TIDMKAV
RNS Number : 8311N
Kavango Resources PLC
26 May 2020
PRESS RELEASE
26 May 2020
KAVANGO RESOURCES PLC ("KAVANGO" OR "THE COMPANY")
Results for year ended 31 December 2019
Kavango Resources plc (LSE: KAV), the exploration group listed
on the Standard List segment of the main market of the London Stock
Exchange and targeting the discovery of world class mineral
deposits in Botswana, is pleased to present its audited financial
statements for the year ended 31 December 2019. The full report is
available on the Company's website at www.kavangoresources.com
.
KEY HIGHLIGHTS
-- The Group reports its results in US Dollars (USD). Its
primary assets are in Botswana and are accounted for in Botswana
Pula (BWP). Kavango Resources plc maintains its accounting records
and raises funds in Pounds Sterling (GBP).
-- Over 4,000 line-kms of airborne electromagnetic (AEM) surveys
were completed over the Company's northern KSZ prospecting licences
in SW Botswana in March 2019.
-- Approximately 1,100m of drilling over three priority targets
identified by the AEM survey and followed up with ground geophysics
was successfully concluded with indications of sulphide
mineralisation and elevated nickel values in gabbro sills. Further
drilling in 2020 is planned.
-- In April 2020, an independent report by Dr David Holwell (BSc
MSc MCSM PhD), a leading authority on the development of
Copper-Nickel-PGE sulphide deposits associated with magmatic
systems confirms the Company's assessment of the KSZ's significant
economic potential.
-- In February/March 2019 the Company completed a placement of
26,785,713 ordinary shares at 2.8p/share (US$ 0.037) to raise
GBP750,000 (before expenses) (US$993,750).
-- In April 2020, the Company announced a financing in the
amount of GBP 468,487 comprised of 27,250,000 shares placed at 0.8p
for gross proceeds of GBP 218,000 and an aggregate of Convertible
Loan Notes with a nominal value of GBP 250,487 convertible into
31,310,875 shares at 0.8p. Further details are provided in Note 19
to the accounts.
-- Total assets - US$2.9M (2018: US$3.4M)
-- Loss - US$1.57M (2018: US$0.761M) including a provision for
impairment of
US$1,000,000 (2018: US$Nil)
Michael Foster, Chief Executive Officer of Kavango Resources,
commented:
"We are pleased to announce our audited financial statements for
the year ended 31 December 2019. Our mineral exploration activities
on the Kalahari Suture Zone in the southwest of Botswana, where we
have an area of 5,573km(2) under licence, continue to show
considerable potential for the discovery of world-class base metals
deposits with the completion during the year of our initial drill
campaign. In addition, we are nearing completion of our first
farm-out by selling a 51% interest in the Ditau Project. We have
added to our mineral portfolio with our involvement on the exciting
Kalahari Copper Belt where two new copper mines are now being
developed. We look forward to an exciting programme of exploration
in 2020."
The Chairman's Statement and Results are set out in the
following pages.
Contacts
Kavango Resources plc
Michael Foster
mfoster@kavangoresources.com
SI Capital Limited (Broker) +44 1483 413500
Nick Emerson / Alan Gunn
Forward looking statement
Certain statements in this announcement, are, or may be deemed
to be, forward looking statements. Forward looking statements are
identified by their use of terms and phrases such as "believe",
"could", "should" "envisage", "estimate", "intend", "may", "plan",
"will" or the negative of those, variations or comparable
expressions, including references to assumptions. These
forward-looking statements are not based on historical facts but
rather on the Directors' current expectations and assumptions
regarding the Company's future growth, results of operations,
performance, future capital and other expenditures (including the
amount, nature and sources of funding thereof), competitive
advantages, business prospects and opportunities.
Such forward looking statements reflect the Directors' current
beliefs and assumptions and are based on information currently
available to the Directors. A number of factors could cause actual
results to differ materially from the results discussed in the
forward-looking statements including risks associated with
vulnerability to general economic and business conditions,
competition, environmental and other regulatory changes, actions by
governmental authorities, the availability of capital markets,
reliance on key personnel, uninsured and underinsured losses and
other factors, many of which are beyond the control of the Company.
Although any forward-looking statements contained in this
announcement are based upon what the Directors believe to be
reasonable assumptions, the Company cannot assure investors that
actual results will be consistent with such forward looking
statements.
Market Abuse Regulation (MAR) Disclosure
Certain information contained in this announcement would have
been deemed inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 until the release of this
announcement.
CHAIRMAN'S STATEMENT
It gives me great pleasure as Chairman of Kavango Resources plc,
an exploration group targeting the discovery of world-class mineral
deposits in Botswana, to report our latest set of final results and
discuss our plans for the future.
First, let me begin with the COVID-19 pandemic, which has
clearly presented many challenges including volatile financial
markets. Kavango has taken swift pre-emptive action to ensure the
safety of all staff and senior management. All of the Company's
directors, senior management and staff are working from home. The
Company initiated a business continuity plan well ahead of the UK
Government's initial advice on home working.
Travel has been restricted in Botswana and the United Kingdom.
Botswana has dealt admirably with COVID-19 and is already easing
partial travel restrictions in the country. While this currently
limits our ability to conduct exploration work in the field, we had
already planned extensive desktop research. This will involve
further analysis and compilation of data gathered during 2019 (from
drilling and surveying) together with additional data we have
sourced from third parties.
Our primary goal in the coming months is to deepen our
understanding of the Kalahari Suture Zone (the "KSZ") Project and
identify future drill targets.
Although it is of course hard to predict just how long the
current difficult conditions will last, we are still able to move
the Company forward meaningfully. We have always managed Kavango
prudently and will continue to significantly reduce costs wherever
possible. This will ensure that current funds last longer and will
give the Company more time to conclude various ongoing commercial
negotiations, which include potential JV agreements.
The Directors are closely monitoring commercial and technical
aspects of the Group's operations in-country to mitigate the impact
from the COVID-19 pandemic. The inability to gauge the length of
such disruption adds uncertainty to planning, but with careful cost
management and continued desktop research and other work from home
the directors believe Kavango will be better positioned for field
exploration once travel restrictions are lifted.
Kavango has three areas of operation (all in Botswana); the KSZ
Project, Ditau Project (which is nearing finalization of a Joint
Venture) and in the Kalahari Copper Belt (the "KCB Project").
The results of the recent drilling programme on the KSZ have
provided valuable geological information to deepen our
understanding of the potential of this project to host large
copper-nickel mineral deposits. The exploration effort is currently
directed towards confirming the existence of the conditions
necessary for the formation of metal sulphide orebodies during the
emplacement of gabbroic intrusives associated with a major volcanic
episode during the late Karoo geological era (180 million years
ago). The drilling programme confirmed the gabbro sills contain
"primary" sulphides, which suggests that the molten magma was in a
condition of "sulphur saturation" at the time of magma
crystallization.
Drill core logging confirms that these relatively thin gabbroic
bodies are associated with extensive heat alteration halos (several
metres) into the host rocks, which suggests that molten magma was
flowing through these "conduits" over prolonged periods. This would
allow for the accumulation of (heavy) metal sulphides in physical
traps during magma flow.
There is now a large body of evidence suggesting that the
accumulation of nickel and copper bearing metal sulphides occurred
within the high level gabbroic intrusions of the KSZ. The
computerized 3-D modelling constructed from the geological
information obtained from the drilling, together with the data from
geophysical and soil geochemical surveys will provide Kavango with
much valuable information concerning the location and genesis of
the intrusives, the mechanisms of magma transport and the chemistry
of the magma itself.
We announced on the 29th April a summary of the very positive
conclusions produced by Dr David Holwell in his independent mineral
systems review of the KSZ. Dr Holwell (BSc MSc MCSM PhD) is a
leading authority on the development of copper-nickel-platinum
group metal sulphide deposits associated with magmatic systems. The
review confirms Kavango's assessment of the KSZ's potential for
hosting significant economic mineral deposits. His review is
available on the Company's website.
On 15 April 2020 the Company announced that Power Metal
Resources plc (POW) had agreed to purchase 51% of the Ditau Project
for GBP 150,000 to be satisfied by the issuance of 35.7M shares of
POW. The transaction is subject to due diligence to be completed
within 30 days of removal of travel restrictions to Botswana.
The Ditau Project comprises two licences (1,386km(2) ) on which
at least 10 "Ring Structures" are located. Ring structures are
commonly associated with the presence of (volcanic) carbonatites,
which are the primary source of Rare Earth Elements (REEs) - in
high demand in the manufacturing of electric motors and batteries
for EVs and other high-tech applications. The presence of
carbonatites is supported by the discovery in drilling by Kavango
of "fenite", an alteration product associated with carbonatite
volcanism. It was recently discovered that three carbonatites were
found by Falconbridge Explorations in the 1970s less than 25km from
the Kavango licences in ground now held by De Beers (for diamonds).
These carbonatites are described as being post-Karoo, lying just
beneath the Kalahari cover and close to surface. One of them
contained high values of niobium. De Beers has given Kavango
permission to identify the location of these carbonatites and
collect data for use on the exploration of the Ditau targets.
In January 2020, the Company signed a Joint Venture Agreement
("JVA") with the Botswana registered company LVR GeoExplorers (Pty)
Ltd ("LVR") in respect of two Prospecting Licences (PLs) situated
in the Botswana section of the Kalahari Copper Belt (KCB). The JVA
allows Kavango to acquire up to a 90% interest in the licences by
way of a staged earn-in.
PL 082/2018 lies 30km north of MOD Resources' T3 mine
development and is completely surrounded by MOD/Metal
Tiger/Sandfire PLs including their T5, T6, T9, T10, T14 and T15
targets. The PL lies astride the main Ghanzi - Maun tarred highway.
PL 083/2018 is close to the Namibian border south of the
Trans-Kalahari Highway and adjacent to a block of PL's held by
Kopore Metals Limited.
We believe the signing of the JVA with LVR represent excellent
value for shareholders. Kavango will continue to review investment
opportunities in Botswana and southern Africa.
During 2019 the Group incurred a loss of US$ 1.57M, US$ 0.94
cents per shares (2018: loss of US$ 0.76M, US$ 0.54 per share). The
current year loss includes an impairment of US$ 1.0M relating to
prospecting licenses that in the ordinary course of business the
Directors have elected to relinquish. These PLs are located in the
south of the KSZ, which the Company has determined is no longer an
area of strategic focus based on results to date.
Due to the ongoing impact of the COVID-19 pandemic the AGM will
take place online. Details of how attendees may join the AGM and
the date of the meeting will be sent out in due course.
Further information in respect of the Company and its business
interests is provided on the Company's website at
www.kavangoresources.com and on social media including Twitter
#KAV.
On a final note, I would like to take this opportunity to thank
everyone at the Company who over recent months have worked
tirelessly on progressing the Company against our stated objectives
with special mention going to both Hillary Gumbo and Eddie Chiteka
plus all the team in Botswana.
DJ Wright
Chairman
22 May 2020
Chief Executive Officer's Report
The Company is exploring three projects in Botswana: the
Kalahari Suture Zone Project for Copper-Nickel-Platinum Group Metal
("PGM") deposits; the Kalahari Copperbelt Project for Copper-Silver
deposits; and the Ditau Project for Copper and rare earth
elements.
The impact of COVID-19 has been addressed in the Chairman's
statement.
Kalahari Suture Zone Project (KSZ)
The Company is exploring the potential of mafic intrusives
(gabbro) to host significant concentrations of nickel, cobalt,
copper and other base metals. The KSZ is a 450km long north-south
trending magnetic structure of continental proportions in SW
Botswana. Kavango holds 10 Prospecting Licences (PLs) along the
KSZ, covering an area of 5,573km(2) .
The link below shows the location of the Company's PLs in south
west Botswana.
https://www.kavangoresources.com/images/Maps/Location_of_the_Companys_PLs_in_SW_Botswana.jpg
The intrusives of interest are of Karoo age (c.180 million years
ago) and almost certainly represent the feeders to the basalt lava
flows, which at one time covered most of southern Africa. These
gabbros are of a similar age, genesis and composition as the
gabbros hosting the giant Norilsk Copper-Nickel-Platinum Group
Metal deposits in Siberia.
Some of the gabbros are close to surface and even outcrop.
Others are buried under Kalahari sand and Karoo sediments. The
Canadian Aid Agency, CIDA, drilled 7 holes along the KSZ in the
early 1980's and the cores of some of these holes were re-logged
and sampled by Kavango. One of the most important observations from
the re-logging was the recognition that most of the "high level"
gabbroic sills had intruded into sulphur rich coal measures and
shales of the Karoo sediments. This would have increased the volume
of sulphur in the magma allowing for the development of metal
sulphides. The results of "whole rock geochemistry" taken from
samples of the cores, together with thin sections were examined by
Dr Martin Prendergast, consulting to the Company, who specialises
in magmatic Cu/Ni/PGE deposits in southern Africa.
Dr Prendergast's observations suggested that metals such as
Copper, Nickel and PGEs were stripped out of the magma at some
stage before crystallisation of the intrusive magma was completed.
The implication is that these metals may have combined with the
available sulphur to form metal sulphides and then deposited in
trap zones within the intrusive bodies as massive sulphide ore
bodies.
During late 2018 and early 2019, the Company carried out two
airborne electro-magnetic (AEM) surveys covering over 4,000
line-kms, in the northern half of the KSZ licence area.
By using the latest generation of low frequency helicopter-borne
EM surveying, conductors lying up to 500m below the Kalahari/Karoo
cover were identified and these were followed up on the ground with
high sensitivity soil sampling and a ground based geophysical
technique known as CSAMT to identify the exact location of the
conductors. Massive sulphide (base metal) deposits can be detected
by CSAMT deep beneath the surface because they conduct electricity
easily. The shape, orientation and depth of the conductors
determines if the conductor should be drilled, particularly if the
conductor coincides with zinc-in-soil (surface) anomalies.
In October-November 2019, three coincident
conductor/magnetic/soil anomalies were selected for drilling and
1,100m of combined R/C and core drilling was carried out, with two
holes on each anomaly.
KSZ Drill results:
The drilling confirmed a number of important pre-requisites for
the formation of magmatic metal sulphide deposits.
- Firstly, the gabbro sills (average thickness 16m) contain
primary sulphides (sulphides generated at the time of initial
crystallisation). This suggests that free sulphur was present in
the melt (which was possible contamination from the coal measures).
If sulphur is available, the metals prefer to crystallise out with
the sulphur rather than the silicates.
- Secondly, the drilling confirmed that there exists beneath the
surface a complex network of dykes and sills, which would have
conveyed the magma to the surface. Often referred to as a "plumbing
system".
- Thirdly, a "heat alteration halo" of 8 to 10m either side of
the sills suggests that these magma conduits were transporting very
large volumes of magma over a considerable time period. Metal
sulphides are heavy relative to the rest of the magma (silicates)
and it is the accumulation of these metal sulphides in "traps" that
result in the formation of massive sulphide deposits.
The link below shows in X-section the location of the two holes
drilled by the Company on anomaly RIT50 that intersected a gabbro
sill (top section), with anomalous nickel values, and the hole
transposed onto a Norilsk geology X-section (bottom section).
https://www.kavangoresources.com/images/Maps/Drill_hole_RIT50_-_X-section_interpretation_with_Norilsk.jpg
We believe the results from our 2019 drilling in the KSZ have
brought us closer to confirming a "Norilsk Style plumbing system",
through which significant quantities of metal sulphides were
transported.
Our goal now is to identify underground traps in the plumbing
system where Copper-Nickel-PGM deposits might have accumulated.
Ditau Project
The Ditau Project comprises two PLs that cover an area of
1,386km(2) . Geophysical and geochemical analyses by Kavango in the
two PLs have identified 10 "ring structures" (including at least
one possible kimberlite).
One of the ring structures is a 7km x 5km magnetic and gravity
anomaly, with significant zinc-in-soils anomalies. Assay and whole
rock geochemistry results from two drill holes carried out at on
this ring structure last year demonstrated the presence of an
extensive zone of altered Karoo sediments sitting above a mafic
intrusive body. The alteration extended to over 300m in depth in
both holes, which were 1.8km apart. The geochemistry obtained from
the drill core suggested that the alteration was due to
"fenitization", a type of extensive alteration associated with
alkali magmatism and carbonatites.
In the 1970s, Falconbridge Exploration Inc. discovered three
carbonatites about 30km north of Ditau, one of which contained high
grades of niobium.
Carbonatites are the principal source of rare earth elements
(REEs) including the much sought-after elements Neodymium (Nd) and
Praseodymium (Pr), which are used in the manufacture of the new
generation of electric vehicles (EVs), magnets and other high-tech
applications.
Kalahari Copper Belt (KCB)
One of the most exciting developments in the mining industry in
Botswana is the continuing success of exploration companies in the
discovery of new deposits of copper and silver along what has
become known as the Kalahari Copperbelt (KCB). In 2019 the
directors of Kavango decided to seek prospective exploration ground
on the KCB. To this end the Company signed a Joint Venture
Agreement in January of this year with a local company for the
right to earn a 90% interest in two highly prospective licences,
one of which lies 30km north of Sandfire's (formerly MOD Resources)
T3 open pit, which is currently being developed. A further two
licences have been applied for by Kavango that lie just south of
the town of Ghanzi.
Key Recent Developments
As discussed in the Chairman's Statement above and where
appropriate in Note 19 to the accounts, which follow:
-- On 15 April we announced a conditional sale of 51% of Ditau
to Power Metals Resources plc (LSE:POW) for GBP 150,000 in exchange
for 35.7M shares of POW. The transaction is conditional on due
diligence.
-- As noted in the Highlights section and in Note 19 to the
accounts the Company has recently announced a financing of GBP
468,487.
-- As announced on 29 April Dr David Holwell, an internationally
recognised expert on magmatic sulphide deposits, delivered a very
positive report on the KSZ. His conclusions are summarised in the
Chairman's Statement.
