TIDMKDNC
RNS Number : 9641D
Cadence Minerals PLC
27 June 2023
Cadence Minerals Plc
("Cadence Minerals", "Cadence", or "the Company")
Annual Results for the year ended 31 December 2022
Cadence Minerals (AIM/NEX: KDNC) is pleased to announce its
final results for the year ending 31 December 2022. The full Annual
Report and Audited Financial Statements will be available on the
Company's website at
https://www.cadenceminerals.com/ and posted to shareholders by 30 June 2023.
Chairman's Statement
I am pleased to present the Company's Annual Report and Audited
Financial Statements for the year ended 31 December 2022.
The global macroeconomic outlook continues to be unpredictable
and difficult to navigate. The expected recovery and bounce back
from pandemic-era conditions have largely been tempered by
fast-rising interest rate and inflation forecasts. Coupled with an
increasing focus on China's status as an adversary rather than just
a competitor, the global outlook remains mixed and confusing. Over
a year has passed, and the Ukraine invasion has now become an
entrenched war, with many of the initial supply disruptions looking
set to become semi-permanent dislocations. The Cadence Minerals
portfolio is both balanced, diversified and constructed to
anticipate supply and demand shocks. As such it should be well
placed to weather this ongoing uncertainty.
Although the above suggests caution and a degree of pessimism,
there are actual positives emerging. Recent economic forecasts
suggest continued stimulus and support for infrastructure projects
globally. Inflation, by some metrics, may have peaked, and the
transformation to an EV world is gaining even more momentum. Recent
merger and acquisition activity suggests an increasing awareness
among multinational companies to integrate critical and strategic
materials into their respective portfolios.
Market observers will be aware of an increase in the number of
potential nationalisations across specific strategic industries and
the resources sector. The net result is of course a greater focus
on the resource sector, particularly while major resource companies
continue to ramp up capital allocation into the EV material space
to meet the sea change in demand for raw materials.
On behalf of the Board of Directors (Board) and management, I
thank all our advisors, consultants, service providers, and
especially our shareholders for their support throughout the year.
The Board and company have continued site visits, viewed potential
investment opportunities, and attended many industry
conferences.
I am always reminded never to approach a marathon by counting
every inch; it is a very hard way to keep and maintain perspective.
Investing in the resource space really is a marathon versus a
sprint. In every area, it continues to surprise how long
permitting, licenses approvals, environmental studies, and raising
capital can take.
Many times, the Board has stated "we will look for opportunities
to unlock and discover value across our portfolio." I am
particularly grateful that our patience has been rewarded with the
continued success and maturing of many of our portfolio companies.
The successful listing on the ASX of Evergreen Lithium is a good
case in point and the Board sends its congratulations to all who
made that listing possible.
The Board sees further potential within our private and public
holdings for further listings and potential transactional activity
to bolster Company returns. In the wake of such a challenging year,
we send our congratulations and support to our portfolio companies
for their continued success. As the Cadence investment portfolio
continues to mature, we will continue our search for new, accretive
investments with the same methodology and rigorous diligence as
before in order to assure a continued supply of diversified growth
opportunities.
We have a clear path ahead for our flagship Iron Ore investment
at Amapa, Brazil. The publication of initial and preliminary
studies, and the DEV team's liaison with federal, state, and local
authorities, continues to unlock the potential of this project. The
Board thanks our JV partner, lawyers, and consultants for their
hard work in negotiations, settlements, and the operational success
emanating from this investment.
The challenge of a dislocated economic recovery and the prospect
of a slowing Chinese economy, highlighted by the likelihood of
steel production at or below one billion tons, has proved to be a
continual challenge to the Cadence share price. However, due to the
likelihood of support and stimulus coupled with acquisition and
investment in the resources sector, (particularly related to the EV
transition), we expect the constitution of the Cadence portfolio to
remain robust and focussed on the strategic and critical sectors of
the economy.
I would like to personally thank my fellow Board members, staff,
and partners, all of whom constitute the Cadence Community and, of
course, all of our shareholders for their encouragement and
continued confidence in the company
Andrew Suckling
Non-Executive Chairman
Chief Executive Officer's Commentary
I am pleased to present the audited results for the year ended
31 December 2022, along with the Strategic Report that provides a
comprehensive review of our business activities during the year. It
is important to note that these results reflect the historical
position of the Company's progress and financial standing, and we
have included additional information on key post-year-end events in
the Strategic Report .
In reviewing the performance of Cadence during the year, it
would be fair to say that our two portfolios preformed quite
differently despite the solid operational performance of the
underlying assets and the long-term outlook of the commodities
these projects intend to extract. While we delivered excellent
operational results and strong investment returns within our
private portfolio, our public traded portfolio decreased
substantially, despite the underlying assets delivering to their
goals.
In our private portfolio, the Amapá iron ore project remained
the primary focus for Cadence's management. In my capacity as a
director of the joint venture, Cadence was heavily involved in the
operational progress we have seen to date, which cumulated in the
delivery of a robust Pre-Feasibility Study ("PFS"), which confirmed
the project's strong economics. To date, our investment has been
circa US$9.3 million for 30% of the Amapá iron ore project; the net
present value of 100% was estimated in the PFS at US$949
million.
In addition to the progress made at Amapá, the Company increased
the investment returns by converting some of its passive private
investments into public traded equity. These returns were achieved
via two asset sales, firstly our 31.5% interests in Lithium
Technology Pty Ltd and Lithium Supplies Pty Ltd ("LT and LS") were
sold to Evergreen Lithium, and secondly, our 30% interest in
licenses within the Yangibana Rare Earth Project ("Yangibana
Project") were sold to owner/operator Hastings Technology Metals.
These transactions were completed after a year-end, so the
financial returns are not reflected in these financial statements.
Cadence has invested approximately GBP1.7 million in these assets,
and our sale price into the equity of the two public companies was
the equivalent of GBP7.4 million, representing a 335% cumulative
return on our investments.
In contrast to these achievements, the performance of our
publicly listed portfolio tracked our largest holding, European
Metals Holdings ("EMH"), which was down some 49% over the year
despite the excellent progress made in developing the asset. EMH's
price depreciation came off multi-year highs achieved during 2021
and followed the general trend of the AIM basic resource index,
which was also down year on year, reflecting the risk-off approach
we have seen with investors since mid-Aug 2021.
These negative year-over-year returns contradict the fundamental
drivers in our portfolio, namely the incredible growth of the
lithium raw material market and the stabilisation of the iron ore
market. Therefore, the driver for the lacklustre performance
appears to be a weakening in equity funds flow. Investment fund
flows were the weakest in eight years as investors turned their
backs on UK equity funds in 2022, selling a record GBP8.38 billion.
In summary, Investors have sold UK equity and sought the safest
havens, taking refuge in cash and perceived lower-risk
investments.
As previously stated, the lithium market has continued to expand
rapidly. The global lithium-ion battery manufacturing industry's
expansion to feed the transportation sector's electrification
fuelled this growth. This expansion results from a concerted shift
toward decarbonisation and net zero targets set by the private
sector and governments worldwide. The IEA predicts that demand for
EV batteries will rise from around 340 Gigawatt hours (GWh) today
to over 3,500 GWh by 2030, with the industry requiring 50
additional lithium mines by then. These macro drivers should
continue to support the fundamentals behind our lithium and rare
earth investments.
Within the iron ore market, although we saw a softening in the
first of the year, it recovered by the end of 2022, with the 62% Fe
Platts closing at circa US$117 per dry metric tonne ("dmt"). Both
short and longer-term prospects for iron ore are driven by China,
given that the nation is the world's biggest steel producer and
currently buys about 70% of global seaborne iron ore.
In the coming year, we look forward to further developing the
Amapa Iron Ore project, progressing the permitting pathway, and, if
possible, securing a joint venture partner to co-develop the
asset.
With our other investments, we look forward to developments at
Evergreen Lithium, which given its proximity to the Finnis project,
represents the most prospective investment in our portfolio.
Hastings and EMH are well advanced in their development cycle, and
we look forward to seeing the construction of the beneficiation
plant at Hastings in Q3 of this year and the publication of the EMH
Definitive Feasibility Study in Q4 of this year.
As discussed in the Investment Review, Cadence's ambition is to
mitigate the need for external capital by growing and reinvesting
the profits from our assets under management. We believe we are on
our way to achieving this goal with our investments over the last
three years of GBP8.64 million being funded by GBP7.77 million of
sales in our public portfolio and GBP0.87 million from equity
capital. Excluding the equity funding for our investments over the
last three years Cadence has raised a total net funding from
external sources of GBP3.72 million. At the time of writing, the
realised profit since inception from the current public portfolio
is GBP5.27 million and a total unrealised and realised gain is
338%.
I want to express my gratitude to the Cadence team and our
investee companies, who have all worked tirelessly to bring the
Company and its investment to their current position. We believe
concentrating risk across a few crucial assets and commodities will
pay off.
Kiran Morzaria
Chief Executive Officer
INVESTMENT REVIEW
As outlined in the section "Our Business and Investment
Strategy" in the Annual Report, Cadence operates an investment
strategy in which we invest in private projects via a private
equity model and public equity. In both investment classes, we take
either an active or passive role. We have reported in these
segments below.
Overall, we achieved our goals within our private investment
portfolio. Amapá delivered against its operational targets, and the
publication of the PFS outlined a potential asset value well above
the valuation we have been investing at. For Evergreen Lithium and
our Investment in the Yangibana Rare Earth deposit, our goals were
to monetise these illiquid assets at a higher valuation for
re-investment in our portfolio. We reached agreements that would
have achieved this during the year, delivering a 335% cumulative
return on our investments. However, due to regulatory delays
outside our control, the crystallisation of this value was only
after the year-end.
Our public portfolio followed the overall risk-off, the downward
trend of the AIM basic resource index. In particular, our holding
in EMH reduced in price by 49% during the year, impacting our
cumulative returns and was reflected in our share price.
Nonetheless, we were able to sell some of this stake to partly fund
our continuing investment in Amapá; the realised return on these
sales was some 174% our overall return on EMH (realised and
unrealised) is some 264%.
The overall ambition of the portfolio is capital growth of the
assets under management which should be reflected in Cadence's
share price. We intend to fund this growth, where possible, by
investing in undervalued assets, selling these investments at
higher valuations, and reinvesting the proceeds.
Once we reach critical mass in terms of assets under management,
this investment cycle will mitigate the need for outside capital,
either in new equity or debt. Over the last three years, we have
been slowly achieving this with a total of GBP7.77 million in sales
of our portfolio, which has partly funded a total of GBP8.64
million of new investments. At the time of writing, the realised
profit from the current public portfolio is GBP5.27 million since
inception.
