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Hannam & Partners – Cadence Minerals #KDNC – Updating valuation as portfolio climbs the development curve

Cadence Minerals – Updating valuation as portfolio climbs the development curve

Portfolio Progressing Towards Value Creation

Cadence is an investment company with a focus on lithium and other new technology metals. Cadence’s strategy in a crowded space is to gain exposure to projects which have strategic cost advantages and can be rapidly moved up the development value curve. Cadence’s core holdings are: a 20.4% stake in European Metal Holdings (AIM:EMH), which operates the Cinovec lithium/tin project in the Czech Republic; a 7% stake in Bacanora Lithium (AIM:BCN), which operates the Sonora Lithium project in Mexico; and a 30% interest in the Yangibana Rare Earth Project, located in Western Australia, with the remaining 70% held by ASX-listed Hastings Technology Metals Limited (ASX:HAS). In the last 6 months, Cadence’s portfolio projects have seen a number of significant developments, as they move towards production and value creation for shareholders.

Core projects getting closer to production

Q4 2017 saw the completion of bankable feasibility studies (BFS) at both the Sonora and Yangibana projects. The Sonora BFS showed a two-stage project with an up front capital cost of US$420m and a post-tax IRR of 21.2% at a Lithium Carbonate price of $11,000/tonne, while the Yangibana BFS outlined a capital cost of US$260m and an impressive IRR of 78%. Industry groups have shown support for both projects through off-take agreements and equity investments in the case of Sonora. Cinovec is currently moving towards completion of a BFS, with a particular focus on the metallurgical optimisation program, which has so far showed significantly improved lithium leaching recoveries with a small increase in roasting temperatures.

Next Steps / Catalysts – projects moving closer to production

Sonora and Yangibana are currently at similar stage of development, preparing for construction financing. In our view, news of such financing is likely to act as a catalyst for share price re-rating of Cadence Minerals as well as the project operators, Bacanora and Hastings Technology Metals. The BFS underway at the earlier stage Cinovec project, operated by European Metal Holdings, is expected to be completed in H2 2018. With potential cost savings from processing flowsheet optimisation, there is scope to improve on the economics of the project’s pre-feasibility study, which could act as another catalyst for Cadence shares, in our view.

Valuation

We update our Cadence valuation for the Sonora BFS results, our updated lithium price deck and updated implied valuations for public market holdings in the Cadence portfolio. We arrive at a sum of the parts valuation for Cadence’s assets of US$169.1m. Applying our NPV multiples to the Company’s operations we generate a valuation of GBp 0.87/sh, implying 277% upside to the current price.

Link here to view the full Hannam & Partners article

Cadence Minerals #KDNC – Results for the year ending December 2017

The Company is pleased to announce its final results for the year ended 31 December 2017. A copy of full results will be made available on the Company’s website from today at http://www.cadenceminerals.com/

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

 

Hannam & Partners LLP (Joint Broker) +44 (0) 207 907 8500
Neil Passmore
Giles Fitzpatrick

 

Square1 Consulting +44 (0) 207 929 5599
David Bick

CHAIRMAN’S STATEMENT

For the year ended 31 December 2017

STRONG ASSET GROWTH AND RETURN ON EQUITY

The rise in electric vehicle usage is fast approaching and with that the demand for batteries is increasing. More and more governments are committing to phasing out vehicles burning oil products and investment in new battery technologies continues apace For example China’s New Energy Vehicle Mandate Policy of Sept 2017 and California’s ZEV ( Zero emission vehicle). Recent significant announcements from the world’s major automakers to boost production of hybrid and fully electric vehicles complement this global drive to legislate for more rapid and intensive take up of emissions-free transportation.

Cobalt, lithium , Nickel along with rare earth elements have been identified as key strategic minerals in this rapidly expanding market. Supply of each must be increased substantially over the coming years to match predicted demand.

This is precisely where Cadence is focused, particularly on mining projects that are both low-cost and scalable. We have witnessed continued consolidation in the Lithium space , along with institutional and strategic involvement in a number of assets and projects Cadence was early to identify. Lithium’s importance has been highlighted at the political and legislative level globally.

Our principal investments now include stakes in Bacanora Minerals, European Metals Holdings, Macarthur Minerals, Yangibana North Project , Clancy , San Luis stakes in Argentina and Auroch Minerals.

The sale of part of our stake in Bacanora was a strategic decision centered on reinvestment. Cadence will redeploy some of the profits in other early-stage mineral exploration companies where we can both hold larger stakes and add our considerable mining and financial management expertise. This will provide us with an opportunity to achieve returns of a similarly high level to those made on our Bacanora investment to date.

Cadence continues to have great confidence in Bacanora Minerals and its management team, and we look forward to being a supportive shareholder and joint-venture partner in the development of the Sonora Lithium Project. We believe that Sonora has the potential to be a significant producer of battery-grade lithium carbonate, forming an important part of the global lithium-compound supply chain in the coming years.

The board and Cadence’s strategy have evolved significantly since the company took a stake in Bacanora four years ago. We have begun to take an active role in management of the companies in which we invest.

Cadence’s future prospects are growing and are very exciting. We will continue to support our investee companies and identify new areas for expansion that offer the potential for superior returns on capital.

Our strategy for delivering material value to shareholders rests on three pillars:

–       Supporting existing projects through to production.

–       Identifying new strategic investments which principally will be lithium exploration assets demonstrating a high probability of entering into commercial production

–       Evaluation of the  investment potential in other key metals used widely in the rapidly expanding energy-storage sector, such as cobalt, copper and nickel.

In this regard, we see added value in acquiring stakes in assets that are currently unlisted but fit our investment criteria, an approach which has to date delivered excellent returns. In this way we will provide our shareholders access to assets that have the same fundamentals as prior investments offerring potentially higher returns.

We continue to view the medium and long term prospects for the Company with confidence.

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

Andrew Suckling

Executive Chairman

25 May 2018

 

STRATEGIC REPORT

Our focus in 2017  was to continue our investment strategy, that is, to identify, invest and play an active role in the development and progress in assets and companies that have unique access to projects that have the right chemistry, are low cost and represent a value investment.

Cadence typically invests at the early stage of the resource development cycle. This can be as early as target delineation and up to scoping study level. The risk associated with investing in any resource projects at an early stage is high particularly within the lithium sector, which is not commoditised and the success or failure of a project is highly dependent on the metallurgical risks.

Our approach to mitigate this risk is to obtain a deep fundamental understanding of the resource, its chemistry and management team. By doing so we can eliminate the many potential investments that we review during the year and fund projects that we believe will come to production and deliver value to our shareholders. Importantly we also take an active approach to our investments by either being part of the management team or, if not, assisting incumbent management in their endeavours.

This approach has led to good absolute return figures which at the end of the financial year stood at 119% for our public listed investments and around 121% inclusive of our non listed investments. The mark market valutions of all our investments, inclusive of our portions of joint ventrures stood at some £33 million, while the valution of our public assets stood at £24.8 million (table 1).

Table 1: Absolute Return Figures

 

31/12/2015 31/12/2016 31/12/2017
Book Value 9,876 17,689 11,345
Mark to Market Equity Value (GB£ ,000) 14,232 24,152 24,869
Absolute Return on Equity (%) 44% 36% 119%

 

LITHIUM MARKET REVIEW

The primary driver for the increasing demand in lithium and lithium compounds is the penetration of electric vehicles (“EV”). 2017 was the year that dramatically changed the EV industry. Several prominent countries announced mandatory EV adoption rates. Many car companies from the U.S. to China to Europe announced new EV cars or at times introduced plans to electrify their entire fleet. Examples of this include, GM’s commitment of at least 20 new EVs by 2023, Mercedes announcing that it will electrify its entire line up by 2022, VW announcing to invest $84 billion to bring 300 new EV models to the market by 2030 and the most aggressive target by Volvo who announced that all of their new models will be EV by 2019.

Looking back at how lithium prices performed in 2017, it’s clear that prices remained strong throughout the year with CIF in Asia for 99% Lithium Carbonate increasing from US$15,500 per tonne at the beginning of the year to US$20,750 at the end of the year.  This was a surprise to a lot of commentators, however given the positive moves from the demand curve and the disappointments in the supply curve it became inevitable that we would see upward movement in prices.

In the early part of 2018 we saw several negative forecasts for pricing, based erroneously on the “wave” of supply from SQM 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 gett financed. It is the latter point that Cadence sees as the largest constraint to EV adoption. In essence there is a pipeline of project which would allow the penetration of EV’s of 25%, however the large majority of these do not have financing in place, by our estimates there is some US$8 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 26 battery mega-factories, up from just three back in 2014. The combined planned capacity of these plants is 344.5 GWh. To put that into perspective, total lithium-ion cell demand in 2017 is estimated at 100 GWh.

Looking ahead to 2018, supply constraints look set to continue as the lithium demand forecast rises. In terms of demand, analysts agree that the lithium space will be led by battery production.

Cadence still maintains its belief that lithium prices will remain strong and anticipates that this pattern will continue for the foreseeable future. We believe that the assets that we have invested in will form part of the medium-term lithium supply chain from 2020 onwards.

INVESTMENT REVIEW

Bacanora Lithium Plc

Cadence holds an interest in Bacanora through a direct equity holding of approximately 8%, and a 30% stake in the joint venture interests in each of Mexalit S.A. de CV and Megalit S.A. de CV. 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)

Key Operational Highlights on the Sonora Project are as follows:

  • On April 10th, 2017, Bacanora announced that it had entered into a strategic partnership with Hanwa Co. Ltd. (“Hanwa”), a leading Japan-based global trading company and one of the larger traders of battery chemicals in Japan, with reported net sales of more than ¥1,000 billion in 2016. Hanwa was awarded an off-take agreement for up to 100% of Bacanora’s stage 1 production of the lithium carbonate (“Li2CO3”) produced at the Sonora Lithium Project at market price at the time. Hanwa also acquired a 10% equity stake in Bacanora by purchasing 12,333,261 of the Company’s common shares and has an option to increase its interest up to 19.9%.
  • On October 20th, 2017, Bacanora announced that the Environmental Impact Statement, the Manifestacion de Impacto Ambiental (“MIA”), for its flagship Sonora project has been approved by SEMARNAT, the Environment Ministry of Mexico. The approval represents a major milestone for Bacanora as it grants Bacanora the governments’ approval to construct an open pit mine and a large-scale beneficiation processing facility at Sonora.
  • On December 12th, 2017, Bacanora announced the results of the Feasibility Study (“FS”) for Sonora prepared in accordance with National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”). The results of the FS confirm the positive economics and favourable operating costs of a 35,000 tonnes per annum (“tpa”) battery grade lithium carbonate (“Li2CO3”) operation.

o  The FS estimates a pre-tax project Net Present Value (“NPV”) of US$1.253 billion at an 8% discount rate and

o  an Internal Rate of Return (“IRR”) of 26.1%, and

o  Life of Mine (“LOM”) operating costs of US$3,910/t Li2CO3.

Both the equity stake in Bacanora and our ownership in the Mexalit joint venture could represent a substantial return for Cadence in the form of cash flow from the Sonora Lithium Project.

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 in southern Saxony, Germany from SolarWorld AG.

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 a 24-month period for €30 million. In the event that 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.

Deutsche Lithium represents a strategic asset located in close proximity to a thriving market for lithium and energy products, which is being fuelled by Germany’s electric automotive industry and the rise of renewable energy storage. Zinnwald is located in a world-class granite hosted Sn/W/Li belt that has been mined historically for tin, tungsten and lithium at different times over the past 300 years.

The project has a historical resource estimate which was reported in accordance with the PERC Code1, comprised of Measured, Indicated and Inferred Resources. A Qualified Person (under NI 43-101) has not done sufficient work to confirm the historical estimate; hence the Company is not treating the historical estimate as current Mineral Resources or Mineral Reserves. demonstrates its potential for economic extraction of lithium products, as well as potential by-products of tin, tantalum and SOP. Bacanora’s investment and expertise will facilitate further development in order to achieve higher-value, downstream lithium products which command higher prices in the market.

A resource infill drilling programme to upgrade the existing resource model in accordance with NI 41-101 has now been completed. Collection of a 100 tonne bulk ore sample from the legacy mine at Zinnwald to provide samples for metallurgical testwork has also been completed. On completion of the concentration testwork, hydrometallurgical testwork for downstream processing will be undertaken, focusing on the production of higher value lithium battery chemical products.

Deutsche Lithium has been granted a mining licence covering 256.5 hectares of the Zinnwald project.The 30 year mining licence has been issued by the Saxony State Mining Authority.

Subsequent to the transaction SolarWorld filed for bankruptcy protection in Germany due to ongoing pricing pressures in its core solar markets. The Company is confident that the SolarWorld insolvency process will have no material impact on the Company’s interest in Deutsche Lithium and the Zinnwald project.

 

Details of Cadence’s ownership

Cadence owns approximately 8% of Bacanora. The Sonora Lithium Project is comprised of the following lithium properties.

  • La Ventana, La Ventana 1, and Megalit concessions, which are 100 percent owned by Minera Sonora Borax S.A. de C.V.(“MSB”), a wholly-owned subsidiary of Bacanora; Cadence, through its approximate direct interest of 8% of Bacanora, has an indirect interest in these concessions of 8%.
  • 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 8% in Bacanora, has a total economic interest in Mexalit of 35%.

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 8% in Bacanora, has a total economic interest in Megalit of 35%.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.

 

European Metals Holdings Limited (European Metals)

Cadence has been investing in EMH since June 2015 and continued to do so during the period. It currently owns approximately 20% in the Cinovec deposit in the Czech Republic through a direct holding in the share capital of European Metals Holdings Limited 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). The district has an extensive mining history, with various metals having been extracted since the 14th Century.

Summary of Activities

European Metals made significant progress during the year.  With the Company’s efforts focusing on the completion of a pre-feasibility study (“PFS”). This was announced in April 2017 and confirmed the potential that the Cinovec deposit could be developed into a low-cost producer of lithium products.

Highlights of the PFS include:

 

·    Net overall cost of production – ·    US$3,483 /tonne Li2CO3
·    Net Present Value (NPV) – ·    US$540 M (post tax, 8%)
·    Internal Rate of Return (IRR) – ·    21 % (post tax)
·    Total Capital Cost – ·    US$393 M
·    Annual production of Battery Grade Lithium Carbonate – ·    20,800 tonnes

Project development for the year was centered on a significant drilling program embarked upon by the Company. There were numerous updates to this program released to the market during the period. Overall, results from the program either confirmed or exceeded expectations with respect of both lithium content and width of mineralisation.

In November 2016, the Company announced a significant increase in the indicated resource at Cinovec. This upgrade was a result of the drilling program to that point and increased the indicated resource by approximately 420%.

Highlights from the Mineral Resource Estimate include:

  • Lithium Indicated Resource increased 420% to 2.6 Mt LCE, contained in 232.8 Mt @ 0.45% Li2O (0.1% Li cutoff)
  • Lithium total resource increased 11.8% to 6.46 Mt LCE, contained in 606.8 Mt @ 0.43% Li2O (0.1% Li cutoff)
  • Tin Indicated Resource increased by 64% to 28.6 Mt @ 0.23% Sn, 0.54% Li2O (0.1% Sn cutoff) for 65.8 kt Sn, 0.38 Mt LCE
  • Lithium exploration target remains 350 to 450 Mt @ 0.39% to 0.47% for 3.4 Mt to 5.3 Mt of LCE

In June 2017, and based on the PFS taken on the Cinovec Project, European Metals declared a maiden Probable Ore Reserve of 34.5 Mt @0.65% Li2O.