Subject to COVID-19 restrictions, proposed Work Programmes for
2020 are:
KSZ:
Computer generated geological and geophysical modelling will
continue to map out the sills and dykes comprising the magma
plumbing system. Trap sites such as changes of direction or
depressions in the floor of the intrusive bodies will be identified
and surveyed with ground based high powered, low frequency EM
surveys. Down-hole EM surveys are also planned. Meanwhile a MSc
student from Leicester University (UK) will begin a study, which
will assist with geochemistry, thin section work and
interpretation. A second drilling campaign is currently planned for
later in the year.
Ditau:
A Ditau work programme will be confirmed once the JV with Power
Metals is concluded. This is subject to due diligence, which is due
to close within 30 days of the lifting of Covid-19 travel
restrictions to Botswana, or the 30 September whichever is the
earlier.
KCB:
Initial desk-top research and compilation will continue. Field
work will commence on the two JV licences. in Q2 or Q3. This will
comprise both regional and detailed soil geochemistry. CSAMT
surveying will be carried out over soil anomalies to define the
stratigraphy, structures and mineralisation. Drilling will commence
once targets have been identified. Further acquisition of
prospective ground will be considered.
Michael JE Foster
Chief Executive
22 May 2020
Board of Directors and Senior Management
Douglas Wright (Non-Executive Chairman)
Douglas studied Business studies at NESCOT and has more than 35
years' experience in finance mainly in the City of London. He was
the Business Development director at the Stockbrokers Tilney's from
2002 with a responsibility to attract new business initially in the
area of discretionary portfolio management and then subsequently
within the alternative investments arena and a partner at Corporate
Finance firm City & Westminster from 2006 where his remit
included fund raising mostly for small cap stocks especially in the
natural resources sector. Douglas is currently a director of
Friction Free Feedback Limited .
Michael Foster (Chief Executive Officer)
Michael is a graduate geologist from St Andrews University in
Scotland with a MBA in Business Administration from London Business
School. He has over 35 years' experience of all aspects of the
mining industry, including exploration, mine development,
operations and finance in a variety of commodities. He was formerly
managing director of LSE listed Africa focused Reunion Mining Plc
prior to its acquisition by Anglo American Plc. He has been
involved in a variety of corporate activity and worked throughout
Africa (including Botswana where he started his career as an
exploration geologist with De Beers), Central Asia, Eastern Europe,
the Middle East and South America. He speaks French and Portuguese.
Michael was founder of Casa Mining in DRC and formerly Chairman of
Copperbelt Minerals Ltd, a company that discovered a 5mt contained
copper deposit in DRC and sold for $197m in 2012.
Mike Moles (Non-Executive Director)
Michael BSc (Geology) and BSoc Sci (African Studies) has over 30
years' experience in mineral exploration in southern Africa.
Initially with the Delta Gold Ltd, then as Exploration Manager for
Reunion Mining (Zimbabwe) Ltd. In 1998, he became Consulting
Geologist for Lonmin Gold before setting up his own company in
2001. He was a founding director of Mimic Mining Ltd, which was
later sold to Impala Platinum. In 2001, he co-founded Millennium
Mining and its parent company, Malawi Minerals Ltd (minerals
sands). In 2005 he set up and managed Africoal Ltd in Mozambique to
acquire exploration licences over the coalfields around
Moatize/Tete. The company was sold two years later to the
Australian junior, Riversdale Mining. In 2008, he became MD of Rio
Mazowe Ltd, which explored for base minerals in Tete (Mozambique).
In 2011, the company was sold to the ASX listed Battery Minerals
Ltd. Mike is co-founder and director of Kavango Minerals with
responsibility for corporate and exploration strategy.
Hillary Gumbo (MD of Kavango Minerals (Pty) Ltd and Exploration
Manager)
Hillary is a Zimbabwe citizen with Botswana residence status. He
graduated from the University of Zimbabwe (UZ) with a BSc in
Geology and Physics (Honours) in 1984 and two years later he
graduated with an MSc Exploration Geophysics (UZ). He worked for
Zimbabwe Mining Development Corporation from 1986 to 1990 when he
joined Reunion Mining (Zimbabwe) Ltd until 1999. He has worked as a
geophysical consultant for a number of companies in Africa and the
Middle East such as Mawarid Mining and Rockover Resources. He has
been involved in a number of discoveries which include chrome at
Anglo America's Inyala mine, Maligreen gold deposit and many
kimberlites, in Zimbabwe. In 2009 he setup 3D Earth Exploration in
Botswana, a geophysical contracting and consulting company. In
2011, with Mike Moles he set up Kavango Minerals to explore for
iron ore and base metals in Botswana. He is responsible for
exploration.
John Forrest (Chief Financial Officer and Company Secretary)
Mr Forrest is a Chartered Professional Accountant. He qualified
with Price Waterhouse in Canada and since 2004 has been based in
London. While at Price Waterhouse he worked with mining clients
including Inco Limited. His company Logwood Financial Services
Limited provides financial management services to companies
involved in minerals exploration and he has worked on several
initial public offerings. For over 30 years he has worked in a
senior financial role with companies operating in Asia and
Africa.
Directors' Report
The Directors present their report and the audited financial
statements of the Group and the Company for the year ended 31
December 2019. Certain information required by the Companies Act
2006 relating to the information to be provided in the Directors'
Report is set out in the Strategic Report and includes the
principal activity, business review, principal risks and
uncertainties.
General Information
The Company was incorporated as F2D Minerals Limited on 31 May
2017 in England & Wales where it is domiciled.
On 7 December 2017, the Company successfully completed the
acquisition of Navassa Resources Limited which resulted in F2D
becoming the holding company for an early stage copper-nickel
exploration group with operations in Botswana.
Following the acquisition, the Company changed its name to
Kavango Resources Limited on 28 December 2017 and then
re-registered to a public limited company on 24 January 2018.
The principal activity of the Group is described in the
Strategic Report.
Dividends
No dividends are planned. (2018: US$ Nil).
Directors
The Directors of the Company during the year ended 31 December
2019 were:
Douglas Wright
Michael Foster
Mike Moles
The Directors interests in the ordinary share capital of the
Company at the date of this report are:
Director
----------------- ---------------
Michael Foster* 7,365,001
Mike Moles 15,092,492
Douglas Wright** 10,740,001
* Includes 1,000,000 ordinary shares held by Teresa
Giovetty-Foster, Michael Foster's wife.
** Includes 1,340,000 ordinary shares held by Lesley Wright,
Douglas Wright's wife.
The Group remunerates the Board at a level commensurate with the
size of the Group and the experience of its Directors. The
Remuneration Committee has reviewed the Directors' remuneration and
believes it upholds the objectives of the Group with regard to this
issue. Details of Directors' emoluments are set out in the
Directors Remuneration Report which follows.
Substantial shareholders
As at 31 December 2019, the total number of issued ordinary
shares with voting rights in the Company was 160,955,709. Details
of the Company's capital structure and voting rights are set out in
note 14 to the financial statements.
On 30 April 2020, the number of issued ordinary shares in the
Company with voting rights was 188,205,709. The Company has been
notified of the following interests of 3 per cent or more in its
issued share capital as at 30 April 2020.
Party Name Number of Ordinary % of Share
Shares Capital
Peter Anderton 14,486,796 7.70%
------------------- -----------
Jose Medeiros 13,492,500 7.17%
------------------- -----------
Michael Moles 15,092,492 8.02%
------------------- -----------
Hillary Gumbo 11,092,500 5.89%
------------------- -----------
Douglas Wright ** 10,740,001 5.71%
------------------- -----------
John Forrest 7,644,998 4.06%
------------------- -----------
Michael Foster * 7,365,001 3.91%
------------------- -----------
JIM Nominees 33,216,948 16.07%
------------------- -----------
Share Nominees 27,031,240 14.36%
------------------- -----------
* Includes 1,000,000 shares in the name of his wife, Teresa
Foster
** Includes 1,340,000 ordinary shares held by Lesley Wright,
Douglas Wright's wife.
Financial risk management
Note 16 of the financial statements details the financial risk
factors affecting the Group and summarises the Group's policies for
mitigating such risks through holding and issuing financial
instruments. These policies have been followed during the current
and prior year.
Financial instruments
Details of the use of financial instruments by the Group are
contained in Note 16 of the financial statements.
Green House Gas emissions
Given the nature of its activities which include aerial
geophysics with a helicopter and the operation of drill rigs, the
Group is conscious of greenhouse gas emissions. The Directors are
mindful of their responsibilities in this regard and strive to seek
opportunities where improvements may be made.
Going Concern
The Group and Company Financial Statements have been prepared on
a going concern basis. Although the Group's assets are not
generating revenues and an operating loss has been reported, the
Directors are of the view that, whilst the Group has funds to meet
its immediate working capital needs, the Group will need to raise
funds within 12 months to meets its planned exploration expenses
over the next 12 months from the date these Financial
Statements.
In the current business climate, the Directors acknowledge the
COVID-19 pandemic has necessitated organisational changes to
underpin the Group's resilience to COVID-19, with the key focus
being protecting all personnel, minimising the impact on critical
work streams and ensuring business continuity. COVID-19 may impact
the Group in varying ways leading to potential impairments of
assets held which could have a direct bearing on the Group's
ability to generate sufficient cash flows for working capital
purposes. The Directors are closely monitoring commercial and
technical aspects of the Group's operations to mitigate the impact
from the COVID-19 pandemic. The inability to gauge the length of
such disruption further adds to this uncertainty
The Group has financial resources which the Directors consider
are insufficient to fund the Group's committed expenditures and
thus acknowledge that additional funding will be required. The
amount of required Group funding will be raised either by way of an
issue of equity or through the issuance of debt. The Directors are
reasonably confident that funds will be forthcoming. Should
additional funding not be forthcoming the Directors have agreed, if
circumstances require, to defer payment of their fees until such
time as adequate funding is received and if necessary scale back
exploration activity.
The Directors have a reasonable expectation that the Group and
Company will be able to raise the required funds as it has done in
the past and thus anticipate that adequate resources will be
available to continue in operational existence for the foreseeable
future. We note the uncertainties arising as a result of COVID-19
in respect of its impact on the global economy however we also draw
attention to the fact that we have successfully raised funds post
year end as disclosed in Note 19 despite the current environment,
as have a number of similar sized exploration groups. Thus, they
continue to adopt the going concern basis of accounting in
preparing the Group and Company Financial Statements.
These financial statements do not include adjustments relating
to the recoverability and classification of recorded asset amounts
nor to the amounts and classification of liabilities that might be
necessary should the group not continue as a going concern. The
auditors have made reference to going concern by way of a material
uncertainty in their audit opinion.
Auditor
The Board first appointed PKF Littlejohn LLP as auditors of the
Group on 15 November 2017. They have expressed their willingness to
continue in office and a resolution to reappoint them will be
proposed at the Annual General Meeting.
Statement of Directors' responsibilities
The Directors are responsible for preparing the Annual Report,
Strategic Report, Directors' Report, Governance Report and
Directors' Remuneration Report along with the financial statements
in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have elected to prepare the financial statements in accordance with
International Financial Reporting Standards as adopted by the
European Union.
Under Company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and the Group and of
the profit or loss of the Company and the Group for that year. The
Directors are also required to prepare financial statements in
accordance with the rules of the London Stock Exchange for
companies with a Standard Listing.
In preparing these financial statements, the Directors are
required to:
-- Select suitable accounting policies and then apply them consistently;
-- Make judgements and accounting estimates that are reasonable and prudent;
-- State whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
-- Prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The maintenance and integrity of the Kavango Resources plc
website is the responsibility of the Directors; work carried out by
the auditor does not involve the consideration of these matters
and, accordingly, the auditor accepts no responsibility for any
changes that may have occurred in the accounts since they were
initially presented on the website.
Legislation in the United Kingdom governing the preparation and
dissemination of the accounts and the other information included in
annual reports may differ from legislation in other
jurisdictions.
Directors' responsibility statement pursuant to Disclosure and
Transparency Rules
Each of the Directors, whose names and functions are listed on
page 11, confirm that to the best of their knowledge and
belief:
-- the financial statements prepared in accordance with IFRS as
adopted by the European Union, give a true and fair view of the
assets, liabilities, financial position and loss of the Group and
parent company; and
-- the Annual Report and financial statements, including the
Business review, includes a fair review of the development and
performance of the business and the position of the Group and
parent company, together with a description of the principal risks
and uncertainties that they face.
Statement as to Disclosure of Information to the Auditor
So far as the Directors are aware, there is no relevant audit
information (as defined by Section 418 of the Companies Act 2006)
of which the Company's auditor are unaware, and each Director has
taken all the steps that he ought to have taken as a Director in
order to make himself aware of any relevant audit information and
to establish that the Company's auditor is aware of that
information.
We confirm to the best of our knowledge:
-- The financial statements, prepared in accordance with the
relevant financial reporting framework, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the Company and the undertakings included in the consolidation
taken as whole;
-- The strategic report includes a fair review of the
development and performance of the business and the position of the
Company and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that they face; and
-- The annual report and financial statements, taken as a whole,
are fair, balanced and understandable and provide the information
necessary for shareholders to assess the Company's position and
performance, business model and strategy.
Subsequent events
Post Balance Sheet Events are disclosed in note 19.
This responsibility statement was approved by the Board of
Directors on 22 May 2020 and is signed on its behalf by;
Michael JE Foster
Director
22 May 2020
Directors' Remuneration Report
The Company's Remuneration Committee comprises two Non-Executive
Directors: Douglas Wright and Mike Moles.
Kavango's Remuneration Committee operates within the terms of
reference approved by the Board.
In the year to 31 December 2019 the Remuneration Committee met
once to review fees of Directors, senior management, and the share
option proposal.
The items included in this report are unaudited unless otherwise
stated.
Committee's main responsibilities
-- The Remuneration Committee considers the remuneration policy,
employment terms and remuneration of the Executive Directors and
senior management;
-- The Remuneration Committee's role is advisory in nature and
it makes recommendations to the Board on the overall remuneration
packages for Executive Directors and senior management in order to
attract, retain and motivate high quality executives capable of
achieving the Company's objectives;
-- The Remuneration Committee also reviews proposals for any
share option plans and other incentive plans, makes recommendations
for the grant of awards under such plans as well as approving the
terms of any performance-related pay schemes;
-- The Board's policy is to remunerate the Company's executives
fairly and in such a manner as to facilitate the recruitment,
retention and motivation of suitably qualified personnel; and
-- The Remuneration Committee, when considering the remuneration
packages of the Company's executives, will review the policies of
comparable companies in the industry.
Consideration of shareholder views
The Remuneration Committee considers shareholder feedback
received and guidance from shareholder bodies. This feedback, plus
any additional feedback received from time to time, is considered
as part of the Company's periodic reviews of its policy on
remuneration.
Statement of policy on Directors' remuneration
Given the current size and stage of development of the Group,
there is no formal policy yet in place in respect of remuneration.
This is reviewed regularly by the Remuneration Committee and will
be implemented when considered necessary. For this reason, neither
the remuneration report nor remuneration policy have been subject
to approval at a general meeting.
The Company's policy is to maintain levels of remuneration so as
to attract, motivate, and retain Directors and Senior Executives of
the highest calibre who can contribute their experience to deliver
industry leading performance with the Company's operations.
Currently Director's remuneration is not subject to specific
performance targets.
The Remuneration Committee considers remuneration policy and the
employment terms and remuneration of the Executive Directors and
makes recommendations to the Board of Directors on the overall
remuneration packages for the Executive Directors. The same
principles are applied when agreeing the components of a
remuneration package for the appointment of new Directors. No
Director takes part in any decision directly affecting their own
remuneration.
Directors' remuneration
The Directors who held office at 31 December 2019 and who had
beneficial interests in the ordinary shares of the Company are
summarised as follows:
Name of Director Position
Douglas Wright Chairman, Non-Executive Director
Mike Moles Non-Executive Director
Michael Foster Chief Executive Officer
Details of these beneficial interests can be found in the
Directors' Report on page 12.
Each of the Directors entered into service agreements at the
time of the Company's admission to the market in July 2018. Details
of those service agreements are set out below. There were no other
major remuneration decisions in the period.
Directors' service contracts
Douglas Wright
Douglas has entered into a Letter of Appointment with the
Company pursuant to which he has agreed to act as the Non-Executive
Chairman of the Company. He is paid GBP40,000 per annum (US$
52,216) and has a notice period of 6 months.
Michael Foster
Michael has entered into a Service Agreement with the Company
pursuant to which he has agreed to act as Chief Executive Officer
of the Company. He is paid GBP40,000 per annum (US$ 52,216) and has
a notice period of 6 months.
Mike Moles
Mike has entered into a Letter of Appointment with the Company
pursuant to which he has agreed to act as a Non-Executive Director
of the Company. He receives no remuneration for his services, but
is repaid expenses incurred, and has a notice period of 6
months.
Remuneration components
For the year ended 31 December 2019 fees and share incentive
arrangements were the sole component of remuneration. The Board
will consider the components of Directors' remuneration during the
year and following this review these are likely to consist of:
-- Salaries and fees
-- Share Incentive arrangements
Directors' emoluments and compensation (audited)
Set out below are the emoluments of the Directors for the year
ended 31 December 2019:
Name of Director Short terms employment Other long Total
benefits term benefits
---------------------
2019 2018 2019 2018 2019 2018
---------------------
USD USD USD USD USD USD
--------------------- ----------- ------------ -------- ------- -------- -------
Douglas Wright 52,216 21,494 - - 52,216 21,494
Mike Moles - - - - - -
--------------------- ----------- ------------ -------- ------- -------- -------
Non-Executive total 52,216 21,494 - - 52,216 21,494
--------------------- ----------- ------------ -------- ------- -------- -------
Michael Foster 52,216 21,494 52,216
--------------------- ----------- ------------ -------- ------- -------- -------
Executive total 52,216 21,494 - - 52,216 21,494
--------------------- ----------- -------- ------- -------- -------
Total 104,432 42,988 - - 104,632 42,988
--------------------- ----------- ------------ -------- ------- -------- -------
As at 31 December 2019 GBP 20,000 was owed to Directors
comprised of GBP 16,667 to the Chairman and GBP 3,333 to the
CEO.
