium oxide (“Li2O”) at grades ranging from 4.5% to 6.5%.

During the period under review the investee’s geology team, utilising a range of remote sensing and geographical information system (GIS) tools, have completed several desktop studies which identify highly prospective areas for lithium mineralisation in known spodumene bearing pegmatite bodies. Encouragingly, there are multiple indicators that confirm the presence of spodumene bearing pegmatite bodies, including geological structural features, aero-magnetic radiometric data analysis, satellite imagery and differentiation in granitic bodies.

The net result is that out of the 55,773 hectares, comprising the six assets total area, the geology team have identified 10,049 hectares as high-priority areas for the next phase of the exploration programme.

Finalised Environmental Impact Assessments have been submitted to the mining regulator for these high priority areas, with applications for drilling permits to follow. At the end of the period, we were still awaiting approval of the necessary exploration permits to be granted.

Given the delay of the grant of these permits after the year-end Cadence and LT and LS agreed to vary it binding agreement to acquire three highly prospective assets in Australia that are in regions with proven high-grade lithium mineralisation.

The acquisition covered three projects – Picasso (Western Australia – WA), Litchfield (Northern Territories – NT) and Alcoota (NT) all of which are in regions with proven lithium mineralisation and supportive mining infrastructure.

The Picasso project (license granted) is near Alliance Mineral Assets’ (ASX: A40; SGX: 40F; “AMA”) high-profile Bald Hill Mine in WA (note: AMA recently completed a 50:50 A$400m+ merger with delisted Tawawa Resources [ASX: TAW] & raised $40M to develop the  asset base). Demonstrating exploration upside for Picasso, the Bald Hill Mine is producing a spodumene concentrate and has a JORC (2012) compliant mineral resource of 26.5Mt @ 0.96% Li2O; probable ore reserves at 11.3Mt @ 1.01% Li2O

The Litchfield project (license granted), located near Darwin (NT), is contiguous to Core Lithium’s (ASX: CXO) ground and has a JORC compliant mineral resource of 8.55Mt @ 1.33% Li2O for its Finnis project (for all six deposits)

Finally, the Alcoota project (license to be granted) is circa 145km NE of Alice Springs (NT) and has seen comparatively limited exploration, though significant geochemistry samples from 10km south of the project returned assays of 10.2% & 9.6% Li2O, with evidence suggesting there is a pegmatite zone within tenure prospective for lithium mineralisation

The variation resulted in LT & LS acquiring between them 100% of Synergy Prospecting Ltd (“Synergy”), which owns the three lithium projects in Australia. As two of Synergy’s assets are granted, Cadence agreed to move forward with increasing is ownership in LT & LS form 4% to 31.5% via:

·      Issuing 373,544,298 million Cadence shares to the founding shareholders of LT & LS valued at £400,000 (based on 14-day VWAP of £0.0107) to acquire a further 20% stake, which is in line with the terms of the original agreements; and

·      Invest £300,000 to earn an incremental 7.5% stake, with the funds earmarked to commence developing Synergy’s lithium assets in Australia.

The result of the variation would mean no change to the £ consideration to be paid for of LS and LT, however additional shares would be issued as a result of the change in the share price in Cadence between November 2017 and March 2019.

As of the date of this document, Cadence owns 24% of LT & LS and consequently of the Australian and Argentinian lithium prospects.

Yangibana Project, Australia

On 1 December 2011, Cadence announced that it had acquired a 30% free carried interest to Bankable Feasibility Study of the Yangibana North Rare Earth Deposit. The exploration costs until the commencement of the BFS are therefore borne solely by Hastings (70% owners and operator). The same terms agreed and announced on 1 December 2012 also apply to Gossan, Hook, Kanes Gossan, Lions Ear and Bald Hill North.

Probable Ore Reserves of some 2.1 million tonnes at 1.66% total rare earth elements are contained within 30% owned joint venture tenements. Further details of these reserves and pre-feasibility study can be found at http://irservices.netbuilder.com/ir/cadence/newsArticle.php?ST=REM&id=2688632.

Summary of Activities

Hastings Technology Metals Ltd (“Hastings”), which is the operator of the Project and the owner of the remaining 70% in the Yangibana North Project, made considerable progress during the year to date. This included:

·      Probable Ore Reserves increased to 10.35 million tonnes at 1.22%TREO including 0.43%Nd2O3+Pr6O11,

·      Updated Ore Reserves confirm >10-year mine life ,

·      Total JORC Resources increased to 21.67 million tonnes at 1.17%TREO including 0.39%Nd2O3+Pr6O11 of which 62% are in the Measured and Indicated categories,

·      Successful completion of the second beneficiation pilot plant operation test. Upgrading of the Nd2O3+Pr6O11 head grade by 20 times from 0.43% to 8.6% was achieved,

·      KfW IPEX-Bank provided indicative terms for senior debt of up to A$250 million for the project (conditional upon UFK Cover being obtained).

Auroch Minerals Ltd (“Auroch”)

As of the date of this document, Cadence owns 6.5% in Auroch. Auroch Minerals’ primary focus was drilling and exploration programmes at the Arden and Bonaventura Projects.

The Arden project consists of a Sedex type potential deposit. The Sedex potential was initially discovered by Kennecott (Rio Tinto Group) between 1966 and 1972, identifying anomalous Sedex-style zinc mineralisation up to 40m wide and with a potential for over 10km of the strike. However, since 1980 the area has been the focus of regional diamond exploration, and as such the Sedex horizon at the Ragless Range Target had not been explored.

In late July 2018, Auroch was granted environmental approval for its drilling programme at the Arden Project with work beginning on the first drill-hole in early August. First results were reported in November 2018, with base-metal mineralisation intersected in all 10 drill-holes.

At the Ragless Range Prospect, all eight drill-holes successfully intersected the SEDEX zinc horizon previously identified by Kennecott, confirming a strike length of more than 3km and a vertical depth of at least 220m. The drilling also intersected two new mineralised zinc horizons, increasing the potential scale of the SEDEX base-metal system at Arden. Importantly, all three horizons remain open in all directions.

In December, Auroch announced that it had completed drilling at its Bonaventura Project  with the first drill-hole at the Dewrang Prospect intersecting significant zinc-lead mineralisation. The mineralised interval correlated very well with the previously identified geophysical IP anomaly which is up to 1.5km-long and had never previously been drill-tested and demonstrated excellent correlation between the mineralised interval in the  drill-hole and the high chargeability anomaly bound by interpreted major reverse faults.

A single drill-hole was completed at the Grainger Prospect targeting the down-dip extensions of an historic artisanal working. The drilling intersected significant vein sets of zinc-lead mineralisation in fresh rock at shallow depths.

Greenland Rare Earth Projects

During the year Cadence retained it exposure to 1 license in Greenland, of which it owns 100%. This licenses abuts the northern and eastern boundaries of Greenland Minerals and Energy Limited’s ‘GGG’ licences that encompass the world-class Kvanefjeld, Sørenson, Zone 3 and Steenstrupfjeld Rare Earth Element (REE) deposits.

An extensive exploration programme was carried out on all of Cadence’s exploration licences in south Greenland from June to August 2014. We will continue to review the cost / benefit analysis of this license on an annual basis, and will monitor the progress that GGG makes over the coming year as it progresses the Kvanefjeld REE deposits.

Clancy Exploration Limited (“Clancy Exploration”)

Through a compensation agreement in relation to preceding claims over the the historical Nockelberg and Leogang mines, Cadence were issued 140 million fully paid ordinary shares in Clancy as compensation for the discovery of third party priority over the 28 overlapping licenses (including the historical Nockelberg and Leogang mines). As of the date of this document Cadence holds approximately 3.9% of Clancy

FINANCIAL REVIEW

Total comprehensive loss for the year attributable to equity holders was £11.92m loss (2017: £1.88m profit). This decrease in profit from the previous year of approximately £13.79m is mainly due to realised and unrealised losses of approximately £9.41m relating to our share investment portfolio (available for resale assets) held during the period (2017: there was a gain of £4.47m).

Diluted loss per share was 0.145p (2017 : 0.013p profit per share).

The net assets of the Group at the end of period was £14.40 million (2017: £26.72 million). This decrease of approximately £12.32m was mainly driven by the reduction in value of available for resale assets during the period.

Kiran Morzaria

Chief Executive Officer

29 May 2019

REPORT OF THE DIRECTORS

For the year ended 31 December 2018

___________________________________________________________________________________

The Directors present their annual report together with the audited consolidated financial statements of the Group and the Company for the Year Ended 31 December 2018.

Principal activity

The principal activity of the Group and the Company is that of the identification, investment and development of Lithium and rare earth assets.  The Group is also exploring other mining related opportunities.

Domicile and principal place of business

Cadence Minerals plc is domiciled in the United Kingdom, which is also its principal place of business.

Business review

The results of the Group are shown on page 29.  The directors do not recommend the payment of a dividend.

A review of the performance of the Group and its future prospects is included in the Chairman’s Statement and the Strategic Report on pages 1 to 9.

Key Performance Indicators

Due to the current status of the Group, the Board has not identified any performance indicators as key.

Principal risks and uncertainties

The principal risks and uncertainties facing the Group involve the ability to raise funding in order to finance the acquisition and exploitation of mining opportunities and the exposure to fluctuating commodity prices.

In addition, the amount and quality of minerals available and the related costs of extraction and production represent a significant risk to the group.

Financial risk management objectives and policies

The Group’s principal financial instruments are available for sale assets, trade receivables, trade payables, loans and cash at bank.  The main purpose of these financial instruments are to fund the Group’s operations.

It is, and has been throughout the period under review, the Group’s policy that no trading in financial instruments shall be undertaken.  The main risks arising from the Group’s financial instruments are liquidity risk and interest rate risk.  The board reviews and agrees policies for managing each of these risks and they are summarised below.

Liquidity risk

The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of equity and its cash resources.  Further details of this are provided in the principal accounting policies, headed ‘going concern’ and note 17 to the financial statements.

Interest rate risk

The Group only has borrowings at a fixed coupon rate of 12% and therefore minimal interest rate risk, as this is deemed its only material exposure thereto.  The Group seeks the highest rate of interest receivable on its cash deposits whilst minimising risk.

Market risk

The Group is subject to market risk in relation to its investments in listed Companies held as available for sale assets.

Directors

The membership of the Board is set out below.  All directors served throughout the period unless otherwise stated.

Andrew Suckling

Kiran Morzaria

Don Strang

Adrian Fairbourn

Substantial shareholdings

Interests in excess of 3% of the issued share capital of the Company which had been notified as at 24 May 2019 were as follows:

Ordinary shares held

Number

Percentage of capital

%

Hargreaves Lansdown (Nominees) Limited Des:15942

   923,927,736

10.2

Barclays Direct Investing Nominees Limited Des: CLIENT1

    865,520,074

9.5

Interactive Investor Services Nominees Limited Des:SMKTNOMS

     653,623,934

7.2

Hargreaves Lansdown (Nominees) Limited Des:VRA

613,882,115

6.8

Interactive Investor Services Nominees Limited Des:SMKTISAS

    602,050,509

6.6

HSDL Nominees Limited Des:MAXI

     477,711,684

5.3

Hargreaves Lansdown (Nominees) Limited Des:HLNOM

     434,549,780

4.8

HSDL Nominees Limited

     365,460,084

4.0

HSBC Client Holdings Nominee (UK) Limited Des: 731504

289,552,893

3.2

Forest Nominees Limited

     276,371,000

3.0

Payment to suppliers

It is the Group’s policy to agree appropriate terms and conditions for its transactions with suppliers by means ranging from standard terms and conditions to individually negotiated contracts and to pay suppliers according to agreed terms and conditions, provided that the supplier meets those terms and conditions.  The Group does not have a standard or code dealing specifically with the payment of suppliers.

Trade payables at the year end all relate to sundry administrative overheads and disclosure of the number of days purchases represented by year end payables is therefore not meaningful.

Events after the Reporting Period

Events after the Reporting Period are outlined in Note 21 to the Financial Statements.

Going concern

The Directors have prepared cash flow forecasts for the period ending 31 May 2020 which take account of the current cost and operational structure of the Group.

The cost structure of the Group comprises a high proportion of discretionary spend and therefore in the event that cash flows become constrained, costs can be quickly reduced to enable the Group to operate within its available funding.

These forecasts demonstrate that the Group has sufficient cash funds available to allow it to continue in business for a period of at least twelve months from the date of approval of these financial statements.  Accordingly, the financial statements have been prepared on a going concern basis.

Directors’ responsibilities statement

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 have elected to prepare the Group financial statements in accordance with International Financial Reporting Standards as adopted by the European Union  (IFRSs).  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 and profit or loss of the group for that period.  In preparing these financial statements, the directors are required to:

–     select suitable accounting policies and then apply them consistently;

–     make judgements and estimates that are reasonable and prudent;

–     state whether applicable IFRSs have been followed, 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 will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s transactions and disclose with reasonable accuracy at any time the financial position of the Group 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 hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

In so far as each of the Directors are aware:

·    there is no relevant audit information of which the Group’s auditors are 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 auditors are aware of that information.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Auditors

Chapman Davis LLP, offer themselves for re-appointment as auditor in accordance with Section 489 of the Companies Act 2006.

ON BEHALF OF THE BOARD

Kiran Morzaria

Director

Date: 29 May 20

CORPORATE GOVERNANCE

For the year ended 31 December 2018

___________________________________________________________________________________

Changes to corporate governance regime

The board of Cadence Minerals Plc are committed to the principles of good corporate governance and believe in the importance and value of robust corporate governance and in our accountability to our shareholders and stakeholders.

The AIM Rules for companies, updated in early 2018, required AIM companies to apply a recognised corporate governance code from 28 September 2018. Cadence has chosen to adhere to the Quoted Company Alliance’s Corporate Governance Code for Small and Mid-Size Quoted Companies (the “QCA Code”) and listed below are the 10 broad principles of the QCA Code and the Company’s disclosure with respect to each point.

The Board is committed to maintaining high standards of corporate governance and complies with the provisions of the Quoted Companies Alliance Corporate Governance Code for small and mid-size quoted companies (“QCA code”).

