NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.    ACCOUNTING POLICIES AND BASIS OF PREPARATION

GreenRoc Mining Plc is a public limited company incorporated on 17 March 2021 and domiciled in England & Wales, whose shares are publicly traded on the AIM market of the London Stock Exchange Group Plc. The registered office address is 6th Floor 60 Gracechurch Street, London, United Kingdom, EC3V 0HR.

The Company's principal activities are the development of mining and exploration interests in Greenland, where its subsidiaries hold four separate exploration permits.

These consolidated Financial Statements have been prepared in accordance with UK-adopted international accounting standards ("UK-adopted IAS") as they apply to the Group for the period ended 30 November 2022 and with the Companies Act 2006. Numbers have been rounded to £'000.

The consolidated Financial Statements have been prepared on the historical cost basis, save for the revaluation of certain financial assets as a result of fair value accounting. The principal accounting policies applied in the preparation of these Financial Statements are set out below.

The Company's Ultimate Controlling Party during the year was Alba Mineral Resources Plc, which held 54% of the ordinary share capital of the Company (since reduced post year end to 44.7%) and has the right to appoint two Directors to the Board. The next largest shareholder, Kadupul Limited, currently holds 15.6% of the Company's share capital.

Going concern

Based on financial projections prepared by the Directors, the Group's current cash resources are insufficient to enable the Group to meet its recurring outgoings and planned exploration expenditure for the entirety of the next twelve months.

The Directors have prepared cash flow forecasts to 30 November 2024 which take into account planned exploration spend, costs and external funding. In December 2022, the Company raised gross proceeds of £333k through a share placing, followed by a further placing of £550k in March 2023. At 21 March 2023, the Company had £446k in cash. Nevertheless, the need for external funding is a material uncertainty that may cast doubt on the Group's ability to continue as a going concern.

As an explorer with assets in the exploration and development stage, the Group does not generate revenue and is reliant on external funding such as capital raisings to fund activities. The Directors intend to raise funds in advance of fieldwork programmes in Greenland, in order to advance its mineral projects. The precise nature and cost of those programmes are determined based on the results of previous studies.

These fundraisings are ad-hoc and as such the Group does not carry a cash balance sufficient for 12 months of expenditure. However, the Board has a reasonable expectation that the Group will continue to be able to meet its commitments for the foreseeable future by raising funds when required from the equity capital markets, based on the following:

·    The Group has a track record in sourcing external funding, having raised funds in 2021,  2022, and 2023

·    The Group has a supportive major shareholder (Alba Minerals Resources Plc) which has a strong track record of raising funds for exploration over a number of years

·    Results from the Group's graphite and ilmenite projects in particular have been positive and support the case for further investment

·    Forecasts contain a level of discretionary spend such that in the event that cash flow becomes constrained action can be taken to enable the Group to operate within available funding.

·    The Group and Company may also consider future joint venture funding arrangements in order to share the costs of the development of its exploration assets, or to consider divesting of certain of its assets and realising cash proceeds in that way in order to support the balance of its exploration and investment portfolio.

For these reasons the Directors continue to adopt the going concern basis of accounting in preparing the financial

Statements.

International Financial Reporting Standards

There are no significant changes within the International Financial Reporting Standards (IFRS) framework which impact upon the Company and its subsidiaries within the next financial reporting year.

Standards issued but not yet effective are as follows:

•    Amendments to IAS 1: Presentation of Financial Statements: Classification of Liabilities as Current or Non-current

•    Amendments to IAS 1: Classification of Liabilities as Current or Noncurrent - Deferral of Effective Date

•    Amendments to IAS 1: Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting Policies

•    Amendments to IAS 8: Accounting policies, Changes in Accounting Estimates and Errors - Definition of Accounting Estimates.

•    Amendment to IAS 12: Income Taxes - Deferred Tax related to Assets and Liabilities arising from a Single Transaction.