Private Investments, Active
The Amapá Iron Ore Project, Brazil
Interest - 30% at 31/12/2022 and 30% at 31/05/2023
The Amapá Project is a large-scale iron ore mine with associated
rail, port and beneficiation facilities that commenced operations
in December 2007. The Project ceased operations in 2014 after the
port facility suffered a geotechnical failure, which limited iron
ore export. Before the cessation of operations, the Project
generated an underlying profit of US$54 million in 2012 and US$120
million in 2011. Operations commenced in December 2007, and 2008,
the Project produced 712 thousand tonnes of iron ore concentrate.
Production steadily increased, producing 4.8 Mt and 6.1 Mt of iron
ore concentrate products in 2011 and 2012, respectively.
Investment
In 2019 Cadence entered into a binding investment agreement to
invest in and acquire up to 27% of the Amapá iron ore mine,
beneficiation plant, railway and private port owned by DEV. The
agreement also gave Cadence a first right of refusal to increase
its stake to 49%.
To acquire its 27% interest, Cadence invested US$6 million over
two stages in a joint venture company. The first stage is for 20%
of the JV, the consideration for which was US$2.5 million. The
second stage was for a further 7% of the JV for a consideration of
US$3.5 million. Both of these investments were completed in the
first quarter of 2022. In October 2022, we increased this stake to
30% through the conversion of loans, management capitalisation,
consultancy charges, and cash investment. Cadence's investment in
the Amapá Project at the end of the year was US$ 9.3 million for
30% of the asset.
Operations Review
During the reporting period, the operational focus for the year
at the Amapá Project was the completion of the Pre-Feasibility
Study ("PFS") and the progress of the permitting pathway, including
the regularisation of the mining concessions, tailing storage
facilities and the environmental permits.
Pre-Feasibility Study
As part of the PFS, the Amapá Project increased and upgraded its
Mineral Resource Estimate. This resulted in a substantial crease in
total Measured, Indicated and Inferred Mineral Resources to 276.24
Million Tonnes grading 38.33% Fe and a maiden Measured Resource of
55.33 Mt grading 39.26% Fe.
The PFS was completed during the year, with the results
announced in early January 2023. The PFS confirmed the potential
for the Amapá Iron Ore Project to produce a high-grade iron ore
concentrate and generate strong returns over its life of mine. It
delivered a robust 5.28 Mtpa operation which can provide excellent
cash flows and a post-tax NPV of US$949 million.
The Key Highlights of the PFS are below:
-- Annual average production of 5.28 million dry metric tonnes
per annum ("Mtpa") of Fe concentrate, consisting of 4.36 Mtpa at
65.4% Fe and 0.92 Mtpa at 62% Fe concentrate.
-- Post-tax Net Present Value ("NPV") of US$949 million ("M") at a discount rate of 10%.
-- Post-tax Internal Rate of Return of 34%, with an average
annual life of mine EBITDA of US$235 M annually
-- Maiden Ore Reserve of 195.8 million tonnes ("Mt") at 39.34%
Fe demonstrates an 85% Mineral Resource conversion.
-- Free on Board ("FOB") C1 Cash Costs of US$35.53/dmt at the
port of Santana. Cost and Freight ("CFR") C1 Cash Costs
US$64.23/dmt in China.
-- Pre-production capital cost estimate of US$399 million,
including the improvement and rehabilitation of the processing
facility and the restoration of the railway and the wholly owned
port export facility
-- Opportunities: exploration target at the Tucano Mine to
further extend initial mine life and potential capital savings at
port loading facilities.
Based on the positive outcome of the PFS and subsequent
consultations with the key contractors, three areas of possible
improvement to the Amapá Project were identified. The first was to
review the historical drilling and geological data north of the
Amapá mining concessions. The data has been acquired and is
currently being processed to identify further iron ore resources,
which, if present, would further increase the mine life.
The second area of potential improvement is a change in the
layout of the port at Santana by moving the railway loop further
from the shore. After the year's end, a scoping study regarding
this option was completed and identified a potential net capital
saving to the port refurbishment costs of US$28 million.
The last area of potential improvement is to investigate and
review the flowsheet to improve the final product quality over and
above the current 65% iron ore concentrate. Once these studies are
completed, work on a Definitive Feasibility Study ("DFS") can
begin. The DFS is required to seek project debt and equity finance,
which will be sought once the DFS is complete.
Permitting Pathway
Although DEV owns the Mining Concessions, it does need to obtain
Mine Extraction and Processing Permit to begin operations, and this
is done by obtaining an Operational License ("LO") from the state
environment authority. Once this has been completed, DEV will apply
for Mine Extraction Permit. Since the Project was acquired by its
current owners in 2022, DEV has made the required regulatory
filings and embarked on studies and maintenance works to comply
with the National Mineral Agency requirements.
In 2022 DEV began the regularisation of the expired
environmental permits. In consultation with the Amapá State
Environmental Agency and the relevant state authorities, DEV has
requested that the requirement for an environmental impact study be
waived.
This request for a waiver was on the basis that the previous LOs
were granted on an operation that is substantially the same as is
currently planned and remains applicable to future operations. DEV
proposes that the company submits an Environmental Control Plan -
"PCA" (Plano de Controle Ambiental); and Environmental Control
Report - "RCA" (Relatório de Controle Ambiental). DEV has begun its
proposed permit pathway for the Project based on the above
requirements of a PCA and RCA.
The proposed permit pathway for the Project has both legal and
practical precedent and is a reasonable approach, given the
Project's status and level of development.
The state owns the railway line and associated land; therefore,
for the Project to utilise this, it requires both the LO and a
concession agreement with the State of Amapá. The previous
operators of the Project were granted this concession in 2006 for
20 years under specific terms and conditions. The reinstatement of
this concession to one of DEV's 100% owned subsidiaries was in
December 2019 and was extended to 2046. The concession allows DEV's
100% owned subsidiary to operate the railway to primarily transport
iron ore from the mine to its port in Santana. The State of Amapá
owns the surface rights associated with the railway, and under the
Railway Concession, DEV has been granted use over these surface
rights.
In addition to the LO detailed above, the company's port is
regulated by the Agencia Nacional de Transportes Aquaviários
("ANTAQ"). As a result of the change of ultimate beneficiary of
DEV, a change of control request was filed. This change of control
was granted in November 2021. As part of the port change of
control, ANTAQ agreed to cease the recommended abrogation of the
port concession. DEV owns the surface rights associated with the
port.
Secured Bank Settlement Iron Ore Shipments
As per the settlement agreement announced in December 2021 here
, the net proceeds of the one shipment carried out in 2022, along
with approximately half of the net proceeds from the shipments in
2021, have been used to pay the secured bank creditors.
The main driver for the lack of shipment during the year
resulted from the impact of the Ukraine war and the legacy of Covid
on supply chains resulting in higher shipping costs and lower iron
ore pricing. Other iron ore producers in the region have been able
to ship because their product is of a higher grade than our
stockpiled historical product (58% Iron), which typically will
achieve a 10%-12% discount to 62% Fe Platts CFR. Given these
unprecedented macroeconomic conditions, DEV could not meet the 2022
payment schedule per the settlement deed. Although the bank
creditors have reserved their rights, the settlement deed remains
in full effect with all parties in discussions to agree on a new
timetable to rephase payments so these can be met in light of
market conditions.
With improving iron ore prices and stability returning to
shipping costs, selling the 58% iron ore concentrate stockpile is
economically viable. Although DEV can recommend material shipment,
the secured bank creditors must approve such a shipment.
Nonetheless, assuming that the secured bank creditors act under an
economic desire for their debt to be repaid, we expect shipping to
recommence by the beginning of Q3 2023.
Development Plan for the Amapá Project
The goal is to bring this project back into production. With the
PFS completed, a project would typically directly proceed to DFS,
funding, and construction. Cadence and Its joint venture partners
have agreed that the lowest risk and currently best commercial
approach to developing this project is to bring on a highly
experienced mining operator or EPCM contractor as a joint venture
partner, and we are working towards this goal. We currently have
three interested parties reviewing the data room in this regard.
However, the above strategy does not preclude the option for our
joint venture company developing the project or embarking on trade
sale of the project.
In our ongoing discussions with stakeholders of the Amapá
Project, including shareholders of Cadence, there has been concerns
expressed in relation to the timing of the development of the
project as we would have originally expected to be in production at
this point in time.
The extension of the development timeline is primary
attributable to the almost two and half year delay in reaching a
settlement with the secured bank creditors, this was substantially
more than we had all expected. Given that a representative of the
secured bank creditors indicated that they would be amenable to
being paid from the cashflow after operations had started. However,
it transpired that the secured bank creditors were seeking payment
from the iron ore stockpiles and as such alongside our joint
venture partners we negotiated a substantial reduction if the
amounts payable delivering substantial long term cash savings to
the project.
In the absence of a settlement, as per the investment agreement
with our joint venture partners, Cadence did not want to risk
capital in the project and therefore did not invest any substantial
monies until this matter had been resolved. It was only at this
point in February 2022 that investment in the project and could
start in earnest.
Private Investments, Passive
Evergreen Lithium Limited, Australia
Interest - 13.16% at 31/12/2022 and 8.74% on 31/05/2023
In July 2022, Cadence Minerals received approximately 15.8
million shares in Evergreen Lithium ("Evergreen") when Cadence sold
its 31.5% stake in Lithium Technologies and Lithium Supplies ("LT
and LS") to Evergreen as announced on 27 June 2022. After the
year-end, Evergreen was listed on the Australian Stock Exchange
("ASX"). Before listing, Cadence's equity stake in Evergreen was
13.16%; due to the IPO and associated fundraising, this was reduced
to 8.74%. At the time of writing, the value of this stake was
approximately GBP3.3 million; our initial investment into this
asset was GBP0.83 million.
A further AS$ 6.63 million (GBP3.80 million) shares in Evergreen
are due to Cadence on achieving certain performance milestones by
Evergreen. Further details of these milestones can be found in the
Evergreen prospectus. Cadence's shares are subject to a 2-year
escrow agreement as determined by the listing rules of the ASX.
On acquiring LT and LS, Evergreen became the 100% owner of three
exploration tenements. The Bynoe Lithium Project and Fortune
Lithium Project (awaiting grant of exploration permit) are located
in the Northern Territory, and the Kenny Lithium Project is in
Western Australia.
The Bynoe Lithium Project is Evergreen's flagship prospect.
Evergreen's primary focus is to explore and discover an
economically viable lithium resource for development. The Bynoe
Lithium Project is located south of Darwin in the Northern
Territory, Australia. It covers the north-eastern strike extent of
the lithium- and tantalum-endowed Bynoe Pegmatite Field.
The Bynoe Pegmatite Field is host to Core Lithium Ltd's (ASX:
CXO) ("Core Lithium" or "Core") high-grade Finniss lithium deposit,
which is adjacent to Core Lithium's producing lithium mine. Core
Lithium's deposit is just 1.2km from the Bynoe Lithium Project.
