FAR Ferro-alloy Resources Limited

Consolidated Statement of Cash Flows for the year ended 31 December 2023

 

				2023 $000		2022 $000
Cash flows from operating activities
Loss for the year	Note			(5,251)		(4,286)
Adjustments for:
Depreciation and amortisation	5, 7			476		505
Write-off of property, plant and equipment	8			1		54
Write-down of inventory to net realisable value	8			254		160
Write-off of non-refundable VAT				30		-
Share-based payment expense	20			15		5
Net finance loss / (gain)	10			183		(118)
Cash used in operating activities before changes in working capital				(4,292)		(3,680)
Change in inventories				(609)		312
Change in trade and other receivables				(195)		(1,035)
Change in prepayments				534		(584)
Change in trade and other payables				(622)		1,555
Change in deferred income	24			102		-
Net cash used in operating activities				(5,082)		(3,432)
Cash flows from investing activities
Acquisition of property, plant and equipment	12			(978)		(1,466)
Acquisition of exploration and evaluation assets	13			(2,931)		(2,871)
Acquisition of intangible assets	14			(1)		(1)
Proceeds on fixed asset disposal	6			-		36
Net cash used in investing activities				(3,910)		(4,302)
Cash flows from financing activities
Proceeds from issue of share capital	20			-		10,000
Transaction costs on share subscriptions				-		(425)
Proceeds from borrowings				7,784		-
Repayment of borrowings	21			(1,112)		(300)
Interest paid	21			(157)		(82)
Net cash from financing activities				6,515		9,193
Net increase in cash and cash equivalents				(2,477)		1,459
Cash and cash equivalents at the beginning of year	19			4,331		2,810
Effect of movements in exchange rates on cash and cash equivalents				98		62
Cash and cash equivalents at the end of the year				1,952		4,331

 

Notes to the consolidated financial statements for the year ended 31 December 2023

 

1.    Basis of preparation

The consolidated financial statements for the year ended 31 December 2023 comprise the Company and the following subsidiaries:

Company		Location		Company's share in share capital		Primary activities
Energy Metals Limited		UK		100%		Dormant
Vanadium Products LLC		Kazakhstan		100%		Performs services for the Group
Firma Balausa LLC		Kazakhstan		100%		Production and sale of vanadium and associated by-products
Balausa Processing Company LLC		Kazakhstan		100%		Development of processing facilities

 

(a)                Statement of compliance

These financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS").

 

(b)               Basis of measurement

The consolidated financial statements are prepared on the historical cost basis except as otherwise noted below.

 

o  Functional and presentation currency

The national currency of Kazakhstan is the Kazakhstan Tenge ("KZT") which is also the functional currency of the Group's operating subsidiaries. The functional currency of the Company is US Dollars ("US$"). The presentation currency of the consolidated financial statements is US Dollars.

 

o  Going concern

The consolidated financial statements are prepared in accordance with IFRS on a going concern basis.

 

The Directors have reviewed the Group's cash flow forecasts for a period of at least 12 months from the date of approval of the financial statements, together with sensitivities and mitigating actions. In addition, the Directors have given specific consideration to the continued risks and uncertainties associated with the geopolitical situation with respect to Russia and Ukraine.

 

The Directors are confident, having conducted relevant analyses with respect to estimated concentrate availability and production levels, that the Company has sufficient resources, following the issue and sale of two tranches bonds under the Bond Programme during year and a further tranche after the year end, to continue as a going concern for at least the next 12 months.

 

2.    Use of estimates and judgements

Preparing the financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.

 

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

 

Carrying value of processing operations

The Directors have tested the processing operations' property, plant and equipment ("PP&E") for impairment (Note 12) at 31 December 2023. In doing so, net present value cash flow forecasts were prepared using the value in use method which required key estimates including vanadium pentoxide and ferro-molybdenum prices, production including the impact of ongoing PP&E maintenance costs and an appropriate discount rate.  Key estimates included:

 

·    Production volumes of 48 tonnes per month of vanadium pentoxide and 8.3 tonnes of molybdenum (as ferro-molybdenum).

