TIDMCMET
RNS Number : 5262M
Capital Metals PLC
15 September 2023
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS STIPULATED
UNDER THE UK VERSION OF THE MARKET ABUSE REGULATION NO 596/2014
WHICH IS PART OF ENGLISH LAW BY VIRTUE OF THE EUROPEAN (WITHDRAWAL)
ACT 2018, AS AMED. ON PUBLICATION OF THIS ANNOUNCEMENT VIA A
REGULATORY INFORMATION SERVICE, THIS INFORMATION IS CONSIDERED TO
BE IN THE PUBLIC DOMAIN.
15 September 2023
Capital Metals plc
("Capital Metals", the "Company" or the "Group")
Final Results for the Year Ended 31 March 2023
&
Notice of General Meeting
Capital Metals (AIM: CMET), a mineral sands company approaching
mine development stage at the high-grade Eastern Minerals Project
in Sri Lanka (the "Project"), announces its final results for the
financial year ended 31 March 2023 (the "Year").
The Group's Annual Report and Accounts, together with a notice
convening a General Meeting ("GM") for the purposes of receiving
and considering the Annual Report and Accounts, will be posted to
shareholders later today and will be available shortly on the
Company's website at www.capitalmetals.com . The GM will be held at
the offices of 6 Heddon Street, London, W1B 4BT on 4 October 2023
at 11:15.
Key Points:
During the Year:
-- Grant of the first two Industrial Mining Licences ("IMLs") in August 2022
o Temporarily suspended as announced December 2022. The Company
has engaged in actions to protect its rights and restore the IMLs
which appear to be having a positive impact
-- Completion of Development Study and Project Economics in May
2022 demonstrating robust economics with a base case NPV of $155
million and IRR of 56%
Post Year End:
-- Offtake Memorandum of Understanding ("MoU") signed with LB
Group (002601:SHENZHEN; Market Cap: US$5.7 billion), the world's
No. 1 manufacturer of high-performance titanium dioxide pigments,
in May 2023 to fund the Project into production
o MoU extended in August 2023 through to 31 December 2023
-- Preparing to commence Environmental Impact Assessment over
EL199 in the southern area of the Project
o EL199 holds approximately 60% of the total mineral sands
resource of the Project stretching over 26 km from Panama in the
south to Komari in the north
-- Greg Martyr, previously Non-Executive Chairman, appointed as
Executive Chairman in July 2023 to dedicate more time to resolving
the Company's licence issues
o Concurrently, Michael Frayne stepped down as CEO and
director
-- Board confident that process to reinstate IMLs is moving in the Company's favour
For further information, please visit www.capitalmetals.com or
contact:
Capital Metals plc Via Vigo Consulting
Greg Martyr (Executive Chairman)
Vigo Consulting (Investor Relations) +44 (0)20 7390 0234
Ben Simons / Peter Jacob capitalmetals@vigoconsulting.com
SPARK Advisory Partners (Nominated
Adviser)
Neil Baldwin / James Keeshan +44 (0)20 3368 3554
Tavira Financial
Jonathan Evans / Oliver Stansfield +44 (0)20 7100 5100
About Capital Metals
Capital Metals plc is a British company listed on the AIM
segment of the London Stock Exchange and one of only a few foreign
investors in Sri Lanka's mining industry. After investing US$11
million in exploration and development activities including
detailed environmental assessments between 2017 and 2022, the
Company's Sri Lankan subsidiary, Damsila Exports (Pvt) Limited, was
issued an initial two licences in August 2022 to mine heavy mineral
sands in the Eastern Province, containing industrial minerals
including ilmenite, rutile, zircon, and garnet.
CHAIRMAN'S REPORT
Welcome to the Annual Report for Capital Metals (the "Company")
for the financial year ended 31 March 2023 (the "Year").
This was an extremely challenging year for the Company and its
shareholders. Early in the Year, we were delighted to report that
the Company had finally been granted in August 2022 the first two
Industrial Mining Licences ("IMLs") for the Eastern Minerals heavy
mineral sands project (the "Project") by the Geological Survey and
Mines Bureau of the Government of Sri Lanka ("GSMB").
This authority allows us in due course to commence mining
activities in accordance with the development plan outlined in the
Development Study and Preliminary Economic Assessment ("PEA")
completed in May 2022. This milestone also facilitated the
selection of an offtaker resulting in the signing in May 2023,
after the Year end, of a Memorandum of Understanding ("MoU") with
LB Group, the world's number one manufacturer of high-performance
titanium dioxide pigments, to fund the Project into production.
I expressed in my last Chairman's Report, our gratitude to the
Sri Lankan authorities for their cooperation in the granting of the
IMLs in challenging economic and political circumstances for the
country. What a difference a year makes!
In December 2022, we announced that our two granted IMLs had
been suspended by the GSMB, purportedly pending an investigation
into the ownership structure of our licence-holding subsidiary,
Damsila Exports Pvt Limited ("Damsila"), as it pertained to foreign
ownership. The GSMB had been aware of the ownership structure of
Damsila throughout years of dealings between 2017 and 2022
including the department's granting of exploration licences,
environmental permits and the IMLs themselves. We worked hard with
the GSMB to understand their purported concerns and agreed to
undertake a restructuring to deliver Sri Lankan ownership of 60% of
Damsila which in turn owned the EL168 permit area covering the
northern part of the Project, containing the two granted IMLs.
Despite assurances from the GSMB that this would result in the
reinstatement of the IMLs, we now understand that certain
individuals in the GSMB and its governing Ministry of Environment
had no intention of reinstating the IMLs and the request to change
our ownership structure was illegal, indeed potentially part of a
plan to illegally hand the Company's rights to favoured third
parties.
After the Year end, in May 2023, despite the GSMB specifically
instructing the Company to cease all mining activities as per its
letter suspending the IMLs, the GSMB purported to cancel our IMLs
on the grounds that we had not undertaken any mining activities.
This clearly demonstrated the malfeasance of the GSMB and the
Ministry of Environment and accordingly we promptly filed an appeal
pursuant to the Mines and Minerals Act of Sri Lanka as well as
separate writ actions in the Court of Appeal in Sri Lanka. We also
lodged a Notice of Dispute with the Attorney General of Sri Lanka
regarding potential breaches of the bilateral investment treaty
between the United Kingdom and Sri Lanka for the promotion and
protection of investments.
This has required a huge amount of work on the part of the board
and management to determine and protect the Company's legal rights.
We have been simultaneously engaging in lobbying actions directed
towards the Sri Lankan Government, financial stakeholders such as
the International Monetary Fund whose support of Sri Lanka is
predicated among other things on tackling corruption, and other
diplomatic stakeholders, with a view to resolving our issues
amicably with the GSMB.
Our complaints appear to be having a positive impact, with the
conduct of the chairman of the GSMB and Minister of Environment
coming under intense scrutiny from the Committee on Public
Enterprises in Sri Lanka ("COPE") which has appointed an
independent sub-committee to investigate misappropriation, as has
been widely reported in Sri Lankan media. We are encouraged by the
ongoing exposure of issues within the GSMB and we understand that
certain responsibilities for mining licence applications and
appraisals will be transferred to the Board of Investment ("BOI"),
which we believe would be a very positive step.
What has been most pleasing throughout this process is the
support of our prospective future offtaker, LB Group, with whom we
have been in discussions for some years. It is a testament to the
quality of the Project that, despite the prevailing licence issues,
LB Group still proceeded to sign an MoU with Capital Metals in May
2023 and then extended this, in August 2023, through to 31 December
2023. We believe Sri Lanka will benefit enormously from LB Group's
involvement in the Project. We look forward to concluding this
offtake agreement in due course.
In parallel with the Company's efforts to reinstate the IMLs in
the northern part of the Project area, we will shortly commence an
Environmental Impact Assessment ("EIA") over EL199 in the southern
area of the Project, which is not subject to the illegal actions of
the GSMB. EL199 holds approximately 60% of the total mineral sands
resource of the Project stretching over 26 km from Panama in the
south to Komari in the north. The EIA will also enable the
short-term identification of further areas over which to apply for
industrial mining licences. We aim to complete this work and submit
applications for additional industrial mining licences before the
end of 2023.
In July 2023, after the Year end, I took over the executive
management of the Company as Executive Chairman to dedicate more
time, including on the ground in Colombo, to resolving the
Company's licence issues. At the same time, Michael Frayne stepped
down as Chief Executive Officer and as a director of the Company. A
new Chief Executive Officer with experience in mine construction
and operation will be recruited in due course. I would like to
reiterate our thanks to Michael for his contributions towards the
development of the Project.
In conclusion, while there can be no certainty as to the
outcome, I believe the process to reinstate the IMLs is moving in
our favour. Given the exceptional project economics demonstrated in
the PEA, even on conservative price assumptions, and before
considering further upside from other areas of the Project, the
future looks bright for the Company upon overcoming the
interference of a small number of individuals. It is our intention
when that happens to work with LB Group to deliver a Project that
uses modern mining methods, incorporates in-country value-addition,
offers local knowledge transfer, and generates significant export
income for Sri Lanka.
We look forward to restoring normal relations with the GSMB with
the ongoing input of the BOI. We had until the interference of a
few bad actors been working cooperatively for many years with the
GSMB including extensive work on our studies and Environmental
Impact Assessments.
I would like to finish by thanking our management team in Sri
Lanka for their unstinting efforts in the face of challenging
circumstances, and our investors, including those who supported the
Company's capital raises, after the Year end, in June and July 2023
which are enabling us to continue our actions to get Project
development back on track. I sincerely hope all stakeholders will
in due course be rewarded.
Gregory Martyr
Executive Chairman
14 September 2023
STRATEGIC REPORT
The Directors of the Company present their Strategic Report on
the Group for the year ended 31 March 2023.
Strategic approach
The Group's aim is to create value for shareholders through the
exploration and development of high-grade mineral sands. The
Group's strategy is to continue to progress the development of the
Project in Sri Lanka towards production in the near future.
Organisation overview
The Group's business is directed by the Board and is managed on
a day-to-day basis by the Chief Executive Officer and since his
departure by the Executive Chairman. The Board monitors compliance
with objectives and policies of the Group through monthly
performance reporting, budget updates and periodic operational
reviews.
The Board comprises one Executive Chairman and two Non-Executive
Directors.
Review of business
During the Year the work programme built on previous exploration
efforts continued and the first two IMLs for the Project were
granted by the GSMB as outlined in the PEA which was completed in
May 2022.
In December 2022 the Company announced that these IMLs were
temporarily suspended purportedly due to concerns the GSMB had with
the ownership structure of Damsila. This resulted in a restructure
of the Group.
In May 2023 the GSMB sent a notice of cancellation of the IMLs
purportedly due to failure to comply with certain licence
conditions, primarily relating to a lack of mining activity,
despite the GSMB's instructions when suspending the IMLs to "stop
all mining and transport activities with immediate effect."
The Board is consulting with its international and local legal
advisers but considers the reasons for the notice of cancellation
to be devoid of merit and standing in contradiction to previous
instructions issued by the GSMB.
The Group is following the appeal procedure in accordance with
Sri Lanka's Mines and Minerals Act which stipulates that a
cancellation shall not take effect unless and until an appeal has
been disallowed. It has also been noted the GSMB is under
investigation for misappropriation within its organisation.
The Board is confident both the notice of cancellation and
temporary suspension of the licence will be lifted once due process
has been completed.
In parallel with the Company's efforts to reinstate the IMLs in
the northern part of the Project area, the Group will shortly
commence an EIA over EL199 in the southern area of the Project,
which is not subject to the illegal actions of the GSMB, with a
view to also submit applications for additional industrial mining
licences before the end of 2023.
Since the Year end, financing was raised with the completion of
a Placing, raising a total of GBP500,000 through the placing of
50,000,000 Ordinary Shares. Further financing was raised through a
subscription for 36,470,566 Ordinary Shares raising gross proceeds
of GBP364,705.
Financial performance review
The loss of the Group for the year ended 31 March 2023 before
taxation amounts to $1,138,538 (31 March 2022: $1,914,233).
The Board monitors the activities and performance of the Group
on a regular basis. The Board uses financial indicators based on
budget versus actual to assess the performance of the Group. The
indicators set out below will continue to be used by the Board to
assess performance over the period to 31 March 2024.
The three main KPIs for the Group are as follows. These allow
the Group to monitor costs and plan future exploration and
development activities:
KPI 2023 2022
-------------------------------------------------- --------- -----------
Cash and cash equivalents $216,213 $1,775,754
-------------------------------------------------- --------- -----------
Administrative expenses as a percentage of total
assets 23% 18%
-------------------------------------------------- --------- -----------
Exploration costs capitalised during the period $287,688 $490,256
-------------------------------------------------- --------- -----------
Cash has been used to fund the Group's operations and facilitate
its investment activities (refer to the Statements of Cash
Flows).
Administrative expenses are the expenses related to the Group's
ability to run the corporate functions to ensure they can perform
their operational commitments.
Exploration costs capitalised during the period consist of
exploration expenditure on the Group's exploration licences net of
foreign exchange rate movements.
Our people
Our people are a key element in our success and the Company aims
to attract, develop and retain talented people and to create a
diverse and inclusive working environment, where everyone is
accepted, valued and treated equally without discrimination, taking
into account the current size of the Company.
Currently the Company comprises three directors, one key country
manager and 18 employees in Sri Lanka, with the workforce by gender
summarised below:
As at 31 March 2023 Male Female
------------------------- ----- -------
Executive Directors 1 -
Non-Executive Directors 2 -
Key Management 1 -
Employees 14 4
------------------------- ----- -------
All employees 18 4
------------------------- ----- -------
Principal risks and uncertainties
The management of the business and the execution of the Group's
strategy are subject to a number of risks. The key business risks
affecting the Group are outlined below.
The Company continuously monitors its risk exposures and reports
to the Board on a regular basis. Risks are reviewed by management
and the Board, and appropriate processes are put in place to
monitor and mitigate them. If more than one event occurs, it is
possible that the overall effect of such events would compound the
possible adverse effects on the Group.
Exploration, evaluation and development risk
The exploration and mining business is controlled by a number of
global factors, principally supply and demand which in turn is a
key driver of global mineral prices; these factors are beyond the
control of the Group. Exploration is a high-risk business and there
can be no guarantee that any mineralisation discovered will result
in proven and probable reserves or go on to be an operating mine.
At every stage of the exploration process the projects are
rigorously reviewed to determine if the results justify the next
stage of exploration expenditure ensuring that funds are only
applied to high priority targets.
The principal assets of the Group comprising the mineral
exploration licences are subject to certain financial and legal
commitments. If these commitments are not fulfilled the licences
could be revoked. They are also subject to legislation defined by
the Government; if this legislation is changed it could adversely
affect the value of the Group's assets.
Dependence on key personnel
The Group and Company is dependent upon its executive management
team and various technical consultants. Whilst it has entered into
contractual agreements with the aim of securing the services of
these personnel, the retention of their services cannot be
guaranteed. The development and success of the Group depends on its
ability to recruit and retain high quality and experienced staff.
The loss of the service of key personnel or the inability to
attract additional qualified personnel as the Group grows could
have an adverse effect on future business and financial
conditions.
Uninsured risk
The Group, as a participant in exploration and development
programmes, may become subject to liability for hazards that cannot
be insured against or third-party claims that exceed the insurance
cover. The Group may also be disrupted by a variety of risks and
hazards that are beyond control, including geological, geotechnical
and seismic factors, environmental hazards, industrial accidents,
occupational and health hazards and weather conditions or other
acts of God.
Funding risk
The only sources of funding currently available to the Group are
through the issue of additional equity capital in the parent
company or through bringing in partners to fund exploration and
development costs. The Company's ability to raise further funds
will depend on the success of the Group's exploration activities
and its investment strategy. The Company may not be successful in
procuring funds on terms which are attractive and, if such funding
is unavailable, the Group may be required to reduce the scope of
its exploration activities or relinquish some of the exploration
licences held for which it may incur fines or penalties.
Financial risks
The Group's operations expose it to a variety of financial risks
that can include market risk (including foreign currency, mineral
price and interest rate risk), credit risk, and liquidity risk. The
Group has a risk management programme in place that seeks to limit
the adverse effects on the financial performance of the Group by
monitoring levels of debt finance and the related finance costs.
The Group does not use derivative financial instruments to manage
interest rate costs and, as such, no hedge accounting is
applied.
Environmental risk
There may be unforeseen environmental liabilities resulting from
both future or historic exploration or mining activities, which may
be costly to remedy. In addition, potential environmental
liabilities as a result of unfulfilled environmental obligations by
the previous owners may impact the Group. If the Group is unable to
fully remedy an environmental problem, it may be required to stop
or suspend operations or enter into interim compliance measures
pending completion of the required remedy.
Environmental management systems are in place to mitigate
environmental risks, including the engagement of an independent and
multi-disciplinary team of consultants.
Government regulation, political and country risks
The Project is located in Sri Lanka, where the Group's
activities may be affected in varying degrees by political
stability, governmental regulations and economic stability. Any
changes in regulations or shifts in political attitudes in these
countries or any other countries in which the Group may operate are
beyond the control of the Group and may adversely affect its
operations.
The Group actively monitors political and regulatory
developments through its team of management, local partners,
consultants and advisors.