Soil sampling conducted on the Bynoe Lithium Project has returned
geochemical anomalies that indicate the lithium mineralisation
continues along the trend into the Company's Bynoe Lithium Project.
Based on the initial stages of soil sampling alone (which only
covers approximately 10-20% of the Bynoe Lithium Project area, an
initial five target zones have been identified that contain lithium
mineralisation. The Bynoe Lithium Project covers an area of 231
km2, making Evergreen one of the largest tenement holders within
the central Bynoe Pegmatite Field after Core Lithium.
In recent years, exploration activities within the Bynoe Field
have been focused on the discovery of economic lithium
mineralisation hosted in pegmatites, the most successful of which
has been Evergreen's neighbour, Core Lithium, which in a very short
time frame, has delineated a JORC mineral resource of 18.9mt at
1.32% Li2O at its Finniss Project. Core Lithium has achieved
excellent drilling intercepts at their BP33 prospect of 107 metres
at 1.70% Li2O, located within 1km of the Bynoe Lithium Project and
Core Lithium's Finniss (BP33) mine. Evergreen intends to expand the
geochemical soil sampling significantly. In addition, Evergreen
recently completed an Ambient Noise Topography ("ANT") Survey and
is currently awaiting its geophysical interpretation. Core Lithium
recently used ANT (refer to ASX announcement Core Lithium, 1 August
2022, "BP33 drilling delivers outstanding results"). Core noted the
results were an "outstanding success" and showed "excellent
correlation" with known pegmatite bodies already identified by
drilling. Once the baseline geochemical and geophysical data is
collected, Evergreen plans to systematically drill the anomalies,
starting with the highest priority along strike from Core Lithium's
mineralised pegmatites.
The Kenny Lithium Project is located within the Dundas Mineral
Field of Western Australia and 50km East of Norseman in the Eastern
Goldfields. It is near the Mt Dean and Mt Belches-Bald Hill
pegmatite fields, and multiple significant lithium discoveries have
been made near the Kenny Lithium Project.
The Kenny Lithium Project covers an area of 210 km2, providing
Evergreen with a large and prospective land holding within the
Dundas mineral field.
The Kenny Lithium Project lies at the southern end of the
Norseman-Wiluna Granite Greenstone Belt within the Archaean Yilgarn
Craton. This well-known lithium-producing region/mineral field is
host to the significant Mount Marion, Bald Hill and Baldania mines,
respectively, close to the Company's Kenny Lithium Project.
Initial field mapping on the Kenny Lithium Project has confirmed
the presence of substantial outcropping pegmatites, whereby an
approximate 10km zone of pegmatite outcropping has been confirmed
in the North-Eastern section of the Kenny Lithium Project, which
significantly exceeds what has already been identified by the
Government Survey of Western Australia (GSWA).
Evergreen aims to explore and discover an economic lithium
resource for subsequent development. As with the Company's Bynoe
Lithium Project, minimal geochemical work has been undertaken
within the tenure; however, historical results have proven
encouraging. Evergreen has recently completed a comprehensive auger
program, drilling 1,731 holes.
Since the end of the year, Evergreen, listed on the ASX, has
continued to progress the development of these assets with some
initial positive results from the geochemical results on both the
Byone and Kenny lithium prospects.
Private Investments, Passive
Sonora Lithium Project, Mexico
Interest - 30% on 31/12/2022 and 31/05/2023
Cadence holds an interest in the Sonora Lithium Project via a
30% stake in the joint venture interests in each of Mexalit S.A. de
CV ("Mexalit") and Megalit S.A. de CV ("Megalit").
Mexalit forms part of the Sonora Lithium Project. The Sonora
Lithium Project consists of ten contiguous concessions covering
97,389 hectares. Two of the concessions (La Ventana, La Ventana 1)
are owned as of the date 100% by subsidiaries of Gangfeng Lithium
Co., Ltd ("Gangfeng"). El Sauz, El Sauz 1, El Sauz 2, Fleur and
Fleur 1 concessions are owned by Mexalit S.A. de C.V. ("Mexalit"),
which is owned 70% by Gangfeng and 30% by Cadence.
The Sonora Project holds one of the world's largest lithium
resources and benefits from being both high-grade and scalable. The
polylithionite mineralisation is hosted within shallow dipping
sequences, outcropping on the surface. A Mineral Resource estimate
was prepared by SRK Consulting (UK) Limited ('SRK') following NI
43-101.
The current lithium resources and reserves for the Sonora
Lithium Project and the attributable amounts to Cadence are
available here:
https://www.cadenceminerals.com/projects/sonora-lithium-project/
.
A feasibility study report was published in January 2018, which
confirmed the positive economics and favourable operating costs of
a 35,000 tonnes per annum battery-grade lithium carbonate
operation.
The feasibility study report estimates a pre-tax project net
present value of US$1.253 billion at an 8% discount rate, an
Internal Rate of Return of 26.1%, and Life of Mine operating costs
of US$3,910/t of lithium carbonate. It should be noted that under
the published feasibility study, the concession owned by Mexalit
will be mined starting in year 9 of the mine plan and cease at the
end of the mine life in year 19 , and as such, assuming Cadence
retains its position, any net realisable economic benefit to
Cadence would only accrue at this time.
The full report can be found here:
https://bacanoralithium.com/_userfiles/pages/files/documents/bacanorafstechnicalreport25012018_compressed.pdf
In 2021, Mexican politicians from the MORENA party tabled a
draught bill to reform Mexico's energy sector, including statements
that lithium would be included among the minerals considered
strategic for the energy transition and that no new concessions for
lithium exploitation by private companies could be granted. After
the year-end, the Mexican senate elevated lithium deposits to the
"strategic minerals" category, declaring lithium's exploration,
exploitation, and use as the state's exclusive right. In February
2022, the Mexican government established a decree that reserved
some 234,855 hectares as a lithium mining reserve, which includes
the areas covered by the Sonora Lithium Project. However, the
Decree also notes that the rights and obligations of the holders of
current mining concessions within the lithium mining reserve area
are not affected.
We are constantly examining possible legislative changes. Our
current view is that the Decree passed by the senate only impacts
licenses, concessions, or contracts to be granted, not already
those given, as is the case for the Sonora Lithium Project.
Therefore, at this point, we do not believe there is a material
impact on our joint venture areas.
Private Investments, Passive
Yangibana Project, Australia
Interest - 30% at 31/12/2022
In June 2022, Cadence entered into a binding agreement to sell
its working interest in the leases in the Yangibana Project to
Hastings Technology Metals (ASX: HAS) ("Hastings"), the current
owner and operator of the Yangibana Rare Project. Cadence sold its
30% working interest in the Yangibana Project tenements, to
Hastings, for A$9 million (GBP5.1 million), which has been
satisfied via the issue of 2,452,650 new ordinary shares in
Hastings to Cadence. These shares represent approximately 1.9% of
the current issued share capital of Hastings Technology and are
subject to a 12-month voluntary escrow. At the time of writing, the
value of this stake was approximately GBP1.9 million; our initial
investment into this asset was GBP0.91 million.
Hastings is a well-managed Perth-based rare earth company primed
to become the world's next producer of neodymium and praseodymium
concentrate ("NdPr"). NdPr is vital in manufacturing permanent
magnets used daily in advanced technology products ranging from
electric vehicles to wind turbines, robotics, medical applications
and digital devices.
Hastings flagship Yangibana project, in the Gascoyne region of
Western Australia, contains a highly valued NdPr deposit with an
NdPr: TREO ratio of up to 52%. The site is permitted for long-life
production and with offtake contracts signed and debt finance in an
advanced stage.
Hastings announced after the year's end that it had introduced a
staged development programme to the Yangibana asset. This strategy
will reduce upfront capital requirements and project execution
risks and provide a faster pathway to cash flow by Q1 2025.
Hastings will initially focus on constructing the Yangibana mine
and beneficiation plant to produce rare earths concentrate (Stage
1), followed by developing a hydrometallurgical plant to produce
mixed rare earth carbonate (Stage 2). This has resulted in the
total project capital cost being estimated at $948m, with the Stage
1 component being $470m. The beneficiation plant construction will
commence in Q3 2023, supporting the Stage 1 concentrate delivery
target date of Q1 2025.
As a result of this staged development programme, Stage 1 will
have a post-tax NPV11 of $538m, an IRR of 27.54% and an average
annual EBITDA of $174m, providing a funding source for Stage 2.
Private Investments, Passive
Ferro Verde Iron Ore, Brazil
Interest - 1% at 31/12/2022
During the year, Cadence made a small (GBP0.21 million) in an
advanced iron ore deposit in Brazil. The Ferro Verde Deposit is
located in the southern portion of the state of Bahia, in the
north-eastern region of Brazil, next to the town of Urandi, some
700 km southwest of Salvador, the capital of the state of
Bahia.
The project is currently progressing its definitive feasibility
study. It has a historic inferred resource of 284 million tonnes of
iron ore at 31% Fe. The intent is to produce 4.5 Mtpa of 67% Fe.
Our intended exit strategy is either when the asset is listed, or
the owners carry out a trade sale.
PUBLIC EQUITY
The public equity investment segment includes active and passive
investments in our trading portfolio. The trading portfolio
consists of investments in listed mining entities that the board
believes possess attractive underlying assets. The focus is to
invest in mining companies that are significantly undervalued by
the market and where there is substantial upside potential through
exploration success and/or the development of mining projects for
commercial production. Ultimately, the aim is to make capital gains
in the short to medium term. Investments are considered
individually based on various criteria and are typically traded on
the TSX, ASX, AIM or LSE.
During the period, our public equity investments generated an
unrealised loss of GBP4.59 million (2021: profit of GBP0.58
million). These unrealised losses tracked our largest holding, EMH,
down some 49% over the year despite the excellent progress in
developing the asset. We realised a profit from sales of GBP0.55
million (2020: GBP0.59 million). Most of these profits were derived
from selling EMH. If we look at the portfolio performance since
inception the sales made during the year represented a 174% profit
above the original purchase price. Our investment in EMH is the
only active investment in the public equity portfolio. Our realised
return, unrealised return and total return on our EMH to date is
244%, 290% and 264% respectively.
The movement in public portfolio values during the year is
summarised below.