·    Average prices of vanadium pentoxide of US$7.50/lb, ferro-molybdenum of US$47.90/kg in 2024 and thereafter, reflecting management estimates having consideration of market commentary less a discount, and used by the Company as a long-term assumption for other planning purposes.

·    Discount rate of 14.7% post tax in real terms.

 

Based on the key assumptions set out above, the recoverable amount of PP&E (US$19.2m) exceeds its carrying amount (US$5.95m) by US$13.25m and therefore PP&E were not impaired.

 

Sensitivity analysis

Any impairment is dependent on judgement used in determining the most appropriate basis for the assumptions and estimates made by management, particularly in relation to the key assumptions described above. Sensitivity analysis to potential changes in key assumptions has, therefore, been provided below.

 

The impact on the impairment calculation of applying different assumptions to product sales prices, production volumes and post-tax discount rates, all other inputs remaining equal, would be as follows:

		Decrease in headroom US$'000
Impact if product sales prices reduced by 10%:		(6,800)
Impact if production volumes decreased by 10%:
		(3,500)
Impact if post-tax discount rate increased by 2 percentage points:		(2,200)

 

Inventories (Note 16)

The Group holds material inventories which are assessed for impairment at each reporting date. The assessment of net realisable value requires consideration of future cost to process and sell and spot market prices at year end less applicable discounts. The estimates are based on market data and historical trends.

 

Exploration and evaluation assets (Note 13)

The Group holds material exploration and evaluation assets and judgement is applied in determining whether impairment indicators exist under the Group's accounting policy.  In determining that no impairment indicator exists management have considered the Competent Person's Report on the asset, the strategic plans for exploration and future development and the status of the Subsoil Use Agreement.  Judgement was required in determining that the application for deferral of obligations under the Subsoil Use Agreement (Note 26) will be granted and management anticipate such approvals being provided given their understanding of the Kazakh market and plans for the asset.

 

3.    Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements and have been applied consistently by Group entities, except for the implementation of new standards and interpretations.

 

a.    Basis of consolidation

(i)           Subsidiaries

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group.

 

(ii)          Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

 

b.    Foreign currency

(i)           Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions.

 

Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional currency at the exchange rate at that date.

 

Non-monetary items in a foreign currency that are measured based on historical cost are translated using the exchange rate at the date of the transaction.

 

Foreign currency differences arising in translation are recognised in profit or loss.

 

(ii)          Presentation currency

The assets and liabilities of foreign operations are translated to US$ at the exchange rates prevailing at the reporting date. The income and expenses of foreign operations are translated to US$ at the average exchange rate for the period, which approximates the exchange rates at the dates of the transactions. Where specific material transactions occur, such as impairments or reversals of impairments, the daily exchange rate is applied when the impact is material.

 

Foreign currency differences are recognised in other comprehensive income and are presented within the foreign currency translation reserve in equity.

 

Foreign currency differences arising on intercompany loans, where the loans are not planned to be repaid within the foreseeable future and form part of a net investment, are recorded within other comprehensive income and are presented within the foreign currency translation reserve in equity.

 

c.   Financial instruments

Financial assets and financial liabilities are recognised in the Group's consolidated statement of financial position when the Group becomes a party to the contractual provisions of the instrument.

 

(i)           Financial assets

Financial assets are classified as either financial assets at amortised cost, at fair value through other comprehensive income ("FVTOCI") or at FVTPL depending upon the business model for managing the financial assets and the nature of the contractual cash flow characteristics of the financial asset.