This drilling program provided important data to the Company’s Preliminary Feasibility Study (“PFS”) which was ongoing throughout the period. The Company released various updates with regards to this study throughout the year, and the completion at the end of March 2017.

Highlights of the work program for the PFS included a significant reduction of pre-production capital costs and outstanding recoveries, and the successful manufacture of >99.5% pure lithium carbonate using an industry proven, sodium sulphate roast-based flow-sheet.

Since the completion of the PFS European Metals has been embarking on elements of the Definitive Feasibility Study, including the appointments a DFS manager, further optimisation testwork on the metallurgy and further increases in indicated resource figures.

European Metals is now progressing its permits, environmental studies and the BFS and we look forward to 2018 and the progress that will be made to bring this asset into production.

 

Details of Cadence’s ownership

Cadence owns a direct interest of approximately 20% of European Metals.

San Luis Lithium Project, Argentina

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

These transactions mark the start of the Company’s strategic shift to earn in to early stage lithium assets in well-known lithium jurisdictions where we see the potential to deliver shareholder value by investing in projects that have shorter development timeline to cashflow than a typical lithium carbonate producer.

The San Luis Project 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 past 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%.

On grant of the exploration permits Cadence will acquire up to 49% by spending £1.1m on exploration and drilling, and by issuing £0.4 million of new ordinary shares in Cadence to The Vendors. Cadence has an option to acquire up to 100% by issuing a further £1.75m of new ordinary shares in Cadence.

Subsequent to the year-end, remote exploration has begun on the assets, including geophysical, remote mapping and historic data collection. We anticipate publishing these results over the coming weeks. Once the exploration licenses are granted we can progress with the field mapping and drilling with the aim of delivering a maiden ore resource.

Clancy Exploration Limited

In September 2017 Cadence announced that Clancy’s investigations into its tenure determined that there were 28 overlapping licences out of Clancy’s 200 licences that were preceding priority claimants (‘Preceding Claims’). These Preceding Claims cover a total area of approximately 12km2 and included the historical Nockelberg and Leogang mines. Clancy continues to have priority over the balance of the project area, being 172 licences covering approximately 68km2 (‘Remaining Licenses’).

Prior to the investigations, Cadence acquired a 10% interest (refer to ASX release dated 3 July 2017) in all 200 licences held by Clancy, and the parties entered into a joint venture. Cadence was subsequently made aware of the licensing situation and we agreed with Clancy to continue to evaluate the Remaining Licenses, in which Cadence holds 10%.

Furthermore. the board of Clancy, in discussions with Cadence, have considered it appropriate to issue Cadence 140,000,000 fully paid ordinary shares at a deemed price of $0.003 (‘Clancy Shares’) as compensation for the discovery of third party priority over the 28 overlapping licenses (including the historical Nockelberg and Leogang mines).

Yangibana Project (Australia)

Since December 2011 Cadence has owned a 30% interest in the Yangibana rare earth project situated in the Gascoyne region of Western Australia. Cadence’s interest is free carried up to the commencement of the bankable feasibility study on Yangibana.

Summary of Activities

Hastings Technology Metals Limited is the manager of the Project and holds a 70% interest. Hastings continued to explore and develop the Yangibana project during the year.

Hastings continued to develop the Yangibana project as a whole (inclusive or areas outside our interest) with the publictions of the Yangibana Definitive Feasibility Study published in November 2017. This study did not include any material mined from the joint venture with Hastings.

Discussions with management have determined that given the mineralogy of the deposit on the joint venture areas, processing of the ore prior to the ten years contemplated in the Definitive Feasibility Study would reduce the economics of the project as a whole there it has been excluded, it has yet to be determined if the joint venture areas would form part of the twenty year mine plan.

Macarthur Minerals Limited

In March 2016 Cadence Minerals made a strategic investment in Macarthur (TSX-V: MMS) and now currently holds approximately 15% of Macarthur.

Summary of Activities

Macarthur has made progress on several fronts during the year.

 

Western Australia Gold Prospects

During the period Macarthur has been active in the development of its Gold exploration business. Securing options over or applications over several prospective gold properties in Western Australia. The most significant of which appears to be the Hillside Gold Project.

The Hillside Gold Project encompasses Exploration Licence Applications E45/4824, E45/4708 and E45/4709 held by Macarthur Lithium Pty Ltd, a wholly owned subsidiary of Macarthur Minerals. Macarthur has also entered into an option agreement to acquire Exploration Licence E45/4685, which immediately adjoins the tenements of the Hillside Gold Project. This group of tenements are located approximately 185 kilometres (“km”) South East of Port Hedland and 50 km South West of Marble Bar (the “Hillside Gold Project”).

The Hillside Gold Project is highly prospective for gold and copper. The area has previously been explored by various companies for gold, copper, zinc and lead but limited drilling exists. Historical rock chip sampling by Great Southern Mines in 1998 returned 37 samples grading above one gram per tonne (g/t) up to a maximum of 447 g/t Au.

These tenements surround the mining lease of the historic Edelwiess gold mine. A limited drilling program consisting of six rotary percussion (“RC”) holes conducted by Metana Minerals N.L in 1980 intersected gold mineralisation associated with quartz veins. Gold was recorded in three holes with an average grade of approximately 12 g/t Au and a maximum of 25.83 Au g/t. In addition, sampling along a discontinuous outcropping gossan over a strike of 18 km, showed high potential for copper mineralisation. A total of 20 results yielded above 1,000 ppm Cu to a maximum of 7.8% Cu.

Macarthur recently conducted a reconnaissance field trip to the Hillside Gold Project to investigate further the highly anomalous gold results previously reported. This trip confirmed the potential for high grade gold on the Hillside Gold Project.

 

Western Australian Lithium Projects

Macarthur Minerals has 11 Exploration Licenses and 5 Exploration License Applications in the Pilbara covering a total area of approximately 1,312 km2.

In prior years Macarthur completed two heliborne reconnaissance field trips across a portion of its tenements in the Pilbara region. Sampling across several pegmatites yielded encouraging results warranting further exploration. The best lithium results are from a swarm of pegmatites within Exploration Licence application E45/4702 exploited in the past for tin and tantalum. A sample of lithium muscovite from one old working returned 0.2% Li2O and elevated tantalum and tin values confirming the rare element character of this pegmatite. A feldspar-quartz-muscovite pegmatite within Exploration Licence E45/4711 also returned 111 parts per million (“ppm”) lithium (“Li”). In addition to the reconnaissance sampling, historical results of the Geological Society of WA (“GSWA”) include the Tambourah North lithium pegmatite located in Exploration Licence Application E45/4848. A rock sample collected by Fortescue Metals Group Ltd in 2012 on the western edge of Exploration Licence E45/4702 returned a result of 876 ppm Li (0.19% Li2O).

Nevada Brine Project

On June 15, 2017 Macarthur announced that it had staked 210 new unpatented placer mining claims at its new Reynolds Springs Lithium Brine Project in the Railroad Valley, Nevada.

The new claims are located near the town of Currant, in Nye County, Nevada. The Reynolds Springs Project is located approximately 180 miles (300 km) North of Las Vegas, Nevada.  A total of 206 soil samples were collected across the full extent of the Reynolds Springs Project. Lithium values in the soil samples ranged from a low of 39.3 ppm to a high of 405 ppm Li. Samples were consistently high averaging 168.3 ppm Li with 85% of samples recording over 100 ppm Li and 19% greater than 200 ppm Li.

These results are considered high in comparison to the majority of non-lithium producing playas and amongst the highest we have seen outside of the Clayton Valley.

 

Western Australian Iron Ore Projects

Macarthur Minerals’ Iron Ore Projects are located on mining tenements covering approximately 62 km2 located 175 km northwest of Kalgoorlie in Western Australia. Within the tenements, at least 33 km strike extent of outcropping banded iron formation (“BIF”) occurs as low ridges, surrounded by intensely weathered and mostly unexposed granites, basalts and ultramafic rocks.

The Iron Ore Projects are situated in the Yilgarn Region of south-western, Western Australia. The Yilgarn Region is a host to many significant mineral deposits that have been or are being mined for iron ore. The tenements cover the Yeriligee greenstone belt which is some 80 km in length and lies within the Southern Cross Province of the Yilgarn.

The Iron Ore Projects are approximately 107 km from the existing Eastern Goldfields Railway (located near the township of Menzies) that has a direct connection to the Port of Esperance in Western Australia, where it is intended that ore from the Projects will be shipped. Export is subject to capacity becoming available, which is not certain.

The Ularring Hematite Project’s Mineral Resources are comprised of Indicated Mineral Resources of approximately 54.5 Mt @ 47.2% Fe and approximately 26Mt @ 45.4% Fe Inferred resources.

The Mineral Resource estimates were prepared by CSA Global on behalf of Macarthur Minerals (N143-101 Technical Report, 20123) and reported in accordance with the JORC Code. Macarthur Minerals’ Iron Ore Projects are located on mining tenements covering approximately 62 km2 located 175 km northwest of Kalgoorlie in Western Australia. Within the tenements, at least 33 km strike extent of outcropping banded iron formation (“BIF”) occurs as low ridges, surrounded by intensely weathered and mostly unexposed granites, basalts and ultramafic rocks.

 

Auroch Minerals Ltd

Cadence owns a direct interest of approximately 7% of Auroch.

Auroch is an Australian ASX listed company which during the year focused on the development of three prospective, lithium, copper and cobalt assets. After the year-end Auroch terminated or decided not to pursue these projects further.

Auroch has instead completed the acquisition of 90% of the tenement known as the Arden Zinc Project (Arden Project) and 100% of the tenement known as the Bonaventura Zinc Project. Highlights form both projects are outlined below

  • The Arden Zinc Project (Arden) has the potential to host large-scale zinc, lead, copper and cobalt stratiform sedimentary exhalative (SEDEX) deposits

o Large 710km2 Exploration Licence (EL) already granted with several key mineralised targets already identified within the tenure

o Multiple assays of between 9-10% zinc and 0.1% cobalt in historic trench-sampling at the Arden target over a strike length of 1.5km, with a total strike length of the prospective geological unit of over 10km

o Up to 2.5% cobalt1 from recent sampling at the Kanyaka target within the Arden Project

o The Arden Project is supported by excellent infrastructure including rail, sealed roads and grid power

  • The Bonaventura Zinc Project (Bonaventura) covers highly prospective geology and historic mines along 30km of strike of the regional-scale Cygnet-Snelling Fault

o Previous drilling at Bonaventura hit high-grade zinc intersections, including:

▪    16m @ 3.4% Zn and 0.7% Pb from 52m (including 6m @ 6.3% Zn)

▪    11m @ 3.1% Zn and 1.5% Pb from 26m (including 1m @ 8.0% Zn)

o Samples from the historic Kohinoor gold mine returned grades up to 28 g/t Au

o The Bonaventura Project has several high-grade zinc (base-metal) and gold targets that are drill-ready.

 

Greenland Rare Earth Projects

During the year Cadence reduced it licenses’ exposure to 1 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 have continued to review these licenses on an annual basis. We will continue to review these licenses on an annual basis, and will monitor the progress that GGG makes over the coming year as it progresses the Kvanefjeld REE deposits.

 

FINANCIAL REVIEW

During the period the Group made an operating profit of £2.51 million (2016: £2.84 million). This slight decrease was due to a £300,000 impairment on our Greenland investment (2016: nil).

Total comprehensive profit for the year attributable to equity holders was £1.88m (2016: £0.13m). This increase is mainly due to reduced finance costs (approximately£1m reduction for the period) and favourable foreign exchange (approximately £1m increase for the period).

Diluted earnings per share were 0.013p (2016 : 0.007p).).

Administrative costs decreased by approximately 30% for the period to £1.80m (2016: £2.22m). We anticipate to be able to deliver further cost savings in the coming year. Subsequent to the year end, Directors cash remuneration reduced on average by some 28%.

The net assets of the Group increased to £26.72 million at 31 December 2017 (2016: £24.53 million). This was driven by the part repayment of the convertible loan note and the increase in value of available for sale investments.

During the period our net cash outflow from operating activities was £2.06 million (2016: £1.83m). We had a net inflow from our investing activities of £6.29m, associated with the sale of part of our available sale investments, in particular our sale of just under 50% of our stake in Bacanora Minerals. These receipts were used to pay back some of the convertible loan notes, which resulted in a net cash outflow from financing activities of £6.34 million. As a result of the above we had a net reduction in cash and cash equivalents of £2.16 million for the period and cash equivalents of £2.04 million at the end of the period.

Kiran Morzaria

Chief Executive Officer

25 May 2018

 

REPORT OF THE DIRECTORS

For the year ended 31 December 2017

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 2017.

 

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 in this report.  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 within this report.

 

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 10% 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 10 May 2018 were as follows:

 

Ordinary shares held

Number

Percentage of capital

%

Barclays Direct Investing Nominees Limited 866,101,816.00 11.03%
Hargreaves Lansdown (Nominees) Limited Des:CLIENT1 866,044,049.00 11.03%
Interactive Investor Services Nominees Limited Des:SMKTNOMS 612,438,459.00 7.80%
Interactive Investor Services Nominees Limited Des:SMKTISAS 540,102,200.00 6.88%
Hargreaves Lansdown (Nominees) Limited Des:VRA 497,246,751.00 6.33%
HSDL Nominees Limited Des:MAXI 437,264,827.00 5.57%
Hargreaves Lansdown (Nominees) Limited Des:HLNOM 408,295,871.00 5.20%
HSDL Nominees Limited 338,309,489.00 4.31%
HSBC Client Holdings Nominee (UK) Limited 285,249,689.00 3.63%
Forest Nominees Limited 277,646,000.00 3.54%

 

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 20 to the Financial Statements.

 

Going concern

The Directors have prepared cash flow forecasts for the period ending 31 May 2019 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: 25 May 2018

CORPORATE GOVERNANCE

For the year ended 31 December 2017

Directors

The Group supports the concept of an effective board leading and controlling the Group.  The Board is responsible for approving Group policy and strategy.  It meets on a regular basis and has a schedule of matters specifically reserved to it for decision.  Management supply the Board with appropriate and timely information and the Directors are free to seek any further information they consider necessary.  All Directors have access to advice from the Company Secretary and independent professional advice at the Group’s expense.

The Board consists of four Directors, who hold the key operational positions in the Company.  The Chairman of the Board is Andrew Suckling and the Group’s business is run by the Chief Executive, Kiran Morzaria.

Relations with shareholders

The Company values the views of its shareholders and recognises their interest in the Group’s strategy and performance.  The Annual General Meeting will be used to communicate with private investors and they are encouraged to participate.  The Directors will be available to answer questions.  Separate resolutions will be proposed on each issue so that they can be given proper consideration and there will be a resolution to approve the annual report and financial statements.

Internal control

The Board is responsible for maintaining a strong system of internal control to safeguard shareholders’ investments and the Group’s assets.  The system of internal financial control is designed to provide reasonable, but not absolute, assurance against material misstatement or loss.

The Board has considered the need for an internal audit function but has decided the size of the Group does not justify it at present.  However, it will keep the decision under annual review.

Board Committees

Audit and Remuneration Committees have been established. The Audit committee comprises Adrian Fairbourn (Chairman), Donald Strang, and Andrew Suckling, and the Remuneration Committee comprises Adrian Fairbourn (Chairman) and Andrew Suckling.