Directors beneficial share interests (audited)
The interests of the Directors who served during the year in the
share capital of the Company at 31 December 2019 and at the date of
this report or their resignation (if earlier) were as follows:
Name of Director Number of As at Number of Number of Number of
ordinary the date ordinary share options share options
shares held of this shares held held 31 December vested but
31 December report 31 December 2019 unexercised
2019 2018 31 December
2019
------------------ ------------- ----------- ------------- ------------------ ------------------
Douglas Wright
** 10,740,001 10,740,001 10,740,001 3,180,000 3,180,000
Mike Moles 15,092,492 15,092,492 15,092,492 3,180,000 3,180,000
Michael Foster
* 7,365,001 7,365,001 7,365,001 3,180,000 3,180,000
* Includes 1,000,000 in the name of his wife
** Includes 1,340,000 held by his Wife
Total pension entitlements (audited)
The Company does currently not have any pension plans for any of
the Directors and does not pay pension amounts in relation to their
remuneration.
The Company has not paid out any excess retirement benefits to
any Directors or past Directors.
Payments to past directors (audited)
The Company has not paid any compensation to past Directors.
Payments for loss of office (audited)
No payments were made for loss of office during the year.
Directors' interests in share options (audited)
Details of share options over ordinary shares for directors who
served during the year are set out in the table below:
Number of Share Options Number of Share Warrants
2019 2018 2019 2018
--------------- ------------ ----------- ------------ ------------
Douglas Wright 3,180,000 2,400,000 2,495,000 2,495,000
Mike Moles 3,180,000 2,400,000 - -
Michael Foster 3,180,000 2,400,000 580,000 580,000
--------------- ------------ ----------- ------------ ------------
There are no performance conditions attached. The exercise price
of the awards exceeds the average share price for the period.
There were no awards of annual bonuses or incentive arrangements
in the period. All remuneration was therefore fixed in nature and
no illustrative table of the application of remuneration policy has
been included in this report.
Consideration of employment conditions elsewhere in the
Group
The Committee has not consulted with employees about executive
pay but considers that the current remuneration of Executive
Directors is consistent with pay and employment benefits across the
wider Group.
UK 10-year performance graph
The Directors have considered the requirement for a UK 10-year
performance graph comparing the Group's Total Shareholder Return
with that of a comparable indicator. The Directors do not currently
consider that including the graph will be meaningful because the
Company has only been listed since July 2018, is not paying
dividends and is currently incurring losses. In addition and as
mentioned above, the remuneration of Directors is not currently
linked to performance and we therefore do not consider the
inclusion of this graph to be useful to shareholders at the current
time. The Directors will review the inclusion of this table for
future reports.
UK 10-year CEO table and UK percentage change table
The Directors have considered the requirement for a UK 10-year
CEO table and UK percentage change table. The Directors do not
currently consider that including these tables would be meaningful
as remuneration is not currently linked to performance, therefore
any comparison across years or with the employee group would be
significantly skewed and would not add any information of value to
shareholders. The Directors will review the inclusion of this table
for future reports.
Relative importance of spend on pay
The Directors have considered the requirement to present
information on the relative importance of spend on pay compared to
shareholder dividends paid. Given that the Company does not
currently pay dividends we have not considered it necessary to
include such information.
Other matters
The Company does not currently have any annual or long-term
incentive schemes in place for any of the Directors and as such
there are no disclosures in this respect.
Approved by the Board on 22 May 2020.
Douglas Wright
Chairman of the Remuneration Committee
Strategic Report
The Directors present their strategic report on the group for
the year ended 31 December 2019.
Principal Activity
The Company was incorporated on 31 May 2017. On 7 December 2017,
Kavango Resources plc acquired the entire issued share capital of
Navassa Resources Ltd by way of a share for share exchange. This
led to the shareholders of Navassa Resource Ltd acquiring the
controlling interest in Kavango Resources plc. As a result, Navassa
Resource Ltd is considered to be the legal acquirer and the
transaction has been accounted for using the reverse acquisition
accounting method. The Company was admitted for trading on the
London Stock Exchange (Standard List) on 31 July 2018
Following acquisition of Navassa Resources Ltd the principal
activity of the Group is copper and nickel exploration in Botswana.
The Group is at the early exploration stage and is yet to identify
mineral deposits in the areas for which it holds licenses.
Business review
Details of the Company's strategy, results and prospects are set
out in the Chairman's Statement and in the Chief Executive
Officer's Report on pages 7-10.
On 12 March 2019, a further placement of 26,785,713 ordinary
shares was completed at 2.8p per share to raise GBP750,000 before
expenses.
On 28 April 2020, a placement of 27,250,000 ordinary shares was
completed at 0.8p per share to raise GBP218,000 before
expenses.
Through Kavango Minerals (Pty) Ltd, the Group is pursuing
mineral exploration projects in Botswana.
Principle Risks and uncertainties
The Directors have identified the following principal risks in
regards to the Group's future. The relative importance of risks
faced by the Group can, and is likely to, change as the Group
executes its strategy and as the external business environment
evolves.
COVID -19 - as referenced in Chairman's Statement
Strategic risk
The Group's strategy may not deliver the results expected by
shareholders. The Directors regularly monitor the appropriateness
of the strategy, taking into account both internal and external
factors, together with progress in implementing the strategy, and
modify the strategy as may be required based on developments and
exploration results. Key elements of this process are the Group's
monthly reporting and regular Board meetings.
Concentration risk
The Group has one core exploration asset being licences covering
the Kalahari Suture Zone (KSZ) Project. This is a large area,
approximately 9,000km(2) , which mitigates against this risk to a
degree. Nevertheless the Board understands the importance of
regularly reviewing its strategy of focusing on one area and of
regularly assessing other opportunities in the Botswana market. In
this regards the Group has diversified its exploration portfolio in
Botswana by entering into joint ventures to earn interests in
prospecting licences in the Kalahari Copperbelt (KCB).
Exploration risk
The KSZ, KCB and Ditau Projects may not result in exploration
success.
Whilst the Directors endeavour to apply what they consider to be
the latest technology to assess projects, the business of
exploration for and identification of minerals and metals, is
speculative and involves a high degree of risk. The mineral and
metal potential of the Groups initial projects, KSZ and Ditau, may
not contain economically recoverable volumes of minerals, base
metals, or precious metals of sufficient quality or quantity. To
mitigate this risk, the Group has acquired the rights to carry out
exploration and earn an interest in certain licences in the KCB
area.
Even if there are economically recoverable deposits, delays in
the construction and commissioning of mining projects or other
technical difficulties may make the deposits difficult to exploit.
The exploration and development of any project may be disrupted,
damaged or delayed by a variety of risks and hazards which are
beyond the control of the Group. These include (without limitation)
geological, geotechnical and seismic factors, environmental
hazards, technical failures, adverse weather conditions, acts of
God and government regulations or delays.
Exploration is also subject to general industrial operating
risks, such as equipment failure, explosions, fires and industrial
accidents, which may result in potential delays or liabilities,
loss of life, injury, environmental damage, damage to or
destruction of property and regulatory investigations. The Group
may also be liable for the mining activities of previous miners and
previous exploration works. Although the Group intends, itself or
through its operators, to maintain insurance in accordance with
industry practice, no assurance can be given that the Group or the
operator of an exploration project will be able to obtain insurance
coverage at reasonable rates (or at all), or that any coverage it
obtains will be adequate and available to cover any such claims.
The Group may elect not to become insured because of high premium
costs or may incur a liability to third parties (in excess of any
insurance cover) arising from pollution or other damage or
injury.
Environmental and other regulatory risks
In relation to the Group's existing projects the environmental
impact to date is limited to activities associated with
exploration. The ultimate development of any project into a mining
operation will inevitably impact considerably on the local
landscape and communities. These projects sit in an area of
considerable natural beauty and therefore there is likely to be
opposition to mining by some parties. This may impact on the cost
and/or Group's ability to sell or move these projects into
production.
While the Group believes that its operations and future projects
are currently, and will be, in substantial compliance with all
relevant material environmental and health and safety laws and
regulations, including relevant international standards, there can
be no assurance that new laws and regulations, or amendments to, or
stringent enforcement of, existing laws and regulations will not be
introduced.
Nevertheless, the Group will continue to vigorously apply
international standards to the design and execution of any and all
of its activities, including engagement and consultation with local
communities, and non-governmental and Governmental organisations to
ensure any impacts of current and future activities are minimised
and appropriately managed. The Group has established a
comprehensive suite of health, safety, environmental and community
policies which will underpin all future activities.
Financing
The successful exploration or exploitation of natural resources
on any project will require significant capital investment. The
only sources of financing currently available to the Group are
through the issue of additional equity capital in the Company or
through bringing in partners to fund exploration and development
costs. The Group's ability to raise further funds will depend on
the success of their investment strategy and conditions in
financial and commodity markets. The Group may not be successful in
procuring the requisite funds on terms which are acceptable to it
(or at all) and, if such funding is unavailable, the Group may be
required to reduce the scope of its investments or anticipated
expansion.
Brexit
The outcome to negotiations Brexit in 2020 may pose significant
new challenges in terms of creating instability in the financial
markets and currency exchange rate fluctuations, and in creating
conditions liable to weaken investor sentiment and decision-making
processes. The Company has some protection in that it does not
operate in the United Kingdom and is intending to generate income
in United States dollars if their exploration assets reach
production stage in Botswana. However, whilst Brexit remains
unresolved during the transition period to 31 December 2020,
uncertainty will persist and possible outcomes cannot be predicted
with confidence.
Political, economic and regulatory regime
The licences and operations of the Group are in jurisdictions
outside the United Kingdom and accordingly there will be a number
of risks which the Group will be unable to control. Whilst the
Group will make every effort to ensure it has robust commercial
agreements covering its activities, there is a risk that the
Group's activities will be adversely affected by economic and
political factors such as the imposition of additional taxes and
charges, cancellation or suspension of licences and changes to the
laws governing mineral exploration and operations.
The Group's activities will be dependent upon the grant of
appropriate licences, concessions, leases, permits, and regulatory
consents that may be withdrawn or made subject to limitations.
There can be no assurance that they will be granted or renewed or
if so, on what terms. There is also the possibility that the terms
of any licence may be changed other than as represented or
expected.
Botswana, the current focus of the Group's activity, offers a
stable political framework and actively supports foreign
investment. The country has a well-developed exploration and mining
code and proactive support for foreign companies. Through a
programme of proactive engagement with Government at all levels the
Group is able to partially mitigate these risks by establishing
professional working relationships.
Dependence on key personnel
The Group is dependent upon its executive management team and
various technical consultants. Whilst it has entered into
contractual agreements with the aim of securing the services of
these personnel, the retention of their services cannot be
guaranteed. The development and success of the Group depends on its
ability to recruit and retain high quality and experienced staff.
The loss of the service of key personnel or the inability to
attract additional qualified personnel as the Group grows could
have an adverse effect on future business and financial
conditions.
Nevertheless, through programmes of incentivising staff,
appropriate succession planning, and good management these risks
can be largely mitigated.
Uninsured risk
The Group, as a participant in exploration and development
programmes, may become subject to liability for hazards that cannot
be insured against or third party claims that exceed the insurance
cover. The Group may also be disrupted by a variety of risks and
hazards that are beyond its control, including geological,
geotechnical and seismic factors, environmental hazards, industrial
accidents, occupation and health hazards and weather conditions or
other acts of God.
Other business risks
In addition to the current principal risks identified above and
those disclosed in Note 16, the Group's business is subject to
risks relating to the financial markets and commodity markets. The
buoyancy of both the aforementioned markets can affect the ability
of the Group to raise funds for exploration. The Group has
identified certain risks pertinent to its business including:
Strategic and Economic: Human Resources and Management:
* Business environment changes * Failure to recruit and retain key personnel
* Limited diversification * Human error or deliberate negative action
Operational: * Inadequate management processes
* Difficulty in obtaining / maintaining
Financial:
/ renewing Licences / approvals * Restrictions in capital markets impacting available
Commercial: financial resources
* Failure to maximise value from KSZ/KCB/Ditau
* Cost escalation and budget overruns
* Loss of interest in key assets
* Fraud and corruption
* Regulatory compliance and legal
The Directors regularly monitor such risks, using information
obtained or developed from external and internal sources, and will
take actions as appropriate to mitigate these. Effective risk
mitigation may be critical to the Group in achieving its strategic
objectives and protecting its assets, personnel and reputation. The
Group assesses its risk on an ongoing basis to ensure it identifies
key business risks and takes measures to mitigate these. Other
steps include regular Board review of the business, monthly
management reporting, financial operating procedures and
anti-bribery management systems. The Group reviews its business
risks and management systems on a regular basis.
Key performance indicators
The key performance indicators in assessing the completion of
this activity are monitored on a regular basis:
-- Progress with exploration, monitoring licence commitments and environmental compliance;
-- Cash management - sufficient to meet its obligations as they fall due.
Capital structure
The Company's capital consists of ordinary shares which rank
pari passu in all respects which are traded on the Standard List
segment of the Main Market of the London Stock Exchange. There are
no restrictions on the transfer of securities in the Company or
restrictions on voting rights and none of the Company's shares are
owned or controlled by employee share schemes. There are no
arrangements in place between shareholders that are known to the
Company that may restrict voting rights, restrict the transfer of
securities, result in the appointment or replacement of Directors,
amend the Company's articles of association or restrict the powers
of the Company's Directors, including in relation to the issuing or
buying back by the Company of its shares or any significant
agreements to which the Company is a party that take effect after
or terminate upon, a change of control of the Company following a
takeover bid or arrangements between the Company and its Directors
or employees providing for compensation for loss of office or
employment (whether through resignation, purported redundancy or
otherwise) that may occur because of a takeover bid.
Section 172(1) Statement - Promotion of the Company for the
benefit of the members as a whole
The Directors believe they have acted in the way most likely to
promote the success of the Company for the benefit of its members
as a whole, as required by s172 of the Companies Act 2006.
The requirements of s172 are for the Directors to:
-- Consider the likely consequences of any decision in the long term,
-- Act fairly between the members of the Company,
-- Maintain a reputation for high standards of business conduct,
-- Consider the interests of the Company's employees,
-- Foster the Company's relationships with suppliers, customers and others, and
-- Consider the impact of the Company's operations on the community and the environment.
The Company operates as a minerals exploration business which is
inherently speculative in nature and, without regular income, is
dependent upon fund-raising for its continued operation. The
pre-revenue nature of the business is important to the
understanding of the Company by its members, employees and
suppliers, and the Directors are as transparent about the cash
position and funding requirements as is allowed under FCA
regulations.
The application of the s172 requirements can be demonstrated in
relation to the some of the key decisions made during 2019:
-- Remunerate the Directors with share options in lieu of cash:
having decided on a plan to raise new funds to finance operations,
the Directors also decided that to maximise funds available for
exploration the Directors would be remunerated in part by share
options instead of cash as well as deferring payment of scheduled
fees. This has the added benefit of more fully aligning the
interests of the Directors with those of the members.
-- Expanding our position in Botswana: having established our
presence in Botswana and developed a good working relationship the
Department of Mines, the decision to apply for new licences on the
Kalahari Copper Belt(KCB) and enter into a strategic joint venture
with an existing license holder on the KCB was driven by the
Board's view that the long-term future of mineral exploration in
Botswana is very positive.
-- Ethical responsibility to the community and the environment:
the Board takes seriously its ethical responsibilities to the
communities and environment in which it works. We abide by the
local and relevant UK laws on anti-corruption & bribery.
Wherever possible, local communities are engaged in the geological
operations & support functions required for field operations,
providing much needed employment and wider economic benefits to the
local communities. In addition, we follow international best
practise on environmental aspects of our work. Our goal is to meet
or exceed standards, in order to ensure we obtain and maintain our
social licence to operate from the communities with which we
interact.
On behalf of the Board:
Michael JE Foster
Director
22 May 2020
CORPORATE GOVERNANCE
This report forms part of the Strategic Report.
The Directors of the Company are listed on Page 11. Mr Moles is
also a Director of both subsidiaries, Navassa Resources Limited and
Kavango Minerals (Pty) Ltd. Hillary Gumbo is Managing Director of
Kavango Minerals (Pty) Ltd and a Director of Navassa. All Directors
and employees within the Group are male. There is no formal
diversity policy in place due to the current size of the Group,
however the Directors remain committed to diversity among our staff
and leadership team and this is revisited each year.
The Chairman of the Board of Directors of Kavango Resources plc
('Kavango' or 'the Company') has a responsibility to ensure that
Kavango has a sound corporate governance policy and an effective
Board.
As a Company listed on the Standard List segment of the Official
List of the UK Listing Authority, the Company is not required to
comply with the provisions of the UK Corporate Governance Code.
However, the Board is committed to maintaining high standards of
corporate governance and so far, as appropriate given the Company's
size and the constitution of the Board, complies and intends to
comply with The Corporate Governance Guidelines for Small and
Mid-Sized Companies (the " QCA Code " ).
In light of the Company's size and recent history, the Company
has deviated from the QCA Code in the following respects:
-- The provisions relating to the composition of the Board and
the division of responsibilities are not being complied with as the
Board feels these provisions to be inapplicable, given the size of
the Company and the limited scope of its activities.
-- The Board do not consider an internal audit function to be
applicable due to the limited number of transactions.
-- A diversity policy as applied to the Company's administrative
management and supervisory bodies has not yet been developed but
biographies of directors and senior management and their relevant
experiences are set out on page 11.
The Directors are responsible for internal control in the
Company and for reviewing effectiveness. Due to the size of the
Company, all key decisions are made by the Board. The Directors
have reviewed the effectiveness of the Company's systems during the
period under review and consider that there have been no material
losses, contingencies or uncertainties due to weaknesses in the
controls.