Environmental, Social and Governance
The Project has the potential to open significant new economic
opportunities in eastern Sri Lanka, and the Group's work with local
communities and commitment to ecologically sensitive production
procedures that ensures all mining areas are fully rehabilitated.
Some benefits to the local community from development of the
Project include:
-- New high-quality construction, mining and processing work for
local workers as well as demand for local contracting services. The
Group's construction, mining and processing work will employ local
workers, who will be trained and supported by local and foreign
mining experts. Demand for contractor services is expected to
create a multiplier effect benefiting the wider economy and
transferring skills/knowledge to the local work force.
-- Community initiatives include waste disposal programmes,
assisting reforestation campaigns, ongoing financial and training
support for the local farmers, provision of clean and safe drinking
water during the dry seasons, sponsorships for local community
based sports events and educational projects.
-- Full consultation with the local community on any potential
environmental impact from the Project, and commitment to modern
international mineral sands processing integrating land
rehabilitation into the mining process.
-- Potential to free up the port for the local fishing industry
and commercial shipping by removing the significant volume of sand
that has filled the port area due to the coastal currents
depositing sand in the harbour.
-- Taxes and royalties flowing from the Group's operations will
generate government revenues for reinvestment in Sri Lanka's
continued economic development.
-- The Country will also benefit from foreign direct investment
to bring the mine into production and export earnings from the sale
of the products into the international market.
The economic activity stimulated by the Project will be
complemented by the Group's ongoing engagement with the Eastern
Province's local community. The Company has already demonstrated
its commitment to the coastal environment in which it will operate
sponsoring beach cleaning programmes with community leaders and
assisting a reforestation programme conducted by the local forest
department.
The Group is working closely with local communities in the
Project area, to empower local farmers by providing seedlings, and
arranging expert advice through local agricultural experts
sponsored by the group. Another initiative helps local youth to get
more involved in sports by providing sporting equipment and
sponsoring local community tournaments. Arrangements are also being
made to promote programmes that increase language proficiency and
IT literacy in the local A/L students in the project area.
The Board and local management team are monitoring the economic
and political developments in Sri Lanka. The Board expects that
recent policy changes should enable change to occur more rapidly
with increased international cooperation and an overriding
requirement to encourage foreign investment and job creation in the
country.
Environmentally sensitive mining
The Group is committed to pursuing modern international mineral
sands mining and rehabilitation processes that will respect the
coastline along which the Project will operate.
The Project's commercial mineral sands will be extracted using
proven non-chemical processing methods. The proposed mining method
is staged mining of small 150m x 50m cells, with each cell
continuously rehabilitated after mining and then fully available
for alternative uses such as agriculture and tourism, or to remain
as a wilderness.
Well-regulated mineral sands programmes integrate land
rehabilitation into the mining process. The shallow depth of
mineral sands deposits allow them to be mined using conventional
surface mining methods including bulldozers, excavators and trucks.
Topsoil, subsoil and clay is removed and stockpiled separately to
allow it to be progressively returned after the mining process. The
mineral sand deposit is then removed from the ground and then
transported to a processing plant where the valuable heavy minerals
are separated from the sand. The waste sand (mostly silica) is
transported back to the mining cell, where it is returned to the
ground. Subsoil and topsoil are then replaced and the land
rehabilitated back to its original use.
Directors' statement under section 172 (1) of the Companies Act
2006
The Companies (Miscellaneous Reporting) Regulations 2018 require
Directors to explain how they considered the interests of key
stakeholders and the broader matters set out in section 172(1) (a)
to (f) of the Companies Act 2006 ("S172") when performing their
duty to promote the success of the Company under S172. This
includes considering the interest of other stakeholders which will
have an impact on the long-term success of the company.
This S172 statement explains how the Directors have regard
to:
(a) the likely consequences of any decision in the long
term,
(b) the interests of the Company's employees,
(c) the need to foster the Company's business relationship with suppliers, customers and others,
(d) the impact of the Company's operations on the community and
environment,
(e) the desirability of the Company maintaining a reputation for
high standards of business conduct, and
(f) the need to act fairly as between members of the Company.
The S172 statement focuses on matters of strategic importance to
the Company and the Group, and the level of information disclosed
is consistent with the size and the complexity of the business.
General confirmation of Directors' duties
The Board has a clear framework for determining the matters
within its remit and has approved Terms of Reference for the
matters delegated to its Committees. Certain financial and
strategic thresholds have been determined to identify matters
requiring Board consideration and approval. When making decisions,
each Director ensures that they act in good faith in the way most
likely to promote the Company's success for the benefit of its
members as a whole.
S172(1) (a) "The likely consequences of any decision in the long
term"
The application of the Section 172 (1) requirements can be
demonstrated in relation to some of the key decisions made during
the reporting period, including:
-- completion of the Preliminary Economic Assessment ('PEA')
-- grant of Industrial Mining Licences for the Project
-- completion of equity financing post year end raising
GBP500,000 to further the company's exploration program
-- completion of a post year end subscription raising gross proceeds of GBP364,705
-- commitment to developing an exploration strategy for the
Project towards increasing the overall resource and target of high
value areas of the Project
-- continued assessment of corporate overheads and expenditure
The Group is focused on the development of the Eastern Minerals
Project in Sri Lanka. The raising of new capital advances the
Company's objective, facilitating access to a significant and
globally respected financial market to raise funds from deep pools
of institutional and private investors, towards the development of
the Project, whilst providing important liquidity to
shareholders.
Although the current resource is of sufficient size for
commercial mining operations, the Group is to develop an
exploration strategy towards increasing the size of the resource
and target of high value areas, enhance the economics of the
Project and drive further value to shareholders, as well as further
socio-economic benefits to stakeholders through increased
production. The undertaking of further significant drilling will be
subject to procuring sufficient further funding.
Management assesses overheads and expenditure on an ongoing
basis towards the most effective utilisation of funds to meet Group
business and strategic objectives to the benefit of
shareholders.
S172(1) (b) "The interests of the company's employees"
The Board recognises that the Company's employees are
fundamental and core to our business and delivery of our strategic
ambitions. The success of our business depends on attracting,
retaining and motivating employees. From ensuring that we remain a
responsible employer, from pay and benefits to our health, safety
and workplace environment, the Directors factor the implications of
decisions on employees and the wider workforce, where relevant and
feasible.
S172(1) (c) "The need to foster the company's business
relationships with suppliers, customers and others"
Delivering on our strategy to develop the Project requires
strong mutually beneficial relationships with suppliers, customers,
governments, and local partners. We aim to have a positive and
enduring impact on the communities in which we operate, including
engagement with local suppliers, and through payments to
governments in taxes and other fees. The Group values all of its
suppliers and aims to build strong positive relationships through
open communication and adherence to trade terms. The Group is
committed to being a responsible entity and doing the right thing
for its customers, suppliers and business partners.
S172(1) (d) "The impact of the company's operations on the
community and the environment"
As a mineral sands Group operating in Sri Lanka, the Board takes
seriously its ethical responsibilities to the communities and
environment in which it works. We abide by the local and relevant
UK laws on anti-corruption and bribery. The Group is committed to
following modern international practices on environmental aspects
of our work and the development of the Project. We actively engage
with the local communities in order to ensure we maintain our
social licence to operate and develop the Project. Management and
employees conduct site visits and hold external stakeholder
engagements. Wherever possible, local communities are engaged in
the Group's activities and the development of the Project will
provide much needed employment and wider socio-economic benefits to
the local communities.
S172(1) (e) "The desirability of the company maintaining a
reputation for high standards of business conduct"
The Group aims to achieve the development of the Project in ways
which are economically, environmentally and socially responsible.
The Board periodically reviews and approves clear frameworks, such
as the Company's Code of Business Ethics, to ensure that its high
standards are maintained both within the Group and the business
relationships we maintain. This, complemented by the various ways
the Board is informed and monitors compliance with relevant
governance standards, help ensure its decisions are taken and that
the Group acts in ways that promote high standards of business
conduct.
S172(1) (f) "The need to act fairly as between members of the
company"
After weighing up all relevant factors, the Directors consider
which course of action best enables delivery of our strategy over
the long-term, taking into consideration the impact on
stakeholders. The Directors believe they have acted in the way they
consider most likely to promote the success of the Company for the
benefit of its members as a whole.
The Board is committed to maintaining good communication and
having constructive dialogue with its shareholders. The Company has
close ongoing relationships with key private shareholders, analysts
and brokers, providing the opportunity to discuss issues and
provide feedback at meetings with the Company. All shareholders are
encouraged to attend the Company's Annual General Meeting and any
general meetings held by the Company.
Outlook
The reporting period saw positive progress towards the major
milestones with the approval of the EIA and IMLs which was clearly
undermined by the illegal activities in the GSMB to ultimately seek
to cancel the Licences. The Board remains confident that the
Licences will be reinstated but there can be no guarantee in this
regard.
In common with many exploration and evaluation entities, the
Group will need to raise further funds within the next 12 months,
in order to meet its expected expenditures, and progress the Group
into construction and finally into production. For further details
please see the going concern disclosure in Note 2.4.
We look forward to reporting on the next phase of the Project,
including reinstatement of the Licences and raising finance from
potential offtakers towards construction and bringing the Project
into production.
Greg Martyr
Executive Chairman
14 September 2023
DIRECTORS' REPORT
The Directors present their Annual Report on the affairs of
Capital Metals plc together with the Financial Statements for the
year ended 31 March 2023.
Principal activities
The principal activity of the Group is the development of the
Eastern Minerals Project located in the Ampara District of the
Eastern Province of Sri Lanka.
Dividends
The Directors do not recommend the payment of a dividend for the
year (2022: Nil).
Directors & Directors' interests
The Directors who served during the year ended 31 March 2023 are
shown below and had, at that time the following beneficial
interests in the shares of the Company:
31 March 2023 31 March 2022
----------------------- -----------------------
Ordinary Options Ordinary Options
Shares Shares
-------------------- ----------- ---------- ----------- ----------
Gregory Martyr 4,582,746 1,500,000 4,582,746 1,500,000
-------------------- ----------- ---------- ----------- ----------
Michael Frayne (1) 13,190,006 3,000,000 13,190,006 3,000,000
-------------------- ----------- ---------- ----------- ----------
James Leahy 188,333 1,500,000 188,333 1,500,000
-------------------- ----------- ---------- ----------- ----------
Teh Kwan Wey - 500,000 - 500,000
-------------------- ----------- ---------- ----------- ----------
(1) Michael Frayne resigned on 30 June 2023
Further details on options can be found in Note 16 to the
Financial Statements.
Substantial shareholders
The substantial shareholders at 31 March 2023 are shown
below:
31 March 2023 7 September 2023
---------------------------- ------------------------ ------------------------
Holding Percentage Holding Percentage
---------------------------- ----------- ----------- ----------- -----------
Brent Holdings Limited 24,793,095 13.11 24,793,095 8.93
---------------------------- ----------- ----------- ----------- -----------
Bart Properties Pty Ltd - - 16,438,725 5.92
---------------------------- ----------- ----------- ----------- -----------
Roman Resources Management
Pty Ltd 14,423,869 7.63 14,423,869 5.20
---------------------------- ----------- ----------- ----------- -----------
Stanton Investment Limited 12,678,820 6.70 12,678,820 4.57
---------------------------- ----------- ----------- ----------- -----------
KL-Kepong International
Ltd 11,197,984 5.92 11,822,984 4.26
---------------------------- ----------- ----------- ----------- -----------
Chulu Holding Pty Ltd 8,093,048 4.27 9,093,048 3.28
---------------------------- ----------- ----------- ----------- -----------
Post year end there was a placing to raise gross proceeds of
GBP500,000 through a placing of 50,000,000 new ordinary shares and
a subscription to raise gross proceeds of GBP364,705 through a
subscription for 36,470,566 new ordinary shares.
Corporate responsibility
The Board is committed to ensuring good standards of corporate
governance in so far as practicable for a company of this size. The
London Stock Exchange has required all AIM companies to apply a
recognised corporate governance code. In connection with these
requirements, the Quoted Companies Alliance has published a
Corporate Governance Code which the Company has adopted. The
Company has adopted and operates a share dealing code for Directors
and senior employees on substantially the same terms as the Model
Code appended to the Listing Rules of the UK Listing Authority.
Information in relation to the Corporate Governance of the Group is
contained within the Corporate Governance Report.
Environmental
The Group's operations are, and will be, subject to
environmental regulation (with regular environmental impact
assessments and evaluation of operations required before any
permits are granted to the Group) in the jurisdiction in which it
operates. Although the Group intends to be in compliance with all
applicable environmental laws and regulations, there are certain
risks inherent to its activities, such as accidental spills,
leakages or other circumstances, which could subject the Group to
extensive liability. Further, the Group may fail to obtain the
required approval from the relevant authorities necessary for it to
undertake activities which are likely to impact the environment.
The Group is unable to predict the effect of additional
environmental laws and regulations which may be adopted in the
future, including whether any such laws or regulations would
materially increase the Group's cost of doing business or affect
its operations in any area. No environmental breaches have been
notified by any governmental agency as at the date of this
report.
Health and safety
The Group operates a comprehensive health and safety programme
to ensure the wellness and security of its employees. The control
and eventual elimination of all work-related hazards requires a
dedicated team effort involving the active participation of all
employees. A comprehensive health and safety programme is the
primary means for delivering best practices in health and safety
management. This programme is regularly updated to incorporate
employee suggestions, lessons learned from past incidents and new
guidelines related to new projects with the aim of identifying
areas for further improvement of health and safety management. This
results in continuous improvement of the health and safety
programme. Employee involvement is regarded as fundamental in
recognising and reporting unsafe conditions and avoiding events
that may result in injuries and accidents.
Employment policies and remuneration
The Company is committed to promoting policies which ensure that
high calibre employees are attracted, retained and motivated, to
ensure ongoing success for the business. Employees and those who
seek to work with the Company are to be treated equally regardless
of sex, marital status, creed, age, colour, race or ethnic
origin.
Directors' remuneration
The Group remunerates the Directors at a level commensurate with
the size of the Group and the experience of its Directors. The
Board has reviewed the Directors' remuneration and believes it
upholds the objectives of the Company and the Group with regard to
this issue.
Please refer to Note 20 for details of Directors'
remuneration.
Energy and carbon report
The Group is not required to report energy and emissions
information under The Companies (Directors' Report) and Limited
Liability Partnerships (Energy and Carbon Report) Regulations 2018,
given its size. The Group will review providing voluntary
disclosures in future reporting periods, where it continues to be
below the reporting thresholds.
Corporate and social responsibility
The Company maintains high, ethical standards in its business
activities. We act responsibly, promoting accountability as
individuals and as a company. We operate with ethics and fairness
and comply with all required rules and regulations.
The Company requires that in respect to all of it operations
there runs alongside this a comprehensive community engagement
plan. It is vital that we engage, listen and communicate
effectively with local communities, particularly when they begin
the process of planning new developments. Whilst the Company is
cognisant of its corporate social responsibilities, the Company
considers that it is not of the size to warrant a formal
policy.
Going concern
These financial statements have been prepared on the going
concern basis, as set out in Note 2.4.
The Directors have prepared cash flow forecasts for the period
ending 31 March 2025, which take into account the cost and
operational structure of the Group and Parent Company, planned
exploration and evaluation expenditure, licence commitments and
working capital requirements. These forecasts indicate that the
Group and Company's cash resources are not sufficient to cover the
projected expenditure for the period of 12 months from the date of
approval of these financial statements. These forecasts indicate
that the Group and Parent Company, in order to meet their
operational objectives, and expected liabilities as they fall due,
will be required to raise additional funds within the next 12
months.
Whilst the Directors are confident that they will be able to
secure the necessary funding, the current conditions do indicate
the existence of a material uncertainty that may cast significant
doubt regarding the applicability of the going concern assumption
and the auditors have made reference to this in their audit report.
The Directors are confident in the Company's ability to raise
additional funds as required, from existing and/or new investors,
within the next 12 months. Thus, they continue to adopt the going
concern basis of accounting preparing these financial
statements.
Directors' and Officers' indemnity insurance
The Company maintains a directors' and officers' liability
policy on normal commercial terms which includes third party
indemnity provisions.
Financial Risk Management Objectives
The Group's activities expose it to foreign currency, credit and
liquidity risks. The size of the Company means that it is
unnecessary and impractical for the Directors to delegate the
responsibility of monitoring financial risk management to a
sub-committee of the Board. Refer to Note 3.1 of the financial
statements, for further details.
Events after the reporting period
Events after the reporting period are set out in Note 27 to the
Financial Statements.
Future developments
Details of future developments for the Group are disclosed in
the Chairman's Report.
Provision of information to Auditor
So far as each of the Directors is aware at the time this report
is approved:
-- there is no relevant audit information of which the Company's auditor is unaware; and
-- the Directors have taken all steps that they ought to have
taken to make themselves aware of any relevant audit information
and to establish that the auditor is aware of that information.
Appointment of Auditors
The Group appointed PKF Littlejohn LLP as auditor in September
2022 in accordance with Section 485 of the Companies Act 2006. PKF
Littlejohn LLP has signified its willingness to continue in office
as auditor.
This report was approved by the Board on 14 September 2023 and
signed on its behalf.
Greg Martyr
Executive Chairman
14 September 2023
STATEMENT OF DIRECTORS RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report
and the Financial Statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
are required to prepare the Group and Company financial statements
in accordance with UK adopted international accounting standards.