While building a strong governance framework we also try to ensure that we take a proportionate approach and that our processes remain fit for purpose as well as embedded within the culture of our organisation. We continue to evolve our approach and make ongoing improvements as part of building a successful and sustainable company.

The Board

The Board comprises of a non-executive Chairman, one non-executive director and two executive directors.

Board Members

Board Member

Board Title

Audit Committee Title

Remuneration Committee Title

Andrew Suckling

Non-Executive Chairman

Member

Member

Adrian Fairbourn

Non-Executive Director

Chairman

Chairman

Kiran Morzaria

Chief Executive Officer

Donald Strang

Finance Director

 

The Board is responsible for formulating, reviewing and approving the Company’s strategy, financial activities and operating performance. Day-to-day management is devolved to the executive directors, who are charged with consulting the Board on all significant financial and operational matters. The Board retains ultimate accountability for governance and is responsible for monitoring the activities of the executive team.

The roles of Chairman and Chief Executive Officer are split in accordance with best practice. The Chairman has the responsibility of ensuring that the Board discharges its responsibilities. The Chairman is responsible for the leadership and effective working of the Board, for setting the Board agenda, and ensuring that Directors receive accurate, timely and clear information. No one individual has unfettered powers of decision.

The two Executive Directors are comprised of a Chief Executive Officer (“CEO”) and Finance Director. The CEO has the overall responsibility for creating, planning, implementing, and integrating the strategic direction of the Company. This includes responsibility for all components and departments of a business. The CEO to ensures that the organisation’s leadership maintains constant awareness of both the external and internal competitive landscape, opportunities for expansion, customer base, markets, new industry developments and standards.

CORPORATE GOVERNANCE

For the year ended 31 December 2018

___________________________________________________________________________________

The non-executive directors are not considered independent under the Financial Reporting Council’s Corporate Governance Code (April 2016)  (“FRC Code”) as they both have options in the Company. However, the board considers that both non-executives are independent of management under all other measures and able to exercise independence of judgement.

The Committees

Audit Committee

The audit committee consists of two non-executive members of the board and meet at least twice a year.

The principal duties and responsibilities of the Audit Committee include:

·      Overseeing the Group’s financial reporting disclosure process; this includes the choice of appropriate accounting policies

·      Monitor the Group’s internal financial controls and assess their adequacy

·      Review key estimates, judgements and assumptions applied by management in preparing published financial statements

·      Assess annually the auditor’s independence and objectivity

·      Make recommendations in relation to the appointment, re-appointment and removal of the company’s external auditor

Remuneration committee

The remuneration committee consists of two non-executive members of the board and meet at least once a year.

The principal duties and responsibilities of the Remuneration Committee include:

·      Setting the remuneration policy for all Executive Directors

·      Recommending and monitoring the level and structure of remuneration for senior management

·      Approving the design of, and determining targets for, performance related pay schemes operated by the company and approve the total annual payments made under such schemes

·      Reviewing the design of all share incentive plans for approval by the board and shareholders

·      None of the Committee members have any personal financial interest (other than as shareholders and option holders), conflicts of interest arising from cross-directorships or day-to-day involvement in the running of the business. No director plays a part in any financial decision about his or her own remuneration.

Principle and Approach of the Board

Cadence is committed to achieve and maintain high standards of governance. As such, the Board has chosen to adopt the Quoted Companies Alliance Corporate Governance Code for Small and Mid-Size Quoted Companies 2018 (“the QCA Code”). Detailed below is how the Board applies the 10 principles of Corporate Governance, which form part of the QCA code.

 

CORPORATE GOVERNANCE

For the year ended 31 December 2018

___________________________________________________________________________________

Principle

Application

Compliance

Establish a strategy and business model which promote long-term value for shareholders

The board must be able to express a shared view of the company’s purpose, business model and strategy. It should go beyond the simple description of products and corporate structures and set out how the company intends to deliver shareholder value in the medium to long-term.

It should demonstrate that the delivery of long-term growth is underpinned by a clear set of values aimed at protecting the company from unnecessary risk and securing its long-term future.

Cadence is a unique early investment strategy & development firm, within the mineral resource sector. We identify undervalued assets, with irreplaceable strategic advantages. We invest in them and help turn them into powerhouses. Lithium and other technology minerals must get to market in order to achieve the global green revolution. We uncover new ways and places to extract and process these minerals, so that burgeoning demand is met; and our tomorrow is better.

A more detailed description of its Strategy and Business Model is available on page 2 of the Annual Report and Accounts for the year ended 31 December 2017 HERE and on the About Page HERE on this website.

Please refer to page 10 of the Annual Report and Accounts for the year ended 31 December 2017 HERE and the Corporate Governance section of the website HERE for further details on the principal risks and uncertainties which the Company faces.

It seeks to share this vision and details of the implementation of its strategy through internal dialogue with employees as well as external communications by way of public announcements and dissemination of information through this website and the annual report and accounts

Seek to understand and meet shareholder needs and expectations

Directors must develop a good understanding of the needs and expectations of all elements of the company’s shareholder base.

The board must manage shareholders’ expectations and should seek to understand the motivations behind shareholder voting decisions.

 

The Board is committed to maintaining an open dialogue with shareholders. Communication with shareholders and is coordinated by the CEO.

Throughout the year, the Board maintains a regular dialogue with investors, providing them with such information on the Company’s progress as is permitted within the guidelines of the AIM rules, MAR and requirements of the relevant legislation. We also use these communications to obtain feedback from shareholders and to assess the effectiveness of our communications. Based on this feedback the Board has determined that this engagement has been, to date, successful.

The Board believes that the Annual Report and Accounts, and the Interim Report published at the half-year which can be found HERE, play an important part in presenting all shareholders with an assessment of the Group’s position and prospects. All reports and press releases are published under the “Investors” tab of the Group’s website.

 

Principle

Application

Compliance

Take into account wider stakeholder and social responsibilities and their implications for long-term success

Long-term success relies upon good relations with a range of different stakeholder groups both internal (workforce) and external (suppliers, customers, regulators and others). The board needs to identify the company’s stakeholders and understand their needs, interests and expectations.

Where matters that relate to the company’s impact on society, the communities within which it operates, or the environment have the potential to affect the company’s ability to deliver shareholder value over the medium to long-term, then those matters must be integrated into the company’s strategy and business model. Feedback is an essential part of all control mechanisms. Systems need to be in place to solicit, consider and act on feedback from all stakeholder groups.

The Board recognises its prime responsibility under UK corporate law is to promote the success of the Company for the benefit of its members as a whole.

The Board also understands that it has a responsibility towards employees, partners, customers, suppliers and to the community and environment it operates in as a whole.

Communication with and feedback from these various groups is achieved in a variety of ways. The executive directors hold investor roadshows once a year and quarterly webcast, at which feedback from shareholders is sought.

Regular dialogue is maintained with employees through monthly updates and quarterly briefings given by the executive directors.

The nature of the Cadence’s business as an investment company means that although it has no direct effect on the working environments and communities of the companies it invests in, it nonetheless liaises with the management of its investee companies to understand their approach to stakeholder engagement and their policies, which will form part of its investment criteria.

Embed effective risk management, considering both opportunities and threats, throughout the organisation

The board needs to ensure that the company’s risk management framework identifies and addresses all relevant risks in order to execute and deliver strategy; companies need to consider their extended business, including the company’s supply chain, from key suppliers to end-customer.

Setting strategy includes determining the extent of exposure to the identified risks that the company is able to bear and willing to take (risk tolerance and risk appetite).

 

The Board has an established Audit Committee, a summary of it roles a responsibilities is available on the corporate governance webpage HERE which is set out above.

The Committee is specifically charged with ensuring that Cadence as a whole has the appropriate policies and processes in place to identify the risks which the Company is exposed to and to proactively mitigate those risks as appropriate.

The Company maintains a register of risks and publishes an overview of significant risks and uncertainties in its Annual Report.

Please refer to page 10 of the Annual Report and Accounts for the year ended 31 December 2017 HERE for further details on the principal risks and uncertainties which the Company faces.

The Company receives regular feedback from its external auditors on the state of its internal controls. The Board maintains a register of risks and publishes an annual summary of the significant risks and uncertainties in the Annual Report.

 

___________________________________________________________________________________

Principle

Application

Compliance

Maintain the board as a well-functioning, balanced team led by the chair

The board members have a collective responsibility and legal obligation to promote the interests of the company and are collectively responsible for defining corporate governance arrangements. Ultimate responsibility for the quality of, and approach to, corporate governance lies with the chair of the board. The board (and any committees) should be provided with high-quality information in a timely manner to facilitate proper assessment of the matters requiring a decision or insight.

 

The board should have an appropriate balance between executive and non-executive directors and should have at least two independent non-executive directors. Independence is a board judgement. The board should be supported by committees (e.g. audit, remuneration, nomination) that have the necessary skills and knowledge to discharge their duties and responsibilities effectively. Directors must commit the time necessary to fulfil their roles.

 

The Board is comprised of a non-executive Chairman a non-executive director and two executive directors.

The CEO is engaged to work a minimum of a 39 hour week and is an employee of the Company. The Finance Directors is employed part-time for a minimum of 28 hours a week. The board deemed that given the stage and development of the Company, it would be more cost efficient to employee a full-time accountant which along with the finance director ensure that Company’s financial systems are robust. compliant and support current activities and future growth.

The service agreements of the non-executive directors anticipate that the non-executive Chairman should spend 3 working days per month and the non-executive director 2 working days per month. All directors dedicate such time as required to effectively perform their roles.

The roles of the Chairman and CEO are clearly separated. The directors ensure the skills required to undertake their roles are kept current through training and consultation with subject matter experts as required.

The CEO is responsible for the operational management of the business of Cadence and for the implementation of strategy and policies as agreed by the Board. The non-executive Chairman is responsible for the leadership and effective working of the Board, for setting the Board agenda, and ensuring that Directors receive accurate, timely and clear information.

The non-executive directors are not considered independent under the FRC Code as they hold options in the Company. However, the board considers that the non-executive directors are independent of management under all other measures and are able to exercise independence of judgement. Whilst conflicts of interest are fully disclosed and understood, as appropriate non-executive directors exercise independence of judgement. No director is involved in discussions or decisions where he has a conflict of interest.

The Board is supported by an Audit Committee and a Remuneration Committee.

Cadence has committed that the Board should hold full board meetings at least 4 times each year. The attendance of Board members for meetings during the current financial year is as follows:

·         Andrew Suckling 3 of 3

·         Adrian Fairbourn 3 of 3

·         Kiran Morzaria 3 of 3

·         Donald Strang 3 of 3

 

___________________________________________________________________________________

Principle

Application

Compliance

Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities

The board must have an appropriate balance of sector, financial and public markets skills and experience, as well as an appropriate balance of personal qualities and capabilities. The board should understand and challenge its own diversity, including gender balance, as part of its composition.

The board should not be dominated by one person or a group of people. Strong personal bonds can be important but can also divide a board. As companies evolve, the mix of skills and experience required on the board will change, and board composition will need to evolve to reflect this change.

Directors who have been appointed to the Company have been chosen because of the skills and experience they offer. The Board continually strives to ensure that it has the right balance of knowledge, skills, experience and contacts across the sectors in which it operates. This is evaluated in line with Cadence’s business model as it changes.

 It is of primary importance that the Board’s knowledge is kept to up to date in a rapidly changing mining and metals marketplace. This is achieved by maintaining a broad network of contacts across the industry and ensuring regular dialogue is held and feedback obtained by both the executive and non-executive directors as appropriate.

As necessary directors receive externally provided refresher and update training specific to their individual roles.

The Company Secretary advises the Board members on their legal and corporate responsibilities and matters of corporate governance.

Biographical details of each of the Directors are given on the ‘Who We Are’ page of this website HERE. Going forward the Directors biographical details will be included in the Annual Report and Accounts.

Evaluate board performance based on clear and relevant objectives, seeking continuous improvement

The board should regularly review the effectiveness of its performance as a unit, as well as that of its committees and the individual directors. The board performance review may be carried out internally or, ideally, externally facilitated from time to time.

 

The review should identify development or mentoring needs of individual directors or the wider senior management team. It is healthy for membership of the board to be periodically refreshed. Succession planning is a vital task for boards. No member of the board should become indispensable. 

On the 28 September 2018, Cadence adopted the QCA Code. Prior to this point given the nature and the development of the company it did not set Key Performance Indicators.

The Company now measures its performance, and therefore inherently the performance of the Board as a unit, against Key Performance Indicators. The primary KPI is are absolute equity return on investments. Detail will be disclosed in the Annual Report Accounts for 2019, to be published by the end of June 2019.

The performance of the executive directors is monitored and regularly reviewed by the non-executive directors. Such review considers both the KPIs outlined above and measures such as an annual staff satisfaction survey. In 2019, the Board will introduce qualitative performance measurements for the executive directors to ensure that the right degree of focus is applied to the strategic direction as well as the current financial performance of the business.

The Board periodically considers the need to refresh its membership.

 

___________________________________________________________________________________

Principle

Application

Compliance

Promote a corporate culture that is based on ethical values and behaviours

The board should embody and promote a corporate culture that is based on sound ethical values and behaviours and use it as an asset and a source of competitive advantage.

The policy set by the board should be visible in the actions and decisions of the chief executive and the rest of the management team. Corporate values should guide the objectives and strategy of the company.

The culture should be visible in every aspect of the business, including recruitment, nominations, training and engagement. The performance and reward system should endorse the desired ethical behaviours across all levels of the company. The corporate culture should be recognisable throughout the disclosures in the annual report, website and any other statements issued by the company.

Cadence has a strong ethical culture, which is promoted by the actions of the board and executive team.

These include the following key policies which govern its ethical culture.

·         Equal opportunities policy

·         Dignity at work policy

·         Code of conduct

·         Whistleblowing policy

·         Health and safety policy

·         Email and internet policy

·         Social media policy

The Group has an anti-bribery policy and has implemented adequate procedures described by the Bribery Act 2010. The Group reports on its compliance to the board on an annual basis.