A loss allowance for expected credit losses is determined for all financial assets, other than those at FVTPL, at the end of each reporting period. The Group applies a simplified approach to measure the credit loss allowance for trade receivables using the lifetime expected credit loss provision. The lifetime expected credit loss is evaluated for each trade receivable taking into account payment history, payments made subsequent to year end and prior to reporting, past default experience and the impact of any other relevant and current observable data. The Group applies a general approach on all other receivables classified as financial assets. The general approach recognises lifetime expected credit losses when there has been a significant increase in credit risk since initial recognition.

 

The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. The Group derecognises financial liabilities when the Group's obligations are discharged, cancelled or have expired.

 

(ii)          Customer contracts

Under some of its customer sale arrangements, the Group receives a provisional payment upon satisfaction of its performance obligations based on the spot price at that date, which occurs prior to the final price determination, with the Group then subsequently receiving or paying the difference between the final price and quantity and the provisional payment. As a result of the pricing structure, the instrument is classified at FVTPL and measured at fair value with changes in fair value recorded as other revenue.

 

(iii)         Other receivables

Other receivables are accounted for at amortised cost. Other receivables do not carry any interest and are stated at their nominal value as reduced by appropriate expected credit loss allowances for estimated recoverable amounts as the interest that would be recognised from discounting future cash payments over the short payment period is not considered to be material.

 

(iv)         Cash and cash equivalents

Cash and cash equivalents comprise cash balances in banks, call deposits and highly liquid investments with maturities of three months or less from the acquisition date that are subject to insignificant risk of changes in their fair value, and petty cash.

 

(v)          Financial liabilities

The Group has the following non-derivative financial liabilities: borrowings and trade and other payables. Such financial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are measured at amortised cost using the effective interest method.

 

(vi)         Long-term borrowings

After initial recognition, interest-bearing borrowings are subsequently measured at amortised cost using the effective interest rate method. Gains and losses are recognised in profit or loss. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. The effective interest rate amortisation is included as finance costs in the statement of profit or loss.

 

(vii)        Share capital

Ordinary shares

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects.

 

d.    Property, plant and equipment

(i)           Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses. Land is measured at cost.

 

Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset into a working condition for its intended use, the costs of dismantling and removing the items and restoring the site on which they are located.

 

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and is recognised net within other income/other expenses in profit or loss.

 

 (ii)         Subsequent costs

The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.

 

(iii)         Depreciation

Depreciation is based on the cost of an asset less its residual value. Significant components of individual assets are assessed and if a component has a useful life that is different from the remainder of that asset, that component is depreciated separately.

 

Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Land is not depreciated.

 

The estimated useful lives for the current and prior periods are as follows:

·    Buildings                                         10-50 years;

·    Plant and equipment                  4-20 years;

·    Vehicles                                                          4-7 years;

·    Computers                                      3-6 years; and

·    Other                                                 3-10 years.

·   

Depreciation methods, useful lives and residual values are reviewed at each financial year end and adjusted prospectively if appropriate.

 

Assets under construction are not depreciated and begin being depreciated once they are ready and available for use in the manner intended by management.

 

e.    Exploration and evaluation assets

Exploration and evaluation expenditure for each area of interest once the legal right to explore has been acquired, other than that acquired through a purchase transaction, is carried forward as an asset provided that one of the following conditions is met.

 

·    Such costs are expected to be recouped through successful exploration and development of the area of interest or, alternatively, by its sale; or

·    Exploration and evaluation activities in the area of interest have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in relation to the area are continuing.

 

Exploration and evaluation costs are capitalised as incurred. Exploration and evaluation assets are classified as tangible or intangible based on their nature. Exploration expenditure which fails to meet at least one of the conditions outlined above is written off. Administrative and general expenses relating to exploration and evaluation activities are expensed as incurred.

 

The exploration and evaluation assets shall no longer be classified as such when the technical feasibility and commercial viability of extracting a mineral resource are demonstrable. This includes consideration of a variety of factors such as whether the requisite permits have been awarded, whether funding required for development is sufficiently certain of being secured, whether an appropriate mining method and mine development plan is established and the results of exploration data including internal and external assessments.