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Company and of the
profit or loss of the Group and Company for that period.
In preparing these Financial Statements, the Directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgments and accounting estimates that are reasonable and prudent;
-- state whether they have been prepared in accordance with UK
adopted international accounting standards subject to any material
departures disclosed and explained in the financial statements;
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and the
company will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's and
Group's transactions and disclose with reasonable accuracy at any
time the financial position of the Group and Company and enable
them to ensure that the Financial Statements comply with the
Companies Act 2006. They are also responsible for safeguarding the
assets of the Group and Company, and hence for taking reasonable
steps for the prevention and detection of fraud and other
irregularities.
Website publication
The Directors are responsible for ensuring the annual report and
the financial statements are made available on a website. Financial
statements are published on the Company's website in accordance
with legislation in the United Kingdom governing the preparation
and dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity
of the Company's website is the responsibility of the Directors.
The Directors' responsibility also extends to the ongoing integrity
of the financial statements contained therein.
The Company is compliant with AIM Rule 26 regarding the
Company's website.
The Directors confirm that they have complied with the above
requirements in preparing the Financial Statements.
CORPORATE GOVERNANCE REPORT
The Company continues to be guided by the Quoted Companies
Alliance Corporate Governance Code. Throughout the past year, the
Company has complied with all aspects of the QCA Code and completed
periodic reviews of its charter in order to maintain the robustness
of its governance systems. No material issues were identified over
the past twelve months.
The Company is committed to maintaining the highest standards in
corporate governance throughout its operations and to ensure all of
its practices are conducted transparently, ethically and
efficiently. The Company believes scrutinising all aspects of its
business and reflecting, analysing and improving its procedures
will result in the continued success of the Company and deliver
value to shareholders. Therefore, and in accordance with the AIM
Rules for Companies (the "AIM Rules"), the Company has chosen to
formalise its governance policies by complying with the UK's Quoted
Companies Alliance Corporate Governance Code 2018 (the "QCA
Code").
The Board currently consists of three Directors: the Executive
Chairman, and two Non-Executive Directors ("NED"s). The Board
considers that appropriate oversight of the Company is provided by
the currently constituted Board.
Corporate Governance Report
The QCA Code sets out 10 principles that should be applied.
These are listed below together with a short explanation of how the
Company applies each of the principles:
Principle One
Business Model and Strategy
The business objective of the Group is to successfully evaluate,
permit, finance and develop the Eastern Minerals Project in Sri
Lanka into a profitable mining operation in a socially and
environmentally responsible way. The Company's business model and
strategy are outlined in the strategic report.
Principle Two
Understanding Shareholder Needs and Expectations
The Board is committed to maintaining good communications and
having constructive dialogue with its shareholders. Institutional
shareholders and analysts have the opportunity to discuss issues
and provide feedback at meetings with the Company. In addition, all
shareholders are encouraged to attend the Company's Annual General
Meeting and any other General Meetings that are held throughout the
year.
Investors also have access to current information on the Company
through its website www.capitalmetals.com and its Executive
Chairman, who is available to answer investor relations enquiries
at: info@capitalmetals.com . The Company provides regulatory,
financial and business news updates through the Regulatory News
Service in accordance with the AIM Rules for Companies.
Principle Three
Considering Wider Stakeholder and Social Responsibilities
The Board recognises that the long-term success of the Group is
reliant upon the collective efforts of management, employees,
consultants, suppliers, regulators and other stakeholders. The
Board has put in place a range of processes and systems to ensure
that there is close oversight and contact with its key resources
and relationships, including ongoing two-way communication, control
and feedback processes to enable appropriate and timely
response.
As part of the Industrial Mining Licences application by the
Group for the Project in Sri Lanka, which were subsequently granted
in the year, a detailed social impact assessment study was
undertaken, as well as a public stakeholder consultation process.
The results of this public consultation and engagement process have
been overall positive, with the Project receiving overall support
from relevant stakeholders.
Principle Four
Risk Management
The Board regularly reviews the risks to which the Group is
exposed and ensures through its meetings and regular reporting that
these risks are minimised as far as possible whilst recognising
that its business opportunities carry an inherently high level of
risk. The principal risks and uncertainties facing the Group at
this stage and in the foreseeable future are detailed in the Risk
Factors report of the Company's AIM Admission Document which is
available on the Company's website www.capitalmetals.com .
Principle Five
A Well-Functioning Board of Directors
The Board's role is to agree the Company's long-term direction
and strategy and monitor achievement of key milestones against its
business objectives. The Board meets formally at regular intervals
for these purposes and holds additional meetings when necessary to
transact other business. The Board receives reports for
consideration on all significant strategic, operational and
financial matters.
The Board is comprised of a Chief Executive Officer (Michael
Frayne who resigned on 30 June 2023); Executive Chairman (Greg
Martyr) and two NEDs (James Leahy and Teh Kwan Wey). Each member of
the Board is committed to spending sufficient time to enable them
to carry out their duties as a Director. The Board meets regularly
throughout the year as deemed appropriate formally and informally,
in person and by telephone.
The Company constantly keeps under review the constitution of
the Board and may seek to add more members as required as the
Company grows and develops. Biographies for each member of the
Board is provided on the Company's website www.capitalmetals.com
.
The Board as a whole considers the NEDs to be independent of
management and free from any business or other relationship which
could materially interfere with the exercise of their independent
judgement.
The Board has implemented an effective committee structure to
assist in the discharge of its responsibilities. All committees of
the Board have written terms of reference dealing with their
authority and duties. The Company Secretary acts as secretary to
each of these committees.
Details of the Directors' attendance at the Board and Board
committee meetings are set out below:
Board Meetings Audit committee
attended
Gregory Martyr 5/5 2/2
--------------- ----------------
Michael Frayne 5/5 -
--------------- ----------------
James Leahy 5/5 -
--------------- ----------------
Teh Kwan Wey 5/5 2/2
--------------- ----------------
Principle Six
Appropriate Skills and Experience of the Directors
The Board considers the current balance of sector, financial and
public market skills and experience which it embodies is
appropriate for the size and stage of development of the Company
and that the Board has the skills and requisite experience
necessary to execute the Company's strategy and business plan
whilst also enabling each Director to discharge their fiduciary
duties effectively. Biographies for each member of the Board is
provided on the Company's website www.capitalmetals.com .
All Directors, through their involvement in other listed
companies as well as the Company, including attendance at seminars,
forums and industry events and through their memberships of various
professional bodies, keep their skill sets up to date.
The Board reviews annually, and when required, the
appropriateness of its mix of skills and experience to ensure that
it meets the changing needs of the Company.
The Company has a professional Company Secretary in the UK who
assists the Board in preparing for and running effective Board
meetings, including the timely dissemination of appropriate
information. The Company Secretary provides advice and guidance to
the extent required by the Board on the legal and regulatory
environment.
Principle Seven
Evaluation of Board Performance
Review of the Group's progress against the long-term strategy
and aims of the business provides a means to measure the
effectiveness of the Board. This progress is reviewed in Board
meetings held at least six times a year. The Chief Executive
Officer's performance is reviewed once a year by the Board and
measured against a definitive list of strategic targets set by the
Board.
The Group conducts periodic reviews of its Board succession
planning protocols which includes an assessment of the number of
Board members and relative experience of each Board member
vis-a-vis the Company's requirements given its stage of
development, with the goal of having in place an adequate and
sufficiently experienced Board at all times.
Principle Eight
Corporate Culture
The corporate culture of the Company is promoted throughout its
employees and consultants and is underpinned by compliance with
local regulations and the implementation and regular review and
enforcement of various policies including a Share Dealing Policy
and Code, Anti-Corruption and Anti-Bribery Policy, Matters Reserved
for the Board, Code of Business Ethics, Whistle Blowing Policy, and
Media and Communications Policy, so that all aspects of the Company
are run in a robust and responsible way.
The Board is aware that the culture set by the Board will impact
all aspects of the Group and the way that employees and consultants
behave. The exploration, evaluation and development of mineral
resources can have a significant impact and it is important that
the communities view the Group's activities positively. Therefore,
the importance of sound ethical values and behaviours is crucial to
the ability of the Group to successfully achieve its corporate
objectives.
Principle Nine
Maintenance of Governance Structures and Processes
The Board is responsible for setting the vision and strategy for
the Company to deliver value to the Company's shareholders by
effectively putting in place its business model.
The roles and responsibility of the Chief Executive Officer,
Executive Chairman and other Directors are laid out below:
-- The Chief Executive Officer's primary responsibilities are
to: implement the Company's strategy in consultation with the
Board; take responsibility for the Company's projects in Sri Lanka;
run the Company on a day-by-day basis; implement the decisions of
the Board; monitor, review and manage key risks; act as the
Company's primary spokesman; communicate with external audiences
such as investors, analysts and media; and be responsible for the
administration of all aspects of the Company.
-- The Executive Chairman's primary responsibilities are to:
lead the Board and to ensure the effective working of the Board; in
consultation with the Board, ensure good corporate governance and
set clear expectations with regards to the Company culture, values
and behaviour; set the Board's agenda and ensures that all
Directors are encouraged to participate fully in the
decision-making process of the Board and take responsibility for
relationships with the Company's professional advisers and major
shareholders.
-- The Company's NEDs participate in all Board level decisions and play a particular role in the determination and articulation of strategy. The Company's NEDs provide oversight and scrutiny of the performance of the Executive Directors, whilst both constructively challenging and inspiring them, thereby ensuring the business develops, communicate and execute the agreed strategy and operate within the risk management framework.
-- The Company Secretary is responsible for ensuring that Board
procedures are followed and applicable rules and regulations are
complied with.
The whole Board is responsible for the appointment of all
additional and replacement Executive and Non-Executive
Directors.
The Board is supported by the audit and remuneration committees
as described below.
Audit Committee
The Audit Committee comprises Greg Martyr (Chair) and Teh Kwan
Wey.
The Audit Committee reviews reports from management and from PKF
Littlejohn LLP, the Company's auditor, relating to the interim and
annual accounts and to the system of internal financial
control.
The Audit Committee is responsible for assisting the Board's
oversight of the integrity of the financial statements and other
financial reporting, the independence and performance of PKF
Littlejohn LLP, the regulation and risk profile of the Company and
the review and approval of any related party transactions. The
Audit Committee may hold private sessions with PKF Littlejohn LLP
without management present. Further, the Audit Committee is
responsible for making recommendations to the Board on the
appointment of PKF Littlejohn LLP and the audit fee and reviews
reports from management and PKF Littlejohn LLP on the financial
accounts and internal control systems used throughout the
Company.
The Audit Committee meets at least two times a year and is
responsible for ensuring that the Company's financial performance
is properly monitored, controlled and reported. The Audit Committee
is responsible for the scope and effectiveness of the external
audit and compliance by the Company with statutory and other
regulatory requirements.
The Audit Committee:
-- monitors in discussion with PKF Littlejohn LLP the integrity
of the financial statements of the Company, any formal
announcements relating to the Company's financial performance and
reviews significant financial reporting judgments contained in
them;
-- reviews the Company's internal financial controls and reviews
the Company's internal control and risk management systems;
-- considers annually whether there is a need for an internal
audit function and makes a recommendation to the Board;
-- makes recommendations to the Board for it to put to the
shareholders for their approval in the general meeting, in relation
to the appointment, re-appointment and removal of PKF Littlejohn
LLP and to approve the remuneration and terms of engagement of PKF
Littlejohn LLP;
-- reviews and monitors PKF Littlejohn LLP's independence and
objectivity and the effectiveness of the audit process, taking into
consideration relevant professional and regulatory
requirements;
-- develops and implements policy on the engagement of PKF
Littlejohn LLP to supply non-audit services, taking into account
relevant external guidance regarding the provision of non-audit
services by PKF Littlejohn LLP; and
-- reports to the Board, identifying any matters in respect of
which it considers that action or improvement is needed and making
recommendations as to the steps to be taken.
PKF Littlejohn LLP were appointed as the Group's external
auditor in September 2022. Prior to this, the audit was conducted
by BDO LLP.
Having assessed the performance, objectivity and independence of
the auditor, the Committee will be recommending the reappointment
of PKF Littlejohn LLP as auditor to the Company at the 2023 Annual
General Meeting.
The Audit Committee also reviews arrangements by which the staff
of the Company and the Company may, in confidence, raise concerns
about possible improprieties in matters of financial reporting or
other matters and ensure that arrangements are in place for the
proportionate and independent investigation of such matters with
appropriate follow-up action.
Remuneration Committee
The Remuneration Committee comprises James Leahy (Chair) and
Greg Martyr.
The Remuneration Committee is responsible for considering all
material elements of remuneration policy, the remuneration and
incentivisation of Executive Directors and senior management (as
appropriate) and to make recommendations to the Board on the
framework for executive remuneration and its cost. The role of the
Remuneration Committee is to keep under review the Company's
remuneration policies to ensure that the Company attracts, retains
and motivates the most qualified talent who will contribute to the
long-term success of the Company. The Remuneration Committee also
reviews the performance of the Chief Executive Officer and sets the
scale and structure of his remuneration, including the
implementation of any bonus arrangements, with due regard to the
interests of shareholders.
The Remuneration Committee is also responsible for reviewing the
terms of granting options by the Company, in particular, the price
per share and the application of the performance standards which
may apply to any grant, ensuring in determining such remuneration
packages and arrangements, due regard is given to any relevant
legal requirements, the provisions and recommendations in the AIM
Rules and The QCA Code.
The Remuneration Committee:
-- determines and agrees with the Board the framework or broad
policy for the remuneration of the Chief Executive Officer and
Executive Chairman;
-- determines targets for any performance-related pay schemes operated by the Company;
-- ensures that contractual terms on termination and any
payments made are fair to the individual, the Company, that failure
is not rewarded and that the duty to mitigate loss is fully
recognised;
-- determines the total individual remuneration package of the
Chief Executive Officer and Executive Chairman, including bonuses,
incentive payments and share options;
-- is aware of and advises on any major changes in employees'
benefit structures throughout the Company;
-- ensures that provisions regarding disclosure, including
pensions, as set out in the (Directors' Remuneration Policy and
Directors' Remuneration Report) Regulations 2019, are fulfilled;
and
-- is exclusively responsible for establishing the selection
criteria, selecting, appointing and setting the terms of reference
for any remuneration consultants who advise the Remuneration
Committee.
Principle Ten
Shareholder Communication
The Board is committed to maintaining good communication and
having constructive dialogue with its shareholders. The Company has
close ongoing relationships with key private shareholder, analysts
and brokers, providing the opportunity to discuss issues and
provide feedback at meetings with the Company.
The Company also provides regular updates on the progress of the
Company, detailing recent business and strategy developments, in
news releases which is available on the Company's website
www.capitalmetals.com. The Company's financial reports can also be
found on its website.
All shareholders are encouraged to attend the Company's Annual
General Meeting and any general meetings held by the Company. The
Company has elected to host its AGMs in London. The Directors
believe hosting the AGM in London will enhance engagement with the
Company's shareholders by making the meeting more accessible. The
Board is always open to receiving feedback from shareholders.
Communications should be directed to info@capitalmetals.com. The
Chief Executive Officer has been appointed to manage the
relationship between the Company and its shareholders and will
review and report to the Board on any communications received.
The Company also participates in various investor events
including conferences and presentation evenings, at which
shareholders can meet with management in person to answer queries,
provide information on current developments and to take into
consideration shareholder views and suggestions.
Greg Martyr
Chairman
14 September 2023
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF CAPITAL METALS
PLC
Opinion on the financial statements
We have audited the financial statements of Capital Metals plc
(the 'parent company') and its subsidiaries (the 'group') for the
year ended 31 March 2023 which comprise the Consolidated Income
Statement, the Consolidated Statement of Comprehensive Income, the
Consolidated and Parent Company Statements of Financial Position,
the Consolidated and Parent Company Statements of Changes in
Equity, the Consolidated and Parent Company Statements of Cash
Flows and notes to the financial statements, including significant
accounting policies. The financial reporting framework that has
been applied in their preparation is applicable law and UK-adopted
international accounting standards and as regards the parent
company financial statements, as applied in accordance with the
provisions of the Companies Act 2006.
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
March 2023 and of the group's loss for the year then ended;
-- the group financial statements have been properly prepared in
accordance with UK-adopted international accounting standards;
-- the parent company financial statements have been properly
prepared in accordance with UK-adopted international accounting
standards and as applied in accordance with the provisions of the
Companies Act 2006; and
-- the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
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
and parent company in accordance with the ethical requirements that
are relevant to our audit of the financial statements in the UK,
including the FRC's Ethical Standard as applied to listed entities,
and we have fulfilled our other ethical responsibilities in
accordance with these requirements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Material uncertainty related to going concern
We draw attention to note 2.4 in the financial statements, which
indicates that the group and parent company will need to raise
additional funding within twelve months from the date of approval
of the financial statements in order to fund its ongoing working
capital requirements. As outlined in note 7, the group's Industrial
Mining Licenses ("IMLs") were suspended at the year end, and
subsequently cancelled subject to appeal, which could materially
alter the future financial position of the group and its ability to
raise funds. As stated in note 2.4, these events or conditions,
along with the other matters as set forth in note 2.4 and note 7,
indicate that a material uncertainty exists that may cast
significant doubt on the group and parent company's ability to
continue as a going concern. Our opinion is not modified in respect
of this matter.