Commentary GBP,000
Portfolio value at the beginning of period of 2022 11 ,974
--------
New Investments public investments during the year 235
--------
The majority of disposal was in EMH with proceeds
Disposal of public Investments during the year reinvested into Amapá (1,927)
----------------------------------------------------- --------
Realised and Unrealised loss on portfolio value for The majority of the loss driven by a reduction in
the period EMH share price (5,038)
----------------------------------------------------- --------
Portfolio value at the end of the period 5,244
--------
As of 31 December 2022, our public equity stakes consisted of
the following:
Company 31-Dec-22 GBP,000 30-Jun-22 GBP,000 31-Dec-21 GBP,000 30-Jun-21 GBP,000 31-Dec-20 GBP,000
European Metals
Holding Ltd 4,882 5,357 11,287 14,180 13,426
------------------ ------------------ ------------------ ------------------ ------------------
Charger Metals NL 301 196 342 109 -
------------------ ------------------ ------------------ ------------------ ------------------
Macarthur
Minerals Ltd - 103 181 327 329
------------------ ------------------ ------------------ ------------------ ------------------
Eagle Mountain
Mining Ltd 37 47 122 153 -
------------------ ------------------ ------------------ ------------------ ------------------
Mont-Royal
Resources Ltd 19 39 35 - -
------------------ ------------------ ------------------ ------------------ ------------------
Celsius Resources - - - 103 -
Ltd
------------------ ------------------ ------------------ ------------------ ------------------
Miscellaneous 5 5 7 6 6
------------------ ------------------ ------------------ ------------------ ------------------
Total 5,244 5,747 11,974 14,878 13,761
------------------ ------------------ ------------------ ------------------ ------------------
PUBLIC EQUITY, ACTIVE
European Metals Holdings Limited Interest - 7.0% at 31/12/2022
and 6.5% 31/05/2023
Cadence has held an investment in EMH since June 2015. EMH owns
49% of Geomet s.r.o. with 51% owned by CEZ. CEZ is a significant
energy group listed on various European Exchanges. Geomet s.r.o.
owns 100% of Cinovec which hosts a globally significant hard-rock
lithium deposit with a total Indicated Mineral Resource of 372.4Mt
at 0.45% Li2O and 0.04% Sn and an Inferred Mineral Resource of
323.5Mt at 0.39% Li2O and 0.04% Sn containing a combined 7.22
million tonnes Lithium Carbonate Equivalent and 263kt of tin, as
reported to ASX on 28 November 2017 (Further Increase in Indicated
Resource at Cinovec South).
An initial Probable Ore Reserve of 34.5Mt at 0.65% Li2O and
0.09% Sn reported on 4 July 2017 (Cinovec Maiden Ore Reserve -has
been declared to cover the first 20 years' mining at an output of
22,500tpa of battery-grade lithium carbonate reported on 11 July
2018 (Cinovec Production Modelled to Increase to 22,500tpa of
Lithium Carbonate). This makes Cinovec the largest hard-rock
lithium deposit in Europe, the fourth largest non-brine deposit in
the world and a globally significant tin resource.
For the reporting period EMH continued to manage the advancement
of the Cinovec Lithium/Tin Project in Czech Republic. The macro
conditions relative to the Project have been very strong for the
period. Despite some recent falls, the lithium price remains at
very high levels relative to historic prices, and at a level where
the financial parameters of the Project are exceptionally strong.
In addition to pricing, the global focus on long term security of
strategic metals has increased dramatically and the Company expects
this factor to play an increasingly important role in moving the
Project towards production.
The reporting period was highlighted by EMH's announcement in
January 2022, updating the 2019 PFS, which indicated a post-tax NPV
of US$1.938Bn and a post-tax IRR of 36.3%.
In addition, EMH announced very significant developments in the
optimisation of the flowsheet for the processing plant. EMH
announced that it had finalised a considerably simplified Lithium
Chemical Plant ("LCP") flowsheet with the initial six locked cycle
test ("LCTs") providing 99.99% pure Lithium Carbonate.
The simplification of the central section of the LCP flowsheet
reduces the number of basic chemical engineering unit processes
(after the initial roast/water leach) from 15 to 7. The revised
process also results in the elimination of all energy-intensive
cooling processes. The Company has been advised by its principal
hydrometallurgical adviser, Lithium Consultants Australasia (LCA),
that the changes to the LCP noted above are expected to reduce both
Capex and Opex in the LCP by 10-20%.
EMH continued progress towards finalisation of the DFS, which
scheduled for completion in Q4 2023.
Financial Review
Total comprehensive income for the year attributable to equity
holders was a loss of GBP5.50m (2021: GBP0.14m). This decrease in
profitability from the previous year of approximately GBP5.36m is
mainly due to the reduced amount of realised and unrealised profits
and losses on for the year of approximately GBP4.04m (2021:
GBP1.17m) relating to our share investment portfolio (listed
financial investments) held during the period. Administrative
expenses were down GBP0.34m from GBP1.80m to GBP1.46m, but foreign
exchange gains were down GBP0.452m from GBP0.455m to GBP0.003m.
Basic negative earnings per share was 3.355p (2021: 0.102p).
The net assets of the Group at the end of the period were
GBP21.32 million (2021: GBP22.15 million). This decrease of
approximately GBP0.83m reflects the losses and shares issued in the
year.
Principal Risks and Uncertainties
Cadence continuously monitors its risk exposures and reports its
review to the Board. The Board reviews these risks and focuses on
ensuring effective systems of internal financial and non-financial
controls are in place and maintained .
The main business risk is considered to be investment risk.
The Company faces external risks that can materially impact or
influence the investment environment within which the Company
operates and can include changes in commodity prices, and the
numerous factors which can influence those changes, including
economic recession and investor sentiment and including the current
and potential effects of the coronavirus pandemic.
Commodity prices have an impact on the investment performance
and prospects of all our investments. The extent of the impact
varies depending on a wide variety of factors but depend largely by
where the investment sits on the mineral development curve. The
majority of Cadence's investments sit at the more advanced stage of
the development curve. Commodity price risk is pervasive at all
stages of the development curve, but other prominent risks such as
exploration risk and technical and funding risks at the
exploration/development stage, may be considered to be weighted
higher earlier in the curve than pure commodity risk which tends to
have a greater impact on producers.
The Company's investments are located in jurisdictions other
than the UK and therefore carries with it country risk,
regulatory/permitting risk, political risk, and environmental risk.
Our investments can be at different stages of development and each
stage within the mining exploration and development cycle can carry
its own risks.
Where possible Cadence seeks to mitigate these risks by
structuring its investments in a format which the Board can
influence, obtain high level oversight (often at board level) and
use legal agreements to provide control mechanisms (often negative
control) to protect the Company's investments. In addition, we seek
to further mitigate our risk exposure by obtaining a deep
fundamental understanding of an asset, its potential economics,
operating and legal environment and its management team, prior to
investment.
It should be noted that because the Company does not operate its
project investments on a day-to-day basis, there is a risk that the
operator does not meet deadlines or budgets; fails to propose or
pursue the appropriate strategy; does not adhere to the legal
agreements in place or does not provide accurate or sufficient
information to Cadence on a timely basis.
The equity investment segment of the Company's investments is
exposed to price risk within the market, interest rate changes,
liquidity risk and volatility. Although the investment risk within
the portfolio is dependent on many factors, the Group's principal
investments at the year-end are in companies with significant iron
ore and lithium assets and, to some extent, dependent on the
market's view of these commodities or chemicals and/or the market's
view of the management of the companies in managing those assets.
As with our private investment, the Board seeks to mitigate this by
obtaining a deep fundamental understanding of an asset and its
potential economics, its operating and legal environment and its
management team, prior to any investment by Cadence.
All countries carry political risk that can lead to interruption
of activity. Politically stable countries can have enhanced
environmental and social risks; risks of strikes and changes to
taxation; whereas less developed countries can have, in addition,
risks associated with changes to the legal framework; civil unrest
and government expropriation of assets. The Company has working
knowledge of the countries in which the joint venture holds
exploration licences, and its local joint venture partner has
experienced local operators to assist the Company in its management
of its investment in order to help reduce possible political
risk.
STATEMENT OF COMPREHENSIVE INCOME
Year ended Year ended
Note 31 December 31 December
2022 2021
GBP'000 GBP'000
Income
Unrealised (loss)/profit on financial
investments 6 (4,593) 577
Realised profit on financial investments 6 552 593
------------ ------------
(4,041) 1,170
Share based payments (13) (197)
Other administrative expenses (1,443) (1,604)
------------ ------------
Total administrative expenses (1,456) (1,801)
Operating loss 1 (5,497) (631)
Finance income - 35
Finance cost 3 (3) (3)
Foreign exchange gain 3 455
Loss before taxation (5,497) (144)
Taxation 4 - -
Loss attributable to the equity
holders of the Company (5,497) (144)
------------ ------------
Total comprehensive earnings for
the year, attributable to the equity
holders of the company (5,497) (144)
============ ============
Earnings per ordinary share
Basic earnings per share (pence) 5 (3.355) (0.102)
============ ============
Diluted earnings per share (pence) 5 n/a n/a
============ ============
The accompanying principal accounting policies and notes form an
integral part of these financial statements.
STATEMENT OF FINANCIAL POSITION
31 December 31 December
2022 2021
ASSETS Note GBP'000 GBP'000
Non-current
Financial Assets 6 11,365 5,660
11,365 5,660
------------ ------------
Current
Trade and other receivables 7 3,957 5,048
Financial Assets 6 6,206 11,974
Cash and cash equivalents 110 324
Total current assets 10,273 17,346
Total assets 21,638 23,006
------------ ------------
LIABILITIES
Current
Trade and other payables 8 317 853
Total current liabilities 317 853
------------ ------------
Total liabilities 317 853
------------ ------------
EQUITY
Issued share capital 10 2,144 1,903
Share premium 10 37,612 33,207
Share based payment reserve 252 249
Investment in own shares (64) (70)
Retained earnings (18,623) (13,136)
Equity attributable 21,321 22,153
to equity holders of the Company
Total equity and liabilities 21,638 23,006
============ ============
The accompanying principal accounting policies and notes form an
integral part of these financial statements.
STATEMENT OF CHANGES IN EQUITY
Share Share Investment Share Retained Total
capital premium in own based payment earnings equity
shares reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at
31 December
2020 1,896 33,159 - 39 (13,001) 22,093
Share based
payments - - - 197 - 197
Payments made
through issue
of warrants - - - 22 - 22
Transfer on
exercise of
options - - - (9) 9 -
Adjustment
for shares
held in Trust - - (70) - - (70)
Share issue 7 50 - - - 57
Share issue
costs (2) - - - (2)
Transactions
with owners 7 48 (70) 210 9 204
--------- --------- ----------- --------------- ---------- --------
Loss for the
period - - - - (144) (144)
---------- --------
Total comprehensive
earnings for
the period - - - - (144) (144)
--------- --------- ----------- --------------- ---------- --------
Balance at
31 December
2021 1,903 33,207 (70) 249 (13,136) 22,153
========= ========= =========== =============== ========== ========
Share based
payments - - - 13 - 13
Transfer on
exercise of
warrants - - - (10) 10 -
Issue of shares
held in Trust - 6 6 - - 12
Share issue 241 4,775 - - - 5,016
Share issue
costs - (376) - - - (376)
Transactions
with owners 241 4,405 6 3 10 4,665
--------- --------- ----------- --------------- ---------- --------
Loss for the
period - - - - (5,497) (5,497)
Total comprehensive
earnings for
the period - - - - (5,497) (5,497)
--------- --------- ----------- --------------- ---------- --------
Balance at
31 December
2022 2,144 37,612 (64) 252 (18,623) 21,321
========= ========= =========== =============== ========== ========
The accompanying principal accounting policies and notes form an
integral part of these financial statements.