The role of the Remuneration Committee is to review the performance of the executive Directors and to set the scale and structure of their remuneration, including bonus arrangements. The Remuneration Committee also administers and establishes performance targets for the Group’s employee share schemes and executive incentive schemes for key management. In exercising this role, the terms of reference of the Remuneration Committee require it to comply with the Code of Best Practice published in the Combined Code.

The Audit Committee is responsible for making recommendations to the Board on the appointment of the auditors and the audit fee, and received and reviews reports from management and the Company’s auditors on the internal control systems in use throughout the Group and its accounting policies.

REPORT ON REMUNERATION

For the year ended 31 December 2017

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 2017
Salary and fees 150,000 28,800 178,800
Consulting fees 85,000 150,000 121,200 356,200
Share based payments (1) 283 654 654 654 2,245
Total 85,283 150,654 150,654 150,654 537,245
Year to 31 December 2016
Salary and fees 6,000 6,000 150,000 12,000 174,000
Consulting fees 42,000 144,000 138,000 324,000
Share based payments (1) 143,280 286,560 143,280 143,280 716,400
Total 191,280 436,560 293,280 293,280 1,214,400

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

At 31 December 2017 the following amount was outstanding in fees to directors; £138,000 (2016: £150,000).

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 2017 or the year ended 31 December 2016.

Bonuses
No amounts were payable for bonuses in respect of the Year ended 31 December 2017 or the year ended 31 December 2016.

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 2017 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.

 

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 0.60p and 0.249p respectively (year ended 31 December 2016: 0.925p and 0.404p). The share price at 31 December 2017 was 0.315p (31 December 2016: 0.5p).

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 2017 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 2017 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 AVAILABLE FOR SALE INVESTMENTS

The Group’s Available for Sale Investment assets (‘AFS assets’) represents one of the most significant asset on its statement of financial position totalling £13.5m as at 31 December 2017, all of which includes listed investments.

The carrying value of AFS assets 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 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 AFS 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.

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 and our results found the carrying value for AFS assets to be acceptable.

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 Group financial statements as a whole to be £310,000, based on a 1% percentage consideration of the Group’s total assets.

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.

Keith Fulton

(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).

25 May 2018

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2017

 

Year ended Year ended
Note 31 December 2017 31 December 2016
£’000 £’000
Income
Unrealised profit on available for sale assets 9 1,353 5,701
Realised profit/(loss) on available for sale assets 9 3,118 (107)
Other income 1 145 189
4,616 5,783
Share based payments (2) (717)
Impairment of intangible assets 6 (300)
Other administrative expenses (1,800) (2,223)
Total administrative expenses (2,102) (2,940)
Operating profit 1 2,514 2,843
Share of associates losses 8 (339) (200)
Finance cost 3 (986) (2,027)
Profit before taxation 1,189 616
Taxation 4
Profit attributable to the equity holders of the Company 1,189 616
Other comprehensive income
Foreign exchange 686 (484)
Total other comprehensive income for the period, net of tax 686 (484)
Total comprehensive profit for the year, attributable to the equity holders of the company 1,875 132
Earnings per ordinary share
Basic earnings per share (pence) 5 0.015 0.008
Diluted earnings per share (pence) 5 0.013 0.007

 

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

CONSOLIDATED STATEMENT OF FINANCIAL POSITITON

As at 31 December 2017

 

31 December 2017 31 December 2016
ASSETS Note £’000 £’000
Non-current
Intangible assets 6 1,887 1,909
Investment in associates 8 12,988 12,982
14,875 14,891
Current
Trade and other receivables 10 722 402
Available for resale assets 9 13,534 15,967
Cash and cash equivalents 2,037 4,192
Total current assets 16,293 20,561
Total assets 31,168 35,452
LIABILITIES
Current
Trade and other payables 11 262 603
Borrowings 12 4,182 10,324
Total current liabilities 4,444 10,927
Total liabilities 4,444 10,927
EQUITY
Issued share capital 13 1,202 1,192
Share premium 27,552 27,145
Share based premium reserve 3,178 4,410
Equity loan and exchange reserve 337 (254)
Retained earnings (5,545) (7,968)
Equity attributable 26,724 24,525
to equity holders of the Company
Total equity and liabilities 31,168 35,452

 

The consolidated financial statements were approved by the Board on 25 May 2018, 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 2017

 

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 2015 1,098 22,161 2,783 (277) (8,826) 16,939
Share based payments 717 717
Warrants issued 1,152 1,152
Transfer on lapse of options (80) 80
Transfer on exercise of options (162) 162
Equity component on issue of loan notes 507 507
Share issue 94 5,123 5,217
Share placing costs (139) (139)
Transactions with owners 94 4,984 1,627 507 242 7,454
Foreign exchange (484) (484)
Profit for the period 616 616
Total comprehensive income for the period (484) 616 132
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 income for the period 686 1,189 1,875
Balance at 31 December 2017 1,202 27,552 3,178 337 (5,545) 26,724

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 2017

 

Year ended Year ended
31 December 2017 31 December 2016
£’000 £’000
Cash flow from operating activities
Continuing operations
Operating profit 2,514 2,843
Net realised/unrealised profit on AFSA (4,471) (5,594)
Impairment of intangible assets 300
Equity settled share-based payments 2 717
(Increase) in trade and other receivables (320) (173)
(Decrease)/increase in trade and other payables (83) 373
Net cash outflow from operating activities from continuing operations (2,058) (1,834)
Cash flows from investing activities
Investment in exploration costs (270) (105)
Payments for investments in associates (345)
Payments for investments in AFS assets (214) (7,847)
Receipts on sale of AFS assets 7,118 1,040
Net cash inflow/(outflow) from investing activities 6,289 (6,912)
Cash flows from financing activities
Proceeds from issue of share capital 3,728
Share issue costs (139)
Net borrowings (5,400) 9,331
Finance costs (986) (875)
Net cash (outflow)/inflow from financing activities (6,386) 12,045
Net change in cash and cash equivalents (2,155) 3,299
Cash and cash equivalents at beginning of period 4,192 893
Cash and cash equivalents at end of period 2,037 4,192

 

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

Cadence Minerals #KDNC – Corporate & Investment Update

Cadence Minerals (AIM/NEX: #KDNC; OTC: KDNCY) is pleased to update its shareholders in relation its strategic shift as announced 1 November 2017 and developments in its other investments.

New Investments

As outlined in Cadence’s announcement on 1 November 2017, the Company was at the advanced stages of reviewing several early stage lithium assets in well-known lithium jurisdictions.

The Company has now completed due diligence on two of these assets and anticipates that it will be able to execute binding investment agreements prior to the end of the year with exploration beginning in earnest in Q1 next year.

The Company’s intent is to earn in at a project level basis where it can both hold larger stakes and utilise its management expertise to achieve the high level of returns that we have made on our portfolio to date.

The Company will announce details of the assets and terms of the transactions once it has executed the binding investment agreements.

European Metals Holdings Limited – Equity Raise

European Metals Holdings Limited #EMH has announced a capital raising of £2,281,000 via subscriptions to predominantly UK based professional investors.

The funds will be used to advance the on-going definitive feasibility on the Cinovec deposit, Europe’s largest lithium resource, and for general working capital.

Cadence has subscribed for £345,000 of new ordinary shares and after the issue of these shares, which is expected to occur on the 14 December 2017, Cadence will hold approximately 20% of the enlarged issued share capital of EMH. Cadence’s overall unrealised return on its investment in EMH is 208%.

Macarthur Minerals – Majority of Tenements in Pilbara Region Granted Exploration Licences 

Macarthur Minerals has announced that eleven out of its sixteen Exploration Licences in the Pilbara, Western Australia, covering circa 1,300 km2 have now been granted allowing full exploration activities on those tenements for conglomerate gold, gold and lithium. The remaining licences are expected to be granted shortly.

Cadence has a 15.2% equity interest in Macarthur, which is an Australian mining exploration company focused primarily on lithium, iron ore and gold in the Pilbara region of Western Australia. It also has a lithium project in Nevada, USA.

Yangibana Rare Earth Project – Update

Cadence announced on 22 November 2017 an updated Mineral Resource Statement (“MRE”) for the tenements 30%-owned by Cadence on the Yangibana Rare Earth Project. This MRE represented 36% of the total MRE over the Yangibana Rare Earth Project including areas 100% held by Hastings Technology Metals #HAS.

Total Resource in Tenements 30% held by Cadence

Category

Tonnes

Nd2O3+Pr6O11

TREO

Nd2O3

Pr6O11

Dy2O3

Tb4O7

%

%

ppm

ppm

ppm

ppm

Measured

             900,000

0.43

1.64

3,258

997

42.8

17.55

Indicated

         2,100,000

0.46

1.76

3,507

1,061

45.1

17.39

Meas + Ind

         2,900,000

0.45

1.72

3,433

1,042

44.4

17.44

Inferred

         2,700,000

0.37

1.42

2,806

860

39.6

14.17

TOTAL

         5,600,000

0.41

1.58

3,134

955

42.1

15.88

Note: Rounding errors may occur

The MRE on our partly owned tenements has similar grades to those reported in the total MRE.

Subsequently HAS announced its definitive feasibility study (“DFS”), which was based on mining ore reserves of 5.15 million tonnes for 6 years followed by a further 2 years of mining mineral resources. The DFS contemplates mining in areas wholly owned by HAS.

Given the summary economic information on capital and operating costs, the 5.6 million tonnes of total resource contained with the jointly owned areas, we believe still represents significant value to Cadence. We have engaged with HAS to determine how this can be achieved.

Details of Ownership of Yangibana Rare Earth Deposit

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.

Since the acquisition of this asset Cadence has not been required to invest any further capital in the development of the jointly owned tenements.

– Ends –

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

Hannam & Partners LLP (Joint Broker)

+44 (0) 207 907 8500

Neil Passmore

Giles Fitzpatrick

Square1 Consulting

+44 (0) 207 929 5599

David Bick

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.

About Cadence Minerals:

Cadence is dedicated to smart investments for a greener world. The planet needs rechargeable batteries on a global scale – upcoming supersized passenger vehicles, lorries and buses – require lithium and other technology minerals to power their cells. Cadence is helping find these minerals in new places and extracting them in new ways, which will meet the demand of this burgeoning market. With over £25 million vested in key assets globally, Cadence is helping us reach tomorrow, today.

Cadence invests across the globe, principally in lithium mining projects. Its primary strategy is taking significant economic stakes in upstream exploration and development assets within strategic metals. We identify assets that have strategic cost advantages that are not replicable, with the aim of achieving lower quartile production costs. The combination of this approach and seeking value opportunities allows us to identify projects capable of achieving high rates of return.

The Cadence board has a blend of mining, commodity investing, fund management and deal structuring knowledge and experience, that is supported by access to key marketing, political and industry contacts. These resources are leveraged not only in our investment decisions but also in continuing support of our investments, whether it be increasing market awareness of an asset, or advising on product mix or path to production. Cadence Mineral’s goal is to assist management to rapidly develop the project up the value curve and deliver excellent returns on its investments.

Cadence Minerals #KDNC – Hastings Technology Metals announces JORC resource of 21m tonnes Yangibana Rare Earth Project

Cadence Minerals (AIM/NEX: KDNC; OTC: KDNCY) is pleased to report that Hastings Technology Metals Limited (ASX: HAS), the operator of the Yangibana Rare Earth Project, has announced a final JORC Code Resource for 2017 of 21 million tonnes at 1.17% of Total Rare Earth Oxides (“TREO”).

Cadence has a 30% free carried  interest in some of the tenements included in the Yangibana mineral resource statement. The Yangibana deposit hosts extensive rare earths-bearing ferrocarbontite  /ironstone veins that were evaluated by drilling in the 1980s and by Hastings in 2014 and 2015. It has the potential to host larger, carbontite-hosted rare earth mineralisation at depth, but this target has yet to be assessed.

Of the mineral resource reported the total resource in the tenements in which Cadence holds a 30% is as follows:

Total Resource in Tenements 30% held by Cadence

Category

Tonnes

Nd2O3+Pr6O11

TREO

Nd2O3

Pr6O11

Dy2O3

Tb4O7

%

%

ppm

ppm

ppm

ppm

Measured

             900,000

0.43

1.64

3,258

997

42.8

17.55

Indicated

         2,100,000

0.46

1.76

3,507

1,061

45.1

17.39

Meas + Ind

         2,900,000

0.45

1.72

3,433

1,042

44.4

17.44

Inferred

         2,700,000

0.37

1.42

2,806

860

39.6

14.17

TOTAL

         5,600,000

0.41

1.58

3,134

955

42.1

15.88

Note: Rounding errors may occur

This total resource represents some 36% of the entire mineral resource of Yangibana and importantly has a similar Nd2O3+Pr6O11  grade to the resource in areas not covered by the tenements jointly owned by Cadence.

The full release can be found at: Hastings Technology Metals Release 22 Nov 2017

Details of Ownership

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.

Kiran Morzaria, Chief Executive Officer of Cadence, commented: “It is great to see the progress being made at Yangibana. As electrical vehicle manufacturers continue to  switch from induction to permanent magnet motors, neodymium (Nd) and praseodymium (Pr) are taking centre stage in the rare earth element suite. Yangibana has high grades in these elements, and we believe that this sets it apart from many other rare earth deposits currently under exploration or development. In 2017, 75% of the rare earth market by value was represented by Nd and Pr and we see Yangibana as an important part of that supply chain. We look forward to the publication of the BFS and the mining plan, so that we can determine when and how much ore will be mined from our jointly owned tenements.”

– Ends –

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

Hannam & Partners LLP (Joint Broker)

+44 (0) 207 907 8500

Neil Passmore

Giles Fitzpatrick

Square1 Consulting

+44 (0) 207 929 5599

David Bick

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. 

About Cadence Minerals:

Cadence is dedicated to smart investments for a greener world. The planet needs rechargeable batteries on a global scale – upcoming supersized passenger vehicles, lorries and buses – require lithium and other technology minerals to power their cells. Cadence is helping find these minerals in new places and extracting them in new ways, which will meet the demand of this burgeoning market. With over £25 million vested in key assets globally, Cadence is helping us reach tomorrow, today.

Cadence invests across the globe, principally in lithium mining projects. Its primary strategy is taking significant economic stakes in upstream exploration and development assets within strategic metals. We identify assets that have strategic cost advantages that are not replicable, with the aim of achieving lower quartile production costs. The combination of this approach and seeking value opportunities allows us to identify projects capable of achieving high rates of return.

The Cadence board has a blend of mining, commodity investing, fund management and deal structuring knowledge and experience, that is supported by access to key marketing, political and industry contacts. These resources are leveraged not only in our investment decisions but also in continuing support of our investments, whether it be increasing market awareness of an asset, or advising on product mix or path to production. Cadence Mineral’s goal is to assist management to rapidly develop the project up the value curve and deliver excellent returns on its investments.

Cadence Minerals (KDNC) – Yangibana partner Hastings Technology Metals signs third offtake MOU agreement

Cadence Minerals (AIM/NEX: KDNC; OTC: KDNCY) is pleased to announce that Cadence’s 70% joint venture partner in the Yangibana Neodymium Project in Western Australia, Hastings Technology Metals Ltd, has signed its third offtake MOU agreement with Qiandong Rare Earth Group.