 

Exploration and evaluation assets will be reclassified either as tangible or intangible development assets and amortised on a unit-of-production method based on proved reserves.

 

Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying amount of exploration and evaluation assets may exceed their recoverable amount, which is the case when: the period of exploration license has expired and it is not expected to be renewed; substantial expenditure on further exploration is not planned; exploration has not led to the discovery of commercially viable reserves; or indications exist that exploration and evaluation assets will not be recovered in full from successful development or by sale.

 

Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.

 

f.     Intangible assets

(i)           Intangible assets with finite useful lives

Intangible assets that are acquired by the Group, which have finite useful lives, are measured at cost less accumulated amortisation and accumulated impairment losses.

 

(ii)          Subsequent expenditure

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in profit or loss as incurred.

 

(iii)         Amortisation

Amortisation is calculated over the cost of the asset, or other amount substituted for cost, less its residual value.

 

Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use since this most closely reflects the expected pattern of consumption of future economic benefits embodied in the asset.

 

The estimated useful lives for the current and comparative periods are as follows:

·    Patents                         10-20 years; and

·    Mineral rights            20 years.

 

Amortisation methods, useful lives and residual values are reviewed at each financial year end and adjusted if appropriate.

 

g.    Inventories

Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on first-in first-out method, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity.

 

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

 

h.    Impairment

(i)  Non-financial assets

The carrying amounts of the Group's non-financial assets, other than inventories and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. An impairment loss is recognised if the carrying amount of an asset or its related cash-generating unit ("CGU") exceeds its estimated recoverable amount.

 

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell (otherwise referred to as fair value less cost to develop in the industry). Fair value less costs to sell is determined by discounting the post-tax cash flows expected to be generated by the cash-generating unit, net of associated selling costs, and takes into account assumptions market participants would use in estimating fair value. In assessing the value in use, the estimated future cash flows are adjusted for the risks specific to the asset/cash-generating unit and are discounted to their present value that reflects the current market indicators. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs.

 

The Group's corporate assets do not generate separate cash inflows. If there is an indication that a corporate asset may be impaired, then the recoverable amount is determined for the cash generating unit to which the corporate asset belongs.

 

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in profit or loss.

 

Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

 

i.     Employee benefits

 

(i)           Defined contribution plans

The Group does not incur any expenses in relation to the provision of pensions or other post-employment benefits to its employees. In accordance with Kazakhstan state pension social insurance regulations, the Group withholds pension contributions from Kazakhstan based employee salaries and transfers them into State operated pension funds. Once the contributions have been paid, the Group has no further pension obligations. Upon retirement of employees, all pension payments are administered by the pension funds directly.

(ii)          Short-term benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.

 

j.     Provisions

(i) Recognition and measurement

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as a finance cost.

 

(ii)          Site restoration

In accordance with the Group's environmental policy and applicable legal requirements, a provision for site restoration is recognised when the land is disturbed as a result of pit development and plant decommissioning with a corresponding increase in exploration and evaluation costs or property, plant and equipment. Subsequent changes in the provision due to estimates are recorded as a change in the relevant asset. The provision is discounted at a risk-free rate with the costs incorporating risks relevant to the site restoration and an unwinding charge is recognised within finance costs for the unwinding of the discount.

 

k.    Revenue

(i)           Goods sold

Revenue from customers comprises the sale of vanadium and molybdenum products with other revenues from gravel and waste rock being non-significant. Revenue from vanadium products is recognised at a point in time when the customer has a legally binding obligation to settle under the terms of the contract and when the performance obligations have been satisfied, which is once control of the goods has transferred to the buyer at a designated delivery point at which point possession, title and risk transfers.