Statement of Cash Flows
Year ended Year ended
31 December 31 December
2022 2021
GBP'000 GBP'000
Cash flow from operating activities
Continuing operations
Operating loss (5,497) (631)
Gain/(loss) on financial investments 4,041 (1,170)
Equity settled share based payments 13 197
Adjustment for issue of own shares - (70)
Payments made through issue of warrants - 22
Decrease in trade and other receivables 24 346
(Decrease)/increase in trade and other
payables (536) 555
Net cash outflow from operating activities
from continuing operations (1,955) (751)
------------ ------------
Cash flows from investing activities
Payments for non-current financial investments (4,600) (2,275)
Payments for investments in current
financial investments (235) (830)
Receipts on sale of current investments 1,926 3,787
Net cash inflow from investing activities (2,909) 182
------------ ------------
Cash flows from financing activities
Proceeds from issue of share capital 5,016 57
Share issue costs (376) (2)
Net borrowings - (220)
Net finance cost (3) (3)
Net cash inflow from financing activities 4,637 (168)
------------ ------------
Net change in cash and cash equivalents (227) (737)
Foreign exchange movements on cash and
cash equivalents 13 465
Cash and cash equivalents at beginning
of period 324 596
Cash and cash equivalents at end of
period 110 324
============ ============
Material non-cash transactions
During the year the Company disposed of its 31.5% stake in in
Lithium Technologies and Lithium Supplies, (non-current financial
investments) for initial proceeds of GBP1,810,000 which were
settled in shares of Evergreen PTY Ltd (non-current investment).
Additionally, at 31 December 2021 the Company had a loan
outstanding of GBP514,000 from Amapá and a balance of GBP554,000
held in a trust account (trade and other receivables) which were
converted into its investment in Amapá (non-current
investment).
There were no material non-cash transactions in the year ended
31 December 2021.
The accompanying principal accounting policies and notes form an
integral part of these financial statements.
Principal Accounting Policies
General Information
Cadence Minerals plc is a company incorporated and domiciled in
the United Kingdom. The Company's shares are listed on the AIM
market of the London Stock Exchange, and on the AQUIS Growth Market
as operated by AQUIS Stock Exchange ("AQUIS").
The Financial Statements are for the year ended 31 December 2022
and have been prepared under the historical cost convention, except
for the measurement to fair value of financial assets, and in
accordance with UK adopted International Accounting Standards (IAS)
in conformity with the requirements of the Companies Act 2006.
These Financial Statements (the "Financial Statements") have been
prepared and approved by the Directors on 22 June 2023 and signed
on their behalf by Donald Strang and Kiran Morzaria.
Employee Benefit Trusts ("EBTs") are accounted for under IFRS 10
and are consolidated on the basis that the parent has control, thus
the assets and liabilities of the EBT are included on the Company
balance sheet and shares held by the EBT in the Company are
presented as a deduction from equity.
The accounting policies have been applied consistently
throughout the preparation of these Financial Statements, and the
financial report is presented in Pound Sterling (GBP) and all
values are rounded to the nearest thousand pounds (GBP'000) unless
otherwise stated.
Investing Policy
The Company is an investment entity. The Company's investing
policy, which was approved at a General Meeting on 29 November
2010, is to acquire a diverse portfolio of direct and indirect
interests in exploration and producing rare earth minerals and/or
other metals projects and assets ('Investing Policy'). In light of
the nature of the assets and projects that will be the focus of the
Investing Policy, the Company will consider investment
opportunities anywhere in the world.
The Directors have considerable investment experience, both in
structuring and executing deals and in raising funds. Further
details of the Directors' expertise are set out on the Company
website. The Directors will use this experience to identify and
investigate investment opportunities, and to negotiate
acquisitions. Wherever necessary, the Company will engage suitably
qualified technical personnel to carry out specialist due diligence
prior to making an acquisition or an investment. For the
acquisitions that they expect the Company to make, the Directors
may adopt earn-out structures with specific performance targets
being set for the sellers of the businesses acquired and with
suitable metrics applied.
The Company may invest by way of outright acquisition or by the
acquisition of assets - including the intellectual property - of a
relevant business, partnership or joint venture arrangement. Such
investments may result in the Company acquiring the whole or part
of a company or project (which, in the case of an investment in a
company, may be private or listed on a stock exchange, and which
may be pre-revenue), and such investments may constitute a minority
stake in the company or project in question. The Company's
investments may take the form of equity, joint venture, debt,
convertible documents, licence rights, or other financial
instruments such as the Directors deem appropriate.
The Company may be both an active and a passive investor
depending on the nature of the individual investments in its
portfolio. Although the Company intends to be a long-term investor,
the Directors will place no minimum or maximum limit on the length
of time that any investment may be held.
There is no limit on the number of projects into which the
Company may invest, or on the proportion of the Company's gross
assets that any investment may represent at any time, and the
Company will consider possible opportunities anywhere in the
world.
The Directors may offer new ordinary shares in the capital of
the Company by way of consideration as well as cash, thereby
helping to preserve the Company's cash for working capital and as a
reserve against unforeseen contingencies including, by way of
example and without limit, delays in collecting accounts
receivable, unexpected changes in the economic environment and
unforeseen operational problems. The Company may, in appropriate
circumstances, issue debt securities or otherwise borrow money to
complete an investment. There are no borrowing limits in the
Articles of Association of the Company. The Directors do not intend
to acquire any cross holdings in other corporate entities that have
an interest in the ordinary shares.
Going Concern
The Directors have prepared cash flow forecasts for the period
ending 31 March 2025 which take account of the current cost and
operational structure of the Company.
The cost structure of the Company comprises a high proportion of
discretionary spend and therefore in the event that cash flows
become constrained, costs can be quickly reduced to enable the
Company to operate within its available funding.
During 2022, the Company received net proceeds of GBP4,640,000
through share issues and GBP1,691,000 in net receipts, from sales
less purchases, of listed investments.
These forecasts demonstrate that the Company has sufficient cash
funds available to allow it to continue in business for a period of
at least twelve months from the date of approval of these financial
statements. Accordingly, the financial statements have been
prepared on a going concern basis.
It is the prime responsibility of the Board to ensure the
Company remains a going concern. At 31 December 2022 the Company
had cash and cash equivalents of GBP110,000, current financial
assets of GBP6,206,000 and no borrowings. The Company has minimal
contractual expenditure commitments, and the Board considers the
present funds sufficient to maintain the working capital of the
Company for a period of at least 12 months from the date of signing
the Annual Report and Financial Statements. With overheads of
GBP1,443,000 in 2022, and creditors of GBP317,000 at 31 December
2022 the Company would still be able to meet its obligations,
without the requirement to cut costs, should the value of the
current listed financial assets be reduced by 65%. For these
reasons the Directors adopt the going concern basis in the
preparation of the Financial Statements.
Statement of Compliance With IAS
The Company's financial statements have been prepared under the
historical cost convention except for the measurement to fair value
of financial assets as described in the accounting policy below,
and the financial statements have been prepared in accordance with
UK adopted International Accounting Standards (IAS) in conformity
with the provisions of the Companies Act 2006. The principal
accounting policies adopted by the Company are set out below.
Taxation
Current income tax assets and/or liabilities comprise those
obligations to, or claims from, fiscal authorities relating to the
current or prior reporting period, which are unpaid at the balance
sheet date. They are calculated according to the tax rates and tax
laws applicable to the fiscal periods to which they relate, based
on the taxable result for the period. All changes to current tax
assets or liabilities are recognised as a component of tax expense
in the income statement.
Deferred income taxes are calculated using the liability method
on temporary differences. This involves the comparison of the
carrying amounts of assets and liabilities in the financial
statements with their respective tax bases. In addition, tax losses
available to be carried forward as well as other income tax credits
to the Company are assessed for recognition as deferred tax
assets.
Deferred tax liabilities are always provided for in full.
Deferred tax assets are recognised to the extent that it is
probable that they will be able to be offset against future taxable
income. Deferred tax assets and liabilities are calculated, without
discounting, at tax rates that are expected to apply to their
respective period of realisation, provided they are enacted or
substantively enacted at the balance sheet date.
Most changes in deferred tax assets or liabilities are
recognised as a component of tax expense in the income statement.
Only changes in deferred tax assets or liabilities that relate to a
change in value of assets or liabilities that is charged directly
to equity are charged or credited directly to equity.
Financial Assets
The Company's financial assets include cash, other receivables
and financial assets. Except for those trade receivables that do
not contain a significant financing component and are measured at
the transaction price in accordance with IFRS 9, all financial
assets are initially measured at fair value adjusted for
transaction costs (where applicable).
Financial assets, other than those designated and effective as
hedging instruments, are classified into the following
categories:
-- amortised cost
-- fair value through profit or loss (FVTPL)
-- fair value through other comprehensive income (FVOCI).
In the periods presented the corporation does not have any
financial assets categorised as FVOCI.
The classification is determined by both:
-- the entity's business model for managing the financial
asset
-- the contractual cash flow characteristics of the financial
asset.
All income and expenses relating to financial assets that are
recognised in profit or loss are presented within finance costs,
finance income or other financial items, except for impairment of
trade receivables which is presented within other expenses.
Subsequent measurement of financial assets
Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets
meet the following conditions (and are not designated as
FVTPL):
-- they are held within a business model whose objective is to
hold the financial assets and collect its contractual cash
flows
-- the contractual terms of the financial assets give rise to
cash flows that are solely payments of principal and interest on
the principal amount outstanding
After initial recognition, these are measured at amortised cost
using the effective interest method. Discounting is omitted where
the effect of discounting is immaterial. The Company's cash and
cash equivalents, trade and most other receivables fall into this
category of financial instruments.
Financial assets at fair value through profit or loss
(FVTPL)
Financial assets that are held within a different business model
other than 'hold to collect' or 'hold to collect and sell' are
categorised at fair value through profit and loss. Further,
irrespective of business model financial assets whose contractual
cash flows are not solely payments of principal and interest are
accounted for at FVTPL. All derivative financial instruments fall
into this category, except for those designated and effective as
hedging instruments, for which the hedge accounting requirements
would apply.
Assets in this category are measured at fair value with gains or
losses recognised in profit or loss. The fair values of financial
assets in this category are determined by reference to active
market transactions or using a valuation technique where no active
market exists.