The full release can be found at:

http://hastingstechmetals.com/images/asx_latest/HAS-_20170913-GQD_MOU_FINAL.pdf 

Highlights from the Hastings Release

  • Hastings announces its third MOU with Qiandong Rare Earth Group for the future supply of Mixed Rare Earth Carbonate from Hastings’ Yangibana project in Western Australia.
  • The parties have agreed to enter into discussions to formalise a commercial offtake agreement for Hastings to sell 1,500 tonnes of Mixed Rare Earth Carbonate (MREC) per annum to Qiandong Rare Earth Group.
  • This third MOU agreement is for a period of three years with an option to extend for two years.
  • Total of three MOUs signed so far represent approximately 40% of planned MREC annual production from Yangibana.

Details of Ownership

On 1 December 2011, Cadence announced that it had acquired a 30% free carried interest to Bankable Feasibility Study (“BFS”) 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. 

– Ends –

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 Bavister

Hannam & Partners LLP (Joint Broker)

+44 (0) 207 907 8500

Neil Passmore

Giles Fitzpatrick

Square1 Consulting

+44 (0) 207 929 5599

David Bick

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.

About Cadence Minerals:

Cadence is dedicated to smart investments for a greener world. The planet needs rechargeable batteries on a global scale – upcoming supersized passenger vehicles, lorries and buses – require lithium and other technology minerals to power their cells. Cadence is helping find these minerals in new places and extracting them in new ways, which will meet the demand of this burgeoning market. With over £30 million vested in key assets globally, Cadence is helping us reach tomorrow, today.

Cadence invests across the globe, principally in lithium mining projects. Its primary strategy is taking significant economic stakes in upstream exploration and development assets within strategic metals. We identify assets that have strategic cost advantages that are not replicable, with the aim of achieving lower quartile production costs. The combination of this approach and seeking value opportunities allows us to identify projects capable of achieving high rates of return.

The Cadence board has a blend of mining, commodity investing, fund management and deal structuring knowledge and experience, that is supported by access to key marketing, political and industry contacts. These resources are leveraged not only in our investment decisions but also in continuing support of our investments, whether it be increasing market awareness of an asset, or advising on product mix or path to production. Cadence Mineral’s goal is to assist management to rapidly develop the project up the value curve and deliver excellent returns on its investments.

Cadence Minerals (KDNC) – Hastings Technology Metals signs second MOU with China Rare Earth Holdings Ltd

Cadence (AIM/NEX: KDNC; OTC: KDNCY) is pleased to announce that Cadence’s 70% joint venture partner in the Yangibana Neodymium Project in Western Australia, Hastings Technology Metals Ltd has signed its second Memorandum of Understanding (MOU) with China Rare Earth Holdings Limited (CREH). Under the MOU the parties have outlined their intent to enter into a binding commercial offtake agreement for the sale by Hastings and purchase by CREH of Mixed Rare Earth Carbonate, which will be produced from Yangibana, Western Australia. The framework for the commercial offtake agreement is set out in the MOU, and the final terms and conditions will be formalised  in a contract.

The Parties have undertaken to negotiate in good faith to reach agreement for a commercial offtake contract within 12 months from the date of the MOU. Pricing for the MREC will be based on a formula taking into account prevailing market prices prior to shipment.

The full Hastings release is available at: https://gallery.mailchimp.com/6cc38f730035ae0a04d99359c/files/0c3b9206-595f-4177-baaa-fe68100d185b/HAS_20170831_CREH_MOU_CL.pdf

Details of Ownership

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. 

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 Bavister

Square1 Consulting

+44 (0) 207 929 5599

David Bick

Brian Alexander

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.

About Cadence Minerals:

Cadence is dedicated to smart investments for a greener world. The planet needs rechargeable batteries on a global scale – upcoming supersized passenger vehicles, lorries and buses – require lithium and other technology minerals to power their cells. Cadence is helping find these minerals in new places and extracting them in new ways, which will meet the demand of this burgeoning market. With over £33 million vested in key assets globally, Cadence is helping us reach tomorrow, today.

Cadence invests across the globe, principally in lithium mining projects. Its primary strategy is taking significant economic stakes in upstream exploration and development assets within strategic metals. We identify assets that have strategic cost advantages that are not replicable, with the aim of achieving lower quartile production costs. The combination of this approach and seeking value opportunities allows us to identify projects capable of achieving high rates of return.

The Cadence board has a blend of mining, commodity investing, fund management and deal structuring knowledge and experience, that is supported by access to key marketing, political and industry contacts. These resources are leveraged not only in our investment decisions but also in continuing support of our investments, whether it be increasing market awareness of an asset, or advising on product mix or path to production. Cadence Mineral’s goal is to assist management to rapidly develop the project up the value curve and deliver excellent returns on its investments.

Cadence Minerals (KDNC) says jv partner Hastings Technology Metals has raised A$15m to further develop Yangibana project

Cadence (AIM/NEX: KDNC; OTC: KDNCY) is pleased to announce that Cadence’s 70% joint venture partner in the Yangibana Neodymium Project in Western Australia, Hastings Technology Metals Ltd has received firm commitments for an A$ 15.5 million capital raise.

These funds will be used for infrastructure works before processing plant construction. This will include construction of the Yangibana mine site access road, acquisition and commissioning of an accommodation camp and preliminary engineering design work on the production plant.

The full Hastings release is available at: http://www.hastingstechmetals.com/images/asx_latest/HAS-20170821-capital_raising_CLv3.pdf

Details of Ownership

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.

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 Bavister

Square1 Consulting

+44 (0) 207 929 5599

David Bick

Brian Alexander

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.

About Cadence Minerals:

Cadence is dedicated to smart investments for a greener world. The planet needs rechargeable batteries on a global scale – upcoming supersized passenger vehicles, lorries and buses – require lithium and other technology minerals to power their cells. Cadence is helping find these minerals in new places and extracting them in new ways, which will meet the demand of this burgeoning market. With over £33 million vested in key assets globally, Cadence is helping us reach tomorrow, today.

Cadence invests across the globe, principally in lithium mining projects. Its primary strategy is taking significant economic stakes in upstream exploration and development assets within strategic metals. We identify assets that have strategic cost advantages that are not replicable, with the aim of achieving lower quartile production costs. The combination of this approach and seeking value opportunities allows us to identify projects capable of achieving high rates of return.

The Cadence board has a blend of mining, commodity investing, fund management and deal structuring knowledge and experience, that is supported by access to key marketing, political and industry contacts. These resources are leveraged not only in our investment decisions but also in continuing support of our investments, whether it be increasing market awareness of an asset, or advising on product mix or path to production. Cadence Mineral’s goal is to assist management to rapidly develop the project up the value curve and deliver excellent returns on its investments.

Cadence Minerals (KDNC) – Yangibana jv partner Hastings Technology Metals signs first MOU

Cadence (AIM/NEX: KDNC; OTC: REMMY) is pleased to report that Hastings Technology Metals Limited, Cadence’s 70% joint venture partner in the Yangibana Neodymium Project in Western Australia, has announced its first MOU agreement has been signed with Batou Sky Rock Rare Earth New Material Co. Ltd.

The full Hastings release is available at:

https://gallery.mailchimp.com/6cc38f730035ae0a04d99359c/files/5936590e-7437-4538-aadb-de69f1c242c8/HAS_Skyrock_MOU_20170801_CL_FINAL.pdf.

HIGHLIGHTS

·      Hastings announces first MOU with Baotou Sky Rock for the future supply of Mixed Rare Earth Carbonate from Hastings’ Yangibana project in Western Australia.

·      The parties have agreed to enter discussions to formalise a commercial offtake agreement for Hastings to sell 2,500 tonnes of Mixed Rare Earth Carbonate (MREC) per annum to Baotou Sky Rock.

·      The signing of this first MOU reflects the strong level of interest and demand from potential customers and off-take partners in the Yangibana project. 

Details of Ownership

On 1 December 2011, REM announced that it had acquired a 30% free carried interest to Bankable Feasibility Study (“BFS”) of the Yangibana North Rare Earth Deposit. The exploration costs until the commencement of the BFS are therefore borne solely by Hastings Rare Metals Limited (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. 

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 Bavister

Square1 Consulting

+44 (0) 207 929 5599

David Bick

Brian Alexander

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.

About Cadence Minerals:

Cadence is dedicated to smart investments for a greener world. The planet needs rechargeable batteries on a global scale – upcoming supersized passenger vehicles, lorries and buses – require lithium and other technology minerals to power their cells. Cadence is helping find these minerals in new places and extracting them in new ways, which will meet the demand of this burgeoning market. With over £35 million vested in key assets globally, Cadence is helping us reach tomorrow, today.

Cadence invests across the globe, principally in lithium mining projects. Its primary strategy is taking significant economic stakes in upstream exploration and development assets within strategic metals. We identify assets that have strategic cost advantages that are not replicable, with the aim of achieving lower quartile production costs. The combination of this approach and seeking value opportunities allows us to identify projects capable of achieving high rates of return.

The Cadence board has a blend of mining, commodity investing, fund management and deal structuring knowledge and experience, that is supported by access to key marketing, political and industry contacts. These resources are leveraged not only in our investment decisions but also in continuing support of our investments, whether it be increasing market awareness of an asset, or advising on product mix or path to production. Cadence Mineral’s goal is to assist management to rapidly develop the project up the value curve and deliver excellent returns on its investments.

Cadence Minerals (KDNC) – Significant results from Yangibana North resources expansion drilling announced by Hastings Technology Metals

Cadence Minerals (AIM/NEX: KDNC; OTC: REMMY) is pleased to report that Hastings Technology Metals Limited, Cadence’s 70% joint venture partner in the Yangibana Neodymium Project in Western Australia, has announced significant results from Yangibana North resources expansion drilling to extend mine life.

The full Hastings release is available at: https://gallery.mailchimp.com/6cc38f730035ae0a04d99359c/files/3dc600a1-1682-4c44-a5ec-cc9998dc73cc/First_assay_results_from_YN_and_F_200617FINAL.pdf .

HIGHLIGHTS

  • First assay results from 2017 drilling at Yangibana North and Fraser’s received
  • Holes at Yangibana North tested southern, deeper extension to the known deposit
  • Best intersections include:-

6m at 3.86%TREO including 0.91% Nd2O3+Pr6O11

6m at 3.81%TREO including 0.88% Nd2O3+Pr6O11,

8m at 2.17%TREO including 0.52% Nd2O3+Pr6O11,

3m at 5.24%TREO including 1.40% Nd2O3+Pr6O11, and

3m at 4.54%TREO including 1.20% Nd2O3+Pr6O11

  • Holes at Fraser’s tested northern extension to the known deposit
  • Best intersections include:-

5m at 1.39%TREO including 0.68% Nd2O3+Pr6O11, and

1m at 2.11%TREO including 0.81% Nd2O3+Pr6O11

Details of Ownership

On 1 December 2011, REM 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 Rare Metals Limited (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.

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 Bavister  
   
Square1 Consulting +44 (0) 207 929 5599
David Bick  
Brian Alexander  

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.

About Cadence Minerals:

Cadence is dedicated to smart investments for a greener world. The planet needs rechargeable batteries on a global scale – upcoming supersized passenger vehicles, lorries and buses – require lithium and other technology minerals to power their cells. Cadence is helping find these minerals in new places and extracting them in new ways, which will meet the demand of this burgeoning market. With over £35 million vested in key assets globally, Cadence is helping us reach tomorrow, today.

Cadence invests across the globe, principally in lithium mining projects. Its primary strategy is taking significant economic stakes in upstream exploration and development assets within strategic metals. We identify assets that have strategic cost advantages that are not replicable, with the aim of achieving lower quartile production costs. The combination of this approach and seeking value opportunities allows us to identify projects capable of achieving high rates of return.

The Cadence board has a blend of mining, commodity investing, fund management and deal structuring knowledge and experience, that is supported by access to key marketing, political and industry contacts. These resources are leveraged not only in our investment decisions but also in continuing support of our investments, whether it be increasing market awareness of an asset, or advising on product mix or path to production. Cadence Mineral’s goal is to assist management to rapidly develop the project up the value curve and deliver excellent returns on its investments.

Cadence Minerals (KDNC) – Results for the year ended 31 Dec 2016

The Company is pleased to announce its final results for the year ended 31 December 2016. A copy of these results will be made available on the Company’s website from today.

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 Bavister

Square1 Consulting

+44 (0) 207 929 5599

David Bick

Brian Alexander

CHAIRMAN’S STATEMENT

STRONG ASSET GROWTH AND RETURN ON EQUITY

The lithium compound market continued to perform extremely well in 2016 and with medium-term supply requirements remaining unfulfilled, our assets also rose to the challenge.  

We believe that our two primary assets in Mexico and the Czech Republic will become important sources of battery-grade lithium carbonate from 2019 onward. Our two main investments and joint ventures are targeting to produce, in aggregate, some 55,000 tonnes of battery grade lithium carbonate, which based on analysts’ projections, could represent a very significant 7% to 10% of the world’s supply in 2025. 

Our focus in 2016 was to continue our investment strategy and vision of identifying, investing in and taking an active role in low-cost, large and scalable critical metal deposits. The Group’s current investments have borne out our strategy and delivered both excellent market returns and fundamental progress at the asset level.

Our investment in the Sonora Lithium project (both directly and indirectly through our holding in Bacanora Minerals Ltd and our joint venture with them) continued to make excellent progress both during the year and subsequent to the year-end with the publication of a highly positive pre-feasibility study in 2016. 

Further, in early 2017 the company signed a strategic agreement, inclusive of up to a 100% off-take for lithium carbonate with Hanwa, a major trading house based in Japan. The Sonora Lithium project now has a sound base from which to embark on the next stages of development, including the completion of its bankable feasibility study and securing the capital financing necessary to commence construction in 2018.

The Cinovec Lithium Project, via our significant holding in European Metals Holdings, also continued to develop at a rapid pace, with a 420% upgrade in resources announced during the year and a pre-feasibility study 3published in April 2017.  This study confirmed our analysis of the project in 2015, in that it would represent a low-cost and potentially significant producer of battery grade lithium carbonate. One of the significant positive aspects of Cinovec is the potential tin credits from any mining operation would assist greatly in keeping the unit costs of lithium in the lowest quartile of global producers.

The fundamental progress made with these assets, along with our investment in Macarthur Minerals Ltd and Auroch Minerals Ltd in Australia, has delivered absolute returns in excess of 104%. During the year, our listed investments delivered an operating profit of £2.8 million compared to £0.2 million in 2015.

Investment activity has also continued apace, with a further £7.85 million invested over the period. These funds were used to increase our exposure to both Bacanora Minerals Ltd (16.06% equity interest), European Metals Holdings Ltd (20.76% equity interest), and Macarthur Minerals Ltd (20.3% equity interest). In addition, we also further increased our exposure to lithium exploration with the purchase of a 7.7% stake in Auroch Minerals Ltd, which has exploration assets in Portugal and Namibia.

Our strategy for delivering long-term material value to shareholders will stay focused on three things: First, to support existing projects through to production. Second, to identify new strategic investments. Principally, these will be further lithium exploration assets demonstrating a high probability of entering into commercial production. Third, to evaluate the investment potential in other key metals that are widely used in the rapidly expanding energy storage sector, such as cobalt, copper and nickel. 

In this regard, we are focusing this year on acquiring stakes in assets that are currently unlisted but fit our investment criteria, which to date has delivered excellent returns. In this way we will provide our shareholders access to assets that have the same fundamentals as our previous investments but with potentially higher returns.