Details of the Company's business model and strategy are
included in the Chairman's Statement, the Chief Executive Officer's
Report and the Strategic Report.
The Company will provide updates on our compliance with the
Code. The Board considers that the Company complies with the QCA
code so far as is practicable having regard to the size, nature and
current stage of development of the Company.
The sections below set out how the Group applies the principles
of the QCA Code and sets out areas of non-compliance.
Strategy and business model which promotes long-term value for
shareholders
The Company is involved with the exploration for base metals in
Botswana. Our goal is to deliver long term value for our
shareholders. We aim to do this by identifying good quality
grassroots and early-stage exploration projects which can be
explored and advanced through feasibility sudies to mine
development decisions. Consequently we:
-- use our expertise to identify those areas with potential for
economically feasible deposits,
-- assess the business environment of Botswana and its
attractiveness for prospecting and eventual mining operation,
-- understand existing interests in a prospecting licence area
in order to ensure we can earn-in to existing interests on terms
favourable to our shareholders.
Early stage mineral exploration is by its nature speculative and
we aim to reduce the risks inherent in the industry by careful
application of funds throughout individual projects. We do that
by:
-- Reviewing existing exploration data;
-- Establishing close in-country partnerships and financing for our projects;
-- Applying the most appropriate cost-effective exploration
techniques in order to determine whether further work, using
increasingly expensive exploration techniques, is justified;
and
-- Appreciating the likely realisation routes that will be
available to us as the project moves towards development.
Shareholder communications
The Company is committed to engaging with its shareholders to
ensure that its strategy, operational results and financial
performance are clearly understood. We engage with our shareholders
via roadshows, attending investor conferences, interviews and
through our regular reporting on the London Stock Exchange.
Roadshows are typically timed to follow the release of interim and
final results. The Company takes part in investor conferences, both
in the UK and internationally. LSE announcements include details of
the website, Twitter page and include phone numbers to contact the
Company and its professional advisors.
Private shareholders
The AGM is the main forum for dialogue with retail shareholders
and the Board. The Notice of Meeting is sent to shareholders at
least 21 days before the meeting. All Directors attend the AGM and
are available to answer questions raised by shareholders. For each
vote, the number of proxy votes received for, against and withheld
is announced at the meeting. The results of the AGM are announced
via the London Stock Exchange. In addition, the Directors attend
investor forums specific to the mining industry and engage with
shareholders at those events. Investors can contact us via our
website (www.Kavangoresources.com) or by email
(mfoster@Kavangoresources.com ).
Retail shareholders also regularly attend investor evenings held
by our brokers or other industry bodies and we publicise our
attendance via LSE announcements and Twitter. In addition, our up
to date Corporate presentation is made available on our
website.
Institutional shareholders
The Directors actively seek to build a relationship with
institutional shareholders. Shareholder relations are managed
primarily by the Directors. The Directors make presentations to
institutional shareholders and analysts throughout the year, mainly
in London and Cape Town through events such as Mines and Money,
Indaba and 121 Group. We also have ad-hoc meetings with our
shareholders via conference call and email. The Board as a whole is
kept informed of the views and concerns of major shareholders by
the Chief Executive Officer. Any significant investment reports
from analysts are also circulated to the Board. The Non-Executive
Chairman and Non-Executive Director are available to meet with
major shareholders if required to discuss issues of importance to
them and are considered to be independent from the executive
management of the Company.
Wider stakeholder and social responsibilities and their
implications for long term success .
Aside from our shareholders, our most important stakeholder
groups are our employees, local partners and those local
communities that may be impacted by our exploration activities. The
Board is regularly updated on stakeholder issues and their
potential impact on our business to enable the Board to understand
and consider these issues in decision-making. The Board understands
that maintaining the support of all its stakeholders is paramount
for the long-term success of the Company.
Employees
We maintain only a small permanent staff in the UK and Botswana
and as such employee engagement with the Directors is frequent with
a scheduled weekly team Skype call as well as daily meetings and
discussions.
Local partners and communities
Our operations provide employment in remote areas of Botswana.
Essential to our success is the establishment of close working
relationships with local partners. We seek local partners who have
a good understanding of the local exploration and mining industry
and regulations within the country, and with the capacity and
capability to assist with the management and maintenance of the
project.
We are mindful of our obligations to the local environment and
operate to high levels of health and safety in respect of both our
local workers and the local community. Employee training focuses on
operating safely and considerately in these communities. Engagement
with local communities is dependent on jurisdiction and the stage
of exploration but is typically by public forum or with local or
regional leaders, including site visits and workshops. Social
projects in the local communities are dependent on local need and
also the stage of exploration/level of project investment. Examples
of our social projects will include drilling boreholes for water,
provision of medical clinics, supply of equipment to a local school
and building a new road.
As projects move forward, towards potential mining activities,
we seek to bring in partners who can credibly make the investments
to move towards mine production. In doing so we have regard for
their ability and desire to move projects forward, their industry
reputation and their commitment to treating the local communities
fairly and protecting the environment. We enter agreements that
allow us to monitor their activities and have monthly updates on
project progress.
Risk management and mitigation
Audit, risk and internal control
Financial controls
The Company has a framework of internal financial controls, the
effectiveness of which is regularly reviewed by the Directors and
the Audit Committee. The key financial controls are:
-- The Board is responsible for reviewing and approving overall
Company strategy, approving new exploration projects and budgets,
and for determining the financial structure of the Company
including treasury, tax and dividend policy. Monthly results and
variances from plans and cash flow forecasts are reported to the
Board;
-- The Audit Committee, comprising the two Non-executive
Directors, assists the Board in discharging its duties regarding
the financial statements, accounting policies and the maintenance
of proper internal business, and operational and financial
controls;
-- Regular budgeting and forecasting is performed to monitor the
Company's ongoing cash requirements and cash flow forecasts are
circulated to the Board on a monthly basis;
-- Actual results are reported against budget and prior year and are circulated to the Board;
-- The Company has an investment appraisal system that considers
expected costs against a range of potential outcomes arising from
the exploration opportunities that we are invited to participate
in;
-- Regular reviews of exploration results are performed as the
basis for decisions regarding future expenditure commitment;
-- Due to the international nature of the business there are, at
times, significant foreign exchange rate movement exposures. Cash
flow forecasting is done at the 'required currency' level and
foreign currency balances are maintained to meet expected
requirements; and
-- We manage exploration risk of failure to find economic
deposits by low cost early stage exploration techniques, with
detailed analysis of results. Moving projects to more expensive
exploration techniques requires a rigorous review of results data
prior to deciding whether to proceed with further work.
Non-financial controls
The Board has ultimate responsibility for the Company's system
of internal control and for reviewing its effectiveness. However,
any such system of internal control can provide only reasonable,
but not absolute, assurance against material misstatement or loss.
The Board considers that the internal controls in place are
appropriate for the size, complexity and risk profile of the
Company. The principal elements of the Company's internal control
system include:
-- Close management of the day-to-day activities of the Company by the Executive Director
-- An organisational structure with defined levels of
responsibility, which promotes entrepreneurial decision-making and
rapid implementation while minimising risks; and
-- Central control over key areas such as capital expenditure
authorisation and banking facilities.
The Company reviews at least annually the effectiveness of its
system of internal control, whilst also having regard to its size
and the resources available. As part of the Company's plans we
continue to review a number of non-financial controls covering
areas such as regulatory compliance, business integrity, health and
safety, and corporate social responsibility. All employees are
aware of their obligations under anti-bribery and corruption
legislation.
Maintaining the Board as a well-functioning, balanced team led
by the Chairman
The Board comprises the Non-Executive Chairman, one Executive
Director and one Non-Executive Director. During the current
financial year, Douglas Wright acted as Non-Executive Chairman and
Mike Moles as a Non-Executive Director. Both Non-executive
Directors have extensive experience in the mining industry, are
qualified financier and geologist, respectively, and have
considerable experience of serving on the Board of public
companies.
The Board is satisfied that it has a suitable balance between
independence on the one hand, and knowledge of the Company and
industry on the other, to enable it to discharge its duties and
responsibilities effectively. All Directors are encouraged to use
their independent judgement and to challenge all matters, whether
strategic or operational.
The Board aims to meet quarterly but speaks on skype on a
regular basis, generally every Tuesday. The agenda is set by the
Chief Executive in consultation with the Chairman. The standard
agenda points include:
-- Review of previous meeting minutes and actions arising there from;
-- A report by the CEO covering all operational matters;
-- A report from the CFO covering all financial matters;
-- Any other business including update of Register of Conflicts
Directors' conflict of interest
The Company has effective procedures in place to monitor and
deal with conflicts of interest. The Board is aware of the other
commitments and interests of its Directors, and changes to these
commitments and interests are reported to and, where appropriate,
agreed with the rest of the Board. A Register of Conflicts is
maintained and is a standard agenda item at each Board Meeting. The
Directors have access to the Company's advisers, its brokers and
its lawyers. The advisers do not typically provide materials for
Board meetings except if requested to do so for the purposes of
discussing upcoming regulations and other issues.
Board meetings are deemed quorate if two Board members are
present and providing 7 days' notice of such meeting has been given
and waived by the non-attending Directors.
Directors and Officers Liability insurance is maintained for all
Directors.
The table below sets out the attendance statistics for all
current Board members through 2019:
Meetings attended Meetings held
Douglas Wright 4 4
------------------ --------------
Michael Foster 4 4
------------------ --------------
Mike Moles 4 4
------------------ --------------
John Forrest (CoSec) 4 4
------------------ --------------
Directors experience, skills and capabilities
The Board is satisfied that, between the Directors, it has an
effective and appropriate balance of skills and experience,
particularly so in the area of base metal exploration and
development in Africa. All Directors receive regular and timely
information on the Company's operational and financial performance.
Relevant information is circulated to the Directors in advance of
meetings. Contracts are available for inspection at the Company's
registered office.
New Directors will be selected having regards to the Company's
needs for a balance of operational, industry, legal and financial
skills. Experience of the Mining industry and in particular the
exploration sector is important but not critical, as is experience
of running a public company.
All Directors retire by rotation at regular intervals in
accordance with the Company's Articles of Association.
Appointment, removal and re-election of Directors
Policy for new appointments
Base salary levels will take into account market data for the
relevant role, internal relativities, the individual's experience
and their current base salary. Where an individual is recruited at
below market norms, they may be re-aligned over time (e.g. two to
three years), subject to performance in the role. Benefits will
generally be in accordance with the approved policy.
For external and internal appointments, the Committee may agree
that the Company will meet certain relocation and/or incidental
expenses as appropriate.
Policy on payment for loss of office
Payment for loss of office would be determined by the
Remuneration Committee, taking into account contractual
obligations.
Independent advice
All Directors are able to take independent professional advice
in the furtherance of their duties, if necessary, at the Company's
expense from lawyers, brokers and other professional advisors that
they deem relevant. In addition, the Directors have direct access
to the advice and services of the Company Secretary and Chief
Financial Officer.
Board performance based on clear and relevant objectives
Over the next 12 months we intend to review the performance of
the team as a unit to ensure that the members of the Board
collectively function in an efficient and productive manner. Over
the same period the Non-Executive Directors will be seeking to set
clear and relevant objectives for the Executive Director, and for
the Board as a whole.
A culture that is based on ethical values and behaviours
The Board aims to lead by example and do what is in the best
interests of the Company. We operate in remote and under-developed
areas and ensure our employees understand their obligations towards
the environment and in respect of anti-bribery and corruption.
A weekly call attended by all senior employees serves to refresh
and re-iterate the Company's' ethical standards as they apply to
the operational issues that are discussed on that call.
Maintain governance structures and committees that allow good
decision-making by the Board
Board programme
The Board aims to meet quarterly and as and when required. The
Board sets direction for the Company through a formal schedule of
matters reserved for its decision. During the year to December 2019
the Board met four times, but communicated as a management group on
numerous occasions. The Board receives appropriate and timely
information prior to each meeting; a formal agenda is produced for
each meeting and Board and Committee papers are distributed by the
Chief Executive several days before meetings take place. Any
Director may challenge Company proposals and decisions are taken
democratically after discussion. Any Director who feels that any
concern remains unresolved after discussion may ask for that
concern to be noted in the minutes of the meeting, which are then
circulated to all Directors. Any specific actions arising from such
meetings are agreed by the Board or relevant Committee and are then
followed up by the Company's management.
Roles of the Board, Chairman and Chief Executive Officer
The Board is responsible for the long-term success of the
Company. There is a formal schedule of matters reserved to the
Board. It is responsible for overall Company strategy; approval of
exploration projects; approval of the annual and interim results;
annual budgets; dividend policy; and Board structure. It monitors
the exposure to key business risks. There is a clear division of
responsibility at the head of the Company. The Chairman is
responsible for running the business of the Board and for ensuring
appropriate strategic focus and direction.
The Chief Executive Officer is responsible for proposing the
strategic focus to the Board, implementing it once it has been
approved and overseeing the management of the Company. Together
with the Chief Financial Officer and other senior employees, he is
responsible for establishing and enforcing systems and controls,
and liaison with external advisors. He has responsibility for
communicating with shareholders, assisted by the CFO and other
senior employees.
All Directors receive regular and timely information on the
Company's operational and financial performance. Relevant
information is circulated to the Directors in advance of meetings.
The business reports monthly on its headline performance against
its agreed budget, and the Board reviews the monthly update on
performance and any significant variances are reviewed at each
meeting. Senior executives below Board level attend Board meetings
when deemed appropriate by the Chief Executive or Chairman, to
present business updates.
Board committees and Policies
The Company has a small Board of 3 directors. Directors and
certain Company officers meet every Tuesday for a minimum 60
minutes. During these meetings all aspects of the operations and
all corporate matters are discussed. Formal Board meetings
generally are reserved for times when Board resolutions are
required. These frequent informal meetings of Directors reduce the
need for committee meetings.
Audit and Risk Committee
The Audit and Risk Committee, which comprises Douglas Wright and
Mike Moles, is responsible, amongst other things, for monitoring
the Group's financial reporting, external and internal audits and
controls, including reviewing and monitoring the integrity of the
Group's annual and half yearly financial statements, reviewing and
monitoring the extent of non-audit work undertaken by external
auditors, advising on the appointment of external auditors,
overseeing the Group's relationship with its external auditors,
reviewing the effectiveness of the external audit process and
reviewing the effectiveness of the Group's internal control review
function. The ultimate responsibility for reviewing and approving
the annual report and accounts and the half-yearly reports remains
with the Board. The Audit and Risk Committee gives due
consideration to laws and regulations, the provisions of the UK
Corporate Governance Code and the requirements of the Listing
Rules. There is no formal policy in respect of auditor rotation but
this is considered on an annual basis by the Audit Committee. The
current auditors have held office for a total uninterrupted period
of 3 years and were appointed on 20 March 2018.
The Audit Committee met twice during the year. To date, audit
committee matters have been discussed in full Board meetings. As
such no formal audit committee reports have been required.
Specific risks are set out in the Strategic Report.
The Remuneration Committee
The Remuneration Committee, which comprises Douglas Wright and
Mike Moles, is responsible, amongst other things, for assisting the
Board in determining its responsibilities in relation to
remuneration, including making recommendations to the Board on the
Company's policy on executive remuneration, including setting the
parameters and governance framework of the Group's remuneration
policy and determining the individual remuneration and benefits
package of each of the Company's Executive Directors and the Group.
It is also responsible for approving the rules and basis for
participation in any performance related pay-schemes, share
incentive schemes and obtaining reliable and up-to-date information
about remuneration in other companies. The Remuneration Committee
met once during the year.
Additional information supplied by the remuneration committee
has been disseminated within the Directors' Remuneration Report on
page 16.
Nomination Committee
The Nomination Committee, which comprises Douglas Wright and
Mike Moles, will identify and nominate, for the approval of the
Board, candidates to fill Board vacancies as and when they arise.
The Nomination Committee will meet as required.
Share dealing policy
The Company has adopted a share dealing policy which sets out
the requirements and procedures for dealings in any of its listed
securities. The share dealing policy applies widely to all
Directors of the Company and its subsidiaries, certain employees'
and person closely associated with them.
The policy complies with the Market Abuse Regulations, which
came into effect on 10 July 2016.
Dividend policy
The Company has never declared or paid any dividends on the
Ordinary Shares. The Company currently intends to pay dividends on
future earnings, if any, when it is commercially appropriate to do
so. Any decision to declare and pay dividends will be made at the
discretion of the Board and will depend on, among other things, the
Company's results of operations, financial condition and solvency
and distributable reserves tests imposed by corporate law and such
other factors that the Board may consider relevant. The Company's
current intention is to retain any earnings for use in its business
operations and the Company does not anticipate declaring any
dividends in the foreseeable future.
Anti-bribery and corruption policy
The Company is adopting an Anti-Corruption and Bribery Policy
which applies to the Directors and all employees of the Company.
The Board believes that the Group, through its internal controls,
has appropriate procedures in place to reduce the risk of bribery
and that all employees, agents, consulta nts and associated persons
are made fully aware of the Group's policies and procedures with
respect to ethical behaviour, business conduct and
transparency.
Health and safety
The safety of the Group's employees and contractors is critical
to its operations.
Kavango aims to prevent all incidents and accidents at its
operations and in a reasonably practicable manner and strives to
minimise hazards inherent in the working environment.
The Company is committed to providing a working environment that
is conducive to good health and safety; managing risks in the
workplace and surveillance of workplaces and employees; complying
with applicable legal requirements; ensuring that appropriate
resources, training and personal protective equipment are provided
to improve occupational health and safety; ensuring that employees
and contractors have the relevant skills to perform work-related
tasks in a safe manner and that they are aware of their individual
health and safety obligations and rights.