The Group has undertaken a review of its requirements under the General Data Protection Regulation, implementing appropriate policies, procedures and training to ensure it is compliant.

 

 

Principle

Application

Compliance

Maintain governance structures and processes that are fit for purpose and support good decision-making by the board

The company should maintain governance structures and processes in line with its corporate culture and appropriate to its:

·         size and complexity; and

·         capacity, appetite and tolerance for risk.

The governance structures should evolve over time in parallel with its objectives, strategy and business model to reflect the development of the company.

Details of the Company’s corporate governance arrangements are provided within this Corporate Governance section of this website. The Board considers the appropriateness of these arrangements against the size and complexity of the Company as it evolves over time.

The Chairman leads the Board and is responsible for ensuring its effectiveness in all aspects of its role. The Chairman promotes a culture of openness and debate, in particular by ensuring the non-executive directors provide constructive challenge to the executive directors.

The matters reserved for the board are:

·         Definition of the strategic goals for the Company, sets corporate objectives to enable the goals to be met, and measures performance against those objectives;

·         Ensuring that the necessary financial and human resources are in place to both meet its obligations to all stakeholders and to provide a platform for profitable growth;

·         Recommending any interim and final dividends;

·         Approving all mergers and acquisitions and all capital expenditure greater than £100,000;

·         Receiving recommendations from the Audit Committee in relation to the reporting requirements and the appropriate accounting policies for the Company, the appointment of auditors and their remuneration, and the identification and management of risk;

·         Receives recommendations from the Appointments Committee concerning the appointment of executive directors, and from the Remuneration Committee concerning the remuneration of the executive directors;

·         Determines the fees paid to the non-executive directors.

The CEO has the overall responsibility for creating, planning, implementing, and integrating the strategic direction of the Company. This includes responsibility for all components and departments of a business. The CEO to ensures that the organisation’s leadership maintains constant awareness of both the external and internal competitive landscape, opportunities for expansion, customer base, markets, new industry developments and standards.

The Finance Director works alongside the CEO and has overall control and responsibility for all financial aspects of company strategy. The Finance Director takes overall responsibility of the Company’s accounting function and ensures that Company’s financial systems are robust, compliant and support current activities and future growth. The Finance Director will coordinate corporate finance and manage company policies regarding capital requirements, debt, taxation, equity and acquisitions as appropriate.

 

Principle

Application

Compliance

The Board is supported by two committees being the Audit Committee and Remuneration Committee. The Audit Committee advises the Board on the reporting requirements and the appropriate accounting policies for the Company, the appointment of auditors and their remuneration, and the identification and management of risk. The Remuneration Committee advises the Board on all matters pertaining to the remuneration of the executive directors;

Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders

A healthy dialogue should exist between the board and all of its stakeholders, including shareholders, to enable all interested parties to come to informed decisions about the company. In particular, appropriate communication and reporting structures should exist between the board and all constituent parts of its shareholder base. This will assist:

·         the communication of shareholders’ views to the board; and

·         the shareholders’ understanding of the unique circumstances and constraints faced by the company.

It should be clear where these communication practices are described (annual report or website).

 

The Company encourages two-way communication with both its institutional and private investors and responds quickly to all significant queries received.

The “Investors” tab of this website section of this website contains all required regulatory information together with other information which shareholders may find useful.

The AGM is an important forum for shareholder engagement, and the directors are always available immediately after the AGM to listen to the views of any shareholders in attendance and to provide them with an update on the business.

All votes at the most recent AGM held on 28 August 2018 were passed. The proxy votes were in excess of 85% in favour of all resolutions.

Currently there is no Remuneration or Audit Committee report provided in the Annual report but the Board will consider the provision of this in the next Annual report together with other information which shareholders may find useful.

 

Internal Controls

The Directors acknowledge their responsibility for the Group’s systems of internal controls and for reviewing their effectiveness. These internal controls are designed to safeguard the assets of the Company and to ensure the reliability of financial information for both internal use and external publication. While they are aware that no system can provide absolute assurance against material misstatement or loss, in light of increased activity and further development of the Company, continuing reviews of internal controls will be undertaken to ensure that they are adequate and effective.

Risk Management

The Board considers risk assessment to be important in achieving its strategic objectives. There is a process of evaluation of performance targets through regular reviews by Senior Management to forecasts. Project milestones and timelines are reviewed regularly.

Business Risk

The Board regularly evaluates and reviews any business risks when reviewing project timelines. The types of risks reviewed include:

·      regulatory and compliance obligations

·      occupational health, safety and environmental requirements

·      legal risks relating to contracts, licences and agreements

·      insurance risks

·      political risks where appropriate.

Insurance

The Group maintains insurance in respect of its Directors and Officers against liabilities in relation to the Company.

Treasury Policy

The Group finances its operations through equity and holds its cash as a liquid resource to fund the obligations of the Group. Decisions regarding the management of these assets are approved by the Board.

Securities Trading

The Board has adopted a Share Dealing Code that applies to Directors, Senior Management and any employee who is in possession of ‘inside information’. All such persons are prohibited from trading in the Company’s securities if they are in possession of ‘inside information’. Subject to this condition and trading prohibitions applying to certain periods, trading can occur provided the individual has received the appropriate prescribed clearance.

Directors’ remuneration

The Board recognises that Directors’ remuneration is of legitimate concern to the shareholders.  The Group operates within a competitive environment, performance depends on the individual contributions of the Directors and employees and it believes in rewarding vision and innovation.

Policy on executive Directors’ remuneration

The policy of the Board is to provide executive remuneration packages designed to attract, motivate and retain Directors of the calibre necessary to maintain the Group’s position and to reward them for enhancing shareholder value and return.  It aims to provide sufficient levels of remuneration to do this, but to avoid paying more than is necessary.  The remuneration will also reflect the Directors’ responsibilities and contain incentives to deliver the Group’s objectives.

The remuneration of the Directors was as follows:

A Fairbourn

A Suckling

K Morzaria

D Strang

Total

£

£

£

£

£

Short-term employment benefits:

Year to 31 December 2018

Salary and fees

             52,250

           112,500

           127,500

           127,500

           419,750

Share based payments (1)

                     850

                  1,962

                  1,962

                  1,962

                  6,736

Total

                53,100

              114,462

              129,462

              129,462

              426,486

Year to 31 December 2017

Salary and fees

             85,000

           150,000

           150,000

           150,000

           535,000

Share based payments (1)

                     283

                     654

                     654

                     654

                  2,245

Total

                85,283

              150,654

              150,654

              150,654

              537,245

(1)           Share based payments represent a Black and Scholes valuation of the incentive options granted to the directors during 2017. Options are used to incentivise directors and are a non-cash form of remuneration.

At 31 December 2018 the following amounts were outstanding in fees to directors; £115,500 (2017: £138,000).

Pensions

The Company only operates a basic pension scheme for its directors and employees as required by UK legislation.

Benefits in kind

No benefits in kind were paid during the year to 31 December 2018 or the year ended 31 December 2017.

Bonuses
No amounts were payable for bonuses in respect of the Year ended 31 December 2018 or the year ended 31 December 2017.

Notice periods

Andrew Suckling, Kiran Morzaria, Don Strang and Adrian Fairbourn, each have a 12 month rolling notice period.

Share option incentives

At 31 December 2018 the following options were held by the Directors:

Date of grant

Exercise price

Number of options

Note

K Morzaria

21 May 2014

0.48p

60,000,000

K Morzaria

29 August 2017

0p

6,032,608

1

K Morzaria

29 August 2017

0p

7,994,506

2

K Morzaria

29 August 2017

0p

33,302,753

3

107,329,867

A Fairbourn

13 December 2012

0.06p

20,000,000

A Fairbourn

21 May 2014

0.48p

40,000,000

A Fairbourn

29 August 2017

0p

5,570,652

1

A Fairbourn

29 August 2017

0p

7,760,989

2

A Fairbourn

29 August 2017

0p

32,522,936

3

105,854,577

D Strang

21 May 2014

0.48p

60,000,000

D Strang

29 August 2017

0p

6,032,608

1

D Strang

29 August 2017

0p

7,994,506

2

D Strang

29 August 2017

0p

33,302,753

3

107,329,867

A Suckling

29 August 2017

0p

11,250,000

1

A Suckling

29 August 2017

0p

15,576,923

2

A Suckling

29 August 2017

0p

65,229,358

3

92,056,281

Note 1 – Only vest if VWAP is greater or equal to 0.92p on vesting date

Note 2 – Only vest if VWAP is greater or equal to 1.82p on vesting date

Note 3 – Only vest if VWAP is greater or equal to 2.18p on vesting date

Additionally the Option Holder must have made market purchases of ordinary shares equal to a total of one third of the Option Holders’s annual salary or particpated in a Company share purchase programme for a period of at least six months prior to the grant date.  The options granted in August 2017, have now expired in March 2019, as a result of the failure to meet the VWAP price targets.

All options are exercisable between 18 months and ten years from the date of grant.

The high and low share price for the year were 0.37p and 0.118p respectively (year ended 31 December 2017: 0.60p and 0.249p). The share price at 31 December 2018 was 0.118p (31 December 2017: 0.315p).

INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF
CADENCE MINERALS PLC

_____________________________________________________________________________________________

OPINION

We have audited the financial statements of Cadence Minerals Plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the year ended 31 December 2018 which comprise the consolidated statement of comprehensive income, the consolidated and company statements of financial position, the consolidated and company statements of changes in equity, the consolidated and company 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 the preparation of the company financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

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 31 December 2018 and of the Group’s losses for the year then ended;

•    the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;

•    the Parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union 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.

 

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 are independent of the Group 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, and we have fulfilled our other ethical responsibilities in accordance with these requirements.  We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

CONCLUSIONS RELATING TO GOING CONCERN

We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:

•    the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or

•    the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the Group’s or the parent company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.

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. These matters included 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. This is not a complete list of all risks identified by our audit. Our audit procedures in relation to these matters were designed in the context of our audit opinion as a whole. They were not designed to enable us to express an opinion on these matters individually and we express no such opinion.

We have determined the matters described below to be the key audit matters to be communicated in our report.

CARRYING VALUE OF INVESTMENTS IN ASSOCIATES

The Group’s Investment in Associate assets (‘Associates’) represents one of the most significant asset on its statement of financial position totalling £12.5m as at 31 December 2018, which includes listed and unlisted investments.

The carrying value of associates represents significant assets of the Group and Parent Company, and assessing whether facts or circumstances exist to suggest that impairment indicators were present, and if present, whether the carrying amount of these asset may exceed its recoverable amount was considered key to the audit.  This assessment involves significant judgement applied by management to the Group and Parent Company’s listed and unlisted assoicate investments.

We considered it necessary to assess whether facts and circumstances existed to suggest that impairment indicators were present, and if present, whether the carrying amount of these assets may exceed its recoverable amount.

How the Matter was addressed in the Audit

The procedures included, but were not limited to, assessing and evaluating management’s assessment of whether any impairment indicators have been identified across the Group and Parent Company’s associate assets, the indicators being:

•    Expiring, or imminently expiring, rights to licences or assets held by the investee Companies.

•    A lack of flow of information in regards to the investee companies exploration activities and/or production, trading or strategic advancement.

•    Discontinuation of, or a plan to discontinue, exploration activities in the areas, or cessation or delays in trading of interest by the Investee Companies.

•    Sufficient data exists to suggest carrying value of exploration and evaluation assets is unlikely be recovered in full through successful development or sale by the Investee Companies.

•    Updates on trading activities by Investee Companies.

•    Review available share prices of the listed investments, both during the year and after the year end.

 

We also reviewed Stock Exchange RNS announcements and Board meeting minutes for the year and subsequent to year end for activity to identify any indicators of impairment.

We also assessed the disclosures included in the financial statements.

Materiality

In planning and performing our audit we applied the concept of materiality. An item is considered material if it could reasonably be expected to change the economic decisions of a user of the financial statements. We used the concept of materiality to both focus our testing and to evaluate the impact of misstatements identified.  Based on professional judgement, we determined overall materiality for the financial statements as a whole to be £182,500, based on a 1% percentage consideration of the Group’s total assets, with a lower materiaity set at £100,000 for Investments in Associate.

OTHER INFORMATION

The Directors are responsible for the other information.  The other information comprises the information included in the annual report, 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.

In connection with our audit of the financial statements, 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 audit or otherwise appears to be materially misstated.  If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information.  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.

OPINIONS ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006

In our opinion, based on the work undertaken in the course of the audit:

•    the information given in the Strategic Report and the 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.

 

MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION

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.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

•    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 Directors’ responsibilities statement, 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 and 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 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.

A further description of our responsibilities for the audit of the financial statements is located 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 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 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 Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

 

Rowan Palmer

(Senior Statutory Auditor)

For and on behalf of Chapman Davis LLP, Statutory Auditor

London

Chapman Davis LLP is a limited liability partnership registered in England and Wales (with registered number OC306037).

29 May 2019

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2018

Year ended

Year ended

Note

31 December 2018

31 December 2017

£’000

£’000

Income

Unrealised (loss)/profit on available for sale assets

9

(7,440)

1,353

Realised (loss)/profit on available for sale assets

9

(1,967)

3,118

Other income

1

140

145

(9,267)

4,616

Share based payments

(7)

(2)

Impairment of intangibles

6

(300)

Other administrative expenses

(1,559)

(1,800)

Total administrative expenses

(1,566)

(2,102)

Operating (loss)/profit

1

(10,833)

2,514

Share of associates losses

8

(555)

(339)

Finance cost

3

(377)

(986)

(Loss)/profit before taxation

(11,765)

1,189

Taxation

4

(Loss)/profit attributable to the equity holders of the Company

(11,765)

1,189

Other comprehensive income

Foreign exchange

(150)

686

Other comprehensive income for the period, net of tax

(150)

686

Total comprehensive (loss)/profit for the year, attributable to the equity holders of the company

(11,915)

1,875

(Loss)/Profit per ordinary share

Basic (loss)/profit per share (pence)

5

(0.150)

0.015

Diluted (loss)/profit per share (pence)

5

(0.145)

0.013

The accompanying principal accounting policies and notes form an integral part of these financial statements.