We continue to view the medium and long term prospects for the Company with confidence.

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

Andrew Suckling

Executive Chairman

30 May 2017

STRATEGIC REPORT

Our focus in 2016 was to continue our investment strategy, that is, to identify, invest and play an active role in the development and progress in assets and companies that have unique access to projects that have the right chemistry,  are low cost and represent a value investment.

Cadence typically invests at the early stage of the resource development cycle. This can be as early as target delineation and up to scoping study level. The risk associated with investing in any resource projects at an early stage is high particularly within the lithium sector, which is not commoditised and the success or failure of a project is highly dependent on the metallurgical risks.

Our approach to mitigate this risk is to obtain a deep fundamental understanding of the resource, its chemistry and management team. By doing so we can eliminate the many potential investments that we review during the year and fund projects that we believe will come to production and deliver value to our shareholders. Importantly we also take an active approach to our investments by either being part of the management team or, if not, assisting incumbent management in their endeavours.

Table 1: Absolute Return Figures

31/12/2015

31/12/2016

28/04/2016

Mark to Market Equity Value (GB£ ,000)

13,994

24,152

36,303

Absolute Return on Equity (%)

42%

36%

104%

LITHIUM MARKET REVIEW

During 2016, we continued to see further supply constraints in the lithium supply markets, even with the addition of several new projects providing additional supply. The result was continued upward pressure on seaborne lithium carbonate prices, with battery grade contracts at around US$12,000 per tonne of battery-grade lithium carbonate.

Although the lithium market is opaque, reports have suggested that lithium demand increased 15% year-on-year to 212kt Lithium Carbonate Equivalent (“LCE”) in 2016. 2016 global sales of Electric Vehicles (EVs) and Plug-in Hybrids (PHEVs) were around 780,000 vehicles. Global supply has responded to this increased demand, with year-on-year production growth from Chile (mainly SQM), Argentina (ramp up of Orocobre) and China (high-cost domestic feedstock production incentivised into the market). In 2016 Greenbushes, the world’s largest hard rock operation, exports were close to 70kt LCE, 20% higher than 2015 export volumes. This incremental supply brought the market closer towards balance in the second half of 2016, leading to battery-grade lithium compound prices in China falling c.31% by the end of the year. In contrast, seaborne lithium prices have continued to increase, reducing the pricing spread between China and the rest of the world.

The key drivers of the continued growth in the market will continue to be EVs. The larger catalyst for global mass- market uptakes is EV technology in China. Morning Star has forecasted EV penetration to surge from less than 1% of global auto sales in 2015 to 10% in 2025, well ahead of the market view for only 4%-6% penetration by 2025. They forecast 16% annual lithium demand growth over the next decade, faster than we’ve witnessed for almost any major commodity over the past century. They project 2025 lithium demand at 775,000 tonnes, well above the consensus outlook for 400,000 – 600,000 tonnes.

Cadence still maintains its belief that lithium prices will remain strong and anticipates that this pattern will continue for the foreseeable future. We believe that the assets that we have invested in will form part of the medium-term lithium supply chain from 2019 onwards.

INVESTMENT REVIEW

Bacanora Minerals Ltd (Bacanora)

Cadence holds an interest in Bacanora through a 16.06% (30/05/2017) direct equity holding, making Cadence the single largest shareholder of Bacanora 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”), Which form part of the Sonora Lithium Project. Bacanora is a Canadian and London-listed minerals explorer (TSX-V: BCN and AIM: BCN).

Bacanora’s has two key projects under development. The first is the Sonora Lithium Project in Northern Mexico, which consists of ten mining concession areas covering approximately 100 thousand hectares in the northeast of Sonora State. The second is the Zinnwald Lithium Projects in southern Saxony, Germany, which Bacanora has agreed to acquire 50% for EUR 5 million.

Sonora Lithium Project

The Sonora Lithium project continued to progress up the development curve, achieving several critical milestones during the year and subsequent to the year-end.

First and foremost, Bacanora published its preliminary feasibility study (“PFS”) in March 2016. The PFS has an initial targeted production of 17,500 tonnes (t) of lithium carbonate (Li2CO3) per annum, expanding to 35,000 t of Li2CO3 per annum two years later. The PFS has a pre-tax NPV of US$776 million and an IRR of 29%. Bacanora has commenced the Bankable Feasibility Study (“BFS”), which is scheduled for completion in Q3 2017.

The highlights of the Sonora PFS are summarised below:

·      Phase 1: 17,500 tonnes per year of battery-grade Li2CO3, for the first two years

·      Phase 2: Expansion to 35,000 tonnes Li2CO3 per year

·      Potential to produce up to 50,000 tonnes per year of K2SO4 in the third year, for sale to the fertiliser industry

·      Estimated Project pre-tax IRR of 29%; NPV of US$776M, (at an 8% discount rate); and simple payback of five years, based on a flat US$6,000/t for battery grade lithium carbonate over the Life Of Mine

·      Average annual earnings before interest, taxes, depreciation and amortisation estimated at US$134M per annum

·      Stage 1 capital cost estimate of US$240M includes processing plant, on and off-site infrastructure, Tailings Management Facility construction, and general administration costs

The PFS mine plan currently has some 16% of the plant feed being mined from the 30% joint venture areas owned by Mexalit.

Both the equity stake in Bacanora and our ownership in the Mexalit joint venture could represent a substantial return for Cadence in the form of cash flow from the Sonora Lithium Project. To understand the possible outcomes, we have varied the operational costs and revenue per tonne of lithium carbonate to derive a matrix of potential total NPV’s (US$ millions) from the joint venture and our 16.06% equity stake in Bacanora*.

Table 2:  Matrix of potential total NPV returns from Cadence’s joint venture and indirect equity stakes in the Sonora Lithium Project

  +99.5 % Lithium Carbonate Price US$

6,000

7,000

8,000

9,000

US$ / t Lithium Carbonate

3,000

140

203

265

328

3,500

108

171

233

296

4,000

76

139

201

264

4,500

44

107

169

232

* Company estimates are based on discounted cash flows from both equity and joint venture or direct project interests. The Company has used pre-feasibility or scoping studies in the public domain and has estimated the future cash flows that it could receive assuming all free cash flow is distributed to equity and that the project is entirely equity funded with Cadence retaining its interest and contributing on a pro rata basis.

On 23 November 2016 Cadence & Bacanora announced that the financing condition in the conditional lithium hydroxide off-take agreement previously announced on 28 August 2015 had not been met under the terms of the agreement. The Company advised that it had extensive discussions with the customer as to the feasibility of securing project specific financing pursuant to the terms and conditions of  the agreement, that those discussions  have  now  concluded, and therefore further efforts discontinuing further efforts to secure project specific financing pursuant to the agreement.

Subsequent to this, and after the year end, Bacanoa entered into an offtake agreement for up to 100% of the battery grade lithium carbonate with Hanwa Co., LTD (“Hanwa”). Hanwa is a leading Japan-based global trading company and one of the larger trades of battery chemicals in the Asian region, with reported net sales of more the Y1,500 million in 2016.The off-take agreement formed part of a larger strategic partnership with Hanwa. In addition to the 70%- 100% off-take agreement Hanwa invested approximately £10.2 million to acquire an initial 10% interest in Bacanora and has the option to increase its equity interest in Bacanora to 19.9%.

The strategic partnership, we believe, is critical to the ongoing development of the Sonora Lithium project as it will provide a funding platform for the project and will aid in securing the long-term debt funding.  Moreover, validates the quality of the battery grade (+99.5%) lithium carbonate product produced from the Sonora Lithium project.

In the coming year, we expect Bacanora to focus on the BFS which is scheduled for publication in Q3 2017. We also expect significant progress to be made with, banks, debt providers and strategic investors to develop a project financing strategy. If this is successful Bacanora anticipates the start of construction in H1 of 2018 with an 18 month build period.

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”). This was for a cash consideration of EUR5 million and the completion of a Feasibility Study (“FS”). The agreement also included an option for Bacanora to acquire the outstanding 50% held by SolarWorld within a 24-month period for EUR30 million. Zinnwald, which reportedly produced lithium carbonate in the 1950s, is in a granite hosted Sn/W/Li belt that has been mined historically for tin, tungsten and lithium. The project benefits from excellent access to the rapidly growing market for lithium in Germany which is being driven by the automotive, renewable energy storage and chemicals industries. Bacanora will earn 50% of the project. This project is adjacent to and a continuation of the Cinovec lithium project in the Czech Republic

The FS has begun, with bulk ore to be carried out during the summer to provide samples for metallurgical test work for inclusion in the flowsheet.  Additionally, an infill drilling programme is planned for late 2017 to upgrade the existing resource model in accordance with National Instrument 43-101 – Standards of Disclosure for Mineral Projects.  The drilling will test for a number of potential by-products including tin and tungsten.  The 2014 resource estimate was reported in accordance with the Pan European Code for Reporting of Exploration Results, Mineral Resources and Reserves, and contained circa 700 Kt of LCE.

Details of REM’s ownership

REM owns a direct interest of 16.06% of Bacanora. The Sonora Lithium Project is comprised of the following lithium properties:

·      La Ventana, La Ventana 1, and Megalit concessions, which are 100 percent owned by Minera Sonora Borax S.A. de C.V.(“MSB”), a wholly-owned subsidiary of Bacanora; REM, through its direct interest of 16.06% of Bacanora, has an indirect interest in these concessions of 16.06%.

·      El Sauz, El Sauz 1, El Sauz 2, Fleur and Fleur 1 concessions, which are held by Mexilit S.A. de C.V. (“Mexilit”). REM has a 30% direct interest in Mexalit through its Joint Venture with Bacanora, and when combined with REM’s direct interest of 16.06% in Bacanora, has a total economic interest in Mexalit of 41.24%.

·      The Buenavista, and San Gabriel concessions, which are held by Megalit S.A de C.V (“Megalit”). REM has a 30% direct interest in Megalit through its Joint Venture with Bacanora, and when combined with REM’s direct interest of 16.06% in Bacanora, has a total economic interest in Megalit of 41.24%

European Metals Holdings Limited (European Metals)

In June 2015 Cadence acquired an initial strategic interest in the largest lithium deposit in Europe. REM has subsequently increased its holding to 20.76% in the Cinovec deposit in the Czech Republic through a direct holding in the share capital of European Metals Holdings Limited (ASX code: EMH) 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). The district has an extensive mining history, with various metals having been extracted since the 14th Century.

Summary of Activities

European Metals made significant progress during 2016.  With the Company’s efforts focusing on the completion of a PFS in April 2017. This primarily involved further drilling over the project as well as extensive metallurgical work to determine and test flow sheets for the production of battery grade LCE.

The initial drilling programme began in Dec 2015 and ended in April 2016 with some 5,000 metres of drilling. This data was used to calculate the updated mineral resource published in May 2016. As second 7,500-metre drill programme began in June 2016 which targeted higher grade, shallower lithium bearing zones and also had the aim of converting a significant portion of the inferred lithium and tin resource into an indicated resource.

The results from this programme led to a 420% increase in the indicates Mineral Resources, which when combined with the Inferred Mineral Resources, results in a total resource of an estimated 6.46 Mt of LCE. Highlights from the Mineral Resource Estimate include:

·    Lithium Indicated Resource increased 420% to 2.6 Mt LCE, contained in 232.8 Mt @ 0.45% Li2O (0.1% Li cutoff)

·    Lithium total resource increased 11.8% to 6.46 Mt LCE, contained in 606.8 Mt @ 0.43% Li2O (0.1% Li cutoff)

·    Tin Indicated Resource increased by 64% to 28.6 Mt @ 0.23% Sn, 0.54% Li2O (0.1% Sn cutoff) for 65.8 kt Sn, 0.38 Mt LCE

·    Lithium exploration target remains 350 to 450 Mt @ 0.39% to 0.47% for 3.4 Mt to 5.3 Mt of LCE

In addition to the drilling programme extensive metallurgical test work was carried out over the year which resulted in the successful manufacture of >99.5% pure lithium carbonate using an industry proven, sodium sulphate roast-based flow-sheet from mica-concentrate from the Cinovec Project. The roasting flow-sheet reflected a simplified version of the well-proven technology that converts spodumene concentrate to lithium carbonate. Numerous lithium carbonate plants currently employ this technology internationally.

Subsequent to the year-end European Metals released a PFS on the Cinovec project, which confirmed the potential significance of the Cinovec project, highlights of the PFS include:

·    Net overall cost of production –

·    US$3,483 /tonne Li2CO3

·    Net Present Value (NPV) –

·    US$540 M (post tax, 8%)

·    Internal Rate of Return (IRR) –

·    21 % (post tax)

·    Total Capital Cost –

·    US$393 M

·    Annual production of Battery Grade Lithium Carbonate –

·    20,800 tonnes

European Metals is no progressing it permits, environmental studies and BFS and we look forward to 2017 and the progress that will be made to bring this asset into production.

Details of Cadence’s ownership

Cadence owns a direct interest of 20.76% of European Metals.

Yangibana Project, Australia

Since December 2011 REM has owned a 30% interest in the Yangibana rare earth project situated in the Gascoyne region of Western Australia. REM’s interest is free carried up to the commencement of the bankable feasibility study on Yangibana.

Summary of Activities

Hastings Technology Metals Limited (Hastings) is the manager of the Project and holds a 70% interest. Hastings continued to explore and develop the Yangibana project during the year.

The most significant development during the year was the publication of the PFS, which included the 30% joint venture with extensive drilling and pre-feasibility work.

In April 2016 Hastings published its pre-feasibility study, which showed a pre-tax NPV of US$700 – US$750 M at an 8% discount rate and a 40% internal rate of return. The PFS was not specific as to the total quantum that was to be mined from the joint venture areas. However, the Company has used the mining inventory defined in the mine plan to assess the potential NPV to Cadence under the joint venture.

Subsequent to the publication of the PFS, Hastings has continued to progress the project, with further drilling, target delineation on the project as a whole. In May 2017 Hastings began its final DFS drilling programme, with the primary objective of increasing indicates resources to support a 10-year mine plan. In addition, Hastings successfully tested the hydrometallurgical flowsheets and produced 50kg high purity Mixed Rare Earth Carbonate for marketing purposes.

Macarthur Minerals Limited (Macarthur)

In March 2016 Cadence Minerals made a strategic investment in Macarthur (TSX-V: MMS). During the year, it further increased its position to 16.58% by exercising its warrants. Subsequent to the year-end Cadence exercised its remaining warrants and increased its position to 20.3%.

Summary of Activities

Macarthur has made progress on several fronts during the year.

Australian Lithium Assets

Within the lithium space, Macarthur has applied for a total of 1,449 square kilometres in the Pilbara region of Western Australia. Pilbara lithium acreage is adjacent to and covers similar geological settings to the “world class” Pilgangoora lithium deposits, which host the advanced lithium projects of ASX listed companies, Pilbara Minerals Limited and Altura Mining Limited. Macarthur has reported that initial reconnaissance across a fraction of the Pilbara lithium acreage has been very encouraging, justifying continued assessment.

During the year, Macarthur entered into three Memorandum of Understandings. The first with an ASX listed company for a farm-in and joint venture agreement for rights to lithium on their Sulphur Springs and Whim Creek Projects in the Pilbara, which is contiguous with some of Macarthur’s lithium acreage. The second with a Canadian lithium company for a farm-in to Macarthur lithium acreage at Ravensthorpe for a minimum expenditure of A$2 million to earn a 51% interest. The last was covering an area of 191 square kilometres in the Yalgoo region of Western Australia. The acreage on which rights to lithium are acquired is in proximity to Macarthur’s existing Edah Hill lithium acreage and consists of granted exploration licenses allowing immediate exploration for lithium.