Environmental policy
Kavango plans to undertake its exploration activities in a
manner that strives to minimize or eliminate negative impacts and
maximize positive impacts of an environmental or socio-economic
nature. The Company is committed to responsible stewardship of
natural resources and the ecological environment.
The Company aims to continually improve its environmental
performance and the prevention of pollution, reduce or control the
creation, emission or discharge of any type of pollutant or waste
and to reduce adverse environmental impacts; the integration of
environmental management into management practices throughout the
company; rehabilitate disturbed land as much as possible and
protect environmental biodiversity; protect cultural heritage
resources; comply with applicable legal requirements; and train and
educate employees in environmental responsibilities.
Social policy
Kavango aims to minimise potential negative social impacts while
promoting opportunities and benefits for host communities.
The Company is committed to continually improving community
development and community investment programmes through monitoring,
measuring and managing our social and economic impacts; placing
local people at the centre of development by helping to build their
capacity to control their own development. The Company is adopting
a Social Media Policy to minimise the risks to the Group's business
through use of social media.
Communicate how the Company is governed and is performing by
maintaining a dialogue with shareholders and other relevant
stakeholders
The Company communicates with shareholders through the Annual
Report and Accounts, full-year and half-year results announcements,
the Annual General Meeting (AGM) and one-to-one meetings with large
existing or potential new shareholders. The Company regularly posts
LSE announcements covering operational and corporate matters, such
as drilling results and significant changes in ownership positions
across historic projects in which it still retains an investment. A
range of corporate information (including all Company announcements
and a corporate presentation) is also available to shareholders,
investors and the public on the Company's corporate website,
www.kavangoresources.com and also on its Twitter feed @KAV. The
Board receives regular updates on the views of shareholders through
briefings and reports from our investor relations advisors and from
the CEO, CFO and Company Brokers who interact directly with
shareholders. In addition , analyst notes and reports are reviewed
for a wider understanding of investor views. The Company also
communicates with larger mining companies and with institutional
investors whenever an opportunity presents itself.
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF KAVANGO RESOURCES
PLC
Opinion
We have audited the financial statements of Kavango Resources
Plc (the 'parent company') and its subsidiaries (the 'group') for
the year ended 31 December 2019 which comprise the Consolidated
Statement of Comprehensive Income, the Consolidated and Company
Statements of Financial Position, the Consolidated and Company
Statements of Changes in Equity, the Consolidated and Company
Statements of Cash Flows and notes to the financial statements,
including a summary of significant accounting policies. The
financial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union and, as regards
the parent company financial statements, as applied in accordance
with the provisions of the Companies Act 2006.
In our opinion:
-- the financial statements give a true and fair view of the
state of the group's and of the parent company's affairs as at 31
December 2019 and of the group's and parent company's loss for the
year then ended;
-- the group financial statements have been properly prepared in
accordance with IFRSs as adopted by the EU;
-- the parent company financial statements have been properly
prepared in accordance with IFRSs as adopted by the EU and as
applied in accordance with the provisions of the Companies Act
2006; and
-- the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006 and, as regards the
group financial statements, Article 4 of the IAS Regulation.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We are independent of the group
and parent company in accordance with the ethical requirements that
are relevant to our audit of the financial statements in the UK,
including the FRC's Ethical Standard as applied to listed public
interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Material uncertainty related to going concern
We draw attention to Note 2 to the financial statements which
indicates that the group will require additional funding within the
12 months from the date at which the financial statements are
authorised for issue in order to finance planned exploration
expenditure including committed spend requirements on exploration
licenses. The ability of the group to develop its projects is
therefore dependent on successfully raising funds on the open
market. The total comprehensive loss for the group during 2019 was
$1,573k. The group will require further funding within a period of
12 months from the date of approval of the 2019 financial
statements in order to avoid a cash deficit, which is not yet
committed. In addition, the potential impact of COVID-19, whilst
not yet fully understood, will likely have an impact on the
operations of the business and the ability to raise additional
equity funds.
As stated in Note 2 the events or conditions along with other
matters set forth in that Note and in the Annual Report in relation
to COVID-19, indicate that a material uncertainty exists that may
cast significant doubt on the ability of the group and parent
company to continue as a going concern.
Our opinion is not modified in respect of this matter.
Our application of materiality
Group materiality Group materiality Basis for materiality
2019 2018
$74,000 $60,000 2% of gross assets
================== ======================
Our calculated level of materiality has increased from the
previous year. This is predominantly due to the increase in asset
balances as a result of fundraising during the year and engaging in
further exploration activity. We do not consider the inherent risks
to have increased and therefore consider materiality based on 2% of
gross assets remains appropriate.
We consider gross assets to be the most significant determinant
of the group's financial position and performance used by
shareholders, with the key financial statement balances being
intangible exploration and evaluation assets and cash and cash
equivalents. The going concern of the group is dependent on its
ability to fund operations going forward, as well as on the
valuation of its assets, which represent the underlying value of
the group.
Whilst materiality for the financial statements as a whole was
set at $74,000, component materiality was set between
$70,000-$71,000 with performance materiality set at 70%. We applied
the concept of materiality both in planning and performing our
audit, and in evaluating the effect of misstatements.
We agreed with the audit committee that we would report to the
committee all audit differences identified during the course of our
audit in excess of $3,700 (2018: $3,000). There were certain
misstatements identified during the course of our audit that were
individually considered to be material and adjusted for by
management.
An overview of the scope of our audit
In designing our audit, we determined materiality and assessed
the risk of material misstatement in the financial statements. In
particular, we looked at areas requiring the directors to make
subjective judgements, for example in respect of significant
accounting estimates including the carrying value of exploration,
evaluation and development expenditure (identified as a key audit
matter), the carrying value and recoverability of investments in
subsidiaries at parent company level (identified as a key audit
matter), the valuation of share-based payments, and the
consideration of future events that are inherently uncertain. We
also addressed the risk of management override of internal
controls, including evaluating whether there was evidence of bias
by the directors that represented a risk of material misstatement
due to fraud.
An audit was performed on the financial information of the
group's significant operating components which, for the year ended
31 December 2019, were located in the United Kingdom and Botswana,
with the group's accounting functions being based in the UK and
Botswana.
The Botswana component was audited by PKF network firm operating
under our instruction. This audit was performed both for
consolidation purposes as well as local statutory purposes. There
was regular interaction with the component auditor during all
stages of the audit, and we were responsible for the scope and
direction of the audit process.
We obtained and reviewed remotely the key audit working papers
prepared by the auditors of the Botswanan component, which related
to the work performed on the significant risks identified at group
level. The component auditor also provided their findings to us
which were reviewed and challenged accordingly.
The Mauritian component was not identified as being a
significant component of the group, being that it is a holding
company for the Botswanan component in which the exploration assets
are held. Our work was limited to obtaining a certificate of good
standing and performing analytical procedures at group level.
The approach detailed above gave us sufficient appropriate
evidence for our opinion on the group financial statements.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect
on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters. In addition to
the matter described in the Material uncertainty related to going
concern section we have determined the matters described below to
be the key audit matters to be communicated in our report.
Key Audit Matter How the scope of our audit responded
to the key audit matter
Carrying value and appropriate
capitalisation of Intangible
assets
GROUP
=================================================
The group has reported intangible Our work in this area included:
assets of $2,445k in its Consolidated -- Confirmation that the group
Statement of Financial Position has good title to the applicable
as at 31 December 2019 which exploration licenses;
comprise exploration and evaluation -- A review of component auditor's
assets in Botswana. work in respect of capitalised
There is a risk that these assets costs including the considerations
have been incorrectly capitalised made in respect of IFRS 6's recognition
in accordance with IFRS 6 and criteria; and
that their carrying value should -- Critical review of management's
be impaired. impairment paper and challenge
As shown in Note 9 to the financial of all key assumptions therein,
statements, the directors have as well as considerations of
concluded that an impairment the impairment indicators within
charge of $1m is appropriate. IFRS 6;
-- Obtaining an understanding
of the rationale for the impairment
charge calculated by management
through discussion and review
of available support, and ensuring
it has been correctly accounted
for and disclosed;
-- Obtaining the new Farm-In
Agreement with LVR GeoExplorers
(Pty) Ltd and understanding the
key terms, and holding discussions
with management surrounding status
of the earn-in and future plans;
and
-- Ensuring disclosures made
in the financial statements in
relation to critical accounting
judgements are adequate and in
line with our understanding of
the group and its activities.
=================================================
Carrying value of investments
in subsidiaries
COMPANY
Investments in subsidiaries, Our work in this area included:
as shown in Note 10, is the -- Confirming ownership of investments;
only significant asset in the -- We considered the recoverability
parent company's Statement of of investments by reference to
Financial Position. Given the underlying net asset values;
continuing losses there is a -- We reviewed the impairment
risk that the investment in assessment prepared by management
the subsidiary which holds the in respect of intangible assets,
intangible assets may not be and provided appropriate challenge
fully recoverable. to inputs and estimates included
therein;
-- Review of the impairment
charge calculated by management
in respect of the investment
balance in conjunction with work
done in respect of intangible
assets (see above), and ensuring
this has been correctly accounted
for and disclosed; and
-- Ensuring disclosures made
in the financial statements in
relation to critical accounting
judgements are adequate.
===========================================
Other information
The other information comprises the information included in the
annual report, other than the financial statements and our
auditor's report thereon. The directors are responsible for the
other information. Our opinion on the group and parent company
financial statements does not cover the other information and,
except to the extent otherwise explicitly stated in our report, we
do not express any form of assurance conclusion thereon. In
connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a
material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act
2006
In our opinion the part of the Directors' Remuneration Report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of
the audit:
-- the information given in the strategic report and the
directors' report for the financial year for which the financial
statements are prepared is consistent with the financial
statements; and
-- the strategic report and the directors' report have been
prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and
the parent company and their environment obtained in the course of
the audit, we have not identified material misstatements in the
strategic report or the directors' report.
We have nothing to report in respect of the following matters in
relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
-- adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received
from branches not visited by us; or
-- the parent company financial statements and the part of the
Directors' Remuneration Report to be audited are not in agreement
with the accounting records and returns; or
-- certain disclosures of directors' remuneration specified by law are not made; or
-- we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the Statement of Directors'
responsibilities, the directors are responsible for the preparation
of the group and parent company financial statements and for being
satisfied that they give a true and fair view, and for such
internal control as the directors determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the group and parent company financial statements,
the directors are responsible for assessing the group's and the
parent company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors
either intend to liquidate the group or the parent company or to
cease operations, or have no realistic alternative but to do
so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council's website at: www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor's report.
Other matters which we are required to address
We were appointed by the Board of Directors on 20 March 2018 to
audit the financial statements for the period ending 31 December
2017 and subsequent financial periods. Our total uninterrupted
period of engagement is 3 years, covering the periods ending 31
December 2017 to 31 December 2019.
The non-audit services prohibited by the FRC's Ethical Standard
were not provided to the group or parent company and we remain
independent of the group and the parent company in conducting our
audit.
We identified areas of laws and regulations that could
reasonably be expected to have a material effect on the financial
statements from our sector experience and through discussions with
the directors. We considered the extent of compliance with those
laws and regulations as part of our procedures on the related group
and parent company financial statement items. We communicated
identified laws and regulations throughout our audit team and
remained alert to any indications of non-compliance throughout the
audit. As with any audit, there remained a risk of non-detection of
irregularities, as these may have involved collusion, forgery,
intentional omissions, misrepresentations, or the override of
internal controls.
Our audit opinion is consistent with the additional report to
the audit committee.
Use of our report
This report is made solely to the company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone, other than the company and the company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Zahir Khaki (Senior Statutory Auditor) 15 Westferry Circus
For and on behalf of PKF Littlejohn LLP
Canary Wharf
Statutory Auditor
London E14 4HD
22 May 2020
Consolidated Statement of Total Comprehensive Income
FOR THE YEARED 31 DECEMBER 2019
2019 2018
Notes US$ US$
Continuing operations
Administrative expenses 5 (472,049) (534,242)
Impairment 9 (1,000,000)
Loss before taxation (1,472,049) (534,242)
Taxation 7 - -
Loss for the year attributable
to owners of the parent (1,472,049) (534,242)
================= ==========================
Other comprehensive income:
Items that may be subsequently
reclassified to profit or
loss
Currency translation difference (101,430) (221,065)
Total comprehensive loss for
the year attributable to owners
of the parent (1,573,479) (755,307)
================= ==========================
Earnings per share from continuing
operations attributable to
owners of the parent
Basic and diluted (US cents) 8 (0.94) (0.54)
The accompanying notes form part of these financial
statements.
Consolidated Statement of Financial Position
AS AT YEARED 31 DECEMBER 2019
31 Dec 31 Dec
2019 2018
Notes US$ US$
Non-current assets
Property, plant and equipment 9 A 58,172 22,751
Intangible assets 9 2,445,317 2,287,993
Total non-current assets 2,503,489 2,310,744
Current assets
Trade and other receivables 11 225,091 114,825
Cash and cash equivalents 12 124,294 954,372
--------------------- ----------------------
Total current assets 349,385 1,069,197
Total assets 2,852,874 3,379,941
--------------------- ----------------------
Current liabilities
Trade and other payables 13 139,144 70,782
Total liabilities 139,144 70,782
--------------------- ----------------------
Net current assets/(liabilities) 210,241 998,415
--------------------- ----------------------
Net assets 2,713,730 3,309,159
===================== ======================
Equity attributable to owners
of the parent
Called up share capital 14 206,562 171,025
Share premium 14 5,867,875 4,981,362
Share option reserve 15 245,956 189,956
Foreign Currency Exchange Reserve (132,973) (31,543)
Reorganisation reserve (1,590,777) (1,590,777)
Retained earnings (1,882,913) (410,864)
Total equity attributable to
owners of the parent 2,713,730 3,309,159
===================== ======================
This report was approved by the board and authorised for issue
on 22 May 2020 and signed on its behalf by:
........................
Michael Foster
Director
The accompanying notes form part of these financial
statements.
Company Statement of Financial Position
FOR THE YEARED 31 DECEMBER 2019
Company registration number: 10796849 (England and Wales)
31 Dec 31 Dec
2019 2018
Notes US$ US$
Non-current assets
Investment in subsidiaries 10 4,253,547 3,991,473
Total non-current assets 4,253,547 3,991,473
Current assets
Trade and other receivables 11 196,865 105,333
Cash and cash equivalents 12 96,644 937,124
------------- --------------------
Total current assets 293,509 1,042,457
Total assets 4,547,056 5,033,930
------------- --------------------
Trade and other payables 13 101,121 62,967
Total liabilities 101,121 62,967
------------- --------------------
Net current assets 192,388 979,490
------------- --------------------
Net assets 4,445,935 4,970,963
============= ====================
Equity
Called up share capital 14 206,562 171,025
Share premium 14 5,867,875 4,981,362
Share option reserve 15 245,956 189,956
Foreign exchange reserve 150,660 187,789
Retained earnings (2,025,118) (559,169)
------------- --------------------
Total equity 4,445,935 4,970,963
============= ====================
Kavango Resources Plc has used the exemption grated under s408
of the Companies Act 2006 that allows for the non-disclosure of the
Income Statement of the parent company. The after-tax loss
attributable to Kavango Resources Plc for the period ended 31
December 2019 was US$1,503,078 (2018: US$337,839).
This report was approved by the board and authorised for issue
on 22 May 2020 and signed on its behalf by:
........................
Michael Foster
Director
The accompanying notes form part of these financial
statements.
Consolidated Statement of Changes in Equity
FOR THE YEARED 31 DECEMBER 2019
Foreign
Exchange Share
Reorganisation Reserve Retained Options
Share Capital Share Premium Reserve (restated) Earnings Total
US$ US$ US$ US$ US$ US$ US$
As at 1 January
2018 100,063 3,760,890 (1,590,777) 189,522 123,378 - 2,583,076
-------------- -------------- --------------- ------------ ---------- ---------- ----------
Loss for the year - - - - (534,242) - (534,242)
Other
Comprehensive
Income(loss)
for the year -
foreign currency
exchange
difference - - - (221,065) - - (221,065)
-------------- -------------- --------------- ------------ ---------- ---------- ----------
Total
comprehensive
income
for the year (221,065) (534,242) - (755,307)
Shares issued net
of costs 70,962 1,220,472 - - - - 1,291,434
Share options
granted 189,956 189,956
-------------- -------------- --------------- ------------ ---------- ---------- ----------
Total transactions
with owners
recognised
directly in
equity 70,962 1,220,472 - - - 189,956 1,481,390
-------------- -------------- --------------- ------------ ---------- ---------- ----------
As at 31 December
2018 171,025 4,981,362 (1,590,777) (31,543) (410,864) 189,956 3,309,159
============== ============== =============== ============ ========== ========== ==========
Loss for the year - - - - (1,472,049) - (1,472,049)
Other Comprehensive
Income(loss)
for the year - foreign
currency
exchange difference - - - (101,430) - - (101,430)
-------- ---------- ------------ ---------- ------------ -------- ------------
Total comprehensive income
for the year (101,430) (1,472,049) - (1,573,479)
Shares issued net of costs
of $72,915 35,537 886,513 - - - - 922,050
Share options granted 56,000 56,000
-------- ---------- ------------ ---------- ------------ -------- ------------
Total transactions with owners
recognised directly in equity 35,537 886,513 - - - 56,000 978,050
-------- ---------- ------------ ---------- ------------ -------- ------------
As at 31 December 2019 206,562 5,867,875 (1,590,777) (132,973) (1,882,913) 245,956 2,713,730
======== ========== ============ ========== ============ ======== ============
The accompanying notes form part of these financial
statements.