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITITON

As at 31 December 2018

___________________________________________________________________________________

31 December 2018

31 December 2017

ASSETS

Note

£’000

£’000

Non-current

Intangible assets

6

       2,172

          1,887

Investment in associate

8

12,483

12,988

                     14,655

                       14,875

Current

Trade and other receivables

10

315

722

Available for resale asset

9

2,895

13,534

Cash and cash equivalents

468

2,037

Total current assets

                       3,678

                       16,293

Total assets

18,333

31,168

LIABILITIES

Current

Trade and other payables

11

223

262

Borrowings

12

3,706

4,182

Total current liabilities

3,929

4,444

Total liabilities

3,929

4,444

EQUITY

Issued share capital

13

1,202

1,202

Share premium

27,552

27,552

Share based premium reserve

1,392

3,178

Equity loan and exchange reserve

(225)

337

Retained earnings

(15,517)

(5,545)

Equity attributable

14,404

26,724

to equity holders of the Company

Total equity and liabilities

18,333

31,168

 

The consolidated financial statements were approved by the Board on 29 May 2019, and signed on their behalf by;

 

 

 

Kiran Morzaria                                                                            Don Strang
Director                                                                                          Director

Company number 05234262

The accompanying principal accounting policies and notes form an integral part of these financial statements.

COMPANY STATEMENT OF FINANCIAL POSITION

As at 31 December 2018

___________________________________________________________________________________

31 December 2018

31 December 2017

ASSETS

Note

£’000

£’000

Non-current

Intangible assets

6

325

Investment in associates

8

     9,794

        10,292

Investment in subsidiaries

7

906

906

                            11,025

                              11,198

Current

Trade and other receivables

10

4,515

4,921

Available for resale asset

9

2,895

13,534

Cash and cash equivalents

468

2,037

Total current assets

                              7,878

                              20,492

Total assets

18,903

31,690

LIABILITIES

Current

Trade and other payables

11

223

262

Borrowings

12

3,706

4,182

Total current liabilities

3,929

4,444

Total liabilities

3,929

4,444

EQUITY

Issued share capital

13

1,202

1,202

Share premium

27,552

27,552

Share based premium reserve

1,392

3,178

Equity loan and exchange reserve

(116)

406

Retained earnings

(15,056)

(5,092)

Equity attributable

14,974

27,246

to equity holders of the Company

Total equity and liabilities

18,903

 

The Company financial statements were approved by the Board on 29 May 2019, and signed on their behalf by;

 

 

 

Kiran Morzaria                                                                            Don Strang
Director                                                                                          Director

Company number 05234262

The accompanying principal accounting policies and notes form an integral part of these financial statements.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

As at 31 December 2018

___________________________________________________________________________________

Share capital

Share premium

Share based payment reserves

Equity loan component and exchange reserve

Retained earnings

Total equity

£’000

£’000

£’000

£’000

£’000

£’000

Balance at 31 December 2016

1,192

27,145

4,410

(254)

(7,968)

24,525

Share based payments

2

2

Transfer on lapse of warrants

(681)

681

Transfer on cancellation of options

(553)

553

On issue of loan notes

412

412

On settlement of loan notes

(507)

(507)

Share issue

10

407

417

Transactions with owners

             10

           407

(1,232)

(95)

1,234

324

Foreign exchange

686

686

Profit for the period

1,189

1,189

Total comprehensive profit for the period

686

1,189

1,875

Balance at 31 December 2017

1,202

27,552

3,178

337

(5,545)

26,724

Share based payments

7

7

Transfer on lapse of warrants

(1,793)

1,793

On issue of loan notes

On settlement of loan notes

(412)

(412)

Share issue

Transactions with owners

              –  

–  

(1,786)

(412)

           1,793

(405)

Foreign exchange

(150)

 –

(150)

Loss for the period

 –

 –

 –

(11,765)

(11,765)

Total comprehensive loss for the period

              –  

– 

                –  

(150)

(11,765)

(11,915)

Balance at 31 December 2018

1,202

27,552

1,392

(225)

(15,517)

14,404

The accompanying principal accounting policies and notes form an integral part of these financial statements.

COMPANY STATEMENT OF CHANGES IN EQUITY

As at 31 December 2018

___________________________________________________________________________________

Share capital

Share premium

Share based payment reserves

Equity loan and exchange reserve

Retained earnings

Total equity

£’000

£’000

£’000

£’000

£’000

£’000

Balance at 31 December 2016

1,192

27,145

4,410

(178)

(7,502)

25,067

Share based payments

2

2

Warrants issued

(681)

681

Transfer on lapse of options

(553)

553

Transfer on exercise of options

412

412

On issue of loan notes

(507)

(507)

Share issue

10

407

417

Transactions with owners

             10

           407

(1,232)

(95)

           1,234

              324

Foreign exchange

 –

 –

 –

679

 –

679

Profit for the period

1,176

1,176

Total comprehensive profit for the period

679

1,176

1,855

Balance at 31 December 2017

1,202

27,552

3,178

406

(5,092)

27,246

Share based payments

7

7

Transfer on lapse of warrants

(1,793)

1,793

On issue of loan notes

0

On settlement of loan notes

(412)

(412)

Share issue

Transactions with owners

0

0

(1,786)

(412)

1,793

(405)

Foreign exchange

 –

 –

 –

(110)

 –

(110)

Loss for the period

 –

 –

 –

(11,757)

(11,757)

Total comprehensive loss for the period

              –  

              –  

                –  

(110)

(11,757)

(11,867)

Balance at 31 December 2018

1,202

27,552

1,392

(116)

(15,056)

14,974

The accompanying principal accounting policies and notes form an integral part of these financial statements.

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 December 2018

___________________________________________________________________________________

Year ended

Year ended

31 December 2018

31 December 2017

£’000

£’000

Cash flow from operating activities

Continuing operations

Operating (loss)/profit

(10,833)

2,514

Net realised/unrealised loss/(profit) on AFSA

9,407

(4,471)

Impairment of intangible assets

300

Equity settled share-based payments

7

2

Decrease/(increase) in trade and other receivables

407

(320)

Decrease in trade and other payables

(39)

(83)

Net cash outflow from operating activities from continuing operations

(1,051)

(2,058)

Cash flows from investing activities

Investment in exploration costs

(325)

(270)

Payments for investments in associates

(50)

(345)

Payments for investments in AFS assets

(523)

(214)

Receipts on sale of AFS assets

1,755

7,118

Net cash inflow from investing activities

857

6,289

Cash flows from financing activities

Net borrowings

(998)

(5,400)

Finance cost

(377)

(986)

Net cash outflow from financing activities

(1,375)

(6,386)

Net change in cash and cash equivalents

(1,569)

(2,155)

Cash and cash equivalents at beginning of period

2,037

4,192

Cash and cash equivalents at end of period

468

2,037

The accompanying principal accounting policies and notes form an integral part of these financial statements.

COMPANY STATEMENT OF CASH FLOWS

For the year ended 31 December 2018

___________________________________________________________________________________

Year ended

Year ended

31 December 2018

31 December 2017

£’000

£’000

Cash flow from operating activities

Continuing operations

Operating (loss)/profit

(10,832)

2,513

Loss/(profit) on AFSA

9,407

(4,471)

Equity settled share-based payments

7

2

Decrease/(increase) in trade and other receivables

406

(289)

Decrease in trade and other payables

(39)

(83)

Net cash outflow from operating activities from continuing operations

(1,051)

(2,328)

Cash flows from investing activities

Payments for investments in associates

(50)

(345)

Payments for intangibles

(325)

Payments for investments in AFS assets

(523)

(214)

Receipts on sale of AFS assets

1,755

7,118

Net cash inflow from investing activities

857

6,559

Cash flows from financing activities

Net borrowings

(998)

(5,400)

Finance cost

(377)

(986)

Net cash outflow from financing activities

(1,375)

(6,386)

Net change in cash and cash equivalents

(1,569)

(2,155)

Cash and cash equivalents at beginning of period

2,037

4,192

Cash and cash equivalents at end of period

468

2,037

The accompanying principal accounting policies and notes form an integral part of these financial statements.

PRINCIPAL ACCOUNTUNG POLICIES

For the year ended 31 December 2018

___________________________________________________________________________________

GENERAL INFORMATION

Cadence Minerals plc is a company incorporated in the United Kingdom. The Company’s shares are listed on the AIM market of the London Stock Exchange, and on the NEX Exchange Growth Market as operated by NEX Exchange Limited (“NEX”).

The Financial Statements are for the year ended 31 December 2018 and have been prepared under the historical cost convention and in accordance with International Financial Reporting Standards as adopted by the EU (“adopted IFRS”).  These Financial Statements (the “Financial Statements”) have been prepared and approved by the Directors on 29 May 2019 and signed on their behalf by Donald Strang and Kiran Morzaria.

The accounting policies have been applied consistently throughout the preparation of these Financial Statements, and the financial report is presented in Pound Sterling (£) and all values are rounded to the nearest thousand pounds (£’000) unless otherwise stated.

INVESTING POLICY

The Company’s investing policy, which was approved at a General Meeting on 29 November 2010, is to acquire a diverse portfolio of direct and indirect interests in exploration and producing rare earth minerals and/or other metals projects and assets (‘Investing Policy’). In light of the nature of the assets and projects that will be the focus of the Investing Policy, the Company will consider investment opportunities anywhere in the world.

The Directors have considerable investment experience, both in structuring and executing deals and in raising funds. Further details of the Directors’ expertise are set out on the Company website. The Directors will use this experience to identify and investigate investment opportunities, and to negotiate acquisitions. Wherever necessary, the Company will engage suitably qualified technical personnel to carry out specialist due diligence prior to making an acquisition or an investment. For the acquisitions that they expect the Company to make, the Directors may adopt earn-out structures with specific performance targets being set for the sellers of the businesses acquired and with suitable metrics applied.

The Company may invest by way of outright acquisition or by the acquisition of assets – including the intellectual property – of a relevant business, partnership or joint venture arrangement. Such investments may result in the Company acquiring the whole or part of a company or project (which, in the case of an investment in a company, may be private or listed on a stock exchange, and which may be pre-revenue), and such investments may constitute a minority stake in the company or project in question. The Company’s investments may take the form of equity, joint venture, debt, convertible documents, licence rights, or other financial instruments such as the Directors deem appropriate.

The Company may be both an active and a passive investor depending on the nature of the individual investments in its portfolio. Although the Company intends to be a long-term investor, the Directors will place no minimum or maximum limit on the length of time that any investment may be held.

There is no limit on the number of projects into which the Company may invest, or on the proportion of the Company’s gross assets that any investment may represent at any time, and the Company will consider possible opportunities anywhere in the world.

The Directors may offer new ordinary shares in the capital of the Company by way of consideration as well as cash, thereby helping to preserve the Company’s cash for working capital and as a reserve against unforeseen contingencies including, by way of example and without limit, delays in collecting accounts receivable, unexpected changes in the economic environment and unforeseen operational problems. The Company may, in appropriate circumstances, issue debt securities or otherwise borrow money to complete an investment. There are no borrowing limits in the Articles of Association of the Company. The Directors do not intend to acquire any cross-holdings in other corporate entities that have an interest in the ordinary shares.

GOING CONCERN

The Directors have prepared cash flow forecasts for the period ending 31 May 2020 which take account of the current cost and operational structure of the Group.

The cost structure of the Group comprises a high proportion of discretionary spend and therefore in the event that cash flows become constrained, costs can be quickly reduced to enable the Group to operate within its available funding.

These forecasts demonstrate that the Group has sufficient cash funds available to allow it to continue in business for a period of at least twelve months from the date of approval of these financial statements.  Accordingly, the financial statements have been prepared on a going concern basis.

It is the prime responsibility of the Board to ensure the Group and Company remains a going concern. At 31 December 2018 the Company had cash and cash equivalents of £468,000 and borrowings of £3,706,000. The Group has minimal contractual expenditure commitments and the Board considers the present funds sufficient to maintain the working capital of the Company for a period of at least 12 months from the date of signing the Annual Report and Financial Statements. For these reasons the Directors adopt the going concern basis in the preparation of the Financial Statements.

STATEMENT OF COMPLIANCE WITH IFRS

The Group and the Company’s financial statements have been prepared under the historical cost convention and the financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006. The principal accounting policies adopted by the Group and Company are set out below.

BASIS OF CONSOLIDATION

The Group financial statements consolidate those of the Company and all of its subsidiary undertakings drawn up to the balance sheet date. Subsidiaries are entities over which the Company has the power to control, directly or indirectly, the financial and operating policies so as to obtain benefits from their activities. The Company obtains and exercises control through voting rights. Subsidiaries are fully consolidated from the date at which control is transferred to the Company. They are deconsolidated from the date that control ceases.

Unrealised gains on transactions between the Company and its subsidiaries are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.

Acquisitions of subsidiaries are dealt with by the acquisition method. The acquisition method involves the recognition at fair value of all identifiable assets and liabilities, including contingent liabilities of the subsidiary, at the acquisition date, regardless of whether or not they were recorded in the financial statements of the subsidiary prior to acquisition. On initial recognition, the assets and liabilities of the subsidiary are included in the consolidated balance sheet at their fair values, which are also used as the bases for subsequent measurement in accordance with the Group accounting policies. Goodwill is stated after separating out identifiable intangible assets. Goodwill represents the excess of acquisition cost over the fair value of the Group’s share of the identifiable net assets of the acquired subsidiary at the date of acquisition. Acquisition costs are written off as incurred.

Investments in associates are initially recognised at cost and subsequently accounted for using the equity method. Any goodwill or fair value adjustment attributable to the Group’s share in the associate is not recognised separately and is included in the amount recognised as investment in associate. The carrying amount of the investment in associates is increased or decreased to recognise the Group’s share of the profit or loss and other comprehensive income of the associate, adjusted where necessary to ensure consistency with the accounting policies of the Group. Unrealised gains and losses on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in those entities. Where unrealised losses are eliminated, the underlying asset is also tested for impairment.