Stonewall Project

On October 21, 2016, the Macarthur acquired the Stonewall Project located in both the Lida and Stonewall Flat Valleys, in southern Nevada. The Stonewall Project area is within 50 km of the Clayton Valley and has some similar geologic features the Clayton Valley, which hosts North America’s only producing lithium mine, Albemarle’s Silver Peak Lithium Mine.

The Stonewall Project is strategically located in the Nevada lithium supply hub, 306 kilometres (191 miles) southeast of Tesla’s new Gigafactory and is located in the mining friendly Nye and Esmeralda Counties of Nevada and is serviced by excellent infrastructure with access to power, water, labour and is bisected by the Veterans Memorial Highway Number 95. The regional climate also favours natural and inexpensive evaporation for brine concentration and allows year-round work.

Lithium has been located at Stonewall Project from a shallow auger drilling program conducted as part of due diligence, for the acquisition of the Stonewall Project. An initial shallow auger drilling program on the Stonewall Project for the purposes of collecting soil and brine samples for lithium was conducted. All holes contained lithium with sediment assays ranging from 34.6 parts per million (“ppm”) lithium (“Li”) and up to 145.5 ppm Li.

On November 4, 2016, the Company completed staking an additional 360 claims covering approximately 6,975 acres (28.22 square kilometres) surrounding its Stonewall Lithium Project, increasing the Company’s footprint in the Lida and Stonewall Flat Valleys to a total of approximately 12,019 acres (48.64 square kilometres) covering almost all of the playa areas (i.e. ‘dry lake bed’) in both of the valleys.

Macarthur Iron Ore Projects

Macarthur retains its two iron ore projects in Western Australia; the Ularring hematite project (Indicated 54.46 million tonnes @ 47.2% Fe, Inferred 25.99 million tonnes @ 45.4% Fe – Pre-Feasibility Study) and the Moonshine magnetite project (1.3 billion tonnes @ 30.1% Fe – Preliminary Economic Assessment). We previously received approval to develop an iron ore mine for the Ularring project.

Subsequent to the year-end Macarthur announce that it has entered into a nonexclusive mandate with the Tulshyan Group to raise up to A$200 million with an initial tranche of A$50 million to develop the Company’s Ularring hematite iron ore project located in Western Australia.

Macarthur Corporate Update

Subsequent to the year-end Macarthur announced that it intended to list its Iron Ore and Lithium assets located in Australia on the Australian stock exchange via an IPO. The prospectus was lodged in March 2017 and was for the issue of 50 million shares in Macarthur Australia at an issue price of A$0.20 per share to raise A$10 million. The minimum raise is for 25 million shares for A$5 million. Lodgement of the prospectus with ASIC and ASX for listing Macarthur Australia on the ASX follows the successful, Pre-IPO raising for A$1.4 million. Funds raised in the IPO will allow Macarthur Australia to significantly advance its iron ore and lithium projects.

Prior to the IPO, Macarthur Minerals has been issued 125 million shares or approximately 90% of Macarthur Australia for consideration for the sale of its subsidiaries, Macarthur Iron Ore Pty Ltd (“MIO”) and Macarthur Lithium Pty Ltd (“MLi”) to Macarthur Australia. MIO and MLi, respectively own the Australian iron ore and ‘hard rock’ lithium projects. Pre-IPO investors have been issued approximately 13 million shares or 9% of Macarthur Australia for A$1.5 million. Pre-IPO Macarthur Australia has a total of approximately 138 million shares on issue and on listing will have between 189 and 164 million shares on issue for a raise of up to A$10 million and a minimum of A$5 million. Post listing, Macarthur Minerals will retain between approximately 76% and 66% of Macarthur Australia.

Auroch Minerals Ltd (Auroch)

In December 2016 Cadence took a 7.7% stake in Auroch. Auroch has a strong financial position with some A$ 8 million in cash and receivables. Auroch is an Australian ASX listed company which is currently focusing on the exploration of two key assets.

The first is a joint venture to earn in 75% of the Alcoutim Project a significant Cu-Zn-Pb-Au-Ag opportunity in south-eastern Portugal located immediately along strike from the supergiant Neves Corvo Mine in the western half of the world famous Iberian Pyrite Belt. 

Drilling has already commenced on the first hole which is situated in the Foupana priority target, one of 5 priority targets to be drilled, a large magmatic centre with corresponding EM anomalies potentially representing massive sulphide orebodies. The Alcoutim targets occur along strike of the supergiant Neves Corvo Cu-Zn-Pb-Ag- Au mine operated by Lundin Mining Corporation. Auroch’s initial drill program will comprise three to five holes targeting geological environments similar to Neves Corvo in combination with significant geophysical anomalies along the Neves Corvo Trend.

The second is some highly prospective lithium acreage in Namibia. This acreage forms the Karibib Lithium Project. The Karibib Lithium Project is situated in the same region as Namibia’s two historic lithium producing mines, Helikon and Rubikon. The company has five existing Exclusive Prospecting Licenses (EPLs) in the region and recently announced an Option and JV agreement to earn up to 90% of granted EPL 5751, which lies South West of Helikon and Rubikon.

Auroch Minerals has applied five EPLs in the Erongo region of Namibia which expands the potential for Auroch to identify a commercial lithium resource. The EPLs are distinguished by the presence of significant historical lithium production within the geological terrain and include untested pegmatites with strongly fractionated geochemistry indicative of potential lithium tantalum mineralisation.

Over 90% of Namibia’s previous lithium production has been sourced from these EPLs. The EPLs in the Karibib area of Namibia occur in the same geological terrain that hosts the Rubikon and the Helikon mines, Namibia’s two historical lithium producing mines. The Karibib area has seen little modern exploration and almost no drilling of the many lithium known occurrences.

Greenland Rare Earth Projects

Cadence owns 100% of three Exploration Licences. Two of these licences abut 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 four of Cadence’s exploration licences in south Greenland from June to August 2014. We have continued to review these licenses on an annual basis. Subsequent to the year we renewed the exploration licenses over two that were expiring at the end of 2016. We will continue to review these licenses on an annual basis, and will watch the progress that GGG makes over the coming year as it progresses the Kvanefjeld REE deposits.

FINANCIAL REVIEW

During the period the Group made an operating profit of £2.84 million compared to £0.24 million for the year ending 31 December 2015. This was primarily driven by a £3.21 million increase in unrealised profits on available for sale asset, which included our investments in Bacanora and European Metals. This resulted in total income for the period of £5.78 million (2015: £2.29 million). Profit before taxation was adversely affected by a one-off financing (£1.6 million) charge associated with the issue of warrants linked to the US$15 million convertible loan note issued during the year. Diluted earnings per share were 0.08p (2015: loss per share 0.06p).).

Administrative costs increased by £0.69 million to £2.94 million (2015: 2.25 million), this was primarily to an increase in administrative expenses associated with the detailed due diligence on potential new assets and development and support of our current assets. These fees were paid to third party providers.

During the year, the total Directors cash remuneration reduced by some 14% with some directors reducing their salary by up to 38%. According to the GCI survey of director’s remuneration for 2016 Cadence’s total director’s remuneration falls below the median of AIM listed companies with a market capitalisation of between £20 and 50 million and below the lower quartile of companies with market capitalizations of £50 and £100 million.

The total assets of the Group increased from £19.58 million at the end of last year (31 December 2015) to £35.42 million. Total liabilities increased from £2.64 at the end of last year (31 December 2015) to £10.92 million at the end of this year. This was driven by an increase in borrowings associated with the convertible loan note issue during the year

During the period our net cash outflow from operating activities was £1.83 million, which was higher than the £0.97 million during the same period last year. We invested £7.85 million in available for sale assets and had receipts of £1 million on the sale of available for sale investments we spent £0.01 million in exploration assets which represented our net cash outflow from investing activities.

These investments plus other costs were funded by cash flows from financing activities totalling £12.04 million. This included £3.72 million of proceeds from the issue of share capital and net proceeds of £9.33 million from the issue of convertible loan notes. At the end of the period, the Company had cash and cash equivalents of £4.19 million.

Kiran Morzaria

Chief Executive Officer

30 May 2017

REPORT OF THE DIRECTORS

For the year ended 31 December 2016

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 2016.

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 directors do not recommend the payment of a dividend.

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, convertible 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, with the exception of the equity swap arrangement , based on the Company’s own share price, which has now been concluded.  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 18 to the financial statements.

Interest rate risk

The Group only has borrowings at a fixed coupon rate of 5% 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 11 May 2017 were as follows:

Ordinary shares held Number

Percentage of capital
%

Barclayshare Nominees Limited

989,619,760

12.72%

Hargreaves Lansdown (Nominees) Limited Des:15942

826,734,658

10.63%

Hargreaves Lansdown (Nominees) Limited Des:VRA

505,747,127

6.50%

TD Direct Investing Nominees (Europe) Limited Des:SMKTNOMS

463,959,308

5.97%

HSDL Nominees Limited Des:MAXI

456,239,464

5.87%

TD Direct Investing Nominees (Europe) Limited Des:SMKTISAS

380,875,207

4.90%

Hargreaves Lansdown (Nominees) Limited Des:HLNOM

379,392,616

4.88%

HSDL Nominees Limited

360,135,097

4.63%

HSBC Client Holdings Nominee (UK) Limited Des:731504

284,792,318

3.66%

Forest Nominees Limited Des:GC1

280,826,000

3.61%

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 19 to the Financial Statements.

Going concern

The Directors note the substantial losses that the Group has made for the Year Ended 31 December 2016.  The Directors have prepared cash flow forecasts for the period ending 31 May 2018 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: 30 May 2017

CORPORATE GOVERNANCE

For the year ended 31 December 2016

Directors

The Group supports the concept of an effective board leading and controlling the Group.  The Board is responsible for approving Group policy and strategy.  It meets on a regular basis and has a schedule of matters specifically reserved to it for decision.  Management supply the Board with appropriate and timely information and the Directors are free to seek any further information they consider necessary.  All Directors have access to advice from the Company Secretary and independent professional advice at the Group’s expense.

The Board consists of four Directors, who hold the key operational positions in the Company.  The Chairman of the Board is Andrew Suckling and the Group’s business is run by the Chief Executive, Kiran Morzaria.

Relations with shareholders

The Company values the views of its shareholders and recognises their interest in the Group’s strategy and performance.  The Annual General Meeting will be used to communicate with private investors and they are encouraged to participate.  The Directors will be available to answer questions.  Separate resolutions will be proposed on each issue so that they can be given proper consideration and there will be a resolution to approve the annual report and financial statements.

Internal control

The Board is responsible for maintaining a strong system of internal control to safeguard shareholders’ investments and the Group’s assets.  The system of internal financial control is designed to provide reasonable, but not absolute, assurance against material misstatement or loss.

The Board has considered the need for an internal audit function but has decided the size of the Group does not justify it at present.  However, it will keep the decision under annual review.

Board Committees

Audit and Remuneration Committees have been established. The Audit committee comprises Adrian Fairbourn (Chairman), Donald Strang, and Andrew Suckling, and the Remuneration Committee comprises, Andrew Suckling and Adrian Fairbourn (Chairman).

The role of the Remuneration Committee is to review the performance of the executive Directors and to set the scale and structure of their remuneration, including bonus arrangements. The Remuneration Committee also administers and establishes performance targets for the Group’s employee share schemes and executive incentive schemes for key management. In exercising this role, the terms of reference of the Remuneration Committee require it to comply with the Code of Best Practice published in the Combined Code.

The Audit Committee is responsible for making recommendations to the Board on the appointment of the auditors and the audit fee, and received and reviews reports from management and the Company’s auditors on the internal control systems in use throughout the Group and its accounting policies.

REPORT ON REMUNERATION

For the year ended 31 December 2016

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

D Lenigas (1)

K Morzaria

D Strang

Total

£

£

£

£

£

£

Short-term employment benefits:

Year to  31 December 2016

Salary and fees

  48,000

  150,000

  –

  150,000

  150,000

  498,000

Share based payments (2)

 143,280

 286,560

  –

 143,280

 143,280

 716,400

Total

 191,280

 436,560

 –

 293,280

 293,280

  1,214,400

Year to 31 December 2015

Salary and fees

  48,000

  25,000

  210,000

  85,000

  210,000

  578,000

Share based payments (2)

 –

 –

 –

 –

 –

 –

Total

 48,000

 25,000

 210,000

 85,000

 210,000

 578,000

At 31 December 2016 the following amounts were outstanding in fees to directors; A Suckling £Nil (2015: £25,000), D Strang £150,000 (2015: £Nil), K Morzaria £Nil (2015: £25,000).

(1)  D Lenigas resigned on 21 December 2015.

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

Pensions

The company does not operate a pension scheme for its directors.

Benefits in kind

No benefits in kind were paid during the year to 31 December 2016 or the year ended 31 December 2015.

Bonuses
No amounts were payable for bonuses in respect of the Year ended 31 December 2016 or the year ended 31 December 2015.

Notice periods

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

Share option incentives

At 31 December 2016 the following options were held by the Directors:

Date of grant

Exercise price

Number of options

K Morzaria

21 May 2014

0.48p

60,000,000

K Morzaria

1 July 2016

0.44p

60,000,000

120,000,000

A Fairbourn

13 December 2012

0.06p

20,000,000

A Fairbourn

21 May 2014

0.48p

40,000,000

A Fairbourn

1 July 2016

0.44p

60,000,000

120,000,000

D Strang

21 May 2014

0.48p

60,000,000

D Strang

1 July 2016

0.44p

60,000,000

120,000,000

A Suckling

1 July 2016

0.44p

120,000,000

120,000,000

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

The high and low share price for the year were 0.925p and 0.404p respectively (year ended 31 December 2015: 1.23p and 0.555p). The share price at 31 December 2016 was 0.5p (31 December 2015: 0.745p).

REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF
CADENCE MINERALS PLC (FORMERLY RARE EARTH MINERALS PLC)

We have audited the Group and Parent Company financial statements of Cadence Minerals plc for the Year ended 31 December 2016 which comprise the consolidated statement of comprehensive income, the consolidated statement of financial position, the Company statement of financial position, the consolidated statement of changes in equity, the company statement of changes in equity, the consolidated statement of cash flows, the company statement of cash flows, the accounting policies, and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRS) as adopted by the European Union.

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.

Respective responsibilities of the Directors and auditor

The Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.

Scope of the audit of the financial statements

A description of the scope of an audit of financial statements is provided on the APB’s website at www.frc.org.uk/apb/scope/private.cfm.

Opinion on financial statements

In our opinion the financial statements:

·    give a true and fair view of the state of the Group and Company’s affairs as at 31 December 2016 and of the Group’s loss for the period then ended;

·    have been properly prepared in accordance with IFRSs as adopted by the European Union; and

·    have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matter prescribed by the Companies Act 2006

In our opinion the information given in the Report of the Directors for the financial period for which the financial statements are prepared is consistent with the group financial statements.

Matters on which we are required to report by exception

We have nothing to report in respect of the following:

Under the Companies Act 2006 we are required to report to you if, in our opinion:

·    Adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

·    The 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.