·   Amendments to IFRS 17 Insurance contracts: Initial Application of IFRS 17 and IFRS 9 - Comparative Information

·   Amendments to IFRS 16 Leases: Lease Liability in a Sale and Leaseback

Critical accounting estimates and judgements

The preparation of the Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as well as the disclosure of contingent assets and liabilities at the reporting date and the reported amounts of revenues and expenses during the reporting period. Actual outcomes could differ from those estimates.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The areas of judgement that have the most significant effect on the amounts recognised in the Financial Statements are as follows:

i)          JUDGEMENTS

Capitalisation of exploration and evaluation costs - £2.1 million (note 7)

The capitalisation of exploration costs relating to the exploration and evaluation phase requires management to make judgements as to the future events and circumstances of a project, especially in relation to whether an economically viable extraction operation can be established. In making such judgements, the Directors take comfort from the findings from exploration activities undertaken, the fact the Group intends to continue these activities and that the Company expects to be able to raise additional funding to enable it to continue the exploration activities.

Impairment assessment of exploration and evaluation costs - £10.2 million (note 7)

At each reporting date, management make a judgment as to whether circumstances have changed following the initial capitalisation and whether there are indicators of impairment. If there are such indicators, an impairment review will be performed which could result in the relevant capitalised amount being written off to the income statement.

At 30 November 2022, all capitalised costs in respect of the Inglefield project were impaired on the basis of the Company's decision to discontinue activity at that permit. The impairment charge arising as a result of this decision was £199k.

All of the other current exploration projects are being actively progressed, the Company does not believe any circumstances have arisen to indicate these assets require impairment.

Fair value of the Greenland subsidiaries upon acquisition in 2021 - £6.0 million

On 22 September 2021, GreenRoc Mining Plc acquired the entire share capital in Obsidian Mining Ltd ("OML"), White Eagle Resources Limited ("WER"), and White Fox Resources Limited ("WFR") from Alba Mineral Resources Plc ("Alba"). The purpose of the transaction was to establish a separate group from Alba which would be solely focused on progressing the Greenland mining projects held by the subsidiaries acquired. The consideration paid by GreenRoc for these shares totalled £6.0 million, in the form of 59.5 million shares in the Company at a value of 10 pence per share, the price at which the shares were admitted to the AIM list of the London Stock Exchange on 28 September 2021, and £50k in cash.

The Directors believe that 10 pence per share was the Fair Value of the Company's shares on the basis that this was the price paid by new investors who subscribed to the placing at the time of the IPO. This gave an implicit value of the consolidated Group, including the new subsidiaries, of £11.1 million, including £5.1 million of new cash, which supports the view of the Directors that the Fair Value of the underlying assets amounted to £6.0 million. The excess of the Fair Value over the historic cost of the underlying assets represents the increased value as perceived by the open market as a result of the development work undertaken by Alba in the periods leading up to the transaction.

As the transaction took place between two legal entities with common control, it was deemed to be outside the scope of IFRS3, and the acquisition method of accounting was adopted as the most appropriate treatment. 

ii)         ESTIMATES

Share-based payments - £141k

Share-based payments represent the fair value of shares issued to employees of the Company, and warrants issued to third parties in consideration for services provided. The cost of these share-based payments is based on the number of options or warrants awarded, the grant date and exercise price, the vesting period, and calculated based on a Black-Scholes model whose input assumptions are derived from market and other estimates. These estimates include volatility rates (38% for 2022 awards, 82% for 2021 awards), the risk-free rate (calculated to be 2.1% for 2022 awards and 0.6% for 2021 awards) and the expected term of the options. For further details, see note 4.

ACCOUNTING POLICIES

Basis of consolidation

The consolidated Financial Statements incorporate the Financial Statements of the Company and companies controlled by the Company, namely the Subsidiary Companies, drawn up to 30 November each year.

Control is recognised where the Company has the power to govern the financial and operating policies of an investee entity to obtain benefits from its activities. The results of subsidiaries acquired or disposed of during the period are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, where appropriate.