Amount subscribed for share capital
Share Capital: at nominal value
Amount subscribed for share capital in excess
Share Premium: of nominal value
Reserve created on issue of shares on acquisition
Reorganisation Reserve: of subsidiaries
Foreign Exchange differences: Cumulative translation differences
Retained Earnings: Cumulative net gains and losses recognised in the consolidated
statement of comprehensive income
Share option reserve: Amount reserved for share capital issued on exercise of share
options
Company Statement of Changes In Equity
FOR THE YEARED 31 DECEMBER 2019
Share Capital Share Premium Foreign Share Options Retained Total
Exchange Earnings
Reserve
(restated)
US$ US$ US$ US$ US$ US$
Balance at 1
January 2018 100,063 3,760,890 - - (33,541) 3,827,412
Loss for the
year - - - - (525,628) (525,628)
Foreign
currency
exchange
difference 187,789 187,789
Total
comprehensive
loss for
the year - - 187,789 - (525,628) (337,839)
--------------------- --------------------- ----------- ------------------- ----------- ----------
Issue of
shares net of
costs 70,962 1,220,472 - - - 1,291,434
Share options
granted - - - 189,956 - 189,956
Total
transactions
with owners
recognised
directly in
equity 70,962 1,220,472 - 189,956 - 1,481,390
Balance at 31
December 2018 171,025 4,981,362 187,789 189,956 (559,169) 4,970,963
--------------------- --------------------- ----------- ------------------- ----------- ----------
Loss for the year - - - - (1,465,949) (1,465,949)
Foreign currency exchange difference - - (37,129) - - (37,129)
Total comprehensive loss for
the year - - (37,129) - (1,465,949) (1,503,078)
-------- ---------- --------- -------- ------------ ------------
Issue of shares net of costs
of $72,915 35,537 886,513 - - - 922,050
Share options granted - - - 56,000 - 56,000
Total transactions with owners
recognised directly in equity 35,537 886,513 - 56,000 - 978,050
Balance at 31 December 2019 206,562 5,867,875 150,660 245,956 (2,025,118) 4,445,935
-------- ---------- --------- -------- ------------ ------------
The accompanying notes form part of these financial
statements.
Amount subscribed for share capital
Share Capital: at nominal value
Amount subscribed for share capital in
Share Premium: excess of nominal value
Cumulative translation
Foreign Exchange differences: differences
Retained Earnings: Cumulative net gains and losses recognised
in the consolidated statement of comprehensive
income
Share option reserve: Amount reserved for share capital issued
on exercise of share options
Consolidated Statement of Cash Flow
FOR THE YEARED 31 DECEMBER 2019
2019 2018
Notes US$ US$
Cash flows from operating activities
(Loss) Profit before taxation (1,472,049) (534,242)
Share option expense 56,000 189,965
Impairment
1,000,000 -
Foreign exchange differences (80,774) 6,543
Net cash flows generated from operating
activities before changes in working
capital (496,823) (337,734)
--------------- -------------------
(Increase) decrease in trade and other
receivables (110,266) 27,431
Increase(decrease) in current liabilities 68,362 (75,459)
--------------- -------------------
Net cash outflow from operating activities (538,727) (385,762)
--------------- -------------------
Investing activities
Purchase of intangible assets, net 9 (1,157,325) (272,581)
Purchase of fixed assets 9A (56,021) (21,270)
Net cash used in investing activities (1,213,346) (293,851)
--------------- -------------------
Financing activities
Loans - (43,921)
Proceeds from issue of shares net
of issue costs 14 922,050 1,291,434
--------------- -------------------
Net cash generated from financing
activities 922,050 1,247,513
--------------- -------------------
Net (decrease)/increase in cash and
cash equivalents (830,023) 567,900
Cash and cash equivalents at beginning
of year 954,317 386,417
Forex translation difference - -
-------------------
Cash and cash equivalents at end of
year 12 124,294 954,317
=============== ===================
The accompanying notes form part of these financial
statements.
Company Statement of Cash Flow
FOR THE YEARED 31 DECEMBER 2019
2019 2018
Notes US$ US$
Cash flows from operating
activities
Loss before taxation (1,465,949) (525,628)
Share option expense 56,000 189,956
Impairment 1,000,000 -
Foreign exchange differences (37,129) 19,754
Net cash flows generated from
operating activities before
changes in working capital (447,078) (315,918)
------------ ----------
(Increase) decrease in trade
and other receivables (91,522) 198,206
Increase(decrease) in trade
and other payables 38,154 (70,635)
------------ ----------
Net cash outflow from operating
activities (500,459) (188,347)
------------ ----------
Investing activities
Investment in subsidiaries 10 (1,262,074) (491,473)
------------ ----------
Net cash used in investing
activities (1,262,074) (491,473)
------------ ----------
Financing activities
Loans - (23,143)
Proceeds from issue of shares
net of issue costs 14 922,050 1,291,434
------------ ----------
Net cash generated from financing
activities 922,050 1,268,291
------------ ----------
Net (decrease)/increase in
cash and cash equivalents (840,480) 588,471
Cash and cash equivalents
at beginning of year 937,124 348,653
Forex translation difference - -
----------
Cash and cash equivalents
at end of year 12 96,644 937,124
============ ==========
The accompanying notes form part of these financial
statements.
Notes to the Financial Statements
FOR THE YEARED 31 DECEMBER 2019
1. Corporate information
Kavango Resources PLC ("the Company") was incorporated on 21 May
2017. It is domiciled in the United Kingdom at Salisbury House,
London Wall, Suite 425, London UK EC2M 5PS.
The Company is a holding company of Navassa Resources Ltd
("Navassa") which has a wholly-owned subsidiary Kavango Minerals
(Pty) Ltd. Navassa is registered and domiciled in Mauritius while
Kavango Minerals (Pty) Ltd is registered and domiciled in
Botswana.
The principal activity of the Company and its subsidiaries (the
"Group") is the exploration for base metals in Botswana.
2. Significant Accounting policies
Statement of compliance
The Group and Company Financial Statements have been prepared in
accordance with International Financial Reporting Standards
('IFRS') and IFRS Interpretations Committee ('IFRS IC') as adopted
by the European Union, the Companies Act 2006 that applies to
companies reporting under IFRS and IFRS IC interpretations. The
Group and Company Financial Statements have also been prepared
under the historical cost convention.
The financial information is presented in US Dollars ("US$"),
which is the Group's presentational currency rounded to the nearest
dollar.
The preparation of Financial Statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of
applying the Accounting Policies. The areas involving a higher
degree of judgement or complexity, or areas where assumptions and
estimates are significant to the Group and Company Financial
Statements are disclosed in Note 3.
Changes in accounting policies and disclosures
i) New and amended standards adopted by the Group and Company
The following new standards, amendments and interpretations are
effective for the first time in these financial statements.
However, none have a material impact on the financial statements
and no adjustments have been required as a result of their
adoption:
-- IFRS 16 Leases;
-- IFRIC 23 Uncertainty over Income Tax Treatments; and
-- 2015-2017 Cycle Annual improvements to IFRS Standards.
ii) New standards, amendments and interpretations in issue but
not yet effective or not yet endorsed and not early adopted
Standards, amendments and interpretations that are not yet
effective and have not been early adopted are as follows:
Standard Impact on initial application Effective date
-------------------- -------------------------------------- ---------------
IFRS 3 (Amendments) Business Combinations 01 January
2020*
-------------------------------------- ---------------
IAS 1 and IAS Definition of Material 01 January
8 (Amendments) 2020
-------------------------------------- ---------------
IAS 1 (Amendments) Presentation of Financial Statements: 01 January
Classification of Liabilities 2022*
as Current or Non-current
-------------------------------------- ---------------
*Subject to EU endorsement
Of the other IFRSs and IFRICs, none are expected to have a
material effect on the Group or Company Financial Statements.
2. Significant Accounting policies (continued)
Basis of consolidation
The Group Financial Statements consolidate the Financial
Statements of the Company and its subsidiaries made up to 31
December. Subsidiaries are entities over which the Group has
control. Control is achieved when the Group is exposed, or has
rights, to variable returns from its involvement with the investee
and has the ability to affect those returns through its power over
the investee.
Generally, there is a presumption that a majority of voting
rights result in control. To support this presumption and when the
Group has less than a majority of the voting or similar rights of
an investee, the Group considers all relevant facts and
circumstances in assessing whether it has power over an investee,
including:
-- The contractual arrangement with the other vote holders of the investee;
-- Rights arising from other contractual arrangements; and
-- The Group's voting rights and potential voting rights
The Group re-assesses whether or not it controls an investee if
facts and circumstances indicate that there are changes to one or
more of the three elements of control. Subsidiaries are fully
consolidated from the date on which control is transferred to the
Group. They are deconsolidated from the date that control ceases.
Assets, liabilities, income and expenses of a subsidiary acquired
or disposed of during the period are included in the Group
Financial Statements from the date the Group gains control until
the date the Group ceases to control the subsidiary.
Investments in subsidiaries are accounted for at cost less
impairment within the Company Financial Statements. Where
necessary, adjustments are made to the Financial Statements of
subsidiaries to bring the accounting policies used in line with
those used by other members of the Group. All significant
intercompany transactions and balances between Group enterprises
are eliminated on consolidation.
2. Significant Accounting policies (continued)
Going concern
The Group and Company Financial Statements have been prepared on
a going concern basis. Although the Group's assets are not
generating revenues and an operating loss has been reported, the
Directors are of the view that, whilst the Group has funds to meet
its immediate working capital needs, the Group will need to raise
funds within 12 months to meets its planned exploration expenses
over the next 12 months from the date these Financial Statements
are approved.
In the current business climate, the Directors acknowledge the
COVID-19 pandemic has necessitated organisational changes to
underpin the Group's resilience to COVID-19, with the key focus
being protecting all personnel, minimising the impact on critical
work streams and ensuring business continuity. COVID-19 may impact
the Group in varying ways leading to potential impairments of
assets held which could have a direct bearing on the Group's
ability to generate sufficient cash flows for working capital
purposes. The Directors are closely monitoring commercial and
technical aspects of the Group's operations to mitigate the impact
from the COVID-19 pandemic. The inability to gauge the length of
such disruption further adds to this uncertainty
The Group has financial resources which the Directors consider
are insufficient to fund the Group's committed expenditures and
thus acknowledge that additional funding will be required. The
amount of required Group funding will be raised either by way of an
issue of equity or through the issuance of debt. The Directors are
reasonably confident that funds will be forthcoming. Should
additional funding not be forthcoming the Directors have agreed, if
circumstances require, to defer payment of their fees until such
time as adequate funding is received and if necessary scale back
exploration activity.
The Directors have a reasonable expectation that the Group and
Company will be able to raise the required funds as it has done in
the past and thus anticipate that adequate resources will be
available to continue in operational existence for the foreseeable
future. We note the uncertainties arising as a result of COVID-19
in respect of its impact on the global economy however we also draw
attention to the fact that we have successfully raised funds post
year end as disclosed in Note 19 despite the current environment,
as have a number of similar sized exploration groups. Thus, they
continue to adopt the going concern basis of accounting in
preparing the Group and Company Financial Statements.
These financial statements do not include adjustments relating
to the recoverability and classification of recorded asset amounts
nor to the amounts and classification of liabilities that might be
necessary should the group not continue as a going concern. The
auditors have made reference to going concern by way of a material
uncertainty in their audit opinion.
2. Significant Accounting policies (continued)
Intangible Assets
Exploration and evaluation costs
The Group capitalises expenditure in relation to exploration and
evaluation of mineral assets when the legal rights are obtained.
Expenditure included in the initial measurement of exploration and
evaluation assets and which are classified as intangible assets
relate to the acquisition of rights to explore, topographical,
geological, geochemical and geophysical studies, exploratory
drilling, trenching, sampling and activities to evaluate the
technical feasibility and commercial viability of extracting a
mineral resource.
Exploration and evaluation assets are assessed for impairment
when facts and circumstances suggest that the carrying amount of an
asset may exceed its recoverable amount. The assessment is carried
out by allocating exploration and evaluation assets to cash
generating units, which are based on specific projects or
geographical areas. Whenever the exploration for and evaluation of
mineral resources does not lead to the discovery of commercially
viable quantities of mineral resources or the Group has decided to
discontinue such activities of that unit, the associated
expenditures are written off to profit or loss.
Taxation and deferred tax
Income tax expense represents the sum of the current tax and
deferred tax charge for the year.
Deferred tax is recognised on differences between the carrying
amounts of assets and liabilities in the financial information and
the corresponding tax bases, and is accounted for using the balance
sheet liability method.
Deferred tax is calculated at the tax rates that have been
enacted or substantively enacted and are expected to apply in the
period when the liability is settled or the asset realised.
Deferred tax is charged or credited to the statement of
comprehensive income, except when it relates to items charged or
credited directly to equity, in which case the deferred tax is also
dealt with in equity.
Deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences can be utilised.
Judgement is applied in making assumptions about future taxable
income, including nickel prices, production, rehabilitation costs
and expenditure to determine the extent to which the Group
recognises deferred tax assets, as well as the anticipated timing
of the utilisation of the losses.
Foreign currencies
The functional currency for the Company, being the currency of
the primary economic environment in which the Company operates, is
the US$. The individual financial statements of each of the
Company's wholly owned subsidiaries are prepared in the currency of
the primary economic environment in which it operates (its
functional currency).
The financial statements of the subsidiaries have been
translated in to US$ in accordance with IAS 21 The Effects of
Changes in Foreign Exchange Rates. This standard requires that
assets and liabilities be translated using the exchange rate at
period end, and income, expenses and cash flow items are translated
using the rate that approximates the exchange rates at the dates of
the transactions (i.e. the average rate for the period). The
foreign exchange differences on translation of subsidiaries are
recognized in other comprehensive income (loss).
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing on the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at
period-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in profit and
loss.
Other income
Other income represents monies received in respect of an option
agreement. Amounts are recognised when the right to receive the
payment is established.
2. Significant Accounting policies (continued)
Segment Reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker
(CODM). The CODM, who is responsible for allocating resources and
assessing performance of the operating segments, has been
identified as the Board of Directors that makes strategic
decisions.
Segment results include items directly attributable to a segment
as well as those that can be allocated on a reasonable basis.
Investment in subsidiaries
Investments in Group undertakings are stated at cost, which is
the fair value of the consideration paid, less any impairment
provision.
Property, plant and equipment
Property, Plant and equipment is stated at cost less accumulated
depreciation and any accumulated impairment losses. Depreciation is
provided on all property, plant and equipment to write off the cost
less estimated residual value of each asset over its expected
useful economic life on a straight line basis at the following
annual rates:
Geological and Field Equipment including Vehicles
Subsequent costs are included in the asset's carrying amount or
recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item
will flow to the Group and the cost of the item can be measured
reliably. The carrying amount of the replaced part is derecognised.
All other repairs and maintenance are charged to the Statement of
Comprehensive Income during the financial period in which they are
incurred.
The assets' residual values and useful lives are reviewed, and
adjusted if appropriate, at the end of each reporting period.
An asset's carrying amount is written down immediately to its
recoverable amount if the asset's carrying amount is greater than
its estimated recoverable amount.
Depreciation
Depreciation commences once the asset is brought into use. Depreciation
is charged to the Intangible assets on a straight-line basis
over the estimated useful lives of the asset. The estimated
useful lives have been assessed as follows:
-- Plant and equipment 6-7 years
-- Motor vehicles 4 years
-- Computer equipment 4 years
-- Furniture and fittings 10 years
The residual value, if not insignificant, useful life, and depreciation
method of each asset are reviewed at the end of each reporting
period. If the expectations differ from previous estimates,
the change is accounted for as a change in accounting estimate.
2. Significant Accounting policies (continued)
Financial assets
Initial recognition and measurement
Financial assets are classified at initial recognition, and
subsequently measured at, amortised cost, fair value through OCI,
or fair value through profit or loss.
The classification of financial assets at initial recognition
that are debt instruments depends on the financial asset's
contractual cash flow characteristics and the Group's business
model for managing them. The Group initially measures a financial
asset at its fair value plus, in the case of a financial asset not
at fair value through profit or loss, transaction costs.
In order for a financial asset to be classified and measured at
amortised cost or fair value through OCI, it needs to give rise to
cash flows that are 'solely payments of principal and interest
(SPPI)' on the principal amount outstanding. This assessment is
referred to as the SPPI test and is performed at an instrument
level.
The Group's business model for managing financial assets refers
to how it manages its financial assets in order to generate cash
flows. The business model determines whether cash flows will result
from collecting contractual cash flows, selling the financial
assets, or both.
The Group's and Company's financial assets are all held at
amortised cost, being trade and other receivables, and cash and
cash equivalents.
Subsequent measurement
The Group and Company measures financial assets at amortised
cost if both of the following conditions are met:
-- The financial asset is held within a business model with the
objective to hold financial assets in order to collect contractual
cash flows; and
-- The contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
Financial assets at amortised cost are subsequently measured
using the effective interest rate (EIR) method and are subject to
impairment. Interest received is recognised as part of finance
income in the statement of profit or loss and other comprehensive
income. Gains and losses are recognised in profit or loss when the
asset is derecognised, modified or impaired. The Group's financial
assets at amortised cost include trade receivables (not subject to
provisional pricing) and other receivables.
Derecognition
A financial asset (or, where applicable, a part of a financial
asset or part of a group of similar financial assets) is primarily
derecognised when:
-- The rights to receive cash flows from the asset have expired; or
-- The Group and Company has transferred its rights to receive
cash flows from the asset or has assumed an obligation to pay the
received cash flows in full without material delay to a third party
under a 'pass-through' arrangement; and either (a) the Group and
Company has transferred substantially all the risks and rewards of
the asset, or (b) the Group and Company has neither transferred nor
retained substantially all the risks and rewards of the asset, but
has transferred control of the asset.
2. Significant Accounting policies (continued)
Financial assets (continued)
Impairment of financial assets
The Group recognises an allowance for expected credit losses
(ECLs) for all debt instruments not held at fair value through
profit or loss. ECLs are based on the difference between the
contractual cash flows due in accordance with the contract and all
the cash flows that the Group expects to receive, discounted at an
approximation of the original EIR. The expected cash flows will
include cash flows from the sale of collateral held or other credit
enhancements that are integral to the contractual terms.