Keith Fulton
Senior Statutory Auditor
for and on behalf of Chapman Davis LLP
Statutory Auditor, Chartered Accountants
LONDON

Date: 30 May 2017

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 

For the year ended 31 December 2016

Year ended

Year ended

Note

31 December 2016

31 December 2015 (restated)

£’000

£’000

Income

Unrealised profit on available for sale assets

9

5,701

2,493

Realised loss on available for sale assets

9

(107)

Other income

1

189

5,783

2,493

Share based payments

(717)

(641)

Depreciation, amortisation and fixed asset write offs

(63)

Other administrative expenses

(2,223)

(1,548)

Total administrative expenses

(2,940)

(2,252)

Operating profit

1

2,843

241

Share of associates losses

8

(200)

(129)

(Loss) on equity swap settlements

(545)

Finance cost

3

(2,027)

(419)

Profit/(loss) before taxation

616

(852)

Taxation

4

Profit/(loss) attributable to the equity holders of the Company

616

(852)

Other comprehensive income

Foreign exchange

(484)

(92)

Fair value adjustment of equity swap

389

Total other comprehensive income for the period, net of tax

(484)

297

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

132

(555)

Earnings per ordinary share

Basic earnings/(loss) per share (pence)

5

0.008

(0.01)

Diluted earnings/(loss) per share (pence)

5

0.007

(0.01)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 31 December 2016

31 December 2016

31 December 2015 (restated)

ASSETS

Note

£’000

£’000

Non-current

Intangible assets

6

 1,909

 1,706

Investment in associate

8

12,982

2,804

  14,891

 4,510

Current

Trade and other receivables

10

402

229

Available for resale asset

9

15,967

13,944

Cash and cash equivalents

4,192

893

Total current assets

 20,561

 15,066

Total assets

35,452

19,576

LIABILITIES

Current

Trade and other payables

11

603

230

Borrowings

     12

10,324

2,407

Total current liabilities

10,927

2,637

Total liabilities

10,927

2,637

EQUITY

Issued share capital

13

1,192

1,098

Share premium

27,145

22,161

Share based premium reserve

4,410

2,783

Hedging, Loan & Exchange reserve

(254)

(277)

Retained earnings

(7,968)

(8,826)

Equity attributable

24,525

16,939

to equity holders of the Company

Total equity and liabilities

35,452

19,576

 

The consolidated financial statements were approved by the Board on 30 May 2017, and signed on their behalf by;

Kiran Morzaria                                                                              Don Strang

Director                                                                                          Director

Company number 05234262

COMPANY STATEMENT OF FINANCIAL POSITION

At 31 December 2016

31 December 2016

31 December 2015 (restated)

ASSETS

Note

£’000

£’000

Non-current

Investment in associates

8

10,297

 –

Investment in subsidiaries

7

906

906

  11,203

 906

Current

Trade and other receivables

10

4,632

4,354

Available for resale asset

9

15,967

13,944

Cash and cash equivalents

4,192

893

Total current assets

  24,791

  19,191

Total assets

35,994

20,097

LIABILITIES

Current

Trade and other payables

11

603

230

Borrowings

     12

10,324

2,407

Total current liabilities

10,927

2,637

Total liabilities

10,927

2,637

EQUITY

Issued share capital

13

1,192

1,098

Share premium

27,145

22,161

Share based premium reserve

4,410

2,783

Hedging, Loan & Exchange reserve

(178)

(103)

Retained earnings

(7,502)

(8,479)

Equity attributable

25,067

17,460

to equity holders of the Company

Total equity and liabilities

35,994

20,097

 

The Company financial statements were approved by the Board on 30 May 2017, and signed on their behalf by;

Kiran Morzaria                                                                              Don Strang

Director                                                                                          Director

Company number 05234262

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

At 31 December 2016

Share capital

Share premium

Share based payment reserves

Hedging, Loan & Exchange reserve

Retained earnings

Total equity

£’000

£’000

£’000

£’000

£’000

£’000

Balance at 1 January 2015 (restated)

1,067

19,865

2,240

(574)

(8,072)

14,526

Share based payments

641

641

Transfer on lapse of options

(98)

98

Share issue

31

2,469

2,500

Share placing costs

(173)

(173)

Transactions with owners

 31

  2,296

  543

  –

  98

 2,968

Foreign exchange

 –

 –

(92)

(92)

Transfer to income statement

389

389

Loss for the year

(852)

(852)

Total comprehensive loss for the period

297

(852)

(555)

Balance at 31 December 2015 (restated)

1,098

22,161

2,783

(277)

(8,826)

16,939

Share based payments

717

717

Warrants issued

1,152

1,152

Transfer on lapse of options

(80)

80

Transfer on exercise of options

(162)

162

Equity component on issue of loan notes

507

507

Share issue

94

5,123

5,217

Share placing costs

(139)

(139)

Transactions with owners

 94

4,984

1,627

  507

  242

7,454

Foreign exchange

(484)

(484)

Profit for the period

 –

 –

 –

616

616

Total comprehensive income for the period

  –

  –

(484)

616

132

Balance at 31 December 2016

1,192

26,746

4,410

(254)

(7,968)

24,525

COMPANY STATEMENT OF CHANGES IN EQUITY

At 31 December 2016

Share capital

Share premium

Share based payment reserves

Hedging, Loan & Exchange reserve

Retained earnings

Total equity

£’000

£’000

£’000

£’000

£’000

£’000

Balance at 1 January 2015 (restated)

1,067

19,865

2,240

(436)

(7,877)

14,859

Share based payments

641

641

Transfer on lapse of options

(98)

98

Share issue

31

2,469

2,500

Share placing costs

(173)

(173)

Transactions with owners

 31

  2,296

  543

  –

  98

 2,968

Foreign exchange

(56)

 –

(56)

Fair value adjustment on equity swap

389

 –

389

Loss for the year

(700)

(700)

Total comprehensive loss for the period

333

(700)

(367)

Balance at 31 December 2015 (restated)

1,098

22,161

2,783

(103)

(8,479)

17,460

Share based payments

717

717

Warrants issued

1,152

1,152

Transfer on lapse of options

(80)

80

Transfer on exercise of options

(162)

162

Equity component on issue of loan notes

507

507

Share issue

94

5,123

5,217

Share placing costs

(139)

(139)

Transactions with owners

 94

4,984

1,627

 507 

  242

7,454

Foreign exchange

(582)

 –

(582)

Profit for the period

 –

 –

 –

735

735

Total comprehensive income for the period

  –

  –

(582)

735

153

Balance at 31 December 2016

1,192

27,145

4,410

(178)

(7,502)

25,067

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 December 2016

Year ended

Year ended

31 December 2016

31 December 2015 (restated)

£’000

£’000

Cash flow from operating activities

Continuing operations

Operating profit

2,843

241

Amortisation of intangibles

29

Net realised/unrealised profit on AFSA

(5,594)

(2,493)

Exploration costs written-off

37

Equity settled share based payments

717

641

(Increase)/decrease in trade and other receivables

(173)

818

Increase/(decrease) in trade and other payables

373

(245)

Net cash (outflow) from operating activities from continuing operations

(1,834)

(972)

Cash flows from investing activities

Investment in exploration costs

(105)

(635)

Payments for investments in AFS assets

(7,847)

(5,743)

Receipts on sale of AFS assets

1,040

Net cash outflow from investing activities

(6,912)

(6,378)

Cash flows from financing activities

Proceeds from issue of share capital

3,728

2,500

Proceeds from equity swap

3,155

Share issue costs

(139)

(173)

Net borrowings

9,331

1,717

Finance cost

(875)

(419)

Net cash inflow from financing activities

12,045

6,780

Net change in cash and cash equivalents

3,299

(570)

Cash and cash equivalents at beginning of period

893

1,463

Cash and cash equivalents at end of period

4,192

893

COMPANY STATEMENT OF CASH FLOWS

For the year ended 31 December 2016

Year ended

Year ended

31 December 2016

31 December 2015 (restated)

£’000

£’000

Cash flow from operating activities

Continuing operations

Operating profit

2,843

262

Amortisation of intangibles

7

Profit on AFSA

(5,594)

(2,493)

Exploration costs written-off

37

Equity settled share based payments

717

641

(Increase)/decrease in trade and other receivables

(278)

184

Increase/(decrease) in trade and other payables

373

(245)

Net cash (outflow) from operating activities from continuing operations

(1,939)

(1,607)

Cash flows from investing activities

Payments for investments in AFS assets

(7,847)

(5,743)

Receipts on sale of AFS assets

1,040

Net cash outflow from investing activities

(6,807)

(5,743)

Cash flows from financing activities

Proceeds from issue of share capital

3,728

2,500

Proceeds from equity swap

3,155

Share issue costs

(139)

(173)

Net borrowings

9,331

1,717

Finance cost

(875)

(419)

Net cash inflow from financing activities

12,045

6,780

Net change in cash and cash equivalents

3,299

(570)

Cash and cash equivalents at beginning of period

893

1,463

Cash and cash equivalents at end of period

4,192

893

PRINCIPAL ACCOUNTING POLICIES

For the year ended 31 December 2016

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”).  On 24 March 2017, the Company changed its name from Rare Earth Minerals Plc to Cadence Minerals Plc by way of a statutory notice of change filed at Companies House.

The Financial Statements are for the year ended 31 December 2016 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 30 May 2017 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 note the substantial losses that the Group has made for the Year ended 31 December 2016.  The Directors have prepared cash flow forecasts for the period ending 31 May 2018 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 2016 the Company had cash and cash equivalents of £4,192,000 and borrowings of £10,831,000. 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.

TURNOVER

Other income represents the total value, excluding VAT of income receivable from professional services. Income is recognised as the services are provided.

RESTATEMENT OF MARKET VALUE MOVENTS IN AFSA

The Group has changed its accounting policy for Available For Sale Assets. The unrealised profits of these quoted investments are now taken into income, less any related costs of purchase. This has resulted in a restatement of the financial statements for 31 December 2015.

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. All financial assets are recognised when the Group becomes party to the contractual provisions of the instrument. All financial assets are initially recognised at fair value, plus transaction costs. Trade and other receivables are provided against when objective evidence is received that the Group will not be able to collect all amounts due to it in accordance with the original terms of the receivables. The amount of the writedown is determined as the difference between the asset’s carrying amount and the present value of estimated future cash flows.

Derivative instruments are recorded at costs, and adjusted for their market value as applicable. They are assessed for any equity and debt component which is subsequently accounted for in accordance with IFRS’s. The Group’s and Company’s only derivative is considered to be the Convertible loan as detailed in Note 12, which is accounted for at cost, with accrued interest in accordance with the terms of the loan notes.

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 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 hedging, loan and exchange reserve represents the change in value of the equity swap, 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.

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 £630,000 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 & third parties 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 2016 of £1,869,000 (2015: £641,000) 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

2016 were £105,000 (2015: £635,000).

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

No new and/or revised Standards and Interpretations have been required to be adopted, and/or are applicable in the current year by/to the Company, as standards, amendments and interpretations which are effective for the financial year beginning on 1 January 2016 are not 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 9 in respect of Financial Instruments which will be effective for the accounting periods beginning on or after 1 January 2018.

§ IFRS 15 in respect of Revenue from Contracts with Customers which will be effective for accounting periods beginning on or after 1 January 2018.

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

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 2016

1       OPERATING PROFIT AND SEGMENTAL INFORMATION

Operating profit – continuing operations

The operating profit is attributable to the principal activities of the Group.

The operating profit is stated after charging:

Year ended 31 December 2016

Year ended 31 December 2015

£’000

£’000

Share based payment charge

717

641

Amortisation charge

29

Exploration costs written off

37

Foreign exchange (gain)/loss

(104)

 96

Directors fees (see note 2)

498

 578

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

21

19

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 mining.

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 £189,000 (2015: £nil) during the period.

In respect of the total assets, £4,592,000 (2015: £1,121,000) arise in the UK, and £618,000 (2015: £1,130,000) arise in Greenland, £17,646,000 arise in Mexico (2015: £15,074,000), £Nil arise in USA (2015: £641,000), £11,646,000 (2015: £1,575,000) arise in Australia and £950,000 arise in Canada (2015: £35,000).

2       EMPLOYEE REMUNERATION

Employee benefits expense

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

Year ended

Year ended

31 December 2016

31 December 2015

£’000

£’000

Wages and salaries

 521

  578

Share based payments

 717

  –

 1,238

  578

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

2016

2015

No.

No.

Directors

4

4

Other

1

5

4

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

Group and Company

Year ended

Year ended

31 December 2016

31 December 2015

£’000

£’000

Salaries

 498

  578

Share based payments

 717

  –

 1,215

578

3       FINANCE COSTS

Year ended 31 December 2016

Year ended 31 December 2015

£’000

£’000

Loan interest

381

97

Finance Fees

1,646

322

  2,027

 419

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 2016

2016

31 December 2015 (restated)

2015

£’000

%

£’000

%

Profit/(loss) before taxation

616

(852)

Profit/(loss) multiplied by standard rate

123

20

(173)

20.25

of corporation tax in the UK

Effect of:

Offset against losses/deferred tax asset not recognised

(270)

(93)

Expenses not deductible for tax purposes

147

 266

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.

There is no tax credit on the loss for the current or prior period

5          EARNINGS PER SHARE

The calculation of the basic earnings per share is calculated by dividing the consolidated loss 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 2016

31 December 2015 (restated)

£’000

£’000

Profit/(loss) attributable to equity holders of the Company

616

(852)

2016

2015

Number

Number

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

 7,418,126,097

 6,802,811,028

Share options and warrants exercisable

 1,738,283,823

  582,123,201

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

 9,156,409,920

 7,384,934,229

2016

2015

Pence

Pence

Basic earnings/(loss) per share

0.008

(0.01)

Diluted earnings/(loss) per share

0.007

(0.01)

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 2015

  576

  567

  207

 1,350

Additions

635

635

Costs written-off

(37)

(37)

Exchange Difference

(35)

(35)

At 31 December  2015

 1,174

  532

  207

 1,913

Additions

105

  –

  –

 105

Licence expiry

(33)

(33)

Exchange Difference

 –

98

98

At 31 December 2016

 1,279

  630

  174

 2,083

Amortisation and impairment

At 1 January 2015

 –

 –

(176)

(176)

Amortisation charge in the year

(29)

(29)

Exchange difference

 –

(2)

(2)

At 31 December  2015

  –

 –

(207)

(207)

Amortisation charge in the year

 –

Elimination on licence expiry

 –

33

33

At 31 December 2016

 –

 –

(174)

(174)

Net book value at 31 December 2016

  1,279

 630

 –

  1,909

Net book value at 31 December 2015

 1,174

  532

 –

 1,706

Net book value at 1 January 2015

  576

  567

  31

 1,174

In the year to 31 December 2016 £nil (2015: £90,000) was invested in Greenland and £105,000 (2015: £545,000) was invested in Exploration costs by REM Mexico Ltd

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 2016 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 2016.

Company only Intangible Assets

Exploration costs

Licences

Total

£’000

£’000

£’000

Cost

At 1 January 2015

 37

 33

 70

Costs written off

(37)

(37)

At 31 December  2015

 –

 33

 33

Licence expired

  (33)

  (33)

At 31 December 2016

 –

 –

 –

Amortisation and impairment

At 1 January 2015

 –

(26)

(26)

Amortisation charge in the year

 –

(7)

(7)

At 31 December  2015

 –

(33)

(33)

Eliminated on Licence expiry

33

33

At 31 December 2016

 –

Net book value at 31 December 2016

 –

  –

  –

Net book value at 31 December 2015

 –

  –

  –

Net book value at 1 January 2015

 37

 7

 44

On 10 January 2016, the Company’s exploration licence in the Cup Lake project in Canada expired and the no renewal application has been made by the Company in respect of this licence. 