In auditing the financial statements, we have concluded that the
director's use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our
evaluation of the directors' assessment of the group and parent
company's ability to continue to adopt the going concern basis of
accounting included the following:
-- Obtaining the directors' going concern assessment and
evaluating the appropriateness of the assessment;
-- Reviewing the budgets/cashflow forecasts which cover the
period to 31 March 2025 and challenging management's basis for the
underlying assumptions in the forecast, agreeing to supporting
documentation such as the review of post year end bank statements,
management accounts and regulatory news service announcements;
-- Evaluating the feasibility of management's plans for future
actions in relation to its going concern assessment, including an
assessment of the cancellation of the IMLs and the impact on the
group's future plans;
-- Reviewing the external market factors affecting the group and
its future economic viability, and ensuring this is appropriately
reflected in the forecasts; and
-- Reviewing the adequacy of the disclosures in respect of going
concern including the uncertainties over the ability to raise
additional funds.
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the relevant
sections of this report.
Our application of materiality
The scope of our audit was influenced by our application of
materiality. The quantitative and qualitative thresholds for
materiality determine the scope of our audit and the nature, timing
and extent of our audit procedures.
The materiality applied to the group financial statements was
$119,000, based on 2.5% of the group's gross assets. Gross assets
were selected as the benchmark because the intangible exploration
assets are the primary assets, and their development is the
principal activity of the group. The materiality applied to the
parent company financial statements was $118,000 which has been
assessed based on 2.5% of the parent company gross assets and
capped below the overall group materiality. Gross assets were
selected as the benchmark for the parent company materiality as the
significant balances in the parent company financial statements are
the investments, which own and operate the underlying exploration
projects.
We use performance materiality to reduce to an appropriately low
level the probability that the aggregate of uncorrected and
undetected misstatements exceeds overall materiality. Specifically,
we use performance materiality in determining the scope of our
audit and the nature and extent of our testing of account balances,
classes of transactions and disclosures. The performance
materiality for the group was $83,000 and $82,000 for the parent
company, being 70% of materiality for the financial statements as a
whole.
In determining performance materiality, we considered the
following factors:
-- Our knowledge of the group and its environment, including industry specific trends;
-- Significant transactions during the year; and
-- The level of judgement required in respect of the key accounting estimates.
Whilst materiality for the financial statements as a whole was
set at $119,000, each significant component of the group was
audited to an overall materiality ranging between $44,000 and
$118,000, with performance materiality set at 70%.
We agreed with the audit committee that we would report all
audit differences identified during the course of our audit in
excess of $5,900 at both group and parent company level, as well as
differences below that threshold that, in our view, warranted
reporting on qualitative grounds.
We applied the concept of materiality in planning and performing
our audit and in evaluating the effect of misstatement. No
significant changes have come to light during the audit which
required a revision of our materiality for the financial statements
as a whole.
Our approach to the audit
Our audit is risk based and is designed to focus our efforts on
the areas at greatest risk of material misstatement, aspects
subject to significant management judgement as well as greatest
complexity, risk and size.
As part of designing our audit, we determined materiality, as
above, and assessed the risk of material misstatement in the
financial statements. In particular, we looked at areas involving
significant accounting estimates and judgement by the directors and
considered future events that are inherently uncertain. These areas
of estimate and judgement included:
-- the recoverability of intangible assets and investments in
subsidiary undertakings, as the future exploration results are
inherently uncertain;
-- the group's assessment of control and subsequent
consolidation of Damsila Exports (Pvt) Limited; and
-- the fair value assessment of the deferred and contingent consideration.
We also addressed the risk of management override of internal
controls, including among other matters consideration of whether
there was evidence of bias that represented a risk of material
misstatement due to fraud.
The scope of our audit was based on the significance of
component's operations and materiality. Each component was assessed
as to whether they were significant or not to the group by either
their size or risk.
The Sri Lankan subsidiaries Damsila Exports (Pvt) Limited
("DEL") and Eastern Minerals (Pvt) Limited ("EML") have been
assessed as significant components of the group. The key balances
held within these entities are exploration and evaluation assets.
These significant components were audited by component auditors in
Sri Lanka operating under our instruction. There was regular
interaction with the component auditors during all stages of the
audit, and we were responsible for the scope and direction of the
audit process. We reviewed key working papers and reporting
appendices to understand the work performed and conclusions
reached, in order to gain sufficient appropriate evidence for our
opinion on the group financial statements.
The parent company was also assessed as a significant component.
All audit work on other components was conducted by the group audit
team in London.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, 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) we identified, including those which had the greatest effect
on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters. In addition to
the matter described in the Material uncertainty related to going
concern section we have determined the matters described below to
be the key audit matters to be communicated in our report.
Key audit matter How our scope addressed this
matter
Accuracy and valuation of the carrying
value of the group's capitalised exploration
costs (Note 7)
---------------------------------------------- ---------------------------------------
The group holds intangible assets Our work in this area included:
in relation to the capitalised exploration - Obtaining documentation to
costs for the Sri Lankan mineral sands confirm ownership and position
projects. of the licenses at year end;
The projects are at an early stage - Obtaining an update from
of development and the intangible assets management with regards to
are subject to periodic impairment the current position of the
reviews when circumstances indicate IMLs and obtaining supporting
the potential for impairment. The carrying documentation in this regard;
value and its recoverability is dependent -Reviewing and challenging
on the expected commerciality of the management's impairment assessment
underlying projects. to consider whether there have
There is also a risk that the asset been any indicators of impairment
is overstated as a result of additions under IFRS 6, including the
being incorrectly capitalised through temporary suspension of the
not meeting the criteria of IFRS 6. IMLs;
Furthermore, as at the year end the - Reviewing external documentation
industrial mining licences ("IMLs") and reports to assess if there
held in DEL were subject to a temporary are any facts or results which
suspension following a review by the would indicate impairments
Geological Survey and Mines Bureau at each project;
("GMSB"). Should these licenses be - Performing substantive testing
revoked, this could lead to a significant on a sample of additions made
impairment to the exploration assets. during the period to ensure
This is considered to be a key audit appropriate capitalisation
matter due to the significant judgement with regards to IFRS 6; and
and estimates involved in assessing - Reviewing disclosures in
whether any indicators of impairment the financial statements to
have arisen at the year end, and in ensure adequate disclosure
quantifying any potential impairment. of the key accounting estimates.
As outlined in note 7, the
IMLs granted in DEL were subject
to a temporary suspension as
at the year end and subsequently
cancelled subject to appeal.
Management have commenced the
appeal and legal proceedings
and believe they have met all
of the GMSB's requirements
and expect the matter to be
positively resolved.
As at the date of this report,
there has been no resolution
and it is still unclear as
to whether the cancellation
will be reversed. No adjustments
have been made to the financial
statements to reflect the uncertainty
over the license position.
---------------------------------------------- ---------------------------------------
Group reorganisation (Note 18)
---------------------------------------------- ---------------------------------------
As announced on 20 February 2023, Our work in this area included:
the group has undertaken a reorganisation - Confirming the ownership
exercise ("the Restructuring") to conform and good standing of the subsidiaries
with the stated requests by the GMSB at the year-end;
with regard to local ownership of the - Reviewing the accounting
mining and exploration assets. entries made with regards to
Under the Restructuring, the group the Restructuring to ensure
has disposed of Keynes Investment Lanka in line with the underlying
(Pvt) Limited ("KIL") and 60% of the commercial agreements and accounting
ownership of DEL. Management has assessed standards, including reviewing
that the group has maintained control management's assessment of
of DEL and as a result has continued control over DEL; and
to consolidate. - Considering the appropriateness
The transaction involves complex accounting of the disclosure included
entries and the assessment of control in the financial statements.
is considered to be a key accounting
judgement. As a result, the Restructuring
is considered to be a key audit matter.
---------------------------------------------- ---------------------------------------
Other information
The other information comprises the information included in the
Annual Report, other than the financial statements and our
auditor's report thereon. The directors are responsible for the
other information contained within the annual report. Our opinion
on the group and parent company financial statements does not cover
the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of
assurance conclusion thereon. Our responsibility is to read the
other information and, in doing so, consider whether the other
information is materially inconsistent with the financial
statements, or our knowledge obtained in the course of the audit,
or otherwise appears to be materially misstated. If we identify
such material inconsistencies or apparent material misstatements,
we are required to determine whether this gives rise to a material
misstatement in the financial statements themselves. If, based on
the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report
that fact.
We have nothing to report in this regard.
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
the parent company and their 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 Statement of Directors'
Responsibilities, the directors are responsible for the preparation
of the group and parent company 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 group and parent company financial statements,
the directors are responsible for assessing the group and the
parent company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors
either intend to liquidate the group or the parent company or to
cease operations, or have no realistic alternative but to do
so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including
fraud is detailed below:
-- We obtained an understanding of the group and parent company
and the sector in which they operate to identify laws and
regulations that could reasonably be expected to have a direct
effect on the financial statements. We obtained our understanding
in this regard through discussions with management about the
potential instances of non-compliance with laws and regulations
both in the UK and in overseas subsidiaries. We also selected a
specific audit team based on experience with auditing exploration
entities of a similar size.
-- We determined the principal laws and regulations relevant to
the group and parent company in this regard to be those arising
from:
o The Companies Act 2006;
o AIM Rules;
o Local industry regulations in Sri Lanka;
o The operating terms set out in the exploration licences and
IMLs; and
o Local tax and employment law in the UK and Sri Lanka.
-- We designed our audit procedures to ensure the audit team
considered whether there were any indications of non-compliance by
the group and parent company with those laws and regulations. These
procedures included, but were not limited to:
o Conducting enquiries of management regarding potential
instances of non-compliance;
o Reviewing Regulatory News Service (RNS) announcements;
o Reviewing legal and professional fees ledger accounts;
o Discussions with the component auditors to report on the good
standing of the significant subsidiaries; and
o Reviewing board minutes and other correspondence from
management.
-- We also identified the risks of material misstatement of the
financial statements due to fraud. We considered, in addition to
the non-rebuttable presumption of a risk of fraud arising from
management override of controls, whether key management judgements
could include management bias. The potential for bias was
identified in relation to the carrying value of the exploration
assets and assessment of control of DEL. We addressed these items
as outlined in the Key Audit Matters section. The potential for
management bias also existed in the:
o Assessment of the carrying value of the investment in
subsidiaries; and
o Fair value assessment of the deferred consideration.
Audit procedures were performed in this regard to review and
challenge management's impairment and fair value assessments.
-- As in all of our audits, we addressed the risk of fraud
arising from management override of controls by performing audit
procedures which included, but were not limited to: the testing of
journals; reviewing accounting estimates for evidence of bias; and
evaluating the business rationale of any significant transactions
that are unusual or outside the normal course of business.
-- Compliance with laws and regulations at the subsidiary level
was ensured through enquiry of management, communication with the
component auditor and reviewing correspondence for any instances of
non-compliance.
Because of the inherent limitations of an audit, there is a risk
that we will not detect all irregularities, including those leading
to a material misstatement in the financial statements or
non-compliance with regulation. This risk increases the more that
compliance with a law or regulation is removed from the events and
transactions reflected in the financial statements, as we will be
less likely to become aware of instances of non-compliance. The
risk is also greater regarding irregularities occurring due to
fraud rather than error, as fraud involves intentional concealment,
forgery, collusion, omission or misrepresentation.
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.
Adam Humphreys (Senior Statutory Auditor)
For and on behalf of PKF Littlejohn LLP
Statutory Auditor
14 September 2023
15 Westferry Circus
Canary Wharf
London E14 4HD
CONSOLIDATED & COMPANY STATEMENTS OF FINANCIAL POSITION
For the year ended 31 March 2023
Company number: 05555087
Group Company
---------------------------- ----------------------------------
For the For the
year ended year ended For the year For the year
31 March 31 March ended 31 March ended 31 March
2023 2022 2023 2022
Note $ $ $ $
----------------------------- ----- ------------- ------------- --- ---------------- ----------------
Non-Current Assets
Property, plant and
equipment 6 25,591 28,541 - -
Investment in subsidiaries 8 - - 32,988,373 35,030,108
Loans to subsidiaries 9 - - 2,278,546 1,834,904
Other loans 10 125,371 - - -
Exploration & evaluation
assets 7 4,451,811 4,556,210 - -
4,602,773 4,584,751 35,266,919 36,865,012
----------------------------- ----- ------------- ------------- --- ---------------- ----------------
Current Assets
Trade and other receivables 11 40,017 36,160 235,710 65,989
Cash and cash equivalents 12 216,213 1,775,754 174,707 1,602,766
----------------------------- ----- ------------- ------------- --- ---------------- ----------------
256,230 1,811,914 410,417 1,668,755
----------------------------- ----- ------------- ------------- --- ---------------- ----------------
Total Assets 4,859,003 6,396,665 35,677,336 38,533,767
----------------------------- ----- ------------- ------------- --- ---------------- ----------------
Non-Current Liabilities
Trade and other payables 13 600,000 602,274 - -
----------------------------- ----- ------------- ------------- --- ---------------- ----------------
600,000 602,274 - -
----------------------------- ----- ------------- ------------- --- ---------------- ----------------
Current Liabilities
Trade and other payables 13 841,891 723,926 234,326 101,812
----------------------------- ----- ------------- ------------- --- ---------------- ----------------
841,891 723,926 234,326 101,812
----------------------------- ----- ------------- ------------- --- ---------------- ----------------
Total Liabilities 1,441,891 1,326,200 234,326 101,812
----------------------------- ----- ------------- ------------- --- ---------------- ----------------
Net Assets 3,417,112 5,070,465 35,443,010 38,431,955
----------------------------- ----- ------------- ------------- --- ---------------- ----------------
Equity attributable
to owners of the Parent
Share capital 15 6,062,403 6,062,403 6,062,403 6,062,403
Share premium 15 48,946,676 48,946,676 48,946,676 48,946,676
Other reserves 17 (35,917,609) (35,507,047) 35,155,483 37,414,384
Retained losses (15,570,928) (14,431,567) (54,721,552) (53,991,508)
Non-controlling interest 18 (103,430) - - -
Total Equity 3,417,112 5,070,465 35,443,010 38,431,955
----------------------------- ----- ------------- ------------- --- ---------------- ----------------