REVENUE

Other income represents the total value, excluding VAT of income receivable from professional services.  Income is recognised as the services are provided. IFRS 15 ‘Revenue from Contracts with Customers’ has been adopted. To determine whether to recognise revenue, the Group follows a 5-step process:

1 Identifying the contract with a customer

2 Identifying the performance obligations

3 Determining the transaction price

4 Allocating the transaction price to the performance obligations

5 Recognising revenue when/as performance obligation(s) are satisfied.

The realised and unrealised gains and losses on Available For Sale Assets which are quoted investments are taken into income, less any related costs of purchase or sale.

TAXATION

Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting period, that are unpaid at the balance sheet date. They are calculated according to the tax rates and tax laws applicable to the fiscal periods to which they relate, based on the taxable result for the period. All changes to current tax assets or liabilities are recognised as a component of tax expense in the income statement.

Deferred income taxes are calculated using the liability method on temporary differences. This involves the comparison of the carrying amounts of assets and liabilities in the consolidated financial statements with their respective tax bases. In addition, tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets.

Deferred tax liabilities are always provided for in full. Deferred tax assets are recognised to the extent that it is probable that they will be able to be offset against future taxable income. Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the balance sheet date.

Most changes in deferred tax assets or liabilities are recognised as a component of tax expense in the income statement. Only changes in deferred tax assets or liabilities that relate to a change in value of assets or liabilities that is charged directly to equity are charged or credited directly to equity.

FINANCIAL ASSETS

The Group’s financial assets include cash, other receivables and available for sale assets. Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with IFRS 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable).

Financial assets, other than those designated and effective as hedging instruments, are classified

into the following categories:

• amortised cost

• fair value through profit or loss (FVTPL)

• fair value through other comprehensive income (FVOCI).

In the periods presented the corporation does not have any financial assets categorised as FVOCI.

The classification is determined by both:

• the entity’s business model for managing the financial asset

• the contractual cash flow characteristics of the financial asset.

All income and expenses relating to financial assets that are recognised in profit or loss are  presented within finance costs, finance income or other financial items, except for impairment of trade receivables which is presented within other expenses.

Subsequent measurement of financial assets

Financial assets at amortised cost

Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVTPL):

• they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows

• the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding

After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial. The Group’s cash and cash equivalents, trade and most other receivables fall into this category of financial instruments.

Financial assets at fair value through profit or loss (FVTPL)

Financial assets that are held within a different business model other than ‘hold to collect’ or ‘hold to collect and sell’ are categorised at fair value through profit and loss. Further, irrespective of business model financial assets whose contractual cash flows are not solely payments of principal and interest are accounted for at FVTPL. All derivative financial instruments fall into this category, except for those designated and effective as hedging instruments, for which the hedge accounting requirements would apply.

Assets in this category are measured at fair value with gains or losses recognised in profit or loss. The fair values of financial assets in this category are determined by reference to active market transactions or using a valuation technique where no active market exists.

Impairment of financial assets

The Group considers trade and other receivables individually in accounting for trade and other receivables as well as contract assets and records the loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows, considering the potential for default at any point during the life of the financial instrument. In calculating, the Group uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses using a provision matrix.

AVAILABLE-FOR-SALE FINANCIAL ASSETS

Available-for-sale financial assets are non-derivative financial assets that are either designated to this category or do not qualify for inclusion in any of the other categories of financial assets. The Group’s available-for-sale financial assets include listed and unlisted securities. These available-for-sale financial assets are measured at fair value. Gains and losses are recognised in the statement of comprehensive income as revenue. Interest calculated using the effective interest method and dividends are recognised in profit or loss within finance income. Reversals of impairment losses are recognised in other comprehensive income.

INTANGIBLE ASSETS – LICENCES

Licences are recognised as an intangible asset at historical cost and are carried at cost less accumulated amortisation and accumulated impairment losses. The licences have a finite life and no residual value and are amortised over the life of the licence.

EXPLORATION OF MINERAL RESOURCES

Acquired intangible assets, which consist of mining rights, are valued at cost less accumulated amortisation.

The Group applies the full cost method of accounting for exploration and evaluation costs, having regard to the requirements of IFRS 6 ‘Exploration for and Evaluation of Mineral Resources’. All costs associated with mining development and investment are capitalised on a project by project basis pending determination of the feasibility of the project. Such expenditure comprises appropriate technical and administrative expenses but not general overheads.

Such exploration and evaluation costs are capitalised provided that the Group’s rights to tenure are current and one of the following conditions is met:

(i)      such costs are expected to be recouped through successful development and exploitation of the area of interest or alternatively by its sale; or

(ii)     the activities have not reached a stage which permits a reasonable assessment of whether or not economically recoverable resources exist; or

(iii)    active and significant operations in relation to the area are continuing.

When an area of interest is abandoned or the directors decide that it is not commercial, any exploration and evaluation costs previously capitalised in respect of that area are written off to profit or loss.

Amortisation does not take place until production commences in these areas. Once production commences, amortisation is calculated on the unit of production method, over the remaining life of the mine. Impairment assessments are carried out regularly by the directors. Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying amount may exceed its recoverable amount. Such indicators include the point at which a determination is made as to whether or not commercial reserves exist.

The asset’s residual value and useful lives are reviewed and adjusted if appropriate, at each reporting date. An assets’ carrying value is written down immediately to its recoverable value if the assets carrying amount is greater than its listed recoverable amount.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents comprise cash at bank and in hand, bank deposits repayable on demand, and other short term highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, less advances from banks repayable within three months from the date of advance if the advance forms part of the Group’s cash management.

GOODWILL

Goodwill representing the excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is capitalised and reviewed annually for impairment. Goodwill is carried at cost less accumulated impairment losses. Negative goodwill is recognised immediately after acquisition in profit or loss.

On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

IMPAIRMENT TESTING OF GOODWILL AND OTHER INTANGIBLE ASSETS

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).  As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level.  Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of the related business combination and represent the lowest level within the Group at which management monitors the related cash flows.

Goodwill, other individual assets or cash-generating units that include goodwill and other intangible assets with an indefinite useful life are tested for impairment at least annually.

An impairment loss is recognised for the amount by which the asset’s or cash-generating unit’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use. Impairment losses recognised for cash-generating units, to which goodwill has been allocated, are credited initially to the carrying amount of goodwill.  Any remaining impairment loss is charged pro rata to the other assets in the cash generating unit.  With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist.

EQUITY

Share capital is determined using the nominal value of shares that have been issued.

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

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

The equity loan and exchange reserve represents the equity component of the issued convertible loan notes, and currency translation movements in foreign exchange.

Retained earnings include all current and prior period results as disclosed in the income statement.

OPERATING LEASES

The Group has chosen not to early adopt IFRS 16 – Leases. Leases in which substantially all the risks and rewards of ownership are retained by the lessor are classified as operating leases.

Payments, including prepayments, made under operating leases  (net of any incentives received from the lessor) are charged to the statement of comprehensive income on a straight-line basis over the period of the lease.

FOREIGN CURRENCIES

The financial statements are presented in Sterling, which is also the functional currency of the parent Company.

In the individual financial statements of the consolidated entities, foreign currency transactions are translated into the functional currency of the individual entity using the exchange rates prevailing at the dates of the transactions.  Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year-end exchange rates are recognised in profit or loss.

In the consolidated financial statements, the financial statements of subsidiaries, originally presented in a functional currency, have been translated into Sterling.  Assets and liabilities have been translated into Sterling at the exchange rates ruling at the balance sheet date.  Profit and losses have been translated at an average monthly rate for the period. Any differences arising from this procedure are taken to the foreign exchange reserve.  Goodwill and fair value adjustments arising on the acquisition of a foreign entity have been treated as assets and liabilities to the foreign entity and translated into Sterling at the closing rates.

SHARE BASED PAYMENTS

The Group issues equity-settled share-based payments to certain employees (including directors). Equity-settled share-based payments are measured at fair value at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, together with a corresponding increase in equity, based upon the Group’s estimate of the shares that will eventually vest.

Fair value is measured using the Black-Scholes model. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

The expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. Estimates are subsequently revised, if there is any indication that the number of share options expected to vest differs from previous estimates.

No adjustment is made to the expense or share issue cost recognised in prior periods if fewer share options are, ultimately exercised than originally estimated. Upon exercise of share options, the proceeds received net of any directly attributable transaction costs up to the nominal value of shares issued are allocated to share capital with any excess being recorded as share premium.

FINANCIAL LIABILITIES

The Group’s financial liabilities include trade and other payables.  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 recognised initially at fair value, net of direct issue costs, and are subsequently recorded at amortised cost using the effective interest method with interest related charges recognised as an expense in the income statement.

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Significant judgments and estimates

The preparation of financial statements requires management to make estimates and judgments 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 amounts of income and expenditure during the reported period. The estimates and associated judgments are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about carrying values of assets and liabilities that are not readily apparent from other sources.

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

·           In the preparation of these consolidated financial statements, estimates and judgments have been made by management concerning calculating the fair values of the assets acquired on business combinations, and the assumptions used in the calculation of the fair value of the share options. Actual amounts could differ from those estimates.

·           Management has made the following estimates that have the most significant effect on the amounts recognised in the financial statements.

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED)

Impairment of goodwill

The basis of review of the carrying value of goodwill is as detailed in note 6. The carrying value of goodwill is £598,000 at the balance sheet date. Management do not consider that any reasonably foreseeable changes in the key assumptions would result in an impairment. Further details of management’s assessment of the goodwill for impairment are included in note 6.

Business combinations

On initial recognition, the assets and liabilities of the acquired business and the consideration paid for them are included in the consolidated financial statements at their fair values. In measuring fair value, management uses estimates of future cash flows. Any subsequent change in these estimates would affect the amount of goodwill if the change qualifies as a measurement period adjustment. Any other change would be recognised in the income statement in the subsequent period.

Share-based payments

The Group measures the cost of the equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The charge for the period ended 31 December 2018 of £7,000 (2017: £2,000) is determined using a Black-Scholes Valuation model, using the assumptions detailed in note 14.

Treatment of exploration and evaluation costs

IFRS 6 “Exploration for and Evaluation of Mineral Resources” requires an entity to consistently apply a policy to account for expenditure on exploration and evaluation of a mineral resource. The directors have set out their policy in respect of the treatment of these costs in the accounting policies. Amounts capitalised in the year to 31 December 2018 were £325,000 (2017: £270,000). Additionally £nil of costs previously capitalised have been impaired in the year to 31 December 2018 (2017: £300,000).

Treatment of licenses

The Company purchased the entire share capital of Mojito Resources Limited during the period ended 31 December 2011. Mojito Resources Limited is the beneficial owner of a 30% interest in the Tenements in the Yangibana Rare Earth Project. These have been treated in the accounting records of Mojito Resources Limited and on consolidation as an intangible asset. The directors consider the fair value of the tenements to be equal to the book value in Mojito Resources Limited at the date of acquisition as the interest in the tenements were purchased during the financial period. In addition Mojito Resources Limited has entered into an Agreement with GTI Resources Limited and Gascoyne Metals Pty Limited in respect of the Yangibana Project. Mojito Resources is not however liable for any of the exploration costs in the initial sole funding period until a Feasibility Report is produced by the operators (GTI Resources Limited). At this stage therefore the directors have treated the licenses as an intangible asset. Following the completion of the Feasibility report the directors will review the accounting treatment going forward giving consideration to their respective responsibilities for the development of the project.

ADOPTION OF NEW OR AMENDED IFRS

New standards, amendments and interpretations adopted by the Company

The Company has applied IFRS 9 – Financial Instruments and IFRS 15 – Revenue from contracts with customers  Their effect has not been material to the Company.

New standards, amendments and interpretations not yet adopted

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

·    IFRS 16 in respect of Leases which will be effective for accounting periods beginning on or after 1 January 2019.

·    IFRS 17 in respect of Insurance Contracts will be effective for accounting periods beginning on or after 1 January 2021.

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

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2018

___________________________________________________________________________________

1.     PROFIT BEFORE TAXATION AND SEGMENTAL INFORMATION

Profit before taxation – continuing operations

The loss before taxation is attributable to the principal activities of the Group.

The loss before taxation is stated after charging:

Year ended 31 December 2018

Year ended 31 December 2017

£’000

£’000

Share based payment charge

7

2

Impairment of intangibles

300

Foreign exchange loss/(gain)

105

(155)

Directors fees and consulting (see note 2)

420

535

Operating lease rentals: land and buildings

204

206

Fees payable to the Company’s auditor for the audit of the financial statements

18

18

Fees payable to the Company’s auditor and its associates for other services:

Other services relating to taxation compliance

 

Segmental information

 

An operating segment is a distinguishable component of the Group that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the Group’s chief operating decision maker to make decisions about the allocation of resources and assessment of performance and about which discrete financial information is available.

The chief operating decision maker has defined that the Group’s only reportable operating segment during the period is the investment in and development of lithium and rare earth assets.

Subject to further acquisitions the Group expects to further review its segmental information during the forthcoming financial year.

The Group generated revenues from external customers totalling £139,000 (2017: £145,000) during the period.

In respect of the total assets, £783,000 (2017: £2,759,000) arise in the UK, and £317,000 (2017: £317,000) arise in Greenland, £5,553,000 arise in Mexico (2017: £15,684,000), £10,808,000 (2017: £10,931,000) arise in Australia, £100,000 (2017: £Nil) arise in Brazil, £225,000 (2017: £Nil) arise in Argentina and £547,000 arise in Canada (2017: £1,477,000).

2.     EMPLOYEE REMUNERATION

Employee benefits expense

 

The expense recognised for employee benefits, including Directors’ emoluments, is analysed below:

Year ended

Year ended

31 December 2018

31 December 2017

£’000

£’000

Wages, salaries and consulting fees

                    456

                     583

Employers NI

21

28

Share based payments

                         7

                          2

                     484

                      613

The average number of employees (including directors) employed by the Group during the period was:

2018

2017

No.

No.

Directors

4

4

Other

1

1

5

5

Included within the above are amounts in respect of Directors, who are considered to be the key management personnel, as follows:

Group

Year ended

Year ended

31 December 2018

31 December 2017

£’000

£’000

Wages, salaries and consulting fees

                      420

                       535

Share based payments

                           7

                           2

                      427

                       537

Details of Directors’ emoluments are included in the Report on Remuneration on pages 23 to 24.