7       INVESTMENTS IN SUBSIDIARIES – COMPANY

Investment in group undertakings

£’000

Cost and carrying value

At 31 December 2016 and 31 December 2015

 906

Subsidiary

Proportion of ordinary share capital held

Nature of business

Country of incorporation

Mojito Resources Ltd

100%

Mining

British Virgin Islands

Rare Earth Minerals 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 2016

31 December 2015

£’000

£’000

Changes in equity accounted investment

Carrying value at beginning of year

 2,804

 2,933

Investment in associate – transferred from AFSA

10,378

Share of retained (losses) attributable to the group

(200)

(129)

Investment carrying value as at year end

 12,982

 2,804

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 £2,685,000 (31 December 2015: £2,804,000).

On 24 November 2016 the Company’s investment in European Metal Holdings Ltd (“EMH”) increased above a 20% shareholding, therefore this has been reclassified as an associate. EMH is listed on the ASX and on AIM. The market value of the shareholding at 31 December 2016 was £9,101,086, with a carrying value of £10,297,000.

8       INVESTMENT IN ASSOCIATES CONTINUED

The Group’s share of results of its associate, 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 2016

Year to 31 December 2016

Mexilit S.A. de C.V.

Mexico

£1,463,806

(£1,162,229)

£nil

(£294,017)

30%

Minera Megalit S.A. de C.V.

Mexico

£607,771

(£450,629)

£Nil

(£104,803)

30%

European Metals Holding Ltd (1)

BVI

£6,539,158

(£364,853)

£nil

(£1,858,231)

20.76%

(1)  EMH’s results are for the 6 months to 31 December 2016.

Company

31 December 2016

31 December 2015

£’000

£’000

Changes in equity accounted investment

Carrying value at beginning of year

 –

 –

Investment in associate – transferred from AFSA

10,378

Share of retained (losses) attributable to the group

(81)

Investment carrying value as at year end

 10,297

  –

9          AVAILABLE FOR SALE INVESTMENTS

Available for sale assets

31 December 2016

31 December 2015

£’000

£’000

Current Assets – Listed Investments

Valuation at 1 January

 13,944

 5,708

Additions at cost

 7,847

  5,743

Disposal proceeds

(1,040)

 –

Realised (loss) on disposal

(107)

 –

Reclassified as investment in associate

(10,378)

Change in fair value recognised in income statement

  5,701

2,493

Valuation at 31 December

  15,967

  13,944

During the year ended 31 December 2016 the company acquired a further 4,550,000 shares in Bacanora Minerals Limited, 16,525,926 CDIs in European Metal Holdings Inc. 22,500,000, shares in MacArthur Minerals Ltd, and 6,500,000 shares in Auroch Minerals Ltd. The company also disposed of 1,436,084 shares in Hastings Rare Metals Ltd, its entire shareholding of 3,579,000 shares in Western Lithium Corporation.

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 2016

31 December 2015

31 December 2016

31 December 2015

£’000

£’000

£’000

£’000

Current assets

Trade receivables

43

43

Other receivables

210

161

210

161

Amounts owed by subsidiaries

 4,230

4,125

Prepayments and accrued income

149

68

149

68

402

229

4,632

4,354

There is no impairment of receivables and no amounts are past due at 31 December 2016 or 31 December 2015.

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 2016

31 December 2015

31 December 2016

31 December 2015

£’000

£’000

Current liabilities

Trade payables

123

123

Tax and social security

Other payables

Accruals and deferred income

107

107

603

230

603

230

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

Group and Company

31 December 2016

31 December 2015

£’000

£’000

Current liabilities

Loans – YAGM (unsecured)

2,407

Convertible loan notes

10,148

Accrued loan note interest

176

10,324

2,407

YAGM Loan Facility

On 13 June 2014, the Company agreed a US$10million debt facility with YA Global Master SPV (“YAGM”), and drew down the first US$3million on that date. This loan facility carries a twelve month repayment schedule at a fixed rate coupon of 10%. Any subsequent drawdowns will be on the same terms and subject to approval by YAGM. The Company made two further drawdowns against the facility both of US$1million each in 2014. As part of the terms of the facility, on each drawdown the Company issues Warrants over ordinary shares to YAGM in accordance with the terms of the agreement. Total warrants issued to YAGM under this agreement in 2014 were 73,718,850, each with a 3 year term and exercise prices ranging from 1.1p to 1.8p per share.

On 3 October 2015 the loan facility was amended and during the year to 31 December 2015, further drawdowns amounting to US$6.5million were made. Total warrants issued to YAGM under this agreement during 2015 were 180,579,351, each with a 3 year term and exercise prices ranging from 0.79p to 1.20p per share. In October 2016 this debt facility was repaid in full.

Convertible Loan Notes

On 8 August 2016, the Company agreed a $15million Convertible Loan Facility with Iskandar Mineral Asset Fund. The Convertible Loan is secured by a pledge over the assets of the Company, and has an interest rate of 5%. The principle is convertible at 0.65 pence which represents a premium of 5 % over the closing price on 8 August 2016. The noteholders shall have 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 is 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 has 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 is redeemable at the Company’s option prior to conversion.

The full $15million was drawn down during the year and 600million warrants issued. During the year $1,850,000 of the capital was converted into 229,063,331 ordinary shares of 0.01p at an exercise price of 0.8p per share, leaving the balance outstanding of $13,150,000 plus interest accrued.

Since the year end, on 31 January 2017, the Company announced that a further US$200,000 of the convertible loan has been converted into 24,529,629 new ordinary shares in the Company at a price of 0.65 pence per share, reducing the capital balance to $12,950,000.

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).

13     SHARE CAPITAL

31 December 2016

31 December 2015

£’000

£’000

Allotted, issued and fully paid

173,619,050 deferred shares of 0.24p

417

417

7,753,160,709 ordinary shares of 0.01p (31 December 2015: 6,815,653,495)

775

681

 1,192

 1,098

 

Ordinary shares

No.

£’000

Allotted and issued

At 31 December 2015

6,815,653,495

681

Total issue of shares during the year

937,507,214

94

At 31 December 2016

 7,753,160,709

 775

Shares Issued during the year

·      On 29 February 2016, 645,619,670 Ordinary Shares of 0.01p were issued at 0.55p per share for proceeds of £3,550,908 before share placing costs.

·      On 26 August 2016, 17,574,213 warrants were exercised for Ordinary Shares of 0.01p at 0.8p per share for proceeds of £140,594.

·      On 7 September 2016, 1,250,000 warrants were exercised for Ordinary Shares of 0.01p at 0.8p per share for proceeds of £10,000.

·      On 3 October 2016, $600,000 of the loan was converted into 71,452,658 Ordinary Shares of 0.01p at 0.65p per share.

·      On 14 October 2016, 44,000,000 warrants were exercised for Ordinary Shares of 0.01p at 0.06p per share for proceeds of £26,400. 

·      On 14 October 2016, $250,000 of the loan was converted into 31,340,633 Ordinary Shares of 0.01p at 0.65p per share.

·      On 18 October 2016, $500,000 of the loan was converted into 63,135,020 Ordinary Shares of 0.01p at 0.65p per share.

·      On 3 November 2016, $500,000 of the loan was converted into 63,135,020 Ordinary Shares of 0.01p at 0.65p per share.

·      (During year ended 31 December 2015, 312,500,000 shares were issued.)

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

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. Warrants were issued to YAGM in connection with further loan drawdowns during the year ended 31 December 2015, and their treatment has been covered in Note 14. During the year ended 31 December 2016, 322,809,835 warrants were issued to shareholders in their capacity as shareholders and 600,000,000 warrants were issued in connection with the Convertible Loan. The treatment of these has been covered in Note 14.

The following table shows details of the warrants granted and exercised during the year:

31 December 2016

31 December 2015

Number

WAEP

Number

WAEP

£

£

Outstanding at the beginning of the year

254,298,201

0.0105

73,718,850

0.01259

Granted

922,809,835

0.00784

180,579,351

0.0097

Exercised

(18,824,213)

0.0080

Outstanding at the end of the year

1,158,283,823

0.00855

254,298,201

0.0105

Exercisable at year end

1,158,283,823

254,298,201

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.  If the options remain unexercised after a period of ten years from the date of grant, the options expire.  Options all vested immediately, there are no vesting requirements.

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

31 December 2016

31 December 2015

Number

WAEP

Number

WAEP

£

£

Outstanding at the beginning of the year

327,825,000

0.00457

332,925,000

0.0045

Granted

300,000,000

0.0044

Exercised

(44,000,000)

(0.006)

Lapsed

(3,825,000)

(0.03)

(5,100,000)

(0.03)

Outstanding at the end of the year

580,000,000

0.00437

327,825,000

0.00457

Exercisable at year end

580,000,000

327,825,000

The share options outstanding at the end of the period have a weighted average remaining contractual life of 4.24 years (31 December 2015: 4.87 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 2016

31 December 2015

£

£

Number

Number

6 March 2009

6 March 2006

0.00325

0.020776

3,825,000

28 January 2013

28 January 2010

0.0006

0.0004

10,000,000

24,000,000

29 November 2013

29 November 2010

0.005

0.003537

30,000,000

13 December 2012

13 December 2012

0.0006

0.00055

20,000,000

20,000,000

28 June 2013

28 June 2013

0.0006

0.000371

10,000,000

10,000,000

21 May 2014

21 May 2014

0.0048

0.004711

200,000,000

200,000,000

23 May 2014

23 May 2014

0.0058

0.005574

40,000,000

40,000,000

1 July 2016

1 July 2016

0.0044

0.002388

300,000,000

580,000,000

327,825,000

 

The share options can be exercised up to seven years after the date first exercisable.  

At 31 December 2016 all 580,000,000 options were exercisable (31 December 2015: 327,825,000).

Share Warrants

During the year ended 31 December 2016, 322,809,835 warrants were issued to shareholders in their capacity as shareholders and 600,000,000 warrants were issued in connection with the Convertible Loan.

Additionally during the year ended 31 December 2016 Nil (2015: 180,579,351) warrants were issued to YAGM in connection with the further $6.5 million loans drawn down.

Share warrants

First exercise date (when vesting conditions are met)

Grant date

Exercise price

31 December 2016

31 December 2015

£

Number

Number

13 June 2014

13 June 2014

0.011

49,068,529

49,068,529

19 September 2014

19 September 2014

0.018

10,848,654

10,848,654

22 October 2014

22 October 2014

0.014

13,801,667

13,801,667

29 June 2015

29 June 2015

1.2

33,574,598

33,574,598

29 July 2015

29 July 2015

1.13

17,656,007

17,656,007

02 October 2015

02 October 2015

0.96

34,341,188

34,341,188

23 October 2015

23 October 2015

0.95

34,366,078

34,366,078

16 November 2015

16 November 2015

0.84

19,647,535

19,647,535

20 November 2015

20 November 2015

0.79

40,993,945

40,993,945

29 February 2016

29 February 2016

0.8

303,985,622

09 August 2016

09 August 2016

0.8

600,000,000

1,158,283,823

254,298,201

These warrants can be exercised up to three years after the date first exercisable.  At 31 December 2016 all of the 1,158,283,823 warrants were exercisable (31 December 2015: 254,298,201).

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 were as follows:

Risk free rate

Share price volatility

Expected life

Share price at date of grant

29 June 2015

2.00%

73%

3 years

£0.0094

29 July 2015

2.00%

64%

3 years

£0.0091

02 October 2015

2.00%

62%

3 years

£0.0102

23 October 2015

2.00%

52%

3 years

£0.0094

16 November 2015

2.00%

50%

3 years

£0.0080

20 November 2015

2.00%

51%

3 years

£0.0081

01 July 2016

2.00%

63%

5 years

£0.0044

09 August 2016

2.00%

68%

2 years

£0.0063

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 Group recognised total expenses of £1,869,000 (year ended 31 December 2015: £641,000) relating to equity-settled share-based payment transactions during the period.

15     CONTINGENT LIABILITIES

There were no contingent liabilities at 31 December 2016 or 31 December 2015.

16     CAPITAL COMMITMENTS

There were no capital commitments at 31 December 2016 or 31 December 2015.

17     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 TSX, AIM 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 2016, 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 2016

31 December 2015

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

  15,967

  –

 –

 15,967

  13,944

  –

 –

 13,944

Other long term financial assets

15,967

  –

  –

 15,967

  13,944

  –

 –

 13,944

Trade receivables

 –

43

 43

 –

  –

Other receivables

 –

 210

  –

 210

 –

 161

 –

  161

Prepayments and accrued income

 –

 149

 –

149

 –

  68

 –

  68

Cash and cash equivalents

 –

  4,192

 –

 4,192

 –

  893

 –

 893

Total

  15,967

 4,594

  –

20,561

  13,944

 1,122

  –

 15,066

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 loan note rate of 5% with various loan note holders and therefore minimal interest rate risk, as this is deemed its only material exposure thereto.

d           Financial liabilities

The group’s financial liabilities are classified as follows:

31 December 2016

31 December 2015

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

404

404

123

123

Tax and social security

11

11

Other payables

3

3

Accruals and deferred income

185

185

107

107

Borrowings

10,324

 –

 10,324

2,407

2,407

Total

10,742

 185

 10,927

2,530

107

  2,637

Maturity of financial liabilities

All financial liabilities at 31 December 2016 and 31 December 2015 mature in less than one year.

Borrowing facilities for the period ended 31 December 2016

The Group has committed borrowing facilities at 31 December 2016 of £10,324,000 (31 December 2015: £2,407,000). 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.

18     RELATED PARTY TRANSACTIONS

There are no related party transactions to disclose.

19     EVENTS AFTER THE END OF THE REPORTING PERIOD

On 31 January 2017, the Company announced that a further US$200,000 of its US$15 million convertible loan has been 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 24 March 2017, the Company changed its name from Rare Earth Minerals Plc to Cadence Minerals Plc by way of a statutory notice of change filed at Companies House.

20     ULTIMATE CONTROLLING PARTY

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

21     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 profit for the year was £735,000 (2015 restated: loss £700,000).

About Cadence Minerals:

Cadence is dedicated to smart investments for a greener world. The planet needs rechargeable batteries on a global scale – upcoming supersized passenger vehicles, lorries and buses – require lithium and other technology minerals to power their cells. Cadence is helping find these minerals in new places and extracting them in new ways, which will meet the demand of this burgeoning market. With over £40 million vested in key assets globally, Cadence is helping us reach tomorrow, today.

Cadence invests across the globe, principally in lithium mining projects. Its primary strategy is taking significant economic stakes in upstream exploration and development assets within strategic metals. We identify assets that have strategic cost advantages that are not replicable, with the aim of achieving lower quartile production costs. The combination of this approach and seeking value opportunities allows us to identify projects capable of achieving high rates of return.

The Cadence board has a blend of mining, commodity investing, fund management and deal structuring knowledge and experience, that is supported by access to key marketing, political and industry contacts. These resources are leveraged not only in our investment decisions but also in continuing support of our investments, whether it be increasing market awareness of an asset, or advising on product mix or path to production. Cadence Mineral’s goal is to assist management to rapidly develop the project up the value curve and deliver excellent returns on its investments.

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