The Company has elected to take the exemption under Section 408
of the Companies Act 2006 from presenting the Parent Company Income
Statement and Statement of Comprehensive Income. The loss for the
Company for the year ended 31 March 2023 was $730,044 (year ended
31 March 2022: $1,699,017).
The Financial Statements were approved and authorised for issue
by the Board of Directors on 14 September 2023 and were signed on
its behalf by:
Greg Martyr
Executive Chairman
CONSOLIDATED INCOME STATEMENT
For the year ended 31 March 2023
For the For the
year ended year ended
31 March 31 March
2023 2022
Continued operations Note $ $
----------------------------------------------- ------ ------------ ------------
Administrative expenses 23 (1,132,498) (1,194,315)
Share based payment charge 16 - (720,842)
Other losses (10,535) 454
Operating loss (1,143,033) (1,914,703)
Finance income 4,495 470
Loss before income tax (1,138,538) (1,914,233)
Income tax 21 - -
----------------------------------------------- ------ ------------ ------------
Loss for the year attributable to owners
of the Parent (1,138,538) (1,914,233)
----------------------------------------------- ------ ------------ ------------
Basic (Loss) Per Share attributable to owners
of the Parent during the period (expressed
in cent per share) 22 (0.21) (0.36)
----------------------------------------------- ------ ------------ ------------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 March 2023
For the For the
year ended year ended
31 March 31 March
2023 2022
$ $
--------------------------------------------- ---- ---- ------------ ---------------------------
Loss for the year (1,138,538) (1,914,233)
Other Comprehensive Income:
Items that may be subsequently reclassified
to profit or loss
Foreign exchange on translation (513,992) (2,100,227)
Retirement benefit obligation (823) (109)
--------------------------------------------------------- ------------ ---------------------------
Total other comprehensive income for the
year, net of tax (514,815) (2,100,336)
--------------------------------------------------------- ------------ ---------------------------
Total comprehensive loss attributable to:
--------------------------------------------- ---- ---- ------------ ---------------------------
Owners of the Company (1,653,353) (4,014,569)
--------------------------------------------------------- ------------ ---------------------------
Non-controlling interests - -
--------------------------------------------- ---- ---- ------------ ---------------------------
Total comprehensive loss (1,653,353) (4,014,569)
--------------------------------------------------------- ------------ ---------------------------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2023
Share Share Other Retained Non-controlling
capital premium reserves losses Total interest Total
Note $ $ $ $ $ $ $
----------
Balance as at
1 April 2021 6,018,628 47,469,912 (34,140,736) (12,517,225) 6,830,579 - 6,830,579
----------------------- ---------- ----------- ------------- ------------- ------------ ----------------- ------------
Loss for the year - - - (1,914,233) (1,914,233) - (1,914,233)
----------------------- ---------- ----------- ------------- ------------- ------------ ----------------- ------------
Other
comprehensive
income for the
year
Items that may
be
subsequently
reclassified
to
profit or loss
--------------- ------ ---------- ----------- ------------- ------------- ------------ ----------------- ------------
Other comprehensive
income - - (2,100,227) (109) (2,100,336) - (2,100,336)
----------------------- ---------- ----------- ------------- ------------- ------------ ----------------- ------------
Total comprehensive
income for the
year - - (2,100,227) (1,914,342) (4,014,569) - (4,014,569)
----------------------- ---------- ----------- ------------- ------------- ------------ ----------------- ------------
Issue of share
capital for cash 43,775 1,597,787 - - 1,641,562 - 1,641,562
Costs of issue
of share capital - (121,023) - - (121,023) - (121,023)
Share based payments - - 733,916 - 733,916 - 733,916
Total transactions
with owners,
recognised
directly in equity 43,775 1,476,764 733,916 - 2,254,455 - 2,254,455
Balance as at
31 March 2022 6,062,403 48,946,676 (35,507,047) (14,431,567) 5,070,465 - 5,070,465
----------------------- ---------- ----------- ------------- ------------- ------------ ----------------- ------------
Balance as at
1 April 2022 6,062,403 48,946,676 (35,507,047) (14,431,567) 5,070,465 - 5,070,465
----------------------- ---------- ----------- ------------- ------------- ------------ ----------------- ------------
Loss for the year - - - (1,138,538) (1,138,538) - (1,138,538)
Other
comprehensive
income for the
year
Items that may
be
subsequently
reclassified
to
profit or loss
Other comprehensive
income - - (513,992) (823) (514,815) - (514,815)
----------------------- ---------- ----------- ------------- ------------- ------------ ----------------- ------------
Total comprehensive
income for the
year - - (513,992) (1,139,361) (1,653,353) - (1,653,353)
----------------------- ---------- ----------- ------------- ------------- ------------ ----------------- ------------
Reserve transfer
on dilution of
subsidiary - foreign
exchange movements
on NCI - - 103,430 - - (103,430) -
----------------------- ---------- ----------- ------------- ------------- ------------ ----------------- ------------
Total transactions
with owners,
recognised
directly in equity - - 103,430 - - (103,430) -
----------------------- ---------- ----------- ------------- ------------- ------------ ----------------- ------------
Balance as at
31 March 2023 6,062,403 48,946,676 (35,917,609) (15,570,928) 3,520,542 (103,430) 3,417,112
----------------------- ---------- ----------- ------------- ------------- ------------ ----------------- ------------
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2023
Share Other Retained
capital Share premium reserves Losses Total
Note $ $ $ $ $
Balance as at
1 April 2021 6,018,628 47,469,912 38,521,164 (52,292,491) 39,717,213
------------------------------ ---------- -------------- ------------ ------------- ------------
Loss for the
year - - - (1,699,017) (1,699,017)
------------------------------ ---------- -------------- ------------ ------------- ------------
Other comprehensive
income for the
year
Items that may
be subsequently
reclassified
to profit or
loss
---------------------- ------ ---------- -------------- ------------ ------------- ------------
Other comprehensive
income - - (1,840,696) - (1,840,696)
------------------------------ ---------- -------------- ------------ ------------- ------------
Total comprehensive
income for the
year - - (1,840,696) (1,699,017) (3,539,713)
------------------------------ ---------- -------------- ------------ ------------- ------------
Issue of share
capital for cash 43,775 1,597,787 - - 1,641,562
Transaction costs
on issue of share
capital - (121,023) - - (121,023)
Share option
expense - - 733,916 - 733,916
Total transactions
with owners,
recognised directly
in equity 43,775 1,476,764 733,916 - 2,254,455
Balance as at
31 March 2022 6,062,403 48,946,676 37,414,384 (53,991,508) 38,431,955
------------------------------ ---------- -------------- ------------ ------------- ------------
Balance as at
1 April 2022 6,062,403 48,946,676 37,414,384 (53,991,508) 38,431,955
------------------------------ ---------- -------------- ------------ ------------- ------------
Loss for the
year - - - (730,044) (730,044)
------------------------------ ---------- -------------- ------------ ------------- ------------
Other comprehensive
income for the
year
Items that may
be subsequently
reclassified
to profit or
loss
---------------------- ------ ---------- -------------- ------------ ------------- --------------
Other comprehensive
loss - - (2,258,901) - (2,258,901)
------------------------------ ---------- -------------- ------------ ------------- --------------
Total comprehensive
loss for the
year - - (2,258,901) (730,044) (2,988,945)
------------------------------ ---------- -------------- ------------ ------------- ------------
Total transactions
with owners,
recognised directly
in equity - - - - -
---------------------- ------ ---------- -------------- ------------ ------------- ------------
Balance as at
31 March 2023 6,062,403 48,946,676 35,155,483 (54,721,552) 35,443,010
------------------------------ ---------- -------------- ------------ ------------- ------------
STATEMENT OF CASH FLOWS
For the year ended 31 March 2023
Group Company
-------------------------- --------------------------
Year
ended Year ended Year ended Year ended
31 March 31 March 31 March 31 March
2023 2022 2023 2022
Note $ $ $ $
------------------------------------ ------ ------------ ------------ ------------ ------------
Cash flows from operating
activities
Loss before income tax (1,138,538) (1,914,233) (730,044) (1,699,017)
Adjustments for:
Depreciation 6 3,208 8,832 - -
Share based payments 16 - 720,842 - 720,842
Foreign exchange (11,494) 104,043 (31,675) 5,283
Interest received (4,463) (388) - -
Changes in working capital:
(Increase)/Decrease in trade
and other receivables (5,349) 73,097 (165,874) 40,325
Increase in trade and other
payables 115,885 23,232 126,579 11,189
Net cash used in operating
activities (1,040,751) (984,575) (801,014) (921,378)
------------------------------------ ------ ------------ ------------ ------------ ------------
Cash flows from investing
activities
Purchase of property plant
and equipment 6 (7,168) (6,322) - -
Disposal of property, plant
and equipment 6 - 4,288 - -
Cash expenditure on exploration
and evaluation activity 7 (287,688) (490,256) - -
Disposal of subsidiary undertaking 10 (124,897) - - -
Loan to subsidiaries 9 - - (533,627) (639,627)
Interest received 4,463 388 - -
------------------------------------ ------ ------------ ------------ ------------ ------------
Net cash used in investing
activities (415,290) (491,902) (533,627) (639,627)
------------------------------------ ------ ------------ ------------ ------------ ------------
Cash flows from financing
activities
Proceeds from issue of share
capital - 1,641,756 - 1,641,756
Transaction costs of share
issue - (121,023) - (121,023)
Net cash generated from financing
activities - 1,520,733 - 1,520,733
------------------------------------ ------ ------------ ------------ ------------ ------------
Net (decrease)/increase in
cash and cash equivalents (1,456,041) 44,256 (1,334,641) (40,272)
Cash and cash equivalents
at beginning of year 1,775,754 1,797,319 1,602,766 1,705,496
Exchange loss on cash and cash
equivalents (103,500) (65,821) (93,418) (62,458)
------------------------------------ ------ ------------ ------------ ------------ ------------
Cash and cash equivalents
at end of year 12 216,213 1,775,754 174,707 1,602,766
------------------------------------ ------ ------------ ------------ ------------ ------------
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2023
1. General information
The principal activity of Capital Metals plc (the 'Company') and
its subsidiaries (together the 'Group') is the exploration and
development of the Eastern Minerals Project located in the Ampara
District of the Eastern Province of Sri Lanka. The Company's shares
are quoted on AIM of the London Stock Exchange. The Company is
incorporated and domiciled in England.
The address of its registered office is 6 Heddon Street, London,
W1B 4BT.
2. Summary of significant Accounting Policies
The principal Accounting Policies applied in the preparation of
these Consolidated Financial Statements are set out below. These
Policies have been consistently applied to all the periods
presented, unless otherwise stated.
2.1. Basis of preparation of Financial Statements
These financial statements have been prepared in accordance with
UK adopted International Accounting Standards and in accordance
with the requirements of the Companies Act 2006. The Financial
Statements have also been prepared under the historical cost
convention, except as modified for assets and liabilities
recognised at fair value on business combination.
The Financial Statements are presented in US Dollars. In the
prior year the financial statements were rounded to the nearest
dollar. The functional currency of the Company is Pound
Sterling.
The preparation of financial statements in accordance with the
applicable financial reporting framework requires the use of
certain critical accounting estimates. It also requires management
to exercise its judgement in the process of applying the Accounting
Policies. The areas involving a higher degree of judgement or
complexity, or areas where assumptions and estimates are
significant to the Consolidated Financial Statements are disclosed
in Note 4.
2.2. New and amended standards
(a) New and amended standards adopted by the Group and
Company
A number of new and amended standards and interpretations issued
by the International Accounting Standards Board (IASB) have become
effective for the first time for financial periods beginning on (or
after) 1 April 2022 and have been applied by the Company and Group
in these financial statements. None of these new and amended
standards and interpretations had a significant effect on the
Company or Group because they are either not relevant to the
Company or Group's activities or require accounting which is
consistent with the Company or Group's current accounting
policies.
(b) New standards, amendments, and interpretations in issue but
not yet effective or not yet endorsed and not early adopted.
No material impact expected on the financial statements.
There are a number of standards, amendments to standards, and
interpretations which have been issued by the IASB that are
effective in future accounting periods and which have not been
adopted early.
2.3. Basis of Consolidation
These consolidated financial statements comprise the financial
statements of Capital Metals plc and its subsidiaries as at 31
March 2023. Subsidiaries are fully consolidated from the date on
which control is transferred to the Group and cease to be
consolidated from the date on which control is transferred out of
the Group. Control exists where the company has the power to govern
the financial and operating policies of an entity so as to obtain
benefits from its activities. Where subsidiaries follow differing
accounting policies from those of the Group, those accounting
policies have been adjusted to align with those of the Group.
Inter-company balances and transactions between Group companies are
eliminated on consolidation, though foreign exchange differences
arising on inter-company balances between subsidiaries with
differing functional currencies is recognised in profit or
loss.
When the Group ceases to have control, any retained interest in
the entity is remeasured to its fair value at the date when control
is lost, with the change in carrying amount recognised in profit or
loss. The fair value is the initial carrying amount for the
purposes of subsequently accounting for the retained interest as an
associate, joint venture or financial asset. In addition, any
previously recognised in other comprehensive income in respect of
that entity are accounted for as if the Group had directly disposed
of the related assets or liabilities. This may mean that amounts
previously recognised in other comprehensive income are
reclassified to profit or loss.
During the year, the Group completed a restructure which
resulted in the disposal of a subsidiary and disposal of an equity
proportion of a subsidiary whilst control was maintained. Refer to
Note 18 for further details. Transactions with non-controlling
interests that do not result in loss of control are accounted for
as equity transactions - that is, as transactions with the owners
in their capacity as owners. The difference between fair value of
any consideration paid and the relevant share acquired of the
carrying value of net assets of the subsidiary is recorded in
equity. Gains or losses on disposals to non-controlling interests
are also recorded in equity.
2.4. Going concern
These financial statements have been prepared on the going
concern basis. The Group's business activities, together with the
factors likely to affect its future development, performance and
position are set out in the Chairman's Statement and the Strategic
Report.
As at 31 March 2023, the Group had cash and cash equivalents of
$216,213. The Directors have prepared cash flow forecasts to 31
March 2025, which take account of the cost and operational
structure of the Group and Company, planned exploration and
evaluation expenditure, licence commitments and working capital
requirements. These forecasts indicate that the Group and Company,
in order to meet their operational objectives, and meets their
expected liabilities as they fall due, will be required to raise
additional funds within the next 12 months.
In common with many exploration and evaluation entities, the
Company will need to raise further funds within the next 12 months
in order to meet its expected liabilities as they fall due and
progress the Group into definitive feasibility and then into
construction and eventual production of revenues. The Directors are
confident in the Company's ability to raise additional funds as
required, from existing and/or new investors, within the next 12
months. The Company has demonstrated its access to financial
resources, as evidenced by the successful completion of a Placing
in June 2023 with an equity raising of GBP500,000 and a further
equity subscription raising total proceeds of GBP364,705.
Whilst the Directors are confident that they will be able to
secure the necessary funding, the current conditions do indicate
the existence of a material uncertainty that may cast significant
doubt regarding the applicability of the going concern assumption
and the auditors have made reference to this in their audit report.
The Directors are confident in the Company's ability to raise
additional funds as required, from existing and/or new investors,
within the next 12 months and the reinstatement of the IMLs as
discussed in Note 7. Thus, they continue to adopt the going concern
basis of accounting preparing these financial statements.
2.5. Segment reporting
An operating segment is a group of assets and operations engaged
in providing products or services that are subject to risks and
returns that are different from those of other business
segments.
The Directors are of the opinion that the Group operates in two
geographical areas, the UK and Sri Lanka. The Company operates in
one geographical area, the UK. Activities in the UK are mainly
administrative in nature whilst activities in Sri Lanka relate to
exploration and evaluation of mineral sand resources. The reports
used by the chief operating decision maker are based on these
geographical segments.
2.6. Foreign currencies
(a) Functional and presentation currency
Items included in the Financial Statements of each of the
Group's entities are measured using the currency of the primary
economic environment in which the entity operates (the 'functional
currency'). The functional currency of the UK parent entity is
Pound Sterling, the functional currency of the BVI subsidiaries is
US Dollars and the functional currency of the Sri Lankan
subsidiaries is Sri Lankan Rupee. The Financial Statements are
presented in US Dollars which is the Group's presentation
currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions or valuation where such items are re-measured. Foreign
exchange gains and losses resulting from the settlement of such
transactions and from the translation at period-end exchange rates
of monetary assets and liabilities denominated in foreign
currencies are recognised in the income statement.
(c) Group companies
The results and financial position of all the Group entities
(none of which has the currency of a hyperinflationary economy)
that have a functional currency different from the presentation
currency are translated into the presentation currency as
follows:
-- assets and liabilities for each period end date presented are
translated at the period-end closing rate;
-- income and expenses for each Income Statement are translated
at average exchange rates (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on
the transaction dates, in which case income and expenses are
translated at the dates of the transactions); and
-- all resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the
translation of the net investment in foreign entities, and of
monetary items receivable from foreign subsidiaries for which
settlement is neither planned nor likely to occur in the
foreseeable future, are taken to other comprehensive income. When a
foreign operation is sold, such exchange differences are recognised
in the Income Statement as part of the gain or loss on sale.
2.7. Intangible assets
Exploration and evaluation assets
Exploration and evaluation assets include the cost of
acquisition, exploration, determination of resources and
recoverable reserves, technical studies, economic feasibility
studies and all technical and administrative overheads directly
associated with these assets, where a mineral deposit has
development potential.
Exploration and evaluation assets which are acquired are
recognised at fair value. Capitalised exploration and evaluation
expenditure is recorded and held at cost.
The Group performs an impairment test on the exploration and
evaluation assets when specific facts and circumstances indicate an
impairment test is required, including:
i) the Group's right to explore in an area has expired, or will
expire in the near future without renewal;
ii) no further exploration or evaluation is planned or budgeted for;
iii) a decision has been taken by the Board to discontinue
exploration and evaluation in an area due to the absence of a
commercial level of reserves; and
iv) sufficient data exists to indicate that the book value will
not be fully recovered from future development and production.
If any such facts or circumstances are noted, the Group, as a
next step, perform an impairment test in accordance with the
provisions of IAS 36 "Impairment of Assets". In such circumstances,
the aggregate carrying value of the exploration and assets is
compared against the expected recoverable amount of the
cash-generating unit. The recoverable amount is the higher of value
in use and the fair value less costs to sell. Management considers
all licences relating to the Project to represent one asset when
undertaking their impairment assessment.
2.8. Investments in subsidiaries
Investments in Group undertakings are stated at cost, which is
the fair value of the consideration paid, less any impairment
provision.
2.9. Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated
depreciation and any accumulated impairment losses. Depreciation is
provided on all property, plant and equipment to write off the cost
less estimated residual value of each asset over its expected
useful economic life on a straight-line basis at the following
annual rates:
Computer & office equipment - 3 years
Motor vehicles - 4 years
Field equipment - 5 years
Drilling equipment - 10 years
Furniture & fittings - 5 years
Subsequent costs are included in the asset's carrying amount or
recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item
will flow to the Group and the cost of the item can be measured
reliably. The carrying amount of the replaced part is derecognised.
All other repairs and maintenance are charged to the income
statement during the financial period in which they are
incurred.
The assets' residual values and useful lives are reviewed, and
adjusted if appropriate, at the end of each reporting period.
An asset's carrying amount is written down immediately to its
recoverable amount if the asset's carrying amount is greater than
its estimated recoverable amount. If an impairment review is
conducted following an indicator of impairment, assets which are
not able to be assessed for impairment individually are assessed in
combination with other assets within a cash generating unit.
Gains and losses on disposal are determined by comparing the
proceeds with the carrying amount and are recognised within 'Other
(losses)/gains' in the Income Statement.
2.10. Impairment of non-financial assets
Assets that have an indefinite useful life, for example,
intangible assets not ready to use, and goodwill, are not subject
to amortisation and are tested annually for impairment. Property,
plant and equipment is reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not
be recoverable. An impairment loss is recognised for the amount by
which the asset's carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset's fair value less
costs to sell and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash flows (cash generating units).
Non-financial assets that suffered impairment are reviewed for
possible reversal of the impairment at each reporting date.