Where necessary, adjustments are made to the Financial Statements of subsidiaries to bring the accounting policies used into line with those used by the Group. All intra-group transactions, balances, income and expenses

are eliminated on consolidation. Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group's equity therein.

Foreign currency

For the purposes of the consolidated Financial Statements, the results and financial position of each Group entity are expressed in pounds sterling, which is the presentation currency for the consolidated Financial Statements, as well as the functional currency for each of the entities within the Group.

In preparing the Financial Statements of the individual entities, transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting date, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the reporting date. Exchange differences arising are included in the profit or loss for the period.

Share-based payments

Share-based compensation benefits are made on an ad-hoc basis on the recommendations of the Remuneration Committee. The fair value of warrants or options granted is recognised as an employee benefits expense, with a corresponding increase in the share-based payment reserve. The total amount to be expensed is determined by reference to the fair value of the options granted:

·    including any market performance conditions (e.g., the entity's share price);

·    excluding the impact of any service and non-market performance vesting conditions (e.g., profitability, sales growth targets and remaining an employee of the entity over a specified time period); and

·    including the impact of any non-vesting conditions (e.g., the requirement for employees to save or hold shares for a specific period of time).

The total expense 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 period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting and service conditions. It recognises the impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to the share-based payment reserve.

Warrants issued as part of the cost of an equity raise (for example as part of advisers' fees) are recorded at fair value as a cost of that financing within Share Premium and Share-based Payment Reserve. 

Intangible assets: capitalised exploration and evaluation costs

Pre-licence costs are expensed in the period in which they are incurred. Expenditure on licence renewals and new licence applications covering an area previously under licence are capitalised in accordance with the policy set out below.

Once the legal right to explore has been acquired, exploration costs and evaluation costs arising are capitalised on a project-by-project basis, pending determination of the technical feasibility and commercial viability of the project. Costs include appropriate technical and administrative expenses. If a project is successful, the related expenditures will be reclassified as development and production assets and amortised over the estimated life of the commercial reserves. Prior to this, no amortisation is recognised in respect of such costs. When all licences comprising a project are relinquished, a project is abandoned or is considered to be of no further commercial value to the Company, the related costs will be written off to administrative expense within profit or loss. Deferred exploration costs are carried at historical cost less any impairment losses recognised.

Impairment reviews for capitalised exploration and evaluation expenditure are carried out on a project-by-project basis, with each project representing a potential single cash generating unit. In accordance with the requirements of IFRS 6, an impairment review is undertaken when indicators of impairment arise such as:

·    unexpected geological occurrences that render the resource uneconomic;

·    title to the asset is compromised;

·    variations in mineral prices that render the project uneconomic;

·    substantive expenditure on further exploration and evaluation of mineral resources which is neither budgeted nor planned; and

·    the period for which the Group has the right to explore has expired and is not expected to be renewed.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised in profit or loss for the year.

Financial instruments

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

Financial assets are classified as either:

·    those to be measured subsequently at fair value (either through other comprehensive income or through profit or loss); or

·    those to be measured at amortised cost.

The classification is dependent on the business model adopted for managing the financial assets and the contractual terms of the cash flows expected to be derived from the assets.

For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income. For investments in equity instruments that are not held for trading, this will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income. 

The Group's financial assets comprise equity instruments and debt instruments as described below.

Impairment provisions for receivables and loans to related parties are recognised based on a forward-looking expected credit loss model. The methodology used to determine the amount of the provision is based on whether there has been a significant increase in credit risk since initial recognition of the financial asset. For those where the credit risk has not increased significantly since initial recognition of the financial asset, twelve month expected credit losses along with gross interest income are recognised. For those for which credit risk has increased significantly, lifetime expected credit losses along with the gross interest income are recognised. For those that are determined to be credit impaired, lifetime expected credit losses along with interest income on a net basis are recognised.