 

The Group commonly receives a provisional payment at the date control passes with reference to spot prices at that date. The final consideration is subject to quantity / quality adjustments and final pricing based on market prices determined after the product reaches its port of destination. The quantity / quality adjustments represent a form of variable consideration and revenue is constrained to record amounts for which it is highly probable no reversal will be required. However, given the short period to delivery post year end the final quantity / quality adjustments are known and revenue for the period is adjusted to reflect the final quantity / quality occurring subsequent to year end if material.

 

Changes in final consideration due to market prices is not determined to qualify as variable consideration within the scope of the IFRS 15 "Revenue from Customers". Changes in fair value as a result of market prices are recorded within revenue as other revenue.

 

l.     Finance costs

Finance costs comprise interest expense on borrowings, unwinding of the discount on provisions for historical costs and site restoration and foreign currency losses. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method.

 

Foreign currency gains and losses are reported on a net basis as either finance income or finance cost depending on whether foreign currency movements result in a net gain or loss, this includes exchange gains and losses that arise on trade and other receivables and trade and other payables in foreign currency.

 

m.   Income tax

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or loss except to the extent that they relate to items recognised directly in equity or in other comprehensive income.

 

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

 

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax assets and liabilities, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

 

A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

 

n.    Earnings per share

The Company presents basic and diluted earnings per share ("EPS") data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares.

 

o.    Segment reporting

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses related to transactions with other components of the same Group); whose operating results are regularly reviewed by the chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

 

p.    Share-based payments

(i) Share-based payment transactions

The Company grants share options to certain Directors and Group employees ("Equity-Settled Transactions") under the Company's share option plan. The Directors determine the specific grant terms within the limits set by the Company's share option plan.

 

(ii)          Equity-settled transactions

The costs of Equity-Settled Transactions are measured by reference to the fair value at the grant date and are recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant persons become fully entitled to the award (the "Vesting Date"). The cumulative expense recognised for Equity-Settled Transactions at each reporting date until the Vesting Date reflects the Company's best estimate of the number of equity instruments that will ultimately vest. The profit or loss charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period and the corresponding amount is represented in share-based payments reserve. No expense is recognised for awards that do not ultimately vest.

 

Where the terms of an equity-settled award are modified, the minimum expense recognised is the expense as if the terms had not been modified. An additional expense is recognised for any modification which increases the total fair value of the share-based payment arrangement or is otherwise beneficial to the Director or Group employee as measured at the date of modification.

 

Where Equity-Settled Transactions are awarded to Directors or Group employees, the fair value of the share options at the date of grant is charged to the profit and loss statement over the vesting period. Non-market performance vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of the options that will eventually vest. Market performance vesting conditions are incorporated into the fair value of the equity instrument at the grant date.

 

Upon exercise of share options, the proceeds received are allocated to share capital together with any associated balance in the share-based payments reserve are transferred to retained earnings. The dilutive effect of outstanding options is reflected as additional dilution in the computation of diluted earnings per share.

 

The Company utilises the Black-Scholes option pricing model to estimate the fair value of share options granted to Directors and Group employees. The use of this model requires management to make various estimates and assumptions that impact the value assigned to the share options including the forecast future volatility of the share price, the risk-free interest rate, dividend yield, the expected life of the share options and the expected number of shares which will vest. See Note 20 for further details.

 

q.    Government grants

Government grants are initially recognised as deferred income once the Group has reasonable assurance that the grant will be received and that the Group will be in a position to comply with any terms or conditions associated with the grant.

 

Grants relating to the purchase of plant and equipment are recognised as deferred income and they are credited to profit or loss on a straight-line basis over the expected lives of the related assets.

Grants that compensate the Group for expenses incurred are recognised in profit or loss on a systematic basis in the periods in which the expenses are recognised. 

 

r.     New and amended standards adopted

No new standards and interpretations issued by the IASB have had a significant impact on the consolidated financial statements.