The Group recognises an allowance for ECLs for all debt
instruments not held at fair value through profit or loss. ECLs are
based on the difference between the contractual cash flows due in
accordance with the contract and all the cash flows that the Group
expects to receive, discounted at an approximation of the original
EIR.
For receivables due in less than 12 months, the Group applies
the simplified approach in calculating ECLs, as permitted by IFRS
9. Therefore, the Group does not track changes in credit risk, but
instead, recognises a loss allowance based on the financial asset's
lifetime ECL at each reporting date.
The Group considers a financial asset in default when
contractual payments are 90 days past due. However, in certain
cases, the Group may also consider a financial asset to be in
default when internal or external information indicates that the
Group is unlikely to receive the outstanding contractual amounts in
full before taking into account any credit enhancements held by the
Group. A financial asset is written off when there is no reasonable
expectation of recovering the contractual cash flows and usually
occurs when past due for more than one year and not subject to
enforcement activity.
At each reporting date, the Group assesses whether financial
assets carried at amortised cost are credit impaired. A financial
asset is credit-impaired when one or more events that have a
detrimental impact on the estimated future cash flows of the
financial asset have occurred.
Financial liabilities
Financial liabilities are classified, at initial recognition, as
financial liabilities at fair value through profit or loss, loans
and borrowings, payables, or as derivatives designated as hedging
instruments in an effective hedge, as appropriate. All financial
liabilities are recognised initially at fair value and, in the case
of payables, net of directly attributable transaction costs. The
Group's financial liabilities include trade and other payables and
are held at amortised cost.
Subsequent measurement
After initial recognition, trade and other payables are
subsequently measured at amortised cost using the EIR method. Gains
and losses are recognised in the statement of profit or loss and
other comprehensive income when the liabilities are derecognised,
as well as through the EIR amortisation process.
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 EIR. The EIR amortisation is included as finance costs
in the statement of profit or loss and other comprehensive
income.
Derecognition
A financial liability is derecognised when the associated
obligation is discharged or cancelled or expires.
When an existing financial liability is replaced by another from
the same lender on substantially different terms, or the terms of
an existing liability are substantially modified, such an exchange
or modification is treated as the derecognition of the original
liability and the recognition of a new liability. The difference in
the respective carrying amounts is recognised in profit or loss and
other comprehensive income.
2. Significant Accounting policies (continued)
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at
call with banks and bank overdrafts. Bank overdrafts are shown
within borrowings in current liabilities.
Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of a company after deducting all of its
liabilities. Equity instruments issued are recorded at the proceeds
received net of direct issue costs.
Share capital represents the amount subscribed for shares at
nominal value.
Retained earnings include all current and prior period results
as disclosed in the statement of comprehensive income, less
dividends paid to the owners of the parent.
Share based payments
The Group operates a number of equity-settled, share-based
schemes, under which the Group receives services from employees or
third party suppliers as consideration for equity instruments
(options and warrants) of the Group. The fair value of the third
party suppliers' services received in exchange for the grant of the
options is recognised as an expense in the Statement of
Comprehensive Income or charged to equity depending on the nature
of the service provided. The value of the employee services
received is expensed in the Statement of Comprehensive Income and
its value is determined by reference to the fair value of the
options granted:
-- including any market performance conditions;
-- excluding the impact of any service and non-market
performance vesting conditions (for example, profitability or sales
growth targets, or remaining an employee of the entity over a
specified time period); and
-- including the impact of any non-vesting conditions (for
example, the requirement for employees to save).
The fair value of the share options and warrants are determined
using the Black Scholes valuation model.
Non-market vesting conditions are included in assumptions about
the number of options that are expected to vest. The total expense
or charge is recognised over the vesting period, which is the
period over which all of the specified vesting conditions are to be
satisfied. At the end of each reporting period, the entity revises
its estimates of the number of options that are expected to vest
based on the non-market vesting conditions. It recognises the
impact of the revision to original estimates, if any, in the
Statement of Comprehensive Income or equity as appropriate, with a
corresponding adjustment to a separate reserve in equity.
When the options are exercised, the Group issues new shares. The
proceeds received, net of any directly attributable transaction
costs, are credited to share capital (nominal value) and share
premium when the options are exercised.
Financial risk management
Financial risk factors
The Group's activities expose it to a variety of financial
risks: market risk (foreign currency risk, price risk and interest
rate risk), credit risk and liquidity risk. The Group's overall
risk management programme focuses on the unpredictability of
financial markets and seeks to minimise potential adverse effects
on the Group's financial performance. None of these risks are
hedged.
Risk management is carried out by the London based management
team under policies approved by the Board of Directors.
2. Significant Accounting policies (continued)
Financial risk management (continued)
Capital risk management
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern, to enable the
Group to continue its exploration and evaluation activities, and to
maintain an optimal capital structure to reduce the cost of
capital. In order to maintain or adjust the capital structure, the
Group may adjust the issue of shares or sell assets to reduce
debts.
At 31 December 2019 the Group had borrowings of nil (2018: nil)
and defines capital based on the total equity of the Group. The
Group monitors its level of cash resources available against future
planned exploration and evaluation activities and may issue new
shares in order to raise further funds from time to time.
Subsequent to year end the Company issued GBP 250,487 of
Convertible Loan Notes which are repayable on 28 February 2021 but
convertible at the election of the Company if the Company has filed
a prospectus on or before the repayment date (Note 19).
3. Critical accounting estimates and judgements in applying accounting policies
In the application of accounting policies, the directors are
required to make judgements, estimates and assumptions which affect
reported income, expenses, assets, liabilities and disclosure of
contingent assets and liabilities. The estimates and associated
assumptions are based on historical experience, expectations of
future events and other factors that are believed to be reasonable
under the circumstances. Actual results in the future could differ
from such estimates. The estimates and underlying assumptions are
reviewed on an on-going basis. Revisions to accounting estimates
are recognised in the period.
a) Valuation of exploration, evaluation and development expenditure
Exploration and evaluation costs have a carrying value at 31
December 2019 of $2.45M (2018: $2.29M). Such assets have an
indefinite useful life as the Group has a right to renew
exploration licences and the asset is only amortised once
extraction of the resource commences. The value of the Group's
exploration, evaluation and development expenditure will be
dependent upon the success of the Group in discovering economic and
recoverable mineral resources, especially in the countries of
operation where political, economic, legal, regulatory and social
uncertainties are potential risk factors. The future revenue flows
relating to these assets is uncertain and will also be affected by
competition, relative exchange rates and potential new legislation
and related environmental requirements. The Group's ability to
continue its exploration programs and develop its projects is
dependent on future fundraisings the outcome of which is uncertain.
The ability of the Group to continue operating within Botswana is
dependent on a stable political environment which is uncertain
based on the history of the country. This may also impact the
Group's legal title to assets held which would affect the valuation
of such assets. There have been no changes made to any past
assumptions.
The Directors have undertaken a review to assess whether
circumstances exist which could indicate the existence of
impairment as follows:
-- The Group no longer has title to mineral leases.
-- A decision has been taken by the Board to discontinue
exploration due to the absence of a commercial level of
reserves.
-- Sufficient data exists to indicate that the costs incurred
will not be fully recovered from future development and
participation.
Following their assessment, the Directors concluded that an
impairment charge of US$1.0M is reasonable.
b) Recoverability of loan due from Kavango Minerals (Pty) Ltd
and investment in Navassa Resources Limited
The Directors have concluded that there has been an impairment
to the carrying value of intangible assets relating to projects in
Botswana held by Kavango Minerals (Pty) Ltd (KML). As stated in
Note 10, the Company holds its investment in the Botswana projects
indirectly via its investment in Navassa Resources Limited
(Navassa), the intermediate parent company of KML, while it has
loan accounts with both KML and Navassa. Accordingly, in the
Company financial statements an impairment to the Company's
investment in Navassa Resources Limited has been recognised. No
impairment has been recognised against the receivable balances from
KML and Navassa, which have a carrying value at 31 December 2019 of
GBP1,753,547. The recoverability of these receivables is dependent
on the success of the underlying project in Botswana, which the
Directors have assessed to have a recoverable amount of
GBP2,445,317. Therefore, the recoverable amount of the projects in
Botswana exceeds the carrying value of the receivables. The
Directors consider that the receivables due will be recovered in
full through future realisation of the projects, whether through
joint venture partnership, divestment or successful production,
however, this is not guaranteed and therefore the recoverability of
the receivable in the Company financial statements is considered to
be a critical accounting estimate.
c) Share-based payments
In accounting for the fair value of options and warrants, the
Company makes assumptions regarding share price volatility, risk
free rate, and expected life in order to determine the amount of
associated expense to recognise.
4. Segmental disclosures
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision--maker.
The chief operating decision--maker, who is responsible for
allocating resources and assessing performance of the operating
segment and that make strategic decisions, has been identified as
the Board of Directors. No revenue was generated during the
period.
The Group has two reportable segments, exploration and
corporate, which are the Group's strategic divisions, for each of
the strategic divisions, the Board reviews internal management
reports on a regular basis. The Group's reportable segments
are:
Exploration: the exploration operating segment is presented as
an aggregate of all Botswana licences held. Expenditure on
exploration activities for each licence is used to measure agreed
upon expenditure targets for each licence to ensure the licence
clauses are met.
Corporate: the corporate segment includes the holding and
intermediate holding companies costs in respect of managing the
Group.
Segment result
31-Dec 31-Dec
2019 2018
Continuing operations US$ US$
Exploration Impairment (Botswana) (1,000,000) -
Corporate (London and Mauritius) (472,049) (534,242)
Loss before tax (1,472,049) (534,242)
Income tax - -
------------ ----------
Loss after tax (1,472,049) (534,242)
------------ ----------
No profit and loss items were incurred in respect of the
exploration activities as all relevant costs, in accordance with
IFRS 6 (Exploration for and Evaluation of Mineral Resources), were
capitalised to Intangible Assets for all of the periods
presented.
Segment assets and liabilities
Non-Current Assets Non-Current Liabilities
31-Dec 31-Dec 31-Dec 31-Dec
2019 2018 2019 2018
US$ US$ US$ US$
Intangible assets and equipment
(Botswana) 2,503,489 2,310,744 - -
Corporate (London and Mauritius) - - - -
---------- ---------- ------------ ------------
Total of all segments 2,503,489 2,310,744 - -
---------- ---------- ------------ ------------
Total Assets Total Liabilities
31-Dec 31-Dec 31-Dec 31-Dec
2019 2018 2019 2018
US$ US$ US$ US$
Exploration (Botswana) 2,539,389 2,313,179 33,897 1,119
Corporate (London and Mauritius) 313,485 1,066,761 105,247 69,663
-------------- -------------- --------------- ----------------
Total of all segments 2,852,874 3,379,940 139,144 70,782
-------------- -------------- --------------- ----------------
5. Expenses by nature
Group
--------------------------------
31 December 31 December
2019 2018
US$ US$
------------------------------------------------- --------------- ---------------
Directors' fees 104,433 42,988
Stock exchange related costs (including public
relations) 86,627 42,567
Auditor remuneration 50,533 42,563
Investor Relations 24,174 51,858
Travel & subsistence 18,152 23,016
Professional & consultancy fees including Legal 86,575 36,649
Insurance 9,617 9,029
Corporate advisory and Broker Fee 34,473 69,219
Share Option expense 56,000 189,956
Office and Other expenses 1,465 26,397
------------------------------------------------- --------------- ---------------
Total administrative expenses 472,049 534,242
------------------------------------------------- --------------- ---------------
Services provided by the Company's auditor and its
associates
During the period, the Group (including overseas subsidiaries)
obtained the following services from the Company's auditors and its
associates:
Group
--------------------------
31 December 31 December
2019 2018
USD USD
---------------------------------------------------- ------------ ------------
Fees payable to the Company's auditor and its
associates for the audit of the Company and Group
Financial Statements 50,533 42,563
---------------------------------------------------- ------------ ------------
6. Employees
Employment costs consist of:
Group 2019 2018
US$ US$
Wages and salaries 134,917 59,679
134,917 59,679
-------- -------
The amounts detailed above were paid by Kavango Minerals (Pty)
Ltd and capitalised in intangible assets.
Company
Directors during the year were USD$ 104,433 which is included in
Directors Fees in Note 5 and the Company Secretary was paid USD
45,720 which is included in Professional fees in Note 5.
Further details are provided in Directors Remuneration Report on
Page 16.
The average monthly number of employees during the period
was:
Group 2019 2018
Directors 3 3
Employees 5 5
8 8
----- -----
Company 2019 2018
Directors 3 3
Employees 1 1
4 4
------ ------
7. Taxation
2019 2018
US$ US$
Current taxation - -
Deferred taxation - -
------------ ------------------------
- -
------------ ------------------------
Loss before tax (1,472,049) (534,242)
Tax at the applicable rate of 19% (2018: 19%) (279,689) (101,506)
Effect of different tax rates in other jurisdictions (28,841) 1,706
Expenditure not deductible 209,000 -
Tax losses carried forward 99,510 99,800
------------ ------------------------
Current tax - -
------------ ------------------------
The weighted average applicable tax rate of 20.9% (2018: 19.8%)
is a combination of the 19% standard rate of corporation tax in the
UK, 22% Botswana corporation tax and exempt from Mauritius
corporation tax.
Deferred tax has not been recognised in accordance with IAS 12
due to uncertainty as to when profits will be recognised against
which the losses can be relieved. The Group has approximately
US$2,637,716 (2018: US$2,165,667) of tax losses available to carry
forward against future taxable profits. A deferred tax asset has
not been recognised because of uncertainty over future taxable
profits against which the lowers may be used.
8. Earnings per share
31-Dec 31-Dec
2019 2018
Earnings per Share (basic) - cents (0.94) (0.54)
Loss for the year from continuing operations
(used in calculation of basic EPS from continuing
operations) (US$) (1,472,049) (534,242)
Weighted average number of Ordinary shares
in issue 156,650,425 99,169,996
In accordance with IAS 33, basic and diluted earnings per share
are identical for the Group as the effect of the exercise of share
options would be to decrease the earnings per share. Details of
share options that could potentially dilute earnings per share in
future periods are set out in Note 15.
9. Intangible assets
Group 31-Dec 31-Dec
Evaluation and Exploration Assets - Cost and 2019 2018
net book value
US$ US$
------------- ----------
At period start (1 January) 2,287,293 2,359,425
------------- ----------
Additions, net 1,175,541 272,581
Impairment (1,000,000) -
Translation difference (17,517) (344,013)
At period end (31 December) 2,445,317 2,287,993
------------- ----------
The Group's intangible assets comprise wholly of Evaluation and
Exploration assets in respect of the licences in Botswana.
Exploration projects in Botswana are at an early stage of
development and there are no JORC (Joint Ore Reserves Committee) or
non-JORC compliant resource estimates available to enable value in
use calculations to be prepared.
The Directors have undertaken a review to assess whether
circumstances exist which could indicate the existence of
impairment as follows:
-- The Group no longer has title to mineral leases.
-- A decision has been taken by the Board to discontinue
exploration due to the absence of a commercial level of
reserves.
-- Sufficient data exists to indicate that the costs incurred
will not be fully recovered from future development and
participation.
Following their assessment, the Directors concluded that an
impairment charge of US$1.0M is reasonable. This charge relates to
costs attributable to 4 licenses which in the ordinary course of
business were dropped as the Directors did not consider them
prospective for further investment.
9A. Exploration Field Equipment
Group 31-Dec 31-Dec
Exploration Field Equipment 2019 2018
US$ US$
---------- ---------
Net Book Value at period start (1 January) 22,751 1,610
---------- ---------
Additions 56,021 28,338
Depreciation (20,710) (7,068)
Translation difference 110 (129)
Net Book Value at period end (31 December) 58,172 22,751
---------- ---------
The Group's Exploration Field Equipment includes all fixed
assets in Botswana, including vehicles used in field activities by
geology staff. Depreciation of $20,710 (2018: $7,068) was
capitalised in Intangible assets.
10. Investment in subsidiaries
Company 2019 2018
US$ US$
Shares in Group undertakings at 1 January 3,500,000 3,500,000
Additions - -
Impairment (1,000,000) -
---------------- ----------------
At 31 December 2,500,000 3,500,000
Loans to subsidiaries 1,753,547 491,473
Total 4,253,547 3,991,473
Investments in subsidiaries are recorded at cost, which is the
fair value of the consideration paid.
Loans to subsidiaries are interest free and payable on
demand.
Following their assessment, the Directors concluded that an
impairment charge of US$1.0M is reasonable. This charge corresponds
to the impairment charge relating to costs attributable to 4
licenses which in the ordinary course of business were dropped as
the Directors did not consider them prospective for further
investment.
Principal subsidiaries
Country of Proportion of equity
Name & registered incorporation Nature of shares held by
office address and residence business Company
Navassa Resources
Ltd
Level 3, 35 Cybercity
Ebene
Mauritius Mauritius Holding 100%
Botswana Base Metals 100%
Kavango Minerals (Pty) Exploration via Navassa
Ltd
Plot 1306 Government
Camp Francistown
Botswana
These subsidiary undertakings are included in the consolidation.
The proportion of the voting rights in the subsidiary undertaking
held directly by the Parent Company does not differ from the
proportion of ordinary shares held.
These subsidiary undertakings are included in the consolidation.
The proportion of the voting rights in the subsidiary undertaking
held directly by the Parent Company does not differ from the
proportion of ordinary shares held.
11. Trade and other receivables
Group Company
31-Dec 31-Dec 31-Dec 31-Dec
2019 2018 2019 2018
US$ US$ US$ US$
Other receivables and prepayments 225,091 114,825 196,865 105,333
225,091 114,825 196,865 105,333
-------- -------- -------- --------
Group Trade and other receivables are all due within one year.
The fair value of all receivables is the same as their carrying
values stated above.