Impairment of financial assets
The Company considers trade and other receivables individually
in accounting for trade and other receivables as well as contract
assets and records the loss allowance as lifetime expected credit
losses. These are the expected shortfalls in contractual cash
flows, considering the potential for default at any point during
the life of the financial instrument. In calculating, the Company
uses its historical experience, external indicators and
forward-looking information to calculate the expected credit losses
using a provision matrix.
FAIR VALUE MEASUREMENT
IFRS 13 establishes a single source of guidance for all fair
value measurements. IFRS 13 does not change when an entity is
required to use fair value, but rather provides guidance on how to
measure fair value under IFRS when fair value is required or
permitted. The resulting calculations under IFRS 13 affected the
principles that the Company uses to assess the fair value, but the
assessment of fair value under IFRS 13 has not materially changed
the fair values recognised or disclosed. IFRS 13 mainly impacts the
disclosures of the Company. It requires specific disclosures about
fair value measurements and disclosures of fair values, some of
which replace existing disclosure requirements in other
standards.
Financial Investments
Non-derivative financial assets comprising the Company's
strategic financial investments in entities not qualifying as
subsidiaries, associates or jointly controlled entities. These
assets are classified as financial assets at fair value through
profit or loss. They are carried at fair value with changes in fair
value recognised through the income statement. Where there is a
significant or prolonged decline in the fair value of a financial
investment (which constitutes objective evidence of impairment),
the full amount of the impairment is recognised in the income
statement.
Due to the nature of these assets being unlisted investments or
held for the longer term, the investment period is likely to be
greater than 12 months and therefore these financial assets are
shown as non-current assets in the Statement of financial position,
unless their disposal is likely to occur within the forthcoming
year. Listed investments are valued at closing bid price on 31
December 2021. For measurement purposes, financial investments are
designated at fair value through income statement. Gains and losses
on the realisation of financial investments are recognised in the
income statement for the period. The difference between the market
value of financial instruments and book value to the Company is
shown as a gain or loss in the income statement for the period.
Cash and Cash Equivalents
Cash and cash equivalents comprise cash at bank and in hand,
bank deposits repayable on demand, and other short term highly
liquid investments that are readily convertible into known amounts
of cash and which are subject to an insignificant risk of changes
in value, less advances from banks repayable within three months
from the date of advance if the advance forms part of the Company's
cash management.
Equity
Share capital is determined using the nominal value of shares
that have been issued.
The share premium account represents premiums received on the
initial issuing of the share capital. Any transaction costs
associated with the issuing of shares are deducted from share
premium, net of any related income tax benefits.
The share based payment reserve represents the cumulative amount
which has been expensed in the income statement in connection with
share based payments, less any amounts transferred to retained
earnings on the exercise of share options.
Retained earnings include all current and prior period results
as disclosed in the statement of comprehensive income.
Operating Leases
The Company does not have any leases within the scope of IFRS 16
in the current or prior year.
Payments, including prepayments, made under low value or
short-term operating leases of less than 12 months (net of any
incentives received from the lessor) are charged to the statement
of comprehensive income on a straight-line basis over the period of
the lease.
Foreign Currencies
The financial statements are presented in Sterling, which is
also the functional currency of the Company.
In the financial statements of the Company, foreign currency
transactions are translated into the functional currency of the
Company entity using the exchange rates prevailing at the dates of
the transactions. Foreign exchange gains and losses resulting from
the settlement of such transactions and from the translation of
monetary assets and liabilities denominated in foreign currencies
at year-end exchange rates are recognised in profit or loss.
Share Based Payments
The Company issues equity-settled share-based payments to
certain employees (including directors). Equity-settled share-based
payments are measured at fair value at the date of grant. The fair
value determined at the grant date of the equity-settled
share-based payments is expensed on a straight-line basis over the
vesting period, together with a corresponding increase in equity,
based upon the Company's estimate of the shares that will
eventually vest.
Fair value is measured using the Black-Scholes model, as the
options have no market related conditions. The expected life used
in the model has been adjusted, based on management's best
estimate, for the effects of non-transferability, exercise
restrictions and behavioural considerations.
The expense is allocated over the vesting period, based on the
best available estimate of the number of share options expected to
vest. Non-market vesting conditions are included in assumptions
about the number of options that are expected to become
exercisable. Estimates are subsequently revised, if there is any
indication that the number of share options expected to vest
differs from previous estimates.
No adjustment is made to the expense or share issue cost
recognised in prior periods if fewer share options are, ultimately
exercised than originally estimated. Upon exercise of share
options, the proceeds received net of any directly attributable
transaction costs up to the nominal value of shares issued are
allocated to share capital with any excess being recorded as share
premium.
Warrants
The Group has also issued equity settled share-based payments in
respect of services provided by external consultants in the form of
warrants. The share-based payment is measured at fair value of the
services provided at the grant date, or if the fair value of the
services cannot be reliably measured using the Black-Scholes model.
The expense is allocated over the vesting period.
Financial Liabilities
The Company's financial liabilities include trade and other
payables. Financial liabilities are obligations to pay cash or
other financial assets and are recognised when the Company becomes
a party to the contractual provisions of the instrument.
All financial liabilities are recognised initially at fair
value, net of direct issue costs, and are subsequently recorded at
amortised cost using the effective interest method with interest
related charges recognised as an expense in the income
statement.
Critical Accounting Estimates and Judgements
Sources of Estimation and Key Judgements
The preparation of the Financial Statements requires the Company
to make estimates, judgements and assumptions that affect the
reported amounts of assets, liabilities, revenues and expenses and
related disclosure of contingent assets and liabilities. The
Directors base their estimates on historic experience and various
other assumptions that they believe are reasonable under the
circumstances, the results of which form the basis of making
judgements about the carrying value of assets and liabilities that
are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or
conditions.
Significant judgments and estimates
The preparation of financial statements requires management to
make estimates and judgments that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of income and expenditure during the reported
period. The estimates and associated judgments are based on
historical experience and various other factors that are believed
to be reasonable under the circumstances, the results of which form
the basis of making judgments about carrying values of assets and
liabilities that are not readily apparent from other sources.
-- The estimates and underlying judgments are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period, or in the period of the revision and future
periods if the revision affects both current and future
periods.
-- In the preparation of these financial statements, estimates
and judgments have been made by management concerning calculating
the fair values of the assets acquired on business combinations,
and the assumptions used in the calculation of the fair value of
the share options. Actual amounts could differ from those
estimates.
-- Management has made the following estimates that have the
most significant effect on the amounts recognised in the financial
statements.
Unlisted investments
The Company is required to make judgments over the carrying
value of investments in unquoted companies where fair values cannot
be readily established and evaluate the size of any impairment
required. It is important to recognise that the carrying value of
such investments cannot always be substantiated by comparison with
independent markets and, in many cases, may not be capable of being
realised immediately. Management's significant judgement in this
regard is that the value of their investment represents their cost
less previous impairment. Management reviews each unquoted
investment at each reporting date for indications of impairment.
Management concluded that no impairment was necessary in the
current or prior year.
-- Management has made the following judgement that has the most
significant effect on the amounts recognised in the financial
statements.
Sonora Lithium Project License
As stated in the strategic report, Mexican politicians from the
MORENA party tabled a draught bill to reform Mexico's energy
sector, including statements that lithium would be included among
the minerals considered strategic for the energy transition and
that no new concessions for lithium exploitation by private
companies could be granted. Subsequent to the year-end, the Mexican
senate elevated lithium deposits to the category of "strategic
minerals", declaring lithium's exploration, exploitation, and use
as the state's exclusive right.
Management's current view is that the Decree passed by the
senate only impacts licenses, concessions, or contracts to be
granted, NOT those already granted, as is the case for the Sonora
Lithium Project. Therefore, at this point, management have
concluded that there is no material impact on Cadence's joint
venture areas. Please see the strategic report for more details.
Management will continue to review
Adoption of New or Amended IFRS
New standards, amendments and interpretations adopted by the
Company
The company has applied the following standards and amendments
for the first time for its annual reporting period commencing 1
January 2022:
-- Amendments to IFRS 3: References to the Conceptual Framework
-- Amendments to IAS 16: Proceeds before intended use
-- Amendments to IAS 37: Onerous Contracts - Cost of Fulfilling
a Contract (Amendments to IAS 37)
IFRS 1, IFRS 9, IFRS 16 and IAS 41: Annual Improvements to IFRS
Standards 2018-2020 Cycle - 1 January 2022
The adoption of the above has not had any material impact on the
disclosures or amounts reported in the financial statements.
New standards, amendments and interpretations not yet
adopted
There are no IFRSs or IFRIC interpretations that are not yet
effective that would be expected to have a material impact on the
Company.
Segment reporting
Segmental analysis is not applicable as there is only one
operating segment of the continuing business - investment
activities.
NOTES TO THE FINANCIAL STATEMENTS
1. Profit Before Taxation And Segmental Information
Profit before taxation - continuing operations
The loss before taxation is attributable to the principal
activities of the Company.
The loss before taxation is stated after charging:
Year ended Year ended
31 December 31 December
2022 2021
GBP'000 GBP'000
Share based payment charge 13 197
Directors' fees and consulting (see Note
[2]) 518 412
Fees payable to the Company's auditor
for the audit of the financial statements 40 36
Segment reporting
The Company operates a single primary activity to invest in
businesses so as to generate a return for the shareholders. The
performance and position are therefore as stated in the primary
statements.
Year ended Year ended
31 December 31 December
2022 2021
GBP'000 GBP'000
Unrealised (loss)/profit on financial
investments (4,593) 577
Realised profit on financial investments 552 593
--------------- ---------------
(4,041) 1,170
2. Employee Remuneration
Employee benefits expense
The expense recognised for employee benefits, including
Directors' emoluments, is analysed below:
Year ended Year ended
31 December 31 December
2022 2021
GBP'000 GBP'000
Short-term benefits
Wages, salaries and consulting fees 623 512
Bonus payments - 450
Employers NI 66 95
Shares awarded 122 -
Other long-term benefits
Share based payments - 197
811 1,237
------------ ------------
The average number of employees (including directors) employed
by the Company during the period was:
2022 2021
No. No.