2.11. Financial assets
(a) Recognition and measurement
Management determines the classification of its financial assets
at initial recognition, the classification of which depends on the
purpose for which the financial assets were acquired.
Financial assets are classified in four categories:
i) amortised cost;
ii) fair value through other comprehensive income ("FVOCI") with
gains or losses recycled to profit or loss on derecognition;
iii) FVOCI with no recycling of gains or losses to profit or loss on derecognition; and
iv) fair value through profit or loss ("FVTPL").
Financial assets are classified as at amortised cost only if
both of the following criteria are met:
-- the asset is held within a business model whose objective is
to collect contractual cash flows; and
-- the contractual terms give rise to cash flows that are solely
payments of principal and interest
The Group's financial assets comprise cash and receivables which
are classified as financial assets at amortised cost. The Company's
financial assets comprise cash and loans to subsidiaries and
connected parties, which are classified as financial assets at
amortised cost.
The Company accounts for loan receivables at amortised cost as
the objective is to hold these assets in order to collect
contractual cash flows and the contractual cash flows are solely
payments of principal and interest. After classification as
amortised cost, the financial assets are initially measured at fair
value plus directly attributable transaction costs, and
subsequently measured at amortised cost using the effective
interest method, less provision for impairment.
Financial assets are derecognized when the rights to receive
cash flows from the assets have expired or have been transferred,
and the Group has transferred substantially all of the risks and
rewards of ownership.
(b) Impairment
Impairment provisions for loans to subsidiaries are recognised
based on a forward-looking expected credit loss model. The
methodology used to determine the amount of the provision is based
on whether there has been a significant increase in credit risk
since initial recognition of the financial asset.
For those where the credit risk has not increased significantly
since initial recognition of the financial asset, twelve month
expected credit losses along with gross interest income are
recognised. For those for which credit risk has increased
significantly, lifetime expected credit losses along with the gross
interest income are recognised. For those that are determined to be
credit impaired, lifetime expected credit losses along with
interest income on a net basis are recognised.
2.12. Financial liabilities
Financial liabilities are obligations to pay cash or other
financial assets and are recognised when the Group becomes a party
to the contractual provisions of the instrument.
All financial liabilities are initially recognised at fair value
and subsequently measured either as:
-- amortised cost using the effective interest method, with
interest-related charges recognised as an expense in the income
statement; or
-- financial liabilities measured at FVTPL, re-measured at
subsequent reporting dates to fair value through the income
statement.
During the reporting period, the Group's financial liabilities
comprised trade and other payables, deferred consideration payable,
loans and convertible bonds. The trade and other payables, and
loans, are classified at amortised cost.
The deferred consideration payable in respect of the acquisition
of the Project is treated as a financial liability measured at
FVTPL.
The convertible bonds were assessed to contain an embedded
derivative conversion feature and the Group elected to treat the
entire instrument as a financial liability measured at FVTPL.
A financial liability is derecognised only when the obligation
is extinguished, that is, when the obligation is discharged or
cancelled or expires.
2.13. Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand.
2.14. Equity
Equity comprises the following:
-- "Share capital" represents the nominal value of the Ordinary shares;
-- "Share Premium" represents consideration less nominal value
of issued shares and costs directly attributable to the issue of
new shares;
-- "Other reserves" represents the capital contribution reserve,
deferred share reserve, merger reserve, foreign currency
translation reserve, reverse acquisition reserve and share option
and warrant reserve where;
o "Merger reserve" represents the difference between the fair
value of an acquisition and the nominal value of the shares
allotted in a share exchange;
o "Foreign currency translation reserve" represents the
translation differences arising from translating the financial
statement items from functional currency to presentational
currency;
o "Reverse acquisition reserve" represents a non-distributable
reserve arising on the acquisition of Capital Metals Limited;
o "Share option and warrant reserve" represents share options
and warrants awarded by the Group;
o Capital contribution reserve - represents capital contributed
by one or more of the members without taking shares in return or
creating a debt.
o Deferred share reserve - represents shares to be issued upon
certain conditions being met.
o "Retained earnings" represents retained losses.
2.15. Share capital, share premium and deferred shares
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares or options are
shown in equity, as a deduction, net of tax, from the proceeds
provided there is sufficient premium available. Should sufficient
premium not be available placing costs are recognised in the Income
Statement. All ordinary shares are fully paid and carry full
voting, dividend and capital distribution (including on winding up)
rights.
Deferred shares are classified as equity. Deferred shares
represent shares to be issued upon certain conditions being met.
The holders of deferred shares do not have any right to receive
written notice of or attend, speak or vote at any general meeting
of the Company. As regards income, on any dividend or other
distribution of the Company, the holders of deferred shares shall
be entitled to payment in priority to any dividend or distribution
to the holders of any other class of shares in the Company, GBP1 in
aggregate. Upon any capital distribution of the Company (including
upon winding up), the holders of the deferred shares shall be
entitled to payment in priority to any distribution to the holders
of any other class of shares in the Company, GBP1 in aggregate. The
deferred shares may be cancelled by the Company at any time at its
determination for no payment and without obtaining sanction of such
holders.
2.16. Share based payments
The Group has granted options over its unissued share capital to
certain Directors, management, employees and consultants as part of
their remuneration. The fair value of options granted in respect of
services provided, is measured at the grant date and recognised as
an expense over the vesting period, with a corresponding increase
in the Share warrants and options reserve.
The fair value of the share options and warrants are determined
using the Black Scholes valuation model or Monte Carlo analysis, as
appropriate, taking into account the terms and conditions upon
which the warrants or options were issued or granted.
Non-market vesting conditions are included in assumptions about
the number of options that are expected to vest. The total expense
or charge is recognised over the vesting period, which is the
period over which all of the specified vesting conditions are to be
satisfied. At the end of each reporting period, the entity revises
its estimates of the number of options that are expected to vest
based on the non-market vesting conditions. It recognises the
impact of the revision to original estimates, if any, in the Income
Statement or equity as appropriate, with a corresponding adjustment
to a separate reserve in equity.
When the options are exercised, the Group issues new shares. The
proceeds received, net of any directly attributable transaction
costs, are credited to share capital (nominal value) and share
premium when the options are exercised.
2.17. Taxation
No current tax is yet payable in view of the losses to date.
Deferred tax is recognised for using the liability method in
respect of temporary differences arising from differences between
the carrying amount of assets and liabilities in the consolidated
financial statements and the corresponding tax bases used in the
computation of taxable profit. However, deferred tax liabilities
are not recognised if they arise from the initial recognition of
goodwill; deferred tax is not accounted for if it arises from
initial recognition of an asset or liability in a transaction other
than a business combination that at the time of the transaction
affects neither accounting nor taxable profit or loss.
In principle, deferred tax liabilities are recognised for all
taxable temporary differences and deferred tax assets (including
those arising from investments in subsidiaries), are recognised to
the extent that it is probable that taxable profits will be
available against which deductible temporary differences can be
utilised.
Deferred income tax assets are recognised on deductible
temporary differences arising from investments in subsidiaries only
to the extent that it is probable the temporary difference will
reverse in the future and there is sufficient taxable profit
available against which the temporary difference can be used.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in except where the Group is
able to control the reversal of the temporary difference and it is
probable that the temporary difference will not reverse in the
foreseeable future.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred tax assets and
liabilities relate to income taxes levied by the same taxation
authority on either the same taxable entity or different taxable
entities where there is an intention to settle the balances on a
net basis.
Deferred tax is calculated at the tax rates (and laws) that have
been enacted or substantively enacted by the statement of financial
position date and are expected to apply to the period when the
deferred tax asset is realised or the deferred tax liability is
settled.
Deferred tax assets and liabilities are not discounted.
3. Financial risk management
3.1. Financial risk factors
The Group's activities expose it to a variety of financial
risks: market risk (foreign currency risk), credit risk and
liquidity risk. The Group's overall risk management programme
focuses on the unpredictability of financial markets and seeks to
minimise potential adverse effects on the Group's financial
performance. None of these risks are hedged.
Risk management is carried out by the management team under
policies approved by the Board of Directors.
Market risk
(a) Foreign currency risk
The Group operates internationally and is exposed to foreign
exchange risk arising from various currency exposures, primarily
with respect to the Sri Lankan Rupee (LKR), US Dollar (USD) and the
British Pound Sterling (GBP or GBP). Foreign exchange risk arises
from future commercial transactions, recognised assets and
liabilities and net investments in foreign operations.
The Group negotiates all material contracts for activities in
relation to its subsidiaries in either LKR, AUD or USD. The Group
does not hedge against the risks of fluctuations in exchange rates.
The volume of transactions is not deemed sufficient to enter into
forward contracts as most of the foreign exchange movements result
from the retranslation of intercompany loans. The Group has
sensitised the figures for fluctuations in foreign exchange rates,
as the Directors acknowledge that, at the present time, the foreign
exchange retranslations have resulted in rather higher than normal
fluctuations and is predominantly due to the exceptional nature of
the LKR exchange rate in the current economic climate.
As at 31 March 2023, the exposure of the Group to foreign
exchange rates is summarised as follows:
Group Group Company Company
2023 2022 2023 2022
Cash and cash equivalents $'000 $'000 $'000 $'000
US Dollar 19 167 18 7
Sri Lankan Rupee 41 13 - -
Pound Sterling 156 1,596 156 1,596
----- ----- ------- -------
216 1,776 174 1,603
Other receivables
US Dollar - - - -
Sri Lankan Rupee - - - -
Pound Sterling 26 23 26 8
----- ----- ------- -------
26 23 26 8
----- ----- ------- -------
242 1,799 200 1,611
----- ----- ------- -------
As at 31 March 2023, if Sterling had gained or lost 10 per cent.
against the USD, the impact on comprehensive loss would have been
as follows:
Group Group Company Company
2023 2022 2023 2022
Impact on comprehensive loss $'000 $'000 $'000 $'000
+10% GBP/USD 18 162 18 160
-10% GBP/USD (18) (162) (18) (160)
----- ----- ------- -------
As at 31 March 2023, if the Sri Lankan Rupee had gained or lost
10 per cent. against the USD, the impact on comprehensive loss
would have been as follows:
Group Group Company Company
2023 2022 2023 2022
Impact on comprehensive loss $'000 $'000 $'000 $'000
+10% LKR/USD 4 1 - -
-10% LKR/USD (4) (1) - -
----- ----- ------- -------
Credit risk
Credit risk is the risk of financial loss to the Group if a
counterparty to a financial instrument fails to meet its
contractual obligations.
Credit risk relating to the Group's financial assets which
comprise principally cash and cash equivalents, arises from the
potential default of counterparties. The credit risk on liquid
funds is limited because the counterparties are reputable banks
with high credit ratings assigned by international credit-rating
agencies.
The carrying amount of financial assets represents the maximum
credit exposure, which at the reporting date was:
Group Group Company Company
2023 2022 2023 2022
$'000 $'000 $'000 $'000
Cash and bank balances 216 1,776 175 1,603
Trade and other receivables 14 28 198 57
Loan to subsidiaries - - 2,278 1,835
----- ----- ------- -------
230 1,804 2,651 3,495
----- ----- ------- -------
The expected credit risk for both the Group and the Company was
assessed as not material.
Liquidity risk
In keeping with similar sized mineral exploration groups, the
Group's continued future operations depend on the ability to raise
sufficient working capital through the issue of equity share
capital or debt. The Directors are reasonably confident that
adequate funding will be forthcoming with which to finance
operations. Controls over expenditure are carefully managed.
With exception to deferred taxation, financial liabilities are
all due within one year.
3.2. Capital risk management
The Directors consider the Group's capital to comprise of share
capital and reserves stated on the statement of financial position.
The Group manages its capital to ensure the Group will be able to
continue on a going concern on a long term basis while ensuring the
optimal return to shareholders and other stakeholders through an
effective debt and equity balance. No changes were made in the
objectives, policies and processes during the current or previous
year.
The share capital, including share premium, and reserves
totalling $3,417,112 (2022: $5,070,465) provides the majority of
the working capital required by the Group. Management reviews the
capital structure and makes adjustment to it in the light of
changes in economic conditions.
4. Critical accounting estimates and judgements
The preparation of the Financial Statements requires management
to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amount of expenses during the period. Actual results may
vary from the estimates used to produce these Financial
Statements.
Estimates and judgements are regularly evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances.
Items subject to such estimates and assumptions, that have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial years,
include but are not limited to:
Impairment of intangible assets - exploration and evaluation
costs
Management make the judgement as to which costs are directly
associated with the exploration and evaluation assets and are to be
capitalised, including the allocation of applicable salary and
overhead costs.
Exploration and evaluation costs have a carrying value at 31
March 2023 of $4,451,811 (31 March 2022 $4,556,210) Such assets
have an indefinite useful life as the Group has a right to renew
exploration licences and the asset is only amortised once
extraction of the resource commences. Management tests for
impairment annually whether exploration projects have future
economic value in accordance with the accounting policy stated in
Note 2.7. Each exploration project is subject to an annual review
by either a consultant or senior company geologist to determine if
the exploration results returned during the period warrant further
exploration expenditure and have the potential to result in an
economic discovery. This review takes into consideration long term
metal prices, anticipated resource volumes and supply and demand
outlook. In the event that a project does not represent an economic
exploration target and results indicate there is no additional
upside a decision will be made to discontinue exploration; an
impairment charge will then be recognised in the Income
Statement.
DEL Licence (EL168/R/4) expired on 31 October 2020, but was
subject to the Group's nine IML Applications, two of which were
granted during the year. It is noted that the IML's granted are for
select areas within license EL168/R/4 and there remains areas
within this license which are not covered by an IML.
Whilst there is no certainty that the remaining IML's will be
granted, management are of the judgement that there is a reasonable
expectation given the Group received approval for two IML's during
the year and based on the ongoing discussions with the Geological
Survey and Mines Bureau, despite the current suspension, that the
remaining IMLs will be approved in due course. Given this judgement
it was deemed that no impairment test was required to be performed.
Should the Group not be successful with the remaining IML
applications or the reinstatement of the suspended IMLs, then
Directors would expect to consider an impairment of the E&E
assets. See Note 7 for further considerations at the year end.
Carrying value of intercompany loans
At 31 March 2023 management reassessed the recovery profile of
the Parent Company loans granted to subsidiaries and noted the
updated project development timetable would mean that it is
unlikely that repayments from subsidiaries would commence in the
next 12 months and accordingly the loans have been classified as
non-current receivables in the current year. See Note 9 for further
information.
Share based payment transactions
Management measured the cost of equity-settled transactions by
reference to the fair value of the equity instruments at the date
at which they are granted. The fair value of shares was determined
by the share price at the date of grant. The fair value of options
and warrants was determined using Monte Carlo simulations and the
Black-Scholes model respectively. Management estimated the number
of options that are expected to vest based on the non-market
vesting conditions. The valuation of these options and warrants
involved making a number of critical estimates relating to price
volatility, future dividend yields, expected life of the options
and forfeiture rates. These assumptions are described in more
detail in Note 16.
Control and consolidation of Damsila Exports (Pvt) Limited
If an entity with a 40% shareholding has a contractual
arrangement that gives it the power to direct the relevant
activities of the other entity, it can maintain control and is
required to consolidate the financial statements of the other
entity. After the restructure of the Group during the year, the
contractual arrangements in place to determine whether they have
the power to direct the relevant activities of another entity and,
as a result, maintain control were carefully assessed and it was
concluded Redgate Lanka maintains control of Damsila Exports and as
such they shall remain consolidated within the Group accounts. No
non-controlling interest has been recognised against the net assets
as the Group continues to have full rights to the returns of the
subsidiary. Please refer to Note 18 for details of the Group
restructure.
Fair value of deferred and contingent consideration
Deferred consideration represents amounts payable in respect of
the acquisitions of Damsila Exports (Pvt) Limited and Eastern
Minerals (Pvt) Limited. The amounts fall due and payable upon
completion of certain milestones within the Group, being for each
of Damsila Exports (Pvt) Limited and Eastern Minerals (Pvt)
Limited: $625,000 in cash (recognised at 95% of face value) upon
completion of feasibility studies on the relevant project and
$750,000 in cash (recognised at 80% of face value) upon
commencement of first commercial production from the relevant
project. At the reporting year end, the probability estimated for
the likelihood of completion of Tranche 2 and 3 of the deferred and
contingent consideration was considered, and management continue to
estimate 95% probability for Tranche 2 and 80% probability for
Tranche 3. If these estimates prove incorrect then the amounts
payable in respect of the acquisition may be different to those
stated within the financial statements.
5. Segment information
As at 31 March 2023, the Group operates in two geographical
areas, the UK and Sri Lanka. The Company operates in one
geographical area, the UK. Activities in the UK are mainly
administrative in nature whilst activities in Sri Lanka relate to
exploration and evaluation of mineral sand resources. The reports
used by the chief operating decision maker are based on these
geographical segments.
The Group generated no revenue during the year ended 31 March
2023 (2022: $Nil).