12. Cash and cash equivalents
Group Company
31-Dec 31-Dec 31-Dec 31-Dec
2019 2018 2019 2018
US$ US$ US$ US$
Cash and cash equivalents 124,294 954,371 96,644 937,124
124,294 954,371 96,644 937,124
-------- -------- ------- --------
Cash and cash equivalents consist of balances in bank accounts
used for normal operational activities.
13. Trade and other payables
Group Company
31-Dec 31-Dec 31-Dec 31-Dec
2019 2018 2019 2018
US$ US$ US$ US$
Other payables 139,144 70,782 101,121 62,967
139,144 70,782 101,121 62,967
-------- ------- -------
Carrying amounts of trade and other payables approximate their
fair value.
14. Share capital
Number of Share capital Share premium Total
shares
US$ US$ US$
Authorised Nil Nil Nil Nil
Issued and Fully Paid
As at 1 January 2018 74,169,996 100,063 3,760,890 3,860,953
Issue of shares at US$0.0328 60,000,000 78,720 1,889,280 1,968,000
Issue costs - - (83,508) (83,508)
IPO costs - - (345,048) (345,048)
Foreign Exchange (Gain) - (7,758) (240,252) (248,010)
As at 31 December 2018 134,169,996 171,025 4,981,362 5,152,387
Issue of shares at US$0.0371 26,785,713 35,491 958,259 993,750
Issue costs - - (72.915) (72,915)
Foreign Exchange Loss - 46 1,169 1,215
As at 31 December 2019 160,955,709 206,562 5,867,875 6,074,437
On 7 December 2017 the Company acquired Navassa Resources Ltd
(Navassa) for a purchase price of US$3.5 million (GBP2.6 million)
through the issue 44,370,000 new ordinary shares of GBP0.001 and
became the legal parent of the Group.
Although the Company was incorporated in 2017 the Group is
considered to have existed prior to 2017 because the shareholders
who controlled Navassa prior to its acquisition controlled the
Company after the Navassa acquisition. Therefore, for 2016 the
share capital figures presented are those of Navassa and subsequent
to 2016 those of Kavango Resources Plc.
Navassa Resources Limited shares are US$1.
Kavango Resources Plc shares are GBP 0.001.
In 2016 US$50,000 of intangible assets additions were settled
through the issuing of 50,000 shares.
On 21 December 2017 4,169,996 shares were allotted and issued at
a price of GBP 0.06(US$0.08) per Ordinary Share.
On 31 July 2018 60,000,000 shares were allotted and issued at a
price of GBP 0.025(US$ 0.0328) per Ordinary Share.
On 25 February 2019 17,857,142 shares were allotted and issued
at a price of GBP 0.028(US$ 0.0371) per Ordinary Share.
On 5 March 2019 8,928,571 shares were allotted and issued at a
price of GBP 0.028(US$ 0.0371) per Ordinary Share.
15. Share based payments
Warrants
(i) As part of the share placement that completed on 21 December
2017 the Company issued 4,169,996 warrants to each of the
subscribers. Each warrant entitles the warrant holder to subscribe
for one ordinary share at a price of 12p (US$0.16) with a further
warrant attached for each two ordinary shares subscribed for under
those warrants, the new warrants entitling the warrant holder to
subscribe for one further ordinary share for each such new warrant
at a price of 24p (US$0.32). Subscriber warrants have not been fair
valued in accordance with IFRS 2.
(ii) As part of the IPO share placement that was completed on 31
July 2018 the Company issued 60,000,000 warrants to each of the
subscribers and 2,146,000 broker warrants. Each subscriber warrant
entitles the warrant holder to subscribe for one ordinary share at
a price of 12p (US$0.16) with a further warrant attached for each
two ordinary shares subscribed for under those warrants, the new
warrants entitling the warrant holder to subscribe for one further
ordinary share for each such new warrant at a price of 24p
(US$0.31). Each broker warrant entitles the warrant holder to
subscribe for one ordinary share at a price of 2.5p (US$0.033).
The fair value of US$ 14,271 for the 2,146,000 Broker Warrants
granted in 2018 was calculated using the Black-Scholes pricing
model. The fair value of these warrants has not been recognised in
the financial statements as their fair value is not material. The
inputs in the model are as follows:
2.5p warrants
Fair value of 1 warrant (US cents) 0.67
Share price at the date of grant (US$) 0.033
Exercise price (US$) 0.033
Dividend yield 0%
Expected life, years 2.0
Annual risk-free interest rate 0.77%
Volatility 35%
The volatility measured at the standard deviation of
continuously compounded share returns is based on statistical
analysis of daily share prices of comparable companies adjusted for
lack of marketability. Should volatility be higher by 10%, fair
value of the warrants would increase by US$ 18,415.
(iii) 26,785,713 Warrants were issued to subscribers to the
February 25/March 5 2019 placement along with 1,428,571 Broker
Warrants. Each subscriber warrant entitles the warrant holder to
subscribe for one ordinary share at a price of 12p (US$0.16) with a
further warrant attached for each two ordinary shares subscribed
for under those warrants, the new warrants entitling the warrant
holder to subscribe for one further ordinary share for each such
new warrant at a price of 24p (US$0.31). Each broker warrant
entitles the warrant holder to subscribe for one ordinary share at
a price of 2.8p (US$0.037). Subscriber warrants have not been fair
valued in accordance with IFRS 2.
The fair value of US$32,786 for the 1,428,571 Broker Warrants
granted in 2019 was calculated using the Black-Scholes pricing
model. The fair value of these warrants has not been recognised in
the financial statements as their fair value is not material. The
inputs in the model are as follows:
2.8p warrants
Fair value of 1 warrant (US$) 0.03
Share price at the date of grant (US$) 0.037
Exercise price (US$) 0.037
Dividend yield 0%
Expected life, years 1.25
Annual risk-free interest rate 0.77%
Volatility 35%
The volatility measured at the standard deviation of
continuously compounded share returns is based on statistical
analysis of daily share prices of comparable companies adjusted for
lack of marketability. Should volatility be higher by 10%, fair
value of the warrants would increase by US$ 143.
Subscriber and broker warrants outstanding at the year end
are:
Average remaining
contractual Weighted average
Exercise price Grant Date Number outstanding life exercise price
US$ (pence) Years US$
31 January
0.16 (12p) 2018 4,169,996 0.58
0.16 (12p) 31 July 2018 60,000,000 0.58
0.033 (2.5p) 31 July 2018 2,146,000 0.58
0.16 (12p) 31 March 2019 26,785,713 0.58
0.037 (2.8p) 31 March 2019 1,428,571 0.58
------------------- ------------------ -----------------
94,530,280 0.58 0.155
Share Options
In 2018 the Company granted 13,400,000 share options to
directors and management exerciseable at 2.5 pence for a period of
10 years from date of grant. Of these options, 1,400,000 had not
been allocated as at 31 December 2018 and these were allocated in
2019.
The fair value of the 2018 share options was calculated using
the Black-Scholes pricing model. The inputs in the model are as
follows:
2.5p share
options
Fair value of 1 share option (US cents) 1.42
Share price at the date of grant (US$) 0.033
Exercise price (US$) 0.033
Dividend yield 0%
Expected life, years 10.0
Annual risk-free interest rate 0.77%
Volatility 35%
The amount of US$ 189,956 calculated using the Black-Scholes
model was expensed in 2018.
The volatility measured at the standard deviation of
continuously compounded share returns is based on statistical
analysis of daily share prices of comparable companies adjusted for
lack of marketability. Should volatility be higher by 10%, fair
value of the options would increase by US$ 232,250.
In 2019 the Company granted 2,500,000 share options to directors
and management exerciseable at 2.8 pence for a period of 10 years
from date of grant.
The fair value of the 2019 share options was calculated using
the Black-Scholes pricing model. The inputs in the model are as
follows:
2.8p share
options
Fair value of 1 share option (US cents) 2.24
Share price at the date of grant (US$) 0.041
Exercise price (US$) 0.037
Dividend yield 0%
Expected life, years 10.0
Annual risk-free interest rate 0.55%
Volatility 100%
The amount of US$ 56,000 calculated using the Black-Scholes
model has been expensed during the year.
The volatility measured at the standard deviation of
continuously compounded share returns is based on statistical
analysis of daily share prices of comparable companies adjusted for
lack of marketability. Should volatility be higher by 10%, fair
value of the options would increase by US$ 4,066.
Share options outstanding at the year end are:
Average remaining
contractual Weighted average
Exercise price Grant Date Number outstanding life exercise price
GBP (pence) Years GBP (pence)
6 November
2.8p (US$0.037) 2018 13,400,000 8.83
2.5p (US$0.033) 5 May 2019 2,500,000 9.33
------------------- ------------------ -----------------
15,900,000 8.91 2.75p (US$0.036)
As at 31 December 2019, there are an additional 100,000 options
which have been approved but not yet allocated and these are under
the same terms as the 5 May 2019 issue.
16. Financial instruments
The Board of Directors determine, as required, the degree to
which it is appropriate to use financial instruments or other
hedging contracts or techniques to mitigate risk. The main risk
affecting such instruments is foreign currency risk which is
discussed below.
There is no material difference between the book value and fair
value of the Group cash balances, and the short-term receivables
and payables because of their short maturities.
Credit risk
Credit risk is the risk that a customer may default or not meet
its obligations to the Group on a timely basis, leading to
financial losses to the Group. Credit risk arises from cash and
deposits kept with banks, advances paid and other receivables.
Financial assets which potentially subject the holder to
concentrations of credit risk consist principally of cash balances.
These balances are all held at a recognised financial institution.
The maximum exposure to credit risk is US$ 124,924 (2018:
US$954,371). The Company and Group does not hold any collateral as
security.
Market risk
Interest rate risk
Interest rate risk is the risk that future cash flows of a
financial instrument will fluctuate because of changes in interest
rates. The exposure to this risk is not considered, for the time
being, to be material and as such no arrangements have been put in
place to mitigate this risk.
Currency risk
Currency risk is the risk that the financial results of the
Group will be adversely affected by changes in exchange rates to
which the Group is exposed. The Group undertakes certain
transactions denominated in foreign currencies. The majority of the
Company's expenditures are denominated in Pound Sterling, while its
exploration expenses are incurred in Botswana Pula, accordingly,
the result for the year are adversely impacted by appreciation of
the Pound Sterling against the US$ while the Group's assets are
positively impacted by appreciation of the Botswana Pula against
the US$. Currency risk is monitored on a regular basis by
performing a sensitivity analysis of foreign currency positions in
order to verify that potential losses are at an acceptable
level.
16. Financial instruments (continued)
The net carrying amount of monetary assets and liabilities
denominated in Botswana Pula at 31 December 2019 was approximately
BWP 56,000 which is not considered material to the Group. The
carrying amounts of monetary assets carried in GBP were as
follows:
Group and Company
31-Dec 31-Dec
2019 2018
US$ US$
Assets (GBP)
Cash and cash equivalents 95,644 936,123
Trade and other receivables 6,634 -
102,278 936,123
Liabilities (GBP)
Trade and other payables (99,644) (62,239)
--------- ---------
Net exposure 2,634 873,884
--------- ---------
A 10% increase / decrease in the USD:GBP exchange rate would
result in a loss / profit of US$ 263 (2018 - US$ 87,388).
Liquidity risk
Liquidity risk arises from the possibility that the Group and
its subsidiaries might encounter difficulty in settling its debts
or otherwise meeting its obligations related to financial
liabilities. The Company manages this risk by monitoring its
financial resources and carefully planning its expenditure
programmes. The Group is dependent upon equity fundraisings to
manage its liquidity risk.
Capital
The Group considers its capital to comprise its ordinary share
capital and retained deficit. In managing its capital, the
Directors primary objective is to maintain a sufficient funding
base to enable the Group to meet its working capital and strategic
investment needs. In making decisions to adjust its capital
structure to achieve these aims, through new share issues, the
Group considers not only their short-term position but also their
longer term operational and strategic objectives.
17. Commitments
The Group's license expenditure commitments are:
Group
31-Dec 31-Dec
2019 2018
US$ US$
Within 12 months 1,123,000 1,278,000
More than 1 year less than 5 years 1,254,000 -
>5 years - -
----------- ----------
Total 2,377,000 1,278,000
At December 31, 2019 the Group had no contractual commitments
with either geophysics or drilling companies.
18. Related party transactions
Related Party Transactions during 2019 and 2018 include:
-- Rent, utilities and other administrative costs incurred by
Kavango Minerals (Pty) Ltd and paid to 3D Exploration Limited, a
technical services company majority-owned by Hillary Gumbo, a
Director of Kavango Minerals (Pty) Ltd;
-- Directors Fees for all Group companies and fees paid to the Corporate Secretary.
-- Technical and consulting services provided by 3D Exploration
Limited to Kavango Minerals (Pty) Ltd.
The following table summarises related party transactions by
year:
Group Currency 2019 2018
US$ US$
Included in Intangible assets:
Costs billed by 3D Exploration
(Hillary Gumbo) USD/BWP 213,772 36,426
Director's fees billed by Hillary
Gumbo GBP 35,205 19,500
248,977 55,926
-------- -------
Net amounts due to related
parties:
2019 2018
US$ US$
Douglas Wright (22,112) -
Michael Foster (4,422) (11,280)
John Forrest (3,980) (4,119)
Hillary Gumbo (23,882) -
3D Exploration (1,584) -
--------------- ------------
(55,980) (15,398)
---------------------------- --------------- ------------
Intragroup Loans:
2019 2018
US$ US$
Kavango Resources plc to Kavango
Minerals (Pty) Ltd 1,587,016 320,290
Kavango Resources plc to Navassa
Resources Ltd 166,531 171,183
Navassa Resources Ltd to Kavango
Minerals (Pty) Ltd 1,973,517 1,966,917
18. Related party transactions (continued)
Directors fees
The following fees were paid or accrued in 2019:
Douglas Wright a Directors Fee of GBP 40,000 (5 Months 2018: GBP
16,666); Michael Foster a Directors Fee of GBP 40,000 (5 Months
2018: GBP 16,666); Hillary Gumbo GBP 36,000 (5 Months 2018:
GBP15,000) for acting as General Manager and Director of Kavango
Minerals (Pty) Ltd and Director of Navassa Resources Ltd; John
Forrest GBP 36,000 (5 Months 2018: GBP15,000) as Corporate
Secretary paid to his personal services company, Logwood Financial
Services Limited.
19. Events after the reporting date
On February 17, 2020 the Company announced a Joint Venture
Agreement (JVA) to acquire an interest in the Kalahari Copper Belt.
The JVA is between 100%-owned subsidiary Kavango Minerals Pty
Limited and LVR GeoExplorers (Pty) Ltd (LVR) to earn up to a 90%
interest in two licenses held by LVR. The expenditure commitment
under the JVA is Botswana Pula 1.25M (approximately US$120,000) in
the first 12 months to earn a 25% interest.
The outbreak of COVID 19 is a significant subsequent event in
2020 It has clearly presented many challenges including volatile
financial markets. The company has taken swift pre-emptive action
to ensure the safety of all directors, senior management and staff.
This includes a full financial and strategic review designed to
safeguard and ensure the stability and longevity of the Company's
activities for the benefit for all its stakeholders. It is of
course hard to predict just how long these extremely difficult
conditions will last and therefore the Company considers it to be
commercially prudent to continue to significantly reduce costs so
that current funds last longer and more time is available to
conclude various ongoing commercial negotiations which include
potential JV agreements. All of the Company's directors, senior
management and staff are working from home, the Company having
initiated a business continuity plan well ahead of the UK
Government's initial advice on home working. This is not having,
nor is it expected to have, any negative effect on the Company's
business. The Directors are closely monitoring commercial and
technical aspects of the Group's operations in-country to mitigate
the impact from the COVID-19 pandemic.
On 15 April 2020 the Company announced:
i. The placement of 27,250,000 ordinary shares at 0.8p each for
gross proceeds of GBP 218,000 which include 27,250,000 warrants to
subscribe for shares at 1.0p each within 3 years of Admission date
for the placement shares (April 2020);
ii. The issue of a zero-coupon Convertible Loan Note in the
nominal amount of GBP 38,000 repayable on 28 February 2021 and
convertible at either the Company or Noteholder election into
4,750,000 ordinary shares. The Noteholder will also receive
4,750,000 warrants to subscribe for shares at 1.0p each within 3
years of Admission date for the placement shares (April 2020);
iii. The issue of 10% Convertible Loan Notes in the nominal
amount of GBP 212,487 repayable on 28 February 2021 and convertible
at either the Company or Noteholder election into 26,560,875
ordinary shares. The Noteholders will also receive 26,560,875
warrants to subscribe for shares at 1.0p each within 3 years of
Admission date for the placement shares (April 2020);
iv. The 58,560,875 warrants in (i) (ii) and (iii)can only be
exercised when there is headroom provided by a prospectus. In the
event that the warrants have been exercised on or before 28
February 2021, a further 56,560,875 warrants would be issued
exerciseable at 2.50p for a period of 3 years. If neither the
Company nor the Noteholder elects to convert their Convertible Loan
Note on or before 28 February 2021 then the amount of the
Convertible Loan Note would be repayable by the Company on 31 March
2021. (Maximum GBP 250,487).
These transactions will increase the issued share capital to
188,205,709 shares.
In addition, the Company announced the sale of a 51% interest in
the Ditau Project for GBP 150,000 subject to due diligence. The
purchase price is to be satisfied with 35,714,286 shares of Power
Metal Resources plc (POW).
Any expenditures by POW on Ditau in 2020 would result in a
corresponding reduction to the commitments of the Company as
disclosed in Note 17. The Ditau share of those commitments is
$1.5M. Due to COVID 19 and the POW due diligence period the
contribution of POW towards Ditau commitments in 2020 may not be
significant.
20. Ultimate Controlling Party
There is not considered to be any ultimate controlling
party.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR UVSNRRUUVUAR
(END) Dow Jones Newswires
May 26, 2020 02:01 ET (06:01 GMT)
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