Directors 4 4
Other 2 2
6 6
----- -----
Included within the above are amounts in respect of Directors,
who are considered to be the key management personnel, as
follows:
Year ended Year ended
31 December 31 December
2022 2021
GBP'000 GBP'000
Short-term benefits
Wages, salaries and consulting fees 518 412
Bonus payments - 450
Shares awarded 122 -
Other long-term benefits
Share based payments charge on issue
of options - 197
640 1,059
------------ ------------
3. Finance Income & Costs
Year ended Year ended
31 December 31 December
2022 2021
GBP'000 GBP'000
Loan interest received - 35
- 35
=============== =============
Year ended Year ended
31 December 31 December
2022 2021
GBP'000 GBP'000
Loan interest - 3
Finance Fees 3 -
3 3
============= =============
4. Taxation
The tax assessed for the period differs from the standard rate
of corporation tax in the UK as follows:
Year ended Year ended
31 December 2022 31 December 2021
2022 2021
GBP'000 % GBP'000 %
(Loss)/profit before taxation (5,497) (144)
(Loss)/profit multiplied by standard
rate (1,044) 19 (27) 19
of corporation tax in the UK
Effect of:
Deferred tax asset not recognised 43 1,760
Remeasurement of deferred tax for
changes in tax rates - (1,573)
Other permanent differences - (1)
Chargeable gains 229 12
Income not taxable (105) (222)
Expenses not deductible for tax purposes 877 51
Total tax charge for year - -
============ ============
The Company has tax losses in the UK of GBP26.22m (2021:
GBP25.97m), subject to His Majesty's Revenue and Customs approval,
available for offset against future operating profits. The Company
has not recognised any deferred tax asset in respect of these
losses, due to there being insufficient certainty regarding its
recovery. The unrecognised deferred tax asset is GBP6.56m (2021:
GBP6.50m). Changes in tax laws and rates may affect tax assets and
liabilities and our effective tax rate in the future. The main
corporation tax rate in the UK is due to increase to 25% from 19%
on 1 April 2023.
5. Earnings per Share
The calculation of the basic earnings per share is calculated by
dividing the consolidated profit attributable to the equity holders
of the Company by the weighted average number of ordinary shares in
issue during the period. The weighted average number of shares
excludes shares held by an Employee Benefit Trust (see Note [10])
and has been adjusted for the issue/purchase of shares during the
period.
Year ended Year ended
31 December 31 December
2022 2021
GBP'000 GBP'000
(Loss) attributable to owners of the
Company (5,497) (144)
------------ ------------
2022 2021
Number Number
Weighted average number of shares in
issue 170,208,788 148,535,664
------------ ------------
Less: shares held by the Employee Benefit
Trust (weighted average) (6,380,000) (7,020,000)
------------ ------------
Weighted average number of shares for
calculating basic earnings per share 163,828,788 141,515,644
Share options and warrants exercisable n/a n/a
Weighted average number of shares for n/a n/a
calculating diluted earnings per share
------------ ------------
2022 2021
Pence Pence
Basic earnings per share (3.355) (0.102)
Diluted earnings per share n/a n/a
------------ ------------
The impact of the share options is considered anti-dilutive when
the Company's result for a period is a loss.
6. Financial Investments
Financial assets at fair value through profit or loss: GBP'000 GBP'000 GBP'000 GBP'000
Level 1 Level 2 Level 3 Total
Fair value at 31 December 2020 13,761 - 2,885 16,646
Additions 830 - 2,775 3,605
Fair value changes 577 - - 577
Gains on disposals 593 - - 593
Disposal (3,787) - - (3,787)
Fair value at 31 December 2021 11,974 - 5,660 17,634
-------- -------- -------- --------
Additions 235 - 7,479 7,714
Fair value changes (4,593) - - (4,593)
(Loss)/Gains on disposals (446) - 998 552
Disposal (1,926) - (1,810) (3,736)
Fair value at 31 December 2022 5,244 - 12,327 17,571
-------- -------- -------- --------
Gains on investments held at fair value through profit or loss
Fair value gain on investments (4,593) - - (4,593)
Realised gain/(loss) on disposal of investments (446) - 998 552
Net gain on investments held at fair value through profit or loss (5,039) - 998 (4,041)
Financial assets GBP'000 GBP'000 GBP'000 GBP'000
Level 1 Level 2 Level 3 Total
Non-current - - 11,365 11,365
Current 5,244 - 962 6,206
-------- -------- -------- --------
5,244 - 12,327 17,571
-------- -------- -------- --------
Level 1 represents those assets, which are measured using
unadjusted quoted prices for identical assets.
Level 2 applies inputs other than quoted prices that are
observable for the assets either directly (as prices) or indirectly
(derived from prices).
Level 3 applies inputs, which are not based on observable market
data.
Level 1 assets comprise investments in listed securities which
are traded on stock markets throughout the world and are held by
the Company as a mix of strategic and short term investments. These
are classified as current assets by virtue of their liquidity. The
listed investments have been valued at bid price, as quoted on
their respective Stock Exchanges, at 31 December 2022. During the
year ended 31 December 2022 the company disposed of a variety of
its shareholdings.
Level 3 assets comprise of investment in exploration costs where
licences are not 100% owned by the Company, and investments in
other companies. The Directors carried out an impairment review as
at 31 December 2022, and determined that no impairment was
necessary. With the exception of the investment in Mojito of
GBP962,000 these are considered to be non-current assets due to
their lack of liquidity. As the Yangibana Project Tenements owned
by Mojito were disposed of in 2023, this has been classified as a
current asset at 31 December 2022.
During 2022, GBP5,669,000 was invested in exploration costs by
the Company (2021: GBP2,775,000).
7. Trade and Other Receivables
31 December 31 December
2022 2021
GBP'000 GBP'000
Current
Trade receivables
Other receivables 27 1,094
Amounts owed by subsidiaries 3,883 3,883
Prepayments and accrued income 47 71
3,957 5,048
============ ============
There is no impairment of receivables, and no amounts are past
due at 31 December 2022 or 31 December 2021.
The fair value of these financial assets is not individually
determined as the carrying amount is a reasonable approximation of
fair value.
8. Trade and Other Payables
31 December 31 December
2022 2021
GBP'000 GBP'000
Trade payables 246 254
Tax and social security - -
Other payables 1 8
Accruals and deferred income 70 591
317 853
============ ============
The fair value of trade and other payables has not been
disclosed as, due to their short duration, management considers the
carrying amounts recognised in the balance sheet to be a reasonable
approximation of their fair value.
9. Borrowings
The Company had no borrowings at 31 December 2022 or 31 December
2021
During the year ended 31 December 2021, GBP3,000 (USD$4,000)
interest and finance charges were charged in the period, GBP223,000
(USD$303,000) was repaid, and GBP1,000 of foreign exchange was
recognised in respect of borrowings.
10. Share Capital
31 December 31 December
2022 2021
GBP'000 GBP'000
Allotted, issued and fully paid
173,619,050 deferred shares of 0.24p 417 417
172,719,813 ordinary shares of 1p
(31 December 2021: 148,649,098 ordinary
shares of 1p) 1,727 1,486
2,144 1,903
============ ============
Ordinary Ordinary Share Share Premium
shares Capital
No. GBP'000 GBP'000
Allotted and issued
At 1 January 2021 147,949,098 1,479 33,159
Issue of shares during
the year 700,000 7 50
Share issue costs - - (2)
At 31 December 2021 148,649,098 1,486 33,207
Issue of shares during
the year 24,070,715 241 4,775
Reissue of shares held
in trust - - 6
Share issue costs - - (376)
At 31 December 2022 172,719,813 1,727 37,612
============ =============== ==============
During the year ended 31 December 2022 the following shares were
issued: On 3 February 2022, 19,512,180 placing and 487,805
subscription shares were issued for proceeds of GBP4,100,000. On 21
February 2022, 3,634,825 shares were issued through an open offer
for proceeds of GBP745,000. On 8 April 2022, 435,905 shares were
issued on exercise of warrants for proceeds of GBP65,000.
Investment in Own Shares
At 31 December 2022, the Company held in Trust 6,380,000 (2021:
7,020,000) of its own shares with a nominal value of GBP63,800
(2021: GBP70,200). The Trust has waived any entitlement to the
receipt of dividends in respect of its holding of the Company's
ordinary shares. The market value of these shares at 31 December
was GBP0.72m (2021: GBP1.75m). In the current period nil were
repurchased (2021: nil) and nil were transferred into the Trust
(2021: nil), with 640,000 reissued on award of shares to
directors.
The deferred shares have no voting rights and are not eligible
for dividends.
11. Share Based Payments
Share Options
The Company operates share option schemes for certain employees
(including directors). Options are exercisable at the option price
agreed at the date of grant. The options are settled in equity once
exercised. The expected life of the options varies between 1 and 6
years. All options issued in the prior years vested immediately,
with no vesting requirements. During the year ended 31 December
2022 nil, (2021: 7,200,000) options were issued to Directors.
Details of the number of share options and the weighted average
exercise price (WAEP) outstanding during the period are as
follows:
31 December 2022 31 December 2021
Number WAEP Number WAEP
GBP GBP
Outstanding at the beginning
of the year 7,200,000 0.290 100,000 0.060
Issued - - 7,200,000 0.290
Exercised - - (100,000) (0.060)
Outstanding at the end of
the year 7,200,000 0.290 7,200,000 0.290
=========== ====== ========== ========
Exercisable at year end 7,200,000 7,200,000
The share options outstanding at the end of the period have a
weighted average remaining contractual life of 3.33 years (31
December 2021: 4.33 years) and have the following exercise prices
and fair values at the date of grant:
First exercise Grant date Exercise Fair 31 December 31 December
date (when price value 2022 2021
vesting conditions
are met)
GBP GBP Number Number
30 April 2021 30 April 2021 0.29 0.02742 7,200,000 7,200,000
7,200,000 7,200,000
============ ============
At 31 December 2022 7,200,000 options were exercisable (31
December 2021: 7,200,000).
For those options and warrants granted where IFRS 2 "Share-Based
Payment" is applicable, the fair values were calculated using the
Black-Scholes model. The inputs into the model for share based
payments recognised in the current and prior year were as
follows:
Risk free Share price Expected Share price
rate volatility life at date
of grant
30 April 2021 0.19% 21.6% 5 years GBP0.2375
Expected volatility was determined by calculating the historical
volatility of the Company's share price for 12 months prior to the
date of grant. The expected life used in the model has been
adjusted, based on management's best estimate, for the effects of
non-transferability, exercise restrictions and behavioural
considerations.
Warrants
Details of the number of warrants and the weighted average
exercise price (WAEP) outstanding during the period are as
follows:
31 December 2022 31 December 2021
Number WAEP Number WAEP
GBP GBP
Outstanding at the beginning
of the year 1,798,405 0.16147 1,598,405 0.11348
Issued 1,157,350 0.20500 800,000 0.20000
Exercised (435,905) (0.015) (600,000) (0.085)
Outstanding at the end
of the year 2,519,850 0.18345 1,798,405 0.16147
========== ======== ========== ========
Exercisable at year end 2,519,850 1,798,405
The warrants outstanding at the end of the period have a
weighted average remaining contractual life of 1.67 years (31
December 2021: 1.78 years) and have the following exercise prices
and fair values at the date of grant:
First exercise Grant date Exercise 31 December 31 December
date (when vesting price 2022 2021
conditions are
met)
GBP Number Number
01 January 2020 01 January 2020 0.15 435,905
06 May 2020 06 May 2020 0.06 41,667 41,667
20 August 2020 20 August 2020 0.12 520,833 520,833
28 September 28 September
2021 2021 0.20 800,000 800,000
25 February 2022 25 February 2022 0.205 1,157,350 -
2,519,850 1,798,405
============ ============
For those warrants granted where IFRS 2 "Share-Based Payment" is
applicable, the fair values were calculated using the Black-Scholes
model. The inputs into the model for share based payments
recognised in the current and prior year were as follows:
Risk free Share price Expected Share price
rate volatility life at date
of grant
28 September 2021 0.19% 28.4% 3 years GBP0.1825
25 February 2022 1.03% 14.9% 3 years GBP0.1825
The Company recognised total expenses of GBP13,000 (year ended
31 December 2021: GBP197,000) relating to equity-settled
share-based payment transactions during the period.