Investment in subsidiaries: Investment in subsidiaries, comprising equity instruments and capital contributions, are recognised initially at cost less any provision for impairment.

Loans to subsidiaries: Loans to subsidiaries, other than capital contributions, are held for the collection of contractual cash flows and are classified as being measured at amortised cost, net of provision for impairment. Impairment is initially based on the expected lifetime credit loss as applied to the portfolio of loans. The loans are interest free and have no fixed repayment terms. As such the loans are assessed as being credit impaired on inception and lifetime expected credit losses are recognised with the amount of provision being recognised in the profit or loss.

A loan is fully impaired when the relevant subsidiary recognises an impairment of its deferred exploration expenditure, such that the subsidiary is not expected to be able to repay the loan from its existing assets.

Trade and other receivables: Trade and other receivables are held for the collection of contractual cash flows and are classified as being measured at amortised cost. They are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method less provision for impairment.

Cash and cash equivalents: Cash and cash equivalents include cash on hand and deposits held at call with banks.

Trade and other payables: Trade and other payables are not interest bearing and are recognised initially at fair value and subsequently measured at amortised cost.

Financial liabilities:

·    Trade payables and other short-term monetary liabilities are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method.

·    There are no financial liabilities classified as being at fair value through profit or loss.

·    Borrowings are initially recognised at fair value net of any transaction costs directly attributable to the issue of the instrument. Such interest-bearing liabilities are subsequently measured at amortised cost using the effective interest rate method. Interest expense includes initial transaction costs and any premium payable on redemption, as well as any interest or coupon payable while the liability is outstanding.

·    Liability components of convertible loan notes are measured as described further below.

Share capital: The Company's ordinary and deferred shares are classified as equity.

Warrants: Warrants are stated at their value, which is estimated using a Black Scholes model where they are not issued as part of a cash transaction.

Taxation

The charge for taxation is based on the profit or loss for the period and takes into account deferred tax. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting date. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the Financial Statements and the corresponding tax bases used in the computation of taxable profit or loss, and is accounted for using the liability method.

Deferred tax assets are only recognised to the extent that it is probable that future taxable profit will be available in the foreseeable future against which the temporary differences can be utilised.

2.    ANALYSIS OF SEGMENTAL INFORMATION

The Group currently only has one primary reporting business segment, exploration and development.  The Group exploration assets and investments along with capital expenditures are presented on this basis below:

The Group's primary business activities are the exploration projects in Greenland and its corporate head office in the UK. The split of total assets and capitalised exploration and evaluation expenditure between these locations is set out below:

The administrative expenditure in the income statement primarily relates to central costs.

3.    OPERATING LOSS

Administration expenses are made up as follows:

Prior period comparatives relate to the two-month period from 28 September to 30 November 2021, prior to which the Group was not active. 

4.    DIRECTORS' EMOLUMENTS AND STAFF COSTS

During the period there were six permanent employees, being the Directors (who are the key management personnel). There were no temporary employees.

Remuneration of each Director is set out below for 2022. Prior period comparatives relate to the two-month period from 28 September to 30 November 2021, prior to which the Group was not active. 

¹ Kirk Adams stood down from the Board on 5 May 2022

² Stefan Bernstein was appointed on 1 July 2022

No bonuses were paid during 2022. During 2021, upon listing, Kirk Adams and George Frangeskides were awarded 200,000 bonus shares at a value of 10 pence per share, while Jim Wynn was awarded 50,000 bonus shares at 10 pence a share. Lars Brünner and Mark Rachovides were awarded cash bonuses of £10k each. These bonuses were compensation for work undertaken relating to the fundraising and admission process prior to 28 September 2021. 

During the year, Kirk Adams was the highest-paid employee, receiving remuneration totalling £139k (2021: £56k). There were no employees other than Directors, whose remunerations is fully disclosed in the above table.

During the period the Company granted share options to the Directors as follows:

The above share options vest after the following periods have elapsed