2023 Sri Lanka UK Total
$ $ $
Administrative expenses (188,665) (943,833) (1,132,498)
Other gains/(losses) 3,533 (14,068) (10,535)
Finance income 4,463 32 4,495
--------------------------------------------- ------------ ---------- ------------
Operating loss from continued operations
per reportable segment (180,669) (957,869) (1,138,538)
--------------------------------------------- ------------ ---------- ------------
Reportable segment assets 4,646,925 212,078 4,859,003
Reportable segment liabilities (1,207,565) (234,326) (1,441,891)
------------ ---------- ------------
Reportable segment net assets/(liabilities) 3,439,360 (22,248) 3,417,112
--------------------------------------------- ------------ ---------- ------------
Segment assets and liabilities are allocated based on
geographical location.
6. Property, plant and equipment
The movement on the property, plant and equipment asset accounts
are shown in aggregate as follows:
Group Total
$
------------------------------- ------------
Cost
As at 31 March 2021 116,458
Exchange Differences (37,022)
Additions 6,322
Disposals (4,288)
As at 31 March 2022 81,470
------------------------------- ------------
As at 1 April 2022 81,470
Exchange Differences (9,332)
Additions 7,168
Disposals -
As at 31 March 2023 79,306
------------------------------- ------------
Depreciation
As at 31 March 2021 68,892
Charge for the year 8,832
Disposals (4,078)
Exchange differences (20,717)
------------------------------- ------------
As at 31 March 2022 52,929
------------------------------- ------------
As at 1 April 2022 52,929
Charge for the year 3,208
Disposals -
Exchange differences (2,422)
------------------------------- ------------
As at 31 March 2023 53,715
------------------------------- ------------
Net book value as at 31 March
2022 28,541
------------------------------- ------------
Net book value as at 31 March
2023 25,591
------------------------------- ------------
7. Intangible assets
Intangible assets comprise exploration and evaluation costs. The
movement on the exploration and evaluation assets was as
follows:
Group
Exploration & Evaluation Assets -
Cost and Net Book Value $
----------------------------------- ------------
Cost
As at 31 March 2021 6,178,503
Additions 490,256
Exchange differences (2,112,549)
As at 31 March 2022 4,556,210
------------------------------------ ------------
Additions 287,688
Exchange differences (392,087)
As at 31 March 2023 4,451,811
------------------------------------ ------------
All exploration and evaluation assets relate to Group
subsidiaries and the Eastern Minerals Project in Sri Lanka.
The Directors undertook a review of the impairment indicators
and none were identified. In performing their review, the Directors
noted the following:
-- DEL Licence (EL430) was issued for a period of 24 months until 13 March 2024.
-- Completion of the Preliminary Economic Assessment ('PEA') was completed in May 2022.
-- The 2 IMLs were approved by the GSMB on 3 August 2022.
-- Significant further exploration and evaluation activity is
planned, including an EIA for EL199.
-- A Memorandum of Understanding (MoU) was signed with LB Group
on 9 May 2023 and extended to December 2023. See Note 26.
-- Mineral sands prices remain strong, and the Group are
continuing off-take discussions following a number of approaches
from strategic and industrial Groups.
It is noted the IML licences granted during the year were
subsequently purported to be cancelled by the GSMB in May 2023.
However, in accordance with Sri Lankan law, the cancellation is not
effective until such time as the legislated appeal process has been
completed. Therefore, effectively the licences are not cancelled
and are effectively only suspended.
The GSMB purported to cancel the licences on the grounds that
mining activities were not being undertaken on the licence areas
but the GSMB specifically stated that our licences were suspended
pending a further investigation and that we should cease all mining
activities forthwith. Given these facts, the Groups lawyers are
very confident that the purported cancellations will be reversed,
and we will in fact be given our licences back free of any
suspension.
It is also noted, the two IMLs only apply to a fraction of the
total resource of the Eastern Minerals Project, which comprises 47
1x1km grids in EL168 and 37 1x1km grids in EL199. The two IMLs
themselves only apply to small areas in four of the total 47 grids
in EL168 however the outstanding 7 IML applications result in
coverage of all of the 47 grids in EL168. The Groups disputes with
the GSMB concern the EL168 area and there is no dispute over the
EL199 area. Damsila Exports also holds a valid exploration licence,
EL430, where exploration activities are ongoing unhindered.
Management are of the judgement that there is a reasonable
expectation, once the IMLs have been reinstated, that the remaining
IML applications will be approved in due course, however the appeal
is ongoing and therefore the result uncertain.
Following their assessment, the Directors concluded that no
impairment charge was required at 31 March 2023.
8. Investments in subsidiaries
Company
For the year ended For the year ended
31 March 2023 31 March 2022
$ $
------------------------------ -------------------- --------------------
At beginning of period 35,030,108 36,799,952
Additions - -
Impairment charge - -
Foreign exchange differences (2,041,735) (1,769,844)
------------------------------ -------------------- --------------------
Investment at end of period 32,988,373 35,030,108
------------------------------ -------------------- --------------------
Investments in Group undertakings are stated at cost, which is
the fair value of the consideration paid, less any impairment
provision.
Subsidiaries
Proportion
of ordinary
Company shares held
Name Country of incorporation number Parent by the Group
of subsidiary and place of business company (%) Nature of business
---------------- -------------------------- ---------- --------------- ---------------- -------------------
Capital
Metals British Virgin Capital Metals
Limited Islands 1890161 plc 100% Holding company
---------------- -------------------------- ---------- ----------------------- -------- -------------------
Brighton
Metals British Virgin Capital Metals
Limited Islands 1893384 Limited 100% Holding company
---------------- -------------------------- ---------- ----------------------- -------- -------------------
Redgate
Lanka
(Pvt) Brighton
Limited Sri Lanka 119784 Metals Limited 100% Holding/Investment
---------------- -------------------------- ---------- ----------------------- -------- -------------------
Damsila Sri Lanka PV8591 Keynes Investments 60.01% Exploration
Exports Lanka (Pvt)
(Pvt) Limited
Limited
Sri Lanka PV8591 Redgate Lanka 39.99% Exploration
(Pvt) Limited
------------------------------------------- ---------- ----------------------- -------- -------------------
Eastern Sri Lanka PV81273 Redgate Lanka 100% Exploration
Minerals (Pvt) Limited
(Pvt)
Limited
---------------- -------------------------- ---------- ----------------------- -------- -------------------
All subsidiary undertakings are included in the
consolidation.
Keynes Investments Lanka (Pvt) Limited was disposed as part of
the Group restructure during the year. Please refer to Notes 10 and
18 for further details.
The proportion of the voting rights in the subsidiary
undertakings held directly by the parent company do not differ from
the proportion of ordinary shares held.
9. Loans to subsidiaries
Company
----------------------------------
For the year For the year
ended 31 March ended 31 March
2023 2022
$ $
------------------------------ ---------------- ----------------
At beginning of period 1,834,904 1,195,000
Additions 533,627 697,389
Foreign exchange differences (89,985) (57,485)
Loan at end of period 2,278,546 1,834,904
------------------------------ ---------------- ----------------
The fair value of all receivables is the same as their carrying
values stated above and are repayable on demand. Interest on the
principal of the loans is charged at a rate of 2% per annum.
The Directors have assessed that there are no expected credit
losses to recognise in respect of the loans to subsidiaries as at
the balance sheet date, based on their assessment of the recovery
strategies, which indicate that the Company would fully recover the
outstanding balance of the loans. As such the Directors concluded
that no impairment was required at 31 March 2023. Please refer to
Note 7 for further details.
At 31 March 2023 Management reassessed the recovery profile of
the Company loans to Subsidiaries and note the updated project
development timetable would mean that it is unlikely that
repayments from subsidiaries would commence in the next 12 months
and accordingly the loans have been classified as non-current
receivables in the current year.
10. Other loans
For the year
ended 31 March
2023
$
--------------------------------------- ----------------
Keynes Investment Lanka (Pvt) Limited 124,897
Green Tech Minerals (Pvt) Limited 467
Other loans 7
Loans at end of period 125,371
--------------------------------------- ----------------
The loan to Keynes Investment Lanka (Pvt) Limited has arisen due
to the restructure of the Group, which took place in the year
(please refer to Note 18). As such Keynes have been deconsolidated
from the Group. The loan balance is a loan balance held with
Damsila Exports (Pvt) Limited that had previously been eliminated
on consolidation.
11. Trade and other receivables
Group Company
-------------------------- --------------------------
For the For the For the For the
year ended year ended year ended year ended
31 March 31 March 31 March 31 March
2023 2022 2023 2022
Current $ $ $ $
------------------- ------------ ------------ --- ------------ ------------
Trade receivables - 14,843 198,339 58,153
Prepayments 10,022 13,481 9,050 -
VAT receivable 26,333 7,836 26,333 7,836
Other receivables 3,662 - 1,988 -
------------------- ------------ ------------ --- ------------ ------------
Total 40,017 36,160 235,710 65,989
------------------- ------------ ------------ --- ------------ ------------
The fair value of all receivables is the same as their carrying
values stated above. The Directors have assessed that there are no
expected credit losses to recognise in respect of the trade and
other receivables.
12. Cash and cash equivalents
Group Company
-------------------------- --------------------------
For the For the For the For the
year ended year ended year ended year ended
31 March 31 March 31 March 31 March
2023 2022 2023 2022
$ $ $ $
-------------------------- ------------ ------------ --- ------------ ------------
Cash at bank and in hand 216,213 1,775,754 174,707 1,602,766
-------------------------- ------------ ------------ --- ------------ ------------
All of the UK entities cash at bank is held with institutions
with high credit ratings. The Sri Lankan entities cash at bank is
held with institutions whose credit rating is unknown. $2,588 is
held as a fixed deposit by Damsila Exports Private Limited.
13. Trade and other payables
Group Company
-------------------------- --------------------------
For the For the For the For the
year ended year ended year ended year ended
31 March 31 March 31 March 31 March
2023 2022 2023 2022
$ $ $ $
------------------------------- ------------ ------------ --- ------------ ------------
Current
------------------------------- ------------ ------------ --- ------------ ------------
Trade payables 90,191 67,659 79,832 40,083
Accrued expenses 155,738 61,895 154,494 61,729
Social security and other 2,212 - - -
taxation
Deferred consideration 593,750 594,372 - -
------------------------------- ------------ ------------ --- ------------ ------------
Total current liabilities 841,891 723,926 234,326 101,812
------------------------------- ------------ ------------ --- ------------ ------------
Non-current
------------------------------- ------------ ------------ --- ------------ ------------
Deferred consideration 600,000 600,000 - -
Other payables - 2,272 - -
------------------------------- ------------ ------------ --- ------------ ------------
Total non-current liabilities 600,000 602,274 - -
------------------------------- ------------ ------------ --- ------------ ------------
Deferred consideration represents amounts payable in respect of
the acquisitions of Damsila Exports (Pvt) Limited and Eastern
Minerals (Pvt) Limited. The amounts fall due and payable upon
completion of certain milestones within the Group, being for each
of Damsila Exports (Pvt) Limited and Eastern Minerals (Pvt)
Limited: $625,000 in cash (recognised at 95% of face value) upon
completion of feasibility studies on the relevant project and
$750,000 in cash (recognised at 80% of face value) upon
commencement of first commercial production from the relevant
project. Management anticipates the completion of the feasibility
study to take place within 12 months of the balance date, and
accordingly the deferred consideration in respect of this milestone
is classified as a current liability.
At the reporting period end, the probability estimated for the
likelihood of completion of Tranche 2 and 3 was considered, and
management continue to estimate 95% probability for Tranche 2 and
80% probability for Tranche 3. If these estimates prove incorrect
then the amounts payable in respect of the acquisition may be
different to those stated within the financial statements. The
total deferred consideration payable if all milestones are achieved
would be $1,375,000. The value of deferred consideration recognised
as at 31 March 2023 was $1,193,750.
14. Financial Instruments by Category
The notional amounts of financial assets and liabilities with a
maturity of less than one year (including trade and other
receivables, cash and cash equivalents and trade and other
payables) are assumed to approximate their fair value.
Group
31 March 2023 31 March 2022
Amortised Amortised
cost Total cost Total
Assets per Statement of Financial
Performance $ $ $ $
---------------------------------------------- ----------- ---------- ------------- ---------
Trade and other receivables - - 15,446 15,446
Cash and cash equivalents 216,213 216,213 1,775,754 1,775,754
----------- ---------- ------------- ---------
216,213 216,213 1,791,200 1,791,200
----------- ---------- ------------- ---------
31 March 2023 31 March 2022
----------------------
Fair value Fair value
through through
Amortised profit and Amortised profit and
cost loss Total cost loss Total
Liabilities per
Statement of Financial
Performance $ $ $ $ $ $
Trade and other
payables 245,930 - 245,930 129,554 - 129,554
Deferred consideration - 593,750 593,750 - 594,372 594,372
245,930 593,750 839,680 129,554 594,372 723,926
--------- -------------- ------- --------- ------------- ------------
Company
31 March 2023 31 March 2022
Amortised Amortised
cost Total cost Total
Assets per Statement of Financial
Performance $ $ $ $
Trade and other receivables (excluding
prepayments) 226,660 226,660 65,989 65,989
Loans to subsidiaries 2,278,546 2,278,546 1,834,904 1,834,904
Cash and cash equivalents 174,707 174,707 1,602,766 1,602,766
2,679,913 2,679,913 3,503,659 3,503,659
--------- --------- --------- ---------
31 March 2023 31 March 2022
Amortised Amortised
cost Total cost Total
Liabilities per Statement of
Financial Performance $ $ $ $
Trade and other payables 234,326 234,326 101,812 101,812
234,326 234,326 101,812 101,812
--------- ------- --------- -------
15. Share capital and premium
Group and Company Number of shares Share capital
---------------------------- --------------------
No. Nominal GBP $
value
---------------------------- ------------ --------- ------------ -----------
Ordinary shares 189,103,432 0.0020 378,207 510,403
Deferred shares 356,277,502 0.0099 3,527,147 5,552,000
Total 545,380,934 3,905,354 6,062,403
---------------------------- ------------ --------- ------------ -----------
Number of Share
Issued at 0.02 pence per Ordinary capital Share premium Total
share shares $ $ $
---------------------------- ------------ --------- -------------- -----------
As at 31 March 2022 189,103,432 510,403 48,946,676 49,457,079
---------------------------- ------------ --------- -------------- -----------
As at 31 March 2023 189,103,432 510,403 48,946,676 49,457,079
---------------------------- ------------ --------- -------------- -----------
Deferred Shares (nominal value of 0.0099 Number of Deferred Share capital
pence per share) shares $
-------------------------------------------- ------------------- --------------
As at 31 March 2022 356,227,502 5,552,000
-------------------------------------------- ------------------- --------------
As at 31 March 2023 356,227,502 5,552,000
-------------------------------------------- ------------------- --------------
16. Share based payments
Options
The Company has established a share option scheme for Directors,
employees and consultants to the Group. Share options outstanding
and exercisable at the end of the period have the following expiry
dates and exercise prices:
Options
Grant Date Vesting Date Exercise Exercise Expiry Date 31 March 31 March
price price hurdle 2023 2022
------------ -------------- --------- -------------- ------------ ----------- -----------
13/01/2021 13/01/2021 12.0p 18.0p 13/01/2026 3,916,667 3,916,667
13/01/2021 13/07/2021 12.0p 18.0p 13/01/2026 3,916,667 3,916,667
13/01/2021 13/01/2022 12.0p 24.0p 13/01/2026 3,916,666 3,916,666
15/09/2021 15/09/2025 12.0p - 15/09/2025 500,000 500,000
12,250,000 12,250,000
--------------------------- --------- -------------- ------------ ----------- -----------
The Company and Group have no legal or constructive obligation
to settle or repurchase the options or warrants in cash.
The fair value of the share options was determined using Black
Scholes and Monte Carlo valuation models. Black Scholes was used
for the options granted in September 2021 and Monte Carlo used for
the options granted in January 2021 given that these options had
specific market hurdles. The parameters used are detailed
below:
2021 Options 2022 Options
---------------- ------------------
Granted on: 13 January 2021 15 September 2021
Estimated Life (years) 5 years 4 years
Share price (pence per share) 19.05p* 9.75p
Risk free rate 1.05% 1.71%
Expected volatility 120% 47.88%
Total fair value ($) 1,459,455 694
*This is the volume weighted average share price. In determining
the expected volatility, consideration is usually given to the
historical company volatility. However, given prior to 13 January
2021 the Company was operating as an investment vehicle, as opposed
to a mineral sands company, as such the future share price
volatility pattern of the Company, will be materially different
from the historic volatility. It has been deemed appropriate to use
the median 5-year monthly volatility of a basket of listed
comparable companies with exposure to mineral sands.
The expected volatility of the options granted during this
financial year is based on the median 4-year volatility of a basket
of listed comparable companies with exposure to mineral sands.
The risk-free rate of return is based on zero yield government
bonds for a term consistent with the option life.
A reconciliation of options granted over the year to 31 March
2023 is shown below:
31 March 2023 31 March 2022
-------------------------- --------------------------
Weighted Weighted
average average
exercise exercise
Number price (GBP) Number price (GBP)
-------------------------- ----------- ------------- ----------- -------------
Outstanding at beginning
of period 12,250,000 12.0p 11,750,000 12.0p
Expired - - - -
Exercised - - - -
Granted - - 500,000 12.0p
-------------------------- ----------- ------------- ----------- -------------
Outstanding as at period
end 12,250,000 12,250,000
-------------------------- ----------- ------------- ----------- -------------
Exercisable at period
end 8,333,333 7,833,333
-------------------------- ----------- ------------- ----------- -------------
The tranche of 3,916,666 options only vests if the share price
hits a 100% premium to the exercise price and therefore given this
condition was not met at year end have been deemed not
exercisable.