3.     FINANCE COSTS

Year ended 31 December 2018

Year ended 31 December 2017

£’000

£’000

Other interest & penalties

9

Loan interest

220

421

Finance Fees

157

556

                377

                986

4.     TAXATION

The tax assessed for the period differs from the standard rate of corporation tax in the UK as follows:

Year ended

Year ended

31 December 2018

2018

31 December 2017

2017

£’000

%

£’000

%

(Loss)/profit before taxation

(11,765)

1,189

(Loss)/profit multiplied by standard rate

(2,235)

19

229

19.3

of corporation tax in the UK

Effect of:

Offset against losses/deferred tax asset not recognised

2,123

(431)

Expenses not deductible for tax purposes

112

202

Total tax charge for year

The Group has tax losses in the UK, subject to Her Majesty’s Revenue and Customs approval, available for offset against future operating profits.  The Group has not recognised any deferred tax asset in respect of these losses, due to there being insufficient certainty regarding its recovery.

5.     (LOSS)/PROFIT PER SHARE

The calculation of the basic (loss)/profit per share is calculated by dividing the consolidated profit attributable to the equity holders of the Company by the weighted average number of ordinary shares in issue during the period.

Year ended

Year ended

31 December 2018

31 December 2017

£’000

£’000

(Loss)/profit attributable to owners of the Company

(11,765)

1,189

2018

2017

Number

Number

Weighted average number of shares for calculating basic (loss)/profit per share

       7,851,440,338

           7,811,370,698

Share options and warrants exercisable

        280,000,000

     1,664,564,973

Weighted average number of shares for calculating diluted (loss) profit per share

       8,131,440,338

           9,475,935,671

2018

2017

Pence

Pence

Basic (loss)/profit per share

(0.150)

0.015

Diluted (loss)/profit per share

(0.145)

0.013

The impact of the share options are considered anti-dilutive when the group’s result for a period is a loss.

6.     INTANGIBLE ASSETS

Group Intangible Assets

Exploration costs

Goodwill

Licences

Total

£’000

£’000

£’000

£’000

Cost

At 1 January 2017

             1,279

                630

                174

             2,083

Additions

270

270

Exchange Difference

8

8

At 31 December 2017

          1,549

            638

            174

         2,361

Additions

            325

 –

 –

            325

Exchange Difference

 –

(40)

(40)

At 31 December 2018

         1,874

            598

            174

         2,646

Amortisation and impairment

At 1 January 2017

                   –  

               –  

(174)

(174)

Amortisation charge in the year

                   –  

               –  

Impairment

(300)

 –

(300)

At 31 December 2017

(300)

               –  

(174)

(474)

Amortisation charge in the year

 –

Impairment

 –

At 31 December 2018

(300)

                   –  

(174)

(474)

Net book value at 31 December 2018

            1,574

               598

                   –  

            2,172

Net book value at 31 December 2017

         1,249

            638

               –  

         1,887

Net book value at 1 January 2017

         1,279

            630

               –  

         1,909

In the year to 31 December 2018 £Nil (2017: £270,000) was invested in Exploration costs by REM Mexico Ltd and £nil (2017: £Nil) invested in Exploration costs by Rare Earth Resources Ltd. The Exploration costs in Rare Earth Resources Ltd were impaired by £300,000 in the year to 31 December 2017. During 2018, £325,000 was invest in exploration costs by the parent company (2017: £nil).

Goodwill of £692,000 arose on the acquisition of Mojito Resources Limited, the licences being the only asset held within that company.  The directors are continuing to review their provisional assessment of the fair value of the licences acquired although do not expect any material adjustment. The directors have therefore identified only one cash generating unit to which the goodwill is allocated. As set out in the accounting policies Goodwill is reviewed annually or in the event of an indication of impairment. The recoverable amount of goodwill has been determined by the fair value less costs to sell.  The directors consider that there have been no changes in circumstances between acquisition on 1 December 2013 and 31 December 2018 that would give rise to an impairment charge.

At this stage the Feasibility Study has not been completed to fully assess the potential future cash flows of developing the area under licence. The directors, however, having given consideration to the past exploration of the Project which has identified nine individual occurrences of rare earth elements known to occur within the Project areas consider that the goodwill is not impaired. Management’s review of the recoverable amount is most sensitive to changes in the commodity prices of the underlying minerals and the existence of the rare earth elements within the Project Area.  Since the acquisition date there has been no significant fluctuation in the commodity prices of the underlying minerals or any material changes to the Project Area. The directors consider that no impairment is required at 31 December 2018.

6.     INTANGIBLE ASSETS CONTINUED

Company only Intangible Assets

Exploration costs

Licences

Total

£’000

£’000

£’000

Cost

At 1 January 2017

 –

              33

              33

Additions

 –

 –

               –  

At 31 December 2017

                   –  

              33

              33

Additions

            325

 –

            325

At 31 December 2018

            325

              33

            358

Amortisation and impairment

At 1 January 2017

                   –  

(33)

(33)

Amortisation charge in the year

                   –  

At 31 December 2017

(33)

(33)

Amortisation charge in the year

At 31 December 2018

(33)

(33)

Net book value at 31 December 2018

           325

                –  

          325

Net book value at 31 December 2017

 –

               –  

               –  

Net book value at 1 January 2017

 –

               –  

              –  

7.     INVESTMENTS IN SUBSIDIARIES – COMPANY

Investment in group undertakings

£’000

Cost and carrying value

At 31 December 2018 and 31 December 2017

                      906

Subsidiary

Proportion of ordinary share capital held

Nature of business

Country of incorporation

Mojito Resources Ltd

100%

Mining

British Virgin Islands

REM Mexico Limited

100%

Mining

UK

Rare Earth Resources Limited

100%

Mining

UK

All subsidiary undertakings are included in the consolidation. The proportion of the voting rights in the subsidiary undertaking held directly by the parent company do not differ from the proportion of the ordinary shares held. The following companies are taking an exception from the audit of the financial statements as per S479A of the Companies Act; REM Mexico Ltd (08022329), Rare Earth Resources Ltd (08390571).

8.     INVESTMENT IN ASSOCIATES

Group

31 December 2018

31 December 2017

£’000

£’000

Changes in equity accounted investment

Carrying value at beginning of year

                 12,988

                 12,982

Equity purchases

50

345

Share of retained (losses) attributable to the group

(555)

(339)

Investment carrying value as at year end

                 12,483

                 12,988

The Group’s two Mexican associate companies have a reporting date of 30 June. These shares are not publicly listed on a stock exchange and hence published results are not available. Therefore the fair value of the Group’s investment equates to the carrying book value of £2,689,000 (31 December 2017: £2,696,000).

EMH is listed on the ASX and on AIM. The market value of the shareholding at 31 December 2018 was £4,495,000 (2017: £10,747,000), with a carrying value of £9,794,000 (2017: £10,292,000). During the year ended 31 December 2018 the company acquired a further 250,000 CDIs in European Metal Holdings Inc.

The Group’s share of results of its associates, which are unlisted, and their aggregated assets and liabilities, are as follows:

Name

Country of incorporation

Assets

Liabilities

Revenues

Profit/(Loss)

% interest held

As at 31 December 2018

Year to 31 December 2018

£’000

£’000

£’000

£’000

Mexilit S.A. de C.V.

Mexico

1,772

1,442

(13)

30%

Minera Megalit S.A. de C.V.

Mexico

440

274

(11)

30%

European Metals Holding Ltd (1)

BVI

7,624

341

362

(2,780)

19.73%

Company

31 December 2018

31 December 2017

£’000

£’000

Changes in equity accounted investment

Carrying value at beginning of year

                 10,292

                 10,297

Equity purchases

50

345

Share of retained (losses) attributable to the group

(548)

(350)

Investment carrying value as at year end

                   9,794

                 10,292

9.     AVAILABLE FOR SALE INVESTMENTS

Available for sale assets

31 December 2018

31 December 2017

£’000

£’000

Current Assets – Listed Investments

Valuation at 1 January

         13,534

            15,967

Additions at cost

                523

                 214

Disposal proceeds

(1,755)

(7,118)

Realised (loss)/profit on disposal

(1,967)

3,118

Change in fair value recognised in income statement

(7,440)

1,353

Valuation at 31 December

            2,895

            13,534

During the year ended 31 December 2018 the company disposed of a variety of its shareholdings, including part of its holding in Bacanora Minerals Limited.

Available-for-sale assets comprise investments in listed securities which are traded on stock markets throughout the world, and are held by the Group as a mix of strategic and short term investments.

10.  TRADE AND OTHER RECEIVABLES

Group

Company

31 December 2018

31 December 2017

31 December 2018

31 December 2017

£’000

£’000

£’000

£’000

Current

Trade receivables

43

48

43

48

Other receivables

154

133

154

133

Amounts owed by subsidiaries

           4,200

            4,199

Prepayments and accrued income

118

541

               118

               541

315

722

4,515

4,921

There is no impairment of receivables and no amounts are past due at 31 December 2018 or 31 December 2017.

The fair value of these financial assets is not individually determined as the carrying amount is a reasonable approximation of fair value.

11.  TRADE AND OTHER PAYABLES

Group

Company

31 December 2018

31 December 2017

31 December 2018

31 December 2017

£’000

£’000

£’000

£’000

Trade payables

                 78

                 98

                 78

                 98

Accruals and deferred income

               145

               164

               145

               164

               223

               262

223

262

 

The fair value of trade and other payables has not been disclosed as, due to their short duration, management considers the carrying amounts recognised in the balance sheet to be a reasonable approximation of their fair value.

 

12.  BORROWINGS

31 December 2018

31 December 2017

£’000

£’000

Current liabilities

Loan Notes

                   3,672

                  4,130

Interest accrued

                      34

                        52

                 3,706

                  4,182

On 8 August 2016, the Company agreed a $15million Convertible Loan Facility with Iskandar Mineral Asset Fund. The Convertible Loan was secured by a pledge over the assets of the Company, and had an interest rate of 5%. The principle is convertible at 0.65 pence which represented a premium of 5 % over the closing price on 8 August 2016. The noteholders had the right to convert the Convertible Loan into shares of REM on the earlier of: (i) the 12 month anniversary of the date the Convertible Note was issued to the noteholders; and (ii) the achievement by REM of certain performance measures, including the volume weighted average price of REM shares being above the 0.65 pence for 90 consecutive days or relating to potential future investments. In addition, each US$1 of the Convertible Loan had forty warrants attached with the right to subscribe to forty new ordinary shares at a price of 0.8 pence per share for a period of 2 years. The warrant exercise price is a 23% premium to the closing price on the 8 August 2016. The Loan Note was redeemable at the Company’s option prior to conversion.

The full $15million was drawn down during the year ended 31 December 2016 and 600million warrants were issued. During the year ended 31 December 2016 $1,850,000 of the capital was converted into 229,063,331 ordinary shares of 0.01p, leaving the balance outstanding of $13,150,000 plus interest accrued. The Loan Note was initially recognised as a liability of £10,672,000 (USD$14,286,000) and an equity element of £534,000 (USD$714,000).

On 31 January 2017, a further US$200,000 of the convertible loan was converted into 24,529,629 new ordinary shares in the Company at a price of 0.65 pence per share, reducing the balance to $12,950,000. On 1 November 2017 the Company announced that the remaining loan had been restructured, with approximately 50% plus the accrued interest being repaid in cash. The outstanding balance of $6,130,034 at that date was restructured into two loans as follows:

12.  BORROWINGS CONTINUED

Loan 1 for $2,365,017 has an interest rate of 10%, a principle and interest rate repayment holiday until January 2018, after which the principle and interest will be paid via equal instalments over a nine-month period. The loan notes are convertible at any time during this period at 0.473 pence, being a 46% premium to the closing mid-market price as at 31 October 2017.

 

Loan 2 for $3,765,017 carries zero interest rate and the principle will be repaid in September 2018. The loan notes are convertible at any time during this period at 0.364 pence, being a 12% premium to the closing mid-market price as at 31 October 2017.

 

Both Convertible Loans were secured by a pledge over the assets of the Company.

Loan Note 1 was initially recognised as a liability of £1,591,000 (USD$2,150,000) and an equity element of £159,000 (USD$215,000). Loan Note 2 was initially recognised as a liability of £2,523,000 (USD$3,423,000) and an equity element of £253,000 (USD$342,000).

During the year ended 31 December 2018, Loan Note 1 was repaid in full and new loans were entered into in September 2018 totalling £3,713,000 (USD$4,875,000) to repay Loan Note 2 and future interest payments. The new loans carry an interest rate of 12% and had a principle repayment holiday until 1 January 2019. After which the loans will be repaid via 12 equal monthly instalments with both the principle and interest being fully repaid by 1 December 2019. The loans are secured over the Company’s assets. The loan notes are only convertible should the Group  default on repayments, in which case the lendor can opt to convert the outstanding balance at 85% of the WWAV for the 15 working days prior to the conversion.

13.  SHARE CAPITAL

31 December 2018

31 December 2017

£’000

£’000

Allotted, issued and fully paid

173,619,050 deferred shares of 0.24p

417

417

7,851,440,338 ordinary shares of 0.01p (31 December 2017: 7,851,440,338)

785

785

1,202

1,202

 

Ordinary shares

No.

£’000

Allotted and issued

At 1 January 2017

7,753,160,709

775

Issue of shares during the year

98,279,629

10

At 31 December 2017 and 31 December 2018

7,851,440,338

785

 

On 31 January 2017, $200,000 of the loan was converted into 24,529,629 Ordinary Shares of 0.01p. On 7 July 2017, 73,750,000 Ordinary Shares of 0.01p were issued in respect of acquiring an interest in the Leogang Project which has yet to be concluded. During year ended 31 December 2017 a total of 98,279,629 shares were issued.

 

During the year ended 31 December 2018, no shares were issued.

 

The deferred shares have no voting rights and are not eligible for dividends.