 

 

4.    Revenue

	2023 $000		2022 $000
Sales of vanadium products	3,308		5,163
Sales of ferro-molybdenum	2,698		1,509
Sales of gravel and waste rock	143		86
Service revenue	15		15
Total revenue from customers under IFRS 15	6,164		6,773
Other revenue - change in fair value of customer contracts	(448)		(502)
Total revenue	5,716		6,271

                Vanadium and molybdenum products

Under certain sales contracts the single performance obligation is the delivery of AMV to the designated delivery point at which point possession, title and risk on the product transfers to the buyer. The buyer makes an initial provisional payment based on volumes and quantities assessed by the Company and market spot prices of vanadium pentoxide for AMV at the date of shipment. The final payment is received once the product has reached its final destination with adjustments for quality / quantity and pricing. The final pricing is based on the historical average market prices during a quotation period based on the date the product reaches the port of destination and an adjusting payment or receipt will be made to the revenue initially received. Where the final payment for a shipment made prior to the end of an accounting period has not been determined before the end of that period, the revenue is recognised based on the spot price that prevails at the end of the accounting period.

 

Other revenue related to the change in the fair value of amounts receivable and payable under the sales contracts between the date of initial recognition and the period end resulting from market prices are recorded as other revenue.

 

5.    Cost of sales

	2023 $000		2022 $000
Materials	4,832		5,863
Wages, salaries and related taxes	1,128		937
Depreciation	425		406
Electricity	94		111
Other	290		199
	6,769		7,516

 

 

6.    Other income

	2023 $000		2022 $000
Currency conversion gain	8		41
Other (sales of equipment)	12		36
	20		77

 

 

7.    Administrative expenses

	2023 $000		2022 $000
Wages, salaries and related taxes	2,023		1,619
Professional services	315		263
Taxes other than income tax	18		15
Listing and reorganisation expenses	155		162
Audit	125		111
Materials	48		37
Rent	40		53
Irrecoverable debts	52		-
Repairs and maintenance	58		-
Depreciation and amortisation	51		99
Insurance	44		44
Staff training	15		-
Research and development costs	10		-
Bank fees	23		23
Travel expenses	89		16
Utilities	5		-
Communication and information services	30		12
Other	270		91
	3,371		2,545

 

 

8.    Other expenses

	2023 $000		2022 $000
Currency conversion loss	59		204
Write-down of inventory to net realisable value	254		160
Write-down of obsolete assets	1		54
Share-based payment expense	15		5
Other	142		3
	471		426

 

 

9.    Personnel costs

		2023 $000		2022 $000
Wages, salaries and related taxes		3,232		2,569
		3,232		2,569

 

During 2023 personnel costs of US$1,128,000 (2022: US$937,000) have been charged to cost of sales, US$2,023,000 (2022: US$1,619,000) to administrative expenses and US$81,000 (2022: US$43,000) were charged to cost of inventories which were not yet sold as at the year end.

 

10.  Finance costs

		2023 $000		2022 $000
Net foreign exchange costs / (gain)		(83)		(195)
Interest expense on financial liabilities (bonds)		266		77
Net finance costs / (income)		183		(118)

 

 

 

 

 

 

 

11.  Income tax

The Group's applicable tax rates in 2023 are an income tax rate of 20% for Kazakhstan registered subsidiaries (2022: 20%) and 0% (2022: 0%) for Guernsey registered companies. The Kazakh tax rate has been applied below as this is most reflective of the Group's trading operations and tax profile.

 

During the years ended 31 December 2023 and 2022 the Group incurred tax losses and, therefore, did not recognise any current income tax expense.

 

Unrecognised deferred tax assets are described in Note 15.

 

Reconciliation of effective tax rate:

		2023				2022
		$000		%		$000		%
Loss before tax (Group)		(5,251)		100		(4,286)		100
Income tax at the applicable tax rate		(1,050)		20		(857)		20
Effect of unrecognised deferred tax assets / (utilisation of previously unrecognised losses)		1,417		(27)		923		(22)
Net non-deductible expenses/non-taxable income or loss		(367)		7		(66)		2
		-		-		-		-