The options outstanding at 31 March 2023 have a weighted average
contractual life of 2.8 years (2022: 3.8 years).
The options granted on 13 January 2021 vest in three tranches of
one-third on 13 January 2021 ("Tranche 1"), one-third on 13 July
2021 ("Tranche 2") and one-third on 13 January 2022 ("Tranche 3").
Tranche 1 and Tranche 2 have a market based vesting condition (i.e.
the Company's shares having traded any time following Admission at
a 50% premium to the exercise price). Tranche 3 has a market based
vesting condition (i.e. the Company's shares having traded any time
following Admission at a 100% premium to the exercise price).
During the period there was a charge of $Nil (2022: $720,842) in
respect of share options. The full charge has been recognised.
Warrants
As at 31 March 2023, there were 18,275,904 warrants outstanding
by the Company (2022: 18,275,904).
Warrants
Exercise 31 March 31 March
Grant Date price Expiry Date 2023 2022
---------------- ---------- ------------- ----------- -----------
08/09/2020* GBP0.080 08/09/2023 250,000 250,000
13/01/2021** GBP0.080 13/01/2024 5,000,000 5,000,000
13/01/2021** GBP0.120 13/01/2024 833,333 833,333
13/01/2021** GBP0.156 13/01/2024 8,687,499 8,687,499
13/01/2021*** GBP0.156 13/01/2024 2,423,848 2,423,848
13/01/2021*** GBP0.156 13/01/2024 247,891 247,891
15/02/2022**** GBP0.075 15/02/2025 833,333 833,333
18,275,904 18,275,904
----------------------------------------- ----------- -----------
The fair value of the warrants was determined using the Black
Scholes model. The parameters used are detailed below:
2020 Warrants 2021 Warrants 2021 Warrants 2022 Warrants
-------------- -------------- -------------- --------------
Granted on: 8 September 13 January 5 February 15 February
2020 2021 2021 2022
Life (years) 3 years 3 years 3 years 3 years
Price at grant 13.2p 20.0p 18.5p 7.75p
Risk free rate 0.20% 0.46% 0.45% 1.71%
Volatility 75% 68.03% 72.53% 88.90%
---------------- -------------- -------------- -------------- --------------
*The estimated fair value of the 250,000 warrants granted on 8
September 2020 was assessed as $25,000 and charged to the share
premium account to recognise the cost of issuing the warrants. The
expected volatility was determined by reference to the historical
volatility of the Company's share price.
**The estimated fair value of the 14,520,832 warrants granted on
13 January 2021 to placing subscribers and advisers was assessed as
$2,295,000, which was charged to the share premium account to
recognise the cost of issuing the warrants.
***The estimated fair value of the 2,423,848 warrants granted on
13 January 2021, and the 247,891 warrants granted on 5 February
2021, to the former holders of CML convertible bonds was assessed
as $342,000 and $32,000 respectively. The assessed fair value of
these warrants was capitalised to the investment in CML within the
Company's accounts and recognised as a share based payments expense
within the consolidated financial statements.
In determining the expected volatility, consideration is usually
given to the historical company volatility. However, given prior to
13 January 2021 the Company was operating as an investment vehicle,
as opposed to a mineral sands company, as such the future share
price volatility pattern of the Company, will be materially
different from the historic volatility. It has been deemed
appropriate to use the median 5-year monthly volatility of a basket
of listed comparable companies with exposure to mineral sands.
****The estimated fair value of the warrants granted on 15
February 2022 was assessed as $13,000 and charged to the share
premium to recognise the cost of issuing the warrants. The expected
volatility was determined by reference to the historical volatility
of the Company's share price.
17. Other reserves
Group
------------- ---------- ----------- ------------- -------------------------------------------
Share Foreign
Capital Deferred Reverse warrants currency
contribution share Merger acquisition and options translation
reserve reserve reserve reserve reserve reserve Total
$ $ $ $ $ $ $
-------------- ------------- ---------- ----------- ------------- ------------- ------------- -------------
At 31 March
2021 1,250,000 1,968,750 35,633,822 (75,441,159) 3,437,051 (989,200) (34,140,736)
-------------- ------------- ---------- ----------- ------------- ------------- ------------- -------------
Currency
translation
differences - - - - - (2,100,227) (2,100,227)
Share based
payments - - - - 733,916 - 733,916
At 31 March
2022 1,250,000 1,968,750 35,633,822 (75,441,159) 4,170,967 (3,089,427) (35,507,047)
-------------- ------------- ---------- ----------- ------------- ------------- ------------- -------------
At 1 April
2022 1,250,000 1,968,750 35,633,822 (75,441,159) 4,170,967 (3,089,427) (35,507,047)
-------------- ------------- ---------- ----------- ------------- ------------- ------------- -------------
Currency
translation
differences - - - - - (513,992) (513,992)
Transfer to
NCI - - - - - 103,430 103,430
At 31 March
2023 1,250,000 1,968,750 35,633,822 (75,441,159) 4,170,967 (3,499,989) (35,917,609)
-------------- ------------- ---------- ----------- ------------- ------------- ------------- -------------
Company
----------- --------------------------------------------
Foreign
Share warrants currency
Merger and options translation
reserve reserve reserve Total
$ $ $ $
---------------------------------- ----------- --------------- ------------- ------------
At 1 April 2021 35,633,822 3,462,051 (574,709) 38,521,164
---------------------------------- ----------- --------------- ------------- ------------
Currency translation differences - - (1,840,696) (1,840,696)
Share based payments - 733,916 - 733,916
At 31 March 2022 35,633,822 4,195,967 (2,415,405) 37,414,384
---------------------------------- ----------- --------------- ------------- ------------
At 1 April 2022 35,633,822 4,195,967 (2,415,405) 37,414,384
---------------------------------- ----------- --------------- ------------- ------------
Currency translation differences - - (2,258,901) (2,258,901)
At 31 March 2023 35,633,822 4,195,967 (4,674,306) 35,155,483
---------------------------------- ----------- --------------- ------------- ------------
18. Group Restructure
On 10 February 2023, following receipt of the notice from Sri
Lanka's GSMB to the Company's Sri Lankan IML-holding subsidiary
Damsila Exports (Pvt) Limited ("Damsila"), the Company had been in
frequent and productive dialogue with senior GSMB and other
officials in Colombo seeking to resolve concerns around the
ownership structure of Damsila. While the Company's legal position
remains that the ownership structure conformed with the relevant
requirements, the Board's objective had been to derive a pragmatic
solution to satisfy the GSMB that the spirit of the law requiring
local ownership of mining and primary processing activities is
reflected. This has resulted in a restructuring of the Group.
Under the Restructuring, an effective 60 percent of the
ownership of Damsila has been issued to a Sri Lankan national who
is known to, and who has worked with, the Company since 2015. As
the Company will continue to fund the capital and operations of the
Project, the Restructuring has been completed without materially
impacting the Company's economic value in the Project.
Prior to the restructure, Damsila had 26,354,812 shares in
issue. The Restructuring involved Damsila issuing 39,548,694 new
shares to Keynes Investment Lanka (Pvt) Limited ("Keynes"), which
is 99.98% owned by a Sri Lankan national, Mr Dinal Peiris, who is
well known to the Company, with the remaining 0.02% owned by an
existing Capital Metals shareholder, giving Keynes a 60.01 percent
interest in Damsila and the Sri Lankan national an effective 60.0
percent of Damsila. The consideration for the above issue of
ordinary shares in Damsila to Keynes is 1 Sri Lankan rupee per
share (equivalent to US$108,353 at 365 SLR: 1 USD).
If an entity with a 40% shareholding has a contractual
arrangement that gives it the power to direct the relevant
activities of the other entity, it can maintain control and is
required to consolidate the financial statements of the other
entity in accordance with IFRS 10. After the restructure of the
Group, the contractual arrangements in place to determine whether
they have the power to direct the relevant activities of another
entity and, as a result, maintain control were carefully assessed.
It was concluded that as Directors have the majority of the voting
rights, the Company will benefit from all future production of any
offtake agreements and that Redgate Lanka maintains control of
Damsila. As such Damsila shall remain consolidated within the Group
accounts. Damsila is now accounted for as a non-controlling
interest. No NCI has been recognised on the net assets of Damsila
as the Group has full rights to returns from the subsidiary. An
equity transfer has been made only in relation to historic OCI
movements through the foreign exchange reserve.
As a result of the restructure, Keynes Investment Lanka (Pvt)
Limited has been deconsolidated and is no longer part of the Group.
There was no material impact on the financial statements. A loan to
Keynes Investment Lanka (Pvt) Limited has arisen due to the
restructure of the Group (please refer to Note 10). The loan
balance is a loan balance held with Damsila that had previously
been eliminated on consolidation.
19. Employee benefit expense
Group Company
------------------------- -------------------------
Year ended Year ended Year ended Year ended
31 March 31 March 31 March 31 March
2023 2022 2023 2022
Staff costs (excluding Directors) $ $ $ $
------------------------------------ ------------ ----------- --- ------------ -----------
Salaries and wages 201,043 10,000 - -
Social security costs - - - -
Other employment costs - 5,000 - -
------------------------------------ ------------ ----------- --- ------------ -----------
201,043 15,000 - -
------------------------------------ ------------ ----------- --- ------------ -----------
The average monthly number of employees for the Group during the
year was 18 (year ended 31 March 2022: 15).
20. Directors' and Key Management remuneration
Salaries Share Year ended Year ended
& fees based payments 31 March 31 March
2023 2022
------------------------ -------- --------------- ---------- ----------
$ $ $ $
------------------------ -------- --------------- ---------- ----------
Executive Directors
Michael Frayne 158,224 - 158,224 204,937
Gregory Martyr 72,941 - 72,941 52,464
Anthony Samaha - - - 56,927
Non-executive Directors
James Leahy 31,543 - 31,543 35,648
Geoffrey Brown - - - 21,655
Teh Kwan Wey 18,083 - 18,083 20,494
Key Management
Iranga Dunuwille 96,000 - 96,000 61,685
376,791 - 376,791 453,810
As at 31 March 2023, there were no directors receiving defined
contribution pension schemes benefits (2022: Nil).
Of the above costs, $61,318 (year ended 31 March 2022: $37,000)
has been capitalised in accordance with IFRS 6 as exploratory
related costs and are shown as an intangible addition in the
year.
Details of fees paid to companies of which the Directors
detailed above are Directors have been disclosed in Note 24.
The remuneration of Directors and key management is determined
by the remuneration committee having regard to the performance of
individuals and market trends.
21. Income tax expense
No charge to taxation arises due to the losses incurred.
The tax on the Group's loss before tax, applicable to the losses
of the consolidated entities, is as follows:
Group
For the For the
year ended year ended
31 March 31 March
2023 2022
$ $
Loss before tax (1,138,538) (1,914,233)
------------
Tax at the applicable rate of 19% (2022: 19%
) (216,322) (363,704)
Effects of:
Expenditure not deductible for tax purposes 7,821 138,638
Deferred tax asset not recognised 208,501 225,066
----------- ------------
Tax charge - -
----------- ------------
No deferred tax assets have been recognised in relation to the
historic losses in the year (2022: nil), this is as a result of the
uncertainty of future profits within the Group.
The UK corporation tax throughout 2022 and 2023 was 19%.
The Company has tax losses of approximately $11,590,377 (31
March 2022: $10,493,000) available to carry forward against future
taxable profits.
22. Loss per share
Group
The calculation of the total basic loss per share of 0.21 cents
(2022: 0.36 cents) is based on the total comprehensive loss
attributable to equity holders of the parent company of $1,138,538
(2022: $1,914,233) and on the weighted average number of ordinary
shares of 545,380,934 (2022: 531,043,035) in issue during the
year.
In accordance with IAS 33, basic and diluted earnings per share
are identical for the Group as the effect of the exercise of share
options would be to decrease the earnings per share. Details of
share options that could potentially dilute earnings per share in
future periods are set out in Note 16.
23. Expenses by nature
Group
Year ended Year ended
31 March 31 March
2023 2022
$ $
------------ -----------
Operations 188,665 -
Director fees & employment tax contributions 315,473 355,000
Employee salaries - 14,635
Audit 95,947 61,000
Accountancy 109,952 155,635
Exchange related costs 188,897 154,751
Professional & consultancy fees 115,503 219,052
Office expenses 31,016 90,938
Insurance 8,298 19,299
Depreciation 3,208 8,832
Travel & entertainment 31,595 23,730
Acquisition related costs 37,953 32,496
Other expenses 5,991 58,947
------------ -----------
Total administrative expenses 1,132,498 1,194,315
------------ -----------
Services provided by the Company's auditor and its
associates
During the year, the Group (including overseas subsidiaries)
obtained the following services from the Company's auditors and its
associates:
Group
Year ended Year ended
31 March 31 March
2023 2022
$ $
Fees payable to the Company's auditor and its
associates for the audit of the Parent Company
and Consolidated Financial Statements 74,202 61,000
The amount payable as at 31 March 2022 related to fees charged
by BDO LLP who were the Company's auditor in the prior year.
24. Commitments
License commitments
Capital Metals plc through its subsidiaries owns two mineral
exploration licenses and two IMLs in Sri Lanka. These licences
include commitments to pay annual licence fees and minimum spend
requirements.
As at 31 March 2023 these are as follows:
2023 2022
Group
Minimum
Licence Minimum Licence spend requirement
fees spend requirement Total fees $ Total
$ $ $ $ $
Not later than one - - -
year - - -
Later than one year
and no later than
five years - 548,450 548,450 54,000 54,000 54,000
Total - 548,450 548,450 54,000 54,000 54,000
New regulations regarding minimum spend requirements were
implemented in January 2023.
25. Related party transactions
Loans to Group undertakings
Amounts receivable as a result of loans granted to subsidiary
undertakings are as follows:
Company
31 March 31 March
2023 2022
$ $
Brighton Metals Limited 1,130,448 782,779
Capital Metals Limited 875,672 918,532
Damsila Exports Private Ltd 272,426 133,593
At 31 March 2023 2,278,546 1,834,904
These amounts are unsecured and repayable in US Dollars on
demand from the Company. Interest on the principal of the loan is
charged at a rate of 2% per annum.
All intra Group transactions are eliminated on
consolidation.
Other transactions
The Group defines its key management personnel as the Directors
of the Company as disclosed in the Directors' Report.
Limerston Pty Limited, a limited company of which Michael Frayne
is a director, was paid a fee of $158,224 for the year ended 31
March 2023 (31 March 2022: $204,937) for the provision of corporate
management and consulting services to the Company. There was a
balance of $15,069 owing at year end (31 March 2022: $Nil).
Hogan's Bluff Capital Pty Ltd, a limited company of which Greg
Martyr is a director, was paid a fee of $72,941 for the year ended
31 March 2023 (31 March 2022: $52,464) for consulting services to
the Company. There was a balance of $34,365 owing at year end (31
March 2022: $Nil).
KL-Kepong International Ltd, a limited company of which is fully
owned by Kuala Lumpur Kepong Berhad Ltd of which Teh Kwan Wey is an
employee of, was paid a fee of $18,083 for the year ended 31 March
2023 (31 March 2022: $20,494) for consulting services to the
Company. There was a balance of $3,014 owing at year end (31 March
2022: $Nil).
Ventureflex (Pvt) Ltd, a limited company of which Iranga
Dunuwille is a director, was paid a fee of $36,000 for the year
ended 31 March 2023 for consulting services to the Company. There
was a balance of $Nil owing at year end.
Related party transactions were made on terms equivalent to
those that prevail in arm's length transactions only when such
terms can be substantiated.
26. Ultimate controlling party
The Directors believe there is no ultimate controlling
party.
27. Events after the reporting date
A Memorandum of Understanding (MoU) was signed with LB Group on
9 May 2023, the world's leading manufacturer of high-performance
titanium dioxide pigments and sponge, to fund the Project into
production. This has now been extended to December 2023 as
announced in August 2023.
On 30 May 2023 the Company received a notice of cancellation of
the IMLs from the GSMB. For further details please refer to Note
7.
On 20 June 2023, the Company issued 50,000,000 new ordinary
shares of 0.2 pence at a price of 1p per share for gross proceeds
of GBP500,000.
On 12 July 2023, warrants to subscribe for 2,500,000 shares were
issued with an exercise price of 1p per share.
Michael Frayne stepped down as Chief Executive Officer and as a
director of the Company with effect from 30 June 2023.
On 17 July 2023, the Company issued 36,470,566 new ordinary
shares of 0.2 pence at a price of 1p per share for gross proceeds
of GBP364,705.
On 1 August 2023 share options to subscribe for 8,000,000
ordinary shares were granted to certain Directors, as well as
3,050,000 options to employees and consultants with an exercise
price of 3p per share. In addition, 1,000,000 warrants were issued
to service providers of the Company with an exercise price of 3p
per share.
On 1 August 2023, the Company issued 2,047,600 ordinary shares
of 0.2 pence each at a price of 1 pence per share to various
service providers as consideration for services rendered.
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END
FR USORROKUKAUR
(END) Dow Jones Newswires
September 15, 2023 02:00 ET (06:00 GMT)
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