 

13.    SHARE CAPITAL CONTINUED

 

Warrants issued

Each warrant issued is governed by the provisions of warrant instruments representing the warrants which have been adopted by the Company. The rights conferred by the warrants are transferable in whole or in part subject to and in accordance with the transfer provisions set out in the Articles. The holders of warrants have no voting rights, pre-emptive rights or other rights attaching to Ordinary Shares. All warrants issued vest in full. Warrants fall outside the scope of IFRS2 if they have been issued to shareholders in their capacity as shareholders and have therefore not been treated as share based payments. During the years ended 31 December 2018 (31 December 2017: Nil)  no warrants were issued, and all outstanding warrants lapsed.

The following table shows details of the warrants during the year:

31 December 2018

31 December 2017

Number

WAEP

Number

WAEP

£

£

Outstanding at the beginning of the year

1,084,564,973

0.00828

1,158,283,823

0.00855

Lapsed

(1,084,564,973)

0.00828

(73,718,850)

0.0126

Outstanding at the end of the year

1,084,564,973

0.00828

Exercisable at year end

1,084,564,973

14.  SHARE BASED PAYMENTS

Share Options

The Group operates share option schemes for certain employees (including directors).  Options are exercisable at the option price agreed at the date of grant.  The options are settled in equity once exercised.  The expected life of the options varies between 1 and 6 years.  All options issued in the prior years vested immediately, with no vesting requirements. . The options which were issued during the year ended 31 December 2017 have vesting conditions attached thereto, and these are detailed on the subsequent disclosures within this note.  No options were issued during the year ended 31 December 2018.

Details of the number of share options and the weighted average exercise price (WAEP) outstanding during the period are as follows:

31 December 2018

31 December 2017

Number

WAEP

Number

WAEP

£

£

Outstanding at the beginning of the year

512,570,592

0.00437

580,000,000

0.00457

Granted

232,570,592

Replaced

(300,000,000)

0.0044

Outstanding at the end of the year

512,570,592

0.00437

512,570,592

0.00437

Exercisable at year end

280,000,000

280,000,000

 

14.  SHARE BASED PAYMENTS CONTINUED

 

The share options outstanding at the end of the period have a weighted average remaining contractual life of 1.15 years (31 December 2017: 2.15 years) and have the following exercise prices and fair values at the date of grant:

 

First exercise date (when vesting conditions are met)

Grant date

Exercise price

Fair value

31 December 2018

31 December 2017

£

£

Number

Number

28 January 2010

0.0004

10,000,000

10,000,000

13 December 2012

0.0006

0.00055

20,000,000

20,000,000

28 June 2013

0.0006

0.000371

10,000,000

10,000,000

21 May 2014

0.0048

0.004711

200,000,000

200,000,000

23 May 2014

0.0058

0.005574

40,000,000

40,000,000

29 August 2017

0.00415

28,885,868

28,885,868

29 August 2017

0.00415

39,326,924

39,326,924

29 August 2017

0.00415

164,357,800

164,357,800

512,570,592

512,570,592

 

The share options issued on 29 August 2017 can only be exercised 18 months after issue if the share price meets certain targets and the director makes purchases of shares into the company as detailed in the Report on Remuneration on pages 23 to 24 (These options expired in March 2019, as a result of the failure to meet these targets). All other options can be exercised up to seven years after the date first exercisable. 

 

At 31 December 2018 280,000,000 options were exercisable (31 December 2017: 280,000,000).

 

Share Warrants

No warrants were issued during the year to 31 December 2018 (2017: nil).

First exercise date (when vesting conditions are met)

Grant date

Exercise price

31 December 2018

31 December 2017

£

Number

Number

29 June 2015

29 June 2015

1.20

33,574,598

29 July 2015

29 July 2015

1.13

17,656,007

02 October 2015

02 October 2015

0.96

34,341,188

23 October 2015

23 October 2015

0.95

34,366,078

16 November 2015

16 November 2015

0.84

19,647,535

20 November 2015

20 November 2015

0.79

40,993,945

29 February 2016

29 February 2016

0.80

303,985,622

09 August 2016

09 August 2016

0.80

600,000,000

1,084,564,973

14.  SHARE BASED PAYMENTS CONTINUED

For those options and warrants granted where IFRS 2 “Share-Based Payment” is applicable, the fair values were calculated using the Black-Scholes model.  The inputs into the model for the current and prior year were as follows:

Risk free rate

Share price volatility

Expected life

Share price at date of grant

29 August 2017

n/a

n/a

18 months

£0.00415

Expected volatility was determined by calculating the historical volatility of the Company’s share price for 12 months prior to the date of grant.  The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

The options granted on 29 August 2017, had a zero exercise price and therefore the value was the share price at the time of issue of 0.415p, irrespective of the interest rate and volatility.

All of the options are exercisable 18 months after the grant date provided that the share price has met a certain price. Should the share price not be achieved the options will lapse.

28,885,868 options only vest if VWAP is greater or equal to 0.92p on vesting date

39,226,924 options only vest if VWAP is greater or equal to 1.82p on vesting date

164,357,800 options only vest if VWAP is greater or equal to 2.18p on vesting date

Additionally the option holder must have made market purchases of ordinary shares equal to a total of one third of the Option Holders’s annual salary or participated in a Company share purchase programme for a period of at least six months prior to the grant date.

It has been assumed that the likelihood on the options of the three sets of options vesting is 60%, 20% and 10% respectively, and the share option has been calculated accordingly.

Of the 232,570,592 options issued during the year ended 31 December 2017, 223,632,074 were replacement options for the 300,000,000 options issued in July 2016, which were cancelled at the time the new options were issued. The charge in respect of these would have been £163,000, but as £716,000 had already been charged in respect of the 2016 options no charge has been made. The remaining 8,938,518 new options issued during the year ended 31 December 2017, carry a charge of £10,000 which has been spread over the 18 month vesting period.

The Group therefore recognised total expenses of £7,000 (year ended 31 December 2017: £2,000) relating to equity-settled share-based payment transactions during the period.

15.  CONTINGENT LIABILITIES

There were no contingent liabilities at 31 December 2018 or 31 December 2017.

16.  CAPITAL COMMITMENTS

There were no capital commitments at 31 December 2018 or 31 December 2017.

17.    LEASE COMMITMENTS

There were the following commitments under non-cancellable operating leases.

31 December 2018

31 December 2017

£’000

£’000

Amounts due within one year

168

168

Amounts due within two to five years

251

420

419

588

18.  FINANCIAL INSTRUMENTS

The Group is exposed to a variety of financial risks which result from both its operating and investing activities.  The Board is responsible for co-ordinating the Group’s risk management and focuses on actively securing the Group’s short to medium term cash flows.  Long term financial investments are managed to generate lasting returns.

The Group has purchased shares in Companies which are listed on public trading exchanges such as the LSE, TSX and ASX, and these shares are held as an available-for-sale asset. The most significant risks to which the Group is exposed are described below:

a              Credit risk

The Group’s credit risk will be primarily attributable to its trade receivables.  At 31 December 2018, the Group had minimal trade receivables and therefore minimal risk arises.

Generally, the Group’s maximum exposure to credit risk is limited to the carrying amount of the financial assets recognised at the balance sheet date, as summarised below:

31 December 2018

31 December 2017

AFS  (carried at fair value

Loans and receivables

Derivative financial assets

Statement of Financial position total

AFS  (carried at fair value)

Loans and receivables

Derivative financial assets

Statement of financial position total

£’000

£’000

£’000

£’000

£’000

£’000

£’000

£’000

                  

Available-for-sale financial asset

     2,895

                –  

              –  

         2,895

  13,534

                –  

              –  

         13,534

Other long term financial assets

     2,895

                –  

              –  

         2,895

  13,534

                –  

              –  

         13,534

Trade receivables

 –

43

               43

48

 –

                48

Other receivables

 –

             154

              –  

             154

 –

              133

              –  

              133

Prepayments and accrued income

 –

             118

 –

             118

 –

              541

 –

              541

Cash and cash equivalents

 –

             468

 –

             468

 –

           2,037

 –

           2,037

Total

 2,895

         783

              –  

     3,678

13,534

      2,759

          –  

  16,293

18.  FINANCIAL INSTRUMENTS CONTINUED

Financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable:

 

·    Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;         

·    Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

·    Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

 

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.  In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.  Management’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgement, and considers factors specific to the investment.

Investments

The Group’s investment in shares in Listed Companies are included as an available-for-sale asset has been classified as Level 1, as market prices are available and the market is considered an active, liquid market.

The credit risk on liquid funds is limited because the Group only places deposits with leading financial institutions in the United Kingdom.

b              Liquidity risk

The Group seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable needs and to invest cash assets safely and profitably.  The Directors prepare rolling cash flow forecasts and seek to raise additional equity funding whenever a shortfall in funding is forecast.  Details of the going concern basis of preparing the financial statements are included in the principal accounting policies.

c              Market risk

 

The amount and quality of minerals available and the related costs of extraction and production represent a significant risk to the group. The group is exposed to fluctuating commodity prices in respect of the underlying assets. The Group seeks to manage this risk by carrying out appropriate due diligence in respect of the projects in which it invests.

 

The Group is exposed to the volatility of the stock markets around the world, on which it holds shares in various listed entities, and the fluctuation of share prices of these underlying companies. The Group manages this risk through constant monitoring of its investments share prices and news information, but does not hedge against these investments.

 

Interest rate risk

The Group only has borrowings at a fixed coupon rate of 10% and therefore minimal interest rate risk, as this is deemed its only material exposure thereto.

18.  FINANCIAL INSTRUMENTS CONTINUED

d              Financial liabilities

The group’s financial liabilities are classified as follows:

31 December 2018

31 December 2017

Other financial liabilities at amortised cost

Liabilities not within the scope of IAS 39

Total

Other financial liabilities at amortised cost

Liabilities not within the scope of IAS 39

Total

£’000

£’000

£’000

£’000

£’000

£’000

Trade payables

78

78

98

98

Accruals and deferred income

145

145

164

164

Borrowings

        3,706

 –

   3,706

        4,182

    4,182

Total

        3,784

           145

    3,929

        4,280

164

   4,444

Maturity of financial liabilities

All financial liabilities at 31 December 2018 and 31 December 2017 mature in less than one year.

Borrowing facilities for the period ended 31 December 2018

The Group has committed borrowing facilities at 31 December 2018 of £3,706,000 (31 December 2017: £4,182,000). See Note 12 for details.

e              Capital risk management

The Group’s objectives when managing capital are:

–     to safeguard the Group’s ability to continue as a going concern, so that it continues to provide returns and benefits for the shareholders;

–     to support the Group’s stability and growth; and

–     to provide capital for the purpose of strengthening the Group’s risk management capability.

The Group actively and regularly reviews and manages its capital structure, to ensure an optimal capital structure, and equity holder returns, taking into consideration the future capital requirements of the Group and capital efficiency, prevailing and projected profitability, projected operating cash flows, projected capital expenditures and projected strategic investment opportunities. Management regards total equity as capital and reserves, for capital management purposes.

19.  RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES

Short-term borrowings

Total

1 January 2018

4,182

4,182

Cash-flows:

– Proceeds

3,713

3,713

– Interest charged

220

220

– Realised foreign exchange

97

97

– Repayments

(5,034)

(5,034)

Non-cash:

– Loans converted

– Transfer from equity

412

412

– Transfer to equity

– Unrealised Foreign exchange movement

116

116

31 December 2018

                   3,706

                   3,706

Short-term borrowings

Total

1 January 2017

10,324

10,324

Cash-flows:

– Interest charged

421

421

– Realised fx

(198)

(198)

– Repayments

(5,623)

(5,623)

Non-cash:

– Loans converted

(158)

(158)

– Transfer from equity

507

507

– Transfer to equity

(412)

(412)

– Unrealised Foreign exchange movement

(679)

(679)

31 December 2017

4,182

4,182

20.  RELATED PARTY TRANSACTIONS

There are no related party transactions to disclose.

Key Management Personnel are considered to be the Company Directors only, and their fees and remuneration are disclosed in the Directors Remuneration on pages 23 to 24, and within Note 2 to the financial statements.

21.  EVENTS AFTER THE END OF THE REPORTING PERIOD

On 4 March 2019, the Company announced that it had agreed to acquire three highly prospective assets in Australia that are in regions with proven high-grade lithium mineralisation. The mechanism to facilitate this acquisition is via varying binding investment agreements in place with Lithium Technologies Pty Ltd (“LT”) and Lithium Supplies Pty Ltd (“LS”) that Cadence entered on 11 December 2017 to acquire up to 100% of six prospective hard rock lithium assets in Argentina.  Cadence has agreed a variation to the agreements with LT and LS. As previously announced, Cadence can acquire 100% of Lithium Technologies Pty Ltd and Lithium Supplies Pty.

The variation will result in LT & LS acquiring between them 100% of Synergy Prospecting Ltd (“Synergy”), which owns the three lithium projects in Australia. As two of Synergy’s assets are granted, Cadence has agreed to move forward with increasing is ownership in LT & LS form 4% to 31.5% via:

a              Issuing 373,544,298 million Cadence shares to the founding shareholders of LT & LS valued at £400,000 (based on 14-day VWAP of £0.0107) to acquire a further 20% stake, which is in line with the terms of the original agreements; and

b              Invest £300,000 to earn an incremental 7.5% stake, with the funds earmarked to commence developing Synergy’s lithium assets in Australia

The result of the variation would mean no change to the £ consideration to be paid for of LS and LT, however additional shares would be issued as a result of the change in the share price in Cadence between November 2017 and March 2019.

On 26 March 2019, the Company announced that it had raised £1.3 million through a placing (“Placing”) of 866,666,663 new ordinary shares (“Placing Shares”) in the capital of the Company with new and existing investors. The Placing is being made at an issue price of 0.15 pence per share (“Placing Price”), representing approximately 21% discount to closing price of the Company’s ordinary shares on the business day prior to this announcement.

On 21 May 2019, the Company announced that it had entered into a non-binding Heads of Terms (“HOT”) with IndoSino Pte Ltd. (“IndoSino”) to invest in and acquire up to a 27% interest in the former Anglo American plc (“Anglo American”) and Cliffs Natural Resources (“Cliffs”) Amapá iron ore mine, beneficiation plant, railway and private port (“Amapá Project”) owned by DEV Mineração S.A. (“Amapá”).  The Amapá Project is a large-scale iron open pit ore mine with associated rail, port and beneficiation facilities and commenced operations in December 2007.Production increased to 4.8 Mt and 6.1 Mt of iron ore concentrate product in 2011 and 2012 respectively. The HOT stipulates that Cadence, upon entering into a binding investment agreement, will have the right to acquire 27% of the Amapá Project by investing a total of US$6 million over two stages into a joint venture company, Pedra Branca Alliance Pte Ltd. (“PBA”). Cadence’s investment is conditional, amongst other matters, on the approval of a judicial restructuring plan (“JRP”) submitted by Cadence and IndoSino to the Sao Paulo Commercial Court in Brazil, the transfer of 99.9% of the issued share capital of Amapá to PBA and Cadence raising the required finance. Cadence is in discussions with potential strategic investors to fund all or part of this investment via equity. Cadence is currently finalising the terms of the binding investment agreement, which is expected to be entered into shortly.

22.  ULTIMATE CONTROLLING PARTY

In the opinion of the directors there is no controlling party.

23.  PROFIT AND LOSS ACCOUNT OF THE PARENT COMPANY

As permitted by section 408 of the Companies Act 2006, the profit and loss account of the parent company has not been separately presented in these accounts. The parent company loss for the year was £11,757,000 (2017: profit £1,176,000).

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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Cadence Minerals (KDNC) – Macarthur Minerals (TSX-V: MMS) Progress Towards Rail Haulage Agreement.

Cadence Minerals (AIM/NEX: KDNC; OTC: KDNCY) is pleased to note the announcement today from Macarthur Minerals (TSX-V: MMS) (“Macarthur”) that it has partnered with Australian freight haulage company Aurizon (“Aurizon”) to finalise a rail haulage contract for its Lake Giles Moonshine Magnetite Project (“Project”) in the Yilgarn region of Western Australia. This news follows the Company’s recent announcement that it has signed a binding Life-of-Mine Off-Take Agreement with Glencore International A.G. for the sale of iron ore to be produced from the Project from the commencement of commercial production.

Macarthur has entered into a Negotiation Agreement with Aurizon to provide above rail haulage services including the supply of rolling stock for the purpose of transporting iron ore from the Project to the Port of Esperance. Aurizon already has rolling stock available that was previously used by other iron ore operators in the region including 325 wagons. The rolling stock is fit for purpose and compatible with rail unloading infrastructure at the Port of Esperance. This represents a key component of the logistics solution for the Project.

Aurizon was selected as the preferred operator based on its superior supply chain experience, safety and operating capability and its expertise in bulk rail freight that includes the transport of over 40 million tonnes of bulk freight and iron ore throughout Australia.  Aurizon has significant rail marshalling, maintenance and traincrew facilities at the Port of Esperance, a legacy investment from its previous Cliffs iron ore haulage contract. The open access rail network owned by Arc Infrastructure has available capacity and is accessible within 90 km of the Project and runs directly to the Port of Esperance.

Cadence holds approximately 10% of the issued equity interest in Macarthur, which is an Australian mining exploration company focused primarily on iron ore, nickel, lithium and gold in Western Australia. It also has a lithium project in Nevada, USA.

The full release can be found at: https://web.tmxmoney.com/article.php?newsid=5047835856823328&qm_symbol=MMS

Cadence Minerals Chairman Andrew Suckling commented: “The partnership with Aurizon to advance Macarthur’s rail haulage requirements represents an important step forward for the Lake Giles Moonshine Magnetite Project take off agreement recently announced between Macarthur and Glencore.”

“Equally significant will be the potential benefits of this agreement to the economies of the local mining communities surrounding the Moonshine Magnetite Project and those of the Port of Esperance community of Western Australia. As stated by Macarthur, these areas have recently suffered from a significant decline in iron ore export.”

This news release is not for distribution to United States Services or for Dissemination in the United States. 

– Ends –

For further information:

Cadence Minerals plc                                                    +44 (0) 207 440 0647
Andrew Suckling  
Kiran Morzaria  
   
WH Ireland Limited (NOMAD & Broker)                                 +44 (0) 207 220 1666
James Joyce  
James Sinclair-Ford  
   
Hannam & Partners LLP (Joint Broker)                                 +44 (0) 207 907 8500
Neil Passmore  
Giles Fitzpatrick  
   
Novum Securities Limited (Joint Broker)                                 +44 (0) 207 399 9400
Jon Belliss  

 

 

Qualified Person

Kiran Morzaria B.Eng. (ACSM), MBA, has reviewed and approved the information contained in this announcement. Kiran holds a Bachelor of Engineering (Industrial Geology) from the Camborne School of Mines and an MBA (Finance) from CASS Business School.

  

Forward-Looking Statements:

Certain statements in this announcement are or may be deemed to be forward-looking statements. Forward-looking statements are identified by their use of terms and phrases such as ”believe” ”could” “should” ”envisage” ”estimate” ”intend” ”may” ”plan” ”will” or the negative of those variations or comparable expressions including references to assumptions. These forward-looking statements are not based on historical facts but rather on the Directors’ current expectations and assumptions regarding the Company’s future growth results of operations performance future capital and other expenditures (including the amount. nature and sources of funding thereof) competitive advantages business prospects and opportunities. Such forward-looking statements reflect the Directors’ current beliefs and assumptions and are based on information currently available to the Directors.  Many factors could cause actual results to differ materially from the results discussed in the forward-looking statements including risks associated with vulnerability to general economic and business conditions competition environmental and other regulatory changes actions by governmental authorities the availability of capital markets reliance on key personnel uninsured and underinsured losses and other factors many of which are beyond the control of the Company. Although any forward-looking statements contained in this announcement are based upon what the Directors believe to be reasonable assumptions. The Company cannot assure investors that actual results will be consistent with such forward-looking statements.

 

Cadence Minerals (AIM: KDNC) – European Metals (AIM: EMH) Cinovec Project Update – Battery Grade Lithium Hydroxide Sample Produced.

Cadence Minerals (AIM/NEX: KDNC; OTC: KDNCY) is pleased to note the Cinovec Project update published today by European Metals Holdings Limited (“European Metals” or “EMH”) highlighting the outcomes from a recently completed engineering assessment of the flowsheet and subsequent testwork aimed at demonstrating the ability to produce lithium hydroxide from Cinovec ore. The move by the company to develop a process for the production of lithium hydroxide from the Cinovec project is in response to market forces that continue to move Czech and European manufacturers towards the production of advanced technology batteries.

Highlights:

  • Flowsheet successfully developed and tested for the production of lithium hydroxide from Cinovec ore.
  • A potential production rate in excess of 25,000 t/a lithium hydroxide has been demonstrated to be possible utilising a robust process route proven in the lithium production sector.
  • A formal update of the project PFS reflecting the production of lithium hydroxide is underway and will be completed within the next 6 weeks.

The data produced from the engineering assessment and associated testwork is now being used as the foundation for an update of the PFS such that the final product from the process will be battery grade lithium hydroxide with the option to produce battery grade lithium carbonate should the market support both products.

Cadence holds approximately 19.1 percent of the equity in European Metals, which, through its wholly owned Subsidiary, Geomet s.r.o., controls the mineral exploration licenses awarded by the Czech State over Cinovec.

The full release can be found at: https://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/EMH/14024475.html

Cadence Minerals Chairman Andrew Suckling commented:“Today’s news confirms that EMH have taken another step along the road to producing battery grade lithium hydroxide. As CEO Keith Coughlan says, it is an exciting development that will enable the Company to supply its final product into the European marketplace. We are also impressed by the potential production rate numbers quoted by EMH, and we look forward to the updated PFS results.”

– Ends –

For further information:

Cadence Minerals plc +44 (0) 207 440 0647
Andrew Suckling
Kiran Morzaria
WH Ireland Limited (NOMAD & Broker) +44 (0) 207 220 1666
James Joyce
James Sinclair-Ford
Hannam & Partners LLP (Joint Broker) +44 (0) 207 907 8500
Neil Passmore
Giles Fitzpatrick
Novum Securities Limited (Joint Broker) +44 (0) 207 399 9400
Jon Belliss

Qualified Person

Kiran Morzaria B.Eng. (ACSM), MBA, has reviewed and approved the information contained in this announcement. Kiran holds a Bachelor of Engineering (Industrial Geology) from the Camborne School of Mines and an MBA (Finance) from CASS Business School.

Forward-LookingStatements:

Certain statements in this announcement are or may be deemed to be forward-lookingstatements. Forward-lookingstatements are identified by their use of terms and phrases such as ‘‘believe’’ ‘‘could’’ “should” ‘‘envisage’’ ‘‘estimate’’ ‘‘intend’’ ‘‘may’’ ‘‘plan’’ ‘‘will’’ or the negative of those variations or comparable expressions including references to assumptions. These forward-looking statements are not based on historical facts but rather on the Directors’ current expectations and assumptions regarding the Company’s future growth results of operations performance future capital and other expenditures (including the amount. nature and sources of funding thereof) competitive advantages business prospects and opportunities. Such forward-lookingstatements reflect the Directors’ current beliefs and assumptions and are based on information currently available to the Directors. Many factors could cause actual results to differ materially from the results discussed in the forward-looking statements including risks associated with vulnerability to general economic and business conditions competition environmental and other regulatory changes actions by governmental authorities the availability of capital markets reliance on keypersonnel uninsured and underinsured losses and other factors many of which are beyond the control of the Company. Although any forward-looking statements contained in this announcement are based upon what the Directors believe to be reasonable assumptions.The Company cannot assure investors that actual results will be consistent with such forward-lookingstatements

Cadence Minerals Plc – Macarthur Minerals (TSX-V: MMS) Signs 10 Year Iron Ore Off-Take Agreement for the Lake Giles Iron Project in Australia With Glencore International A.G.

Cadence Minerals (AIM/NEX: KDNC; OTC: KDNCY) is pleased to note the announcement today from Macarthur Minerals (TSX-V: MMS) (“Macarthur”) that it has entered into a binding Life-of-Mine Off-Take Agreement (“Agreement”) with Glencore International A.G. (“Glencore”) for sale of iron ore to be produced from the Lake Giles Iron Project (“Project”) at Lake Giles in the Yilgarn region of Western Australia from the commencement of commercial production.

Highlights:

  • Glencore secures life-of-mine of the project with commercial terms for approximately 4m tonnes per annum average for the first 10 years, with the option to extend for a following 10 years for all tonnes of future Lake Giles iron ore production.
  • Glencore agrees to release up to 70% of their off-take volume where Macarthur secures project financing from a Strategic Industry Investor, subject to their securing off-take of the product produced.
  • This Agreement with Glencore positions Macarthur to go forward to complete their project financing.
  • The Agreement is currently valued at approximately US$4bn in revenue over the first 10-year term ensuring Macarthur long term revenue and consistent sales per year.
  • Terms and conditions have been competitively negotiated reflecting strong forward demand.

 

High grade iron ore prices:

Metallurgical test work on the Lake Giles’s Moonshine Magnetite Project indicates that an export product of high margin +65% Fe can be achieved. ).  In its announcement, Macarthur states that the current market price for 65% Fe product is quoted at US$98/tonne (A$140 per tonne). Macarthur also states that the value of the initial 10-year Glencore off-take at current market price for Moonshine iron ore would be ~US$4bn.

Cadence holds approximately 10% of the issued equity interest in Macarthur, which is an Australian mining exploration company focused primarily on iron ore, nickel, lithium and gold in Western Australia. It also has a lithium project in Nevada, USA.

The full release can be found at: https://web.tmxmoney.com/article.php?newsid=6303739202199099&qm_symbol=MMS

Cadence Minerals Chairman Andrew Suckling commented: “It is gratifying to see that the confidence of the Cadence management team in its investment strategy into Macarthur Minerals means that our company can now participate in a transformational take off agreement between Macarthur and Glencore, one of the largest mining conglomerates in the world.”

“We congratulate the Macarthur Minerals management team on achieving this key milestone.”

 

This news release is not for distribution to United States Services or for Dissemination in the United States. 

– Ends –

 

For further information:

Cadence Minerals plc                                                    +44 (0) 207 440 0647
Andrew Suckling  
Kiran Morzaria  
   
WH Ireland Limited (NOMAD & Broker)                                 +44 (0) 207 220 1666
James Joyce  
James Sinclair-Ford  
   
Hannam & Partners LLP (Joint Broker)                                 +44 (0) 207 907 8500
Neil Passmore  
Giles Fitzpatrick  
   
Novum Securities Limited (Joint Broker)                                 +44 (0) 207 399 9400
Jon Belliss  

 

 

Qualified Person

Kiran Morzaria B.Eng. (ACSM), MBA, has reviewed and approved the information contained in this announcement. Kiran holds a Bachelor of Engineering (Industrial Geology) from the Camborne School of Mines and an MBA (Finance) from CASS Business School.

  

Forward-Looking Statements:

Certain statements in this announcement are or may be deemed to be forward-looking statements. Forward-looking statements are identified by their use of terms and phrases such as ”believe” ”could” “should” ”envisage” ”estimate” ”intend” ”may” ”plan” ”will” or the negative of those variations or comparable expressions including references to assumptions. These forward-looking statements are not based on historical facts but rather on the Directors’ current expectations and assumptions regarding the Company’s future growth results of operations performance future capital and other expenditures (including the amount. nature and sources of funding thereof) competitive advantages business prospects and opportunities. Such forward-looking statements reflect the Directors’ current beliefs and assumptions and are based on information currently available to the Directors.  Many factors could cause actual results to differ materially from the results discussed in the forward-looking statements including risks associated with vulnerability to general economic and business conditions competition environmental and other regulatory changes actions by governmental authorities the availability of capital markets reliance on key personnel uninsured and underinsured losses and other factors many of which are beyond the control of the Company. Although any forward-looking statements contained in this announcement are based upon what the Directors believe to be reasonable assumptions. The Company cannot assure investors that actual results will be consistent with such forward-looking statements.

 

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