12. Financial Instruments
The Company is exposed to a variety of financial risks which
result from both its operating and investing activities. The Board
is responsible for co-ordinating the Company's risk management and
focuses on actively securing the Company's short to medium term
cash flows. Long term financial investments are managed to generate
lasting returns.
The Company has purchased shares in Companies which are listed
on public trading exchanges such as the LSE, TSX and ASX, and these
shares are held as an available-for-sale asset. The most
significant risks to which the Company is exposed are described
below:
a Credit risk
The Company's credit risk will be primarily attributable to its
trade receivables. At 31 December 2022 and 31 December 2021, the
Company had no trade receivables and therefore minimal risk
arises.
Generally, the Company's maximum exposure to credit risk is
limited to the carrying amount of the financial assets recognised
at the balance sheet date, as summarised below:
31 December 2022 31 December 2021
Investments Loans Derivative Statement Investments Loans Derivative Statement
(carried and financial of (carried and financial of
at fair receivables assets Financial at fair receivables assets financial
value) (carried position value) (carried position
at total at total
amortised amortised
cost) cost)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investments
(carried
at fair
value) 6,206 - - 6,206 11,974 - - 11,974
Other long
term
financial
assets 11,365 - - 11,365 5,660 - - 5,660
Other
receivables - 27 - 27 - 1,094 - 1,094
Receivables
from
investee
companies 3,883 - 3,883 3,883 - 3,883
Prepayments
and accrued
income - 47 - 47 - 71 - 71
Cash and
cash
equivalents - 110 - 110 - 324 - 324
Total 17,571 4,067 - 21,638 17,634 5,372 - 23,006
============ ============ =========== ========== ============ ============ =========== ==========
Financial instruments that are measured subsequent to initial
recognition at fair value, grouped into Levels 1 to 3 based on the
degree to which the fair value is observable:
-- Level 1 fair value measurements are those derived from quoted
prices (unadjusted) in active markets for identical assets or
liabilities;
-- Level 2 fair value measurements are those derived from inputs
other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices); and
-- Level 3 fair value measurements are those derived from
valuation techniques that include inputs for the asset or liability
that are not based on observable market data (unobservable
inputs).
In certain cases, the inputs used to measure fair value may fall
into different levels of the fair value hierarchy. In such cases,
an investment's level within the fair value hierarchy is based on
the lowest level of input that is significant to the fair value
measurement. Management's assessment of the significance of a
particular input to the fair value measurement in its entirety
requires judgement and considers factors specific to the
investment.
Investments
The Company's investment in shares in Listed Companies are
included as a financial investment and has been classified as Level
1, as market prices are available, and the market is considered an
active, liquid market.
The Company's investment in exploration costs where licences are
not 100% owned by the Company, and investments in other companies
are classified as non-current Level 3.
The credit risk on liquid funds is limited because the Company
only places deposits with leading financial institutions in the
United Kingdom.
a Liquidity risk
The Company seeks to manage financial risk by ensuring
sufficient liquidity is available to meet foreseeable needs and to
invest cash assets safely and profitably. The Directors prepare
rolling cash flow forecasts and seek to raise additional equity
funding whenever a shortfall in funding is forecast. Details of the
going concern basis of preparing the financial statements are
included in the principal accounting policies.
b Market risk
The amount and quality of minerals available and the related
costs of extraction and production represent a significant risk to
the Company. The Company is exposed to fluctuating commodity prices
in respect of the underlying assets. The Company seeks to manage
this risk by carrying out appropriate due diligence in respect of
the projects in which it invests.
The Company is exposed to the volatility of the stock markets
around the world, on which it holds shares in various listed
entities, and the fluctuation of share prices of these underlying
companies. The Company manages this risk through constant
monitoring of its investments share prices and news information but
does not hedge against these investments.
c Interest rate risk
The Company only has borrowings at fixed coupon rates and
therefore minimal interest rate risk, as this is deemed its only
material exposure thereto.
d Foreign exchange risk
The Company had no borrowings at 31 December 2022 or 31 December
2021. The Company operates foreign currency bank accounts to help
mitigate the foreign currency risk.
e Financial liabilities
The Company's financial liabilities are classified as
follows:
31 December 2022 31 December 2021
Other Liabilities Total Other Liabilities Total
financial not within financial not within
liabilities the scope liabilities the scope
at amortised of IAS at amortised of IAS
cost 39 cost 39
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Trade payables 246 - 246 254 - 254
Accruals and
deferred income - 70 70 - 591 591
Other payables 1 - 1 8 - 8
Borrowings - - - - - -
Total 247 70 317 262 591 853
============== ============ ======== ============== ============ ========
Maturity of financial liabilities
All financial liabilities at 31 December 2022 and 31 December
2021 mature in less than one year.
Borrowing facilities for the period ended 31 December 2022
The Company had no committed borrowing facilities at 31 December
2022 (31 December 2021: GBPNil).
The Company had no committed undrawn facilities at 31 December
2022 or 31 December 2021.
f Capital risk management
The Company's objectives when managing capital are:
- to safeguard the Company's ability to continue as a going
concern, so that it continues to provide returns and benefits for
the shareholders;
- to support the Company's stability and growth; and
- to provide capital for the purpose of strengthening the Company's risk management capability.
The Company actively and regularly reviews and manages its
capital structure, to ensure an optimal capital structure, and
equity holder returns, taking into consideration the future capital
requirements of the Company and capital efficiency, prevailing and
projected profitability, projected operating cash flows, projected
capital expenditures and projected strategic investment
opportunities. Management regards total equity as capital and
reserves, for capital management purposes.
13. Reconciliation of Liabilities Arising from Financing
Activities
There was no financing activity in the year ended 31 December
2022.
Short-term
borrowings Total
1 January 2021 219 219
------------ ------
Cash-flows:
- Interest charged 3 3
- Realised foreign exchange 1 1
- Repayments (223) (223)
------------ ------
31 December 2021 - -
============ ======
14. Related Party Transactions
The Company was charged rent totalling GBP19,931 to Gunsynd Plc,
a company of which Don Strang is a director (2021: GBP19,200
accrued). Of this GBP9,500 was accrued and GBP131 was unpaid at 31
December 2022. Andrew Suckling is a director of Macarthur Minerals
Limited. During the year the Company purchased 600,000 shares in
Macarthur Minerals and sold 1,616,000 shares in Macarthur Minerals
for net proceeds of GBP24,426 (2021: 286,000 shares disposed of for
proceeds of GBP50,581). At the year end the company held nil shares
in Macarthur Minerals (2021: 1,016,000).
Key Management Personnel are considered to be the Company
Directors only, and their total within Note 2 to the financial
statements.
15. Events after the end of the Reporting Period
On 25 January 2023, the Company announced that it had completed
the sale of its working interests in the Yangibana Rare Earths
project ("Yangibana Project") tenements to Hastings Technology
Metals (ASX: HAS) ("Hastings"). The Company received 2,452,650
shares of Hastings valued at AUD $9m.
On 26 January 2023, the Company announced that Evergreen Lithium
Limited ("Evergreen") has filed its admission Prospectus with
Australian Securities & Investments Commission and the
Australian Stock Exchange ("ASX"). Cadence owns approximately 15.8
million Evergreen shares which are anticipated to represent 8.7% of
the issued share capital of Evergreen on admission. At the offer
price the Company's interest is valued at AUD $3.96m.
On 13 April 2023, the Company announced that Evergreen was
listed on ASX on 11 April 2023, and that Cadence is the largest
shareholder, holding 8.74% of the issued share capital.
16. Ultimate Controlling Party
In the opinion of the directors there is no controlling
party.
17. FORWARD LOOKING STATEMENTS
This annual report contains 'forward-looking information', which
may include but is not limited to, statements concerning the
future. This annual report contains 'forward-looking information',
which may include but is not limited to, statements concerning the
future financial and operating performance of Cadence Minerals, the
estimation of mineral resources, the realisation of mineral
resource estimates, costs of production, capital and exploration
expenditures, costs and timing of the development of new deposits,
requirements for additional capital, governmental regulation of
mining operations and exploration operations, timing and receipt of
approvals, licenses, environmental risks, title disputes or
claims.
Often, but not always, forward-looking statements can be
identified by the use of words such as 'plans', 'expects', 'is
expected', 'budget', 'scheduled', 'estimates', 'forecasts',
'intends', 'anticipates' or 'believes', or variations (including
negative variations) of such words and phrases, or state that
certain actions, events or results 'may', 'could', 'would', 'might'
or 'will' be taken, occur or be achieved. Forward-looking
statements involve known and unknown risks, uncertainties and other
factors that may cause the actual results, performance or
achievements of Cadence and/or its subsidiaries, investment assets
and/or its affiliated companies to be materially different from any
future results, performance, or achievements expressed or implied
by the forward-looking statements.
Such factors include, among others, general business, economic,
competitive, political and social uncertainties; the actual results
of current exploration activities; conclusions of economic
evaluations and studies; fluctuations in the value of UK Pounds
Sterling relative to the United States Dollar, and other foreign
currencies; changes in project parameters as plans continue to be
refined; future prices of products; possible variations of ore
grade or recovery rates; failure of plant, equipment or processes
to operate as anticipated; accidents, labour disputes and other
risks of the mining industry; political instability, adverse
weather conditions, insurrection or war; delays in obtaining
governmental approvals or financing or in the completion of
development or construction activities.
Although Cadence has attempted to identify important factors
that could cause actual actions, events or results to differ
materially from those described in forward-looking statements,
there may well be other factors that cause actions, events or
results to differ from those currently anticipated, estimated or
intended.
Forward-looking statements contained herein are made as of the
date of this annual report. Cadence disclaims any obligation to
update any forward-looking statements, whether as a result of new
information, future events or results or otherwise. There can be no
assurance that forward-looking statements will prove to be
accurate, as actual results and future events could differ
materially from those anticipated in such statements. Accordingly,
readers should not place undue reliance on forward-looking
statements due to the inherent uncertainty therein. Nothing in this
annual report should be construed as a profit forecast
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END
FR FFMPTMTMTBFJ
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June 27, 2023 02:00 ET (06:00 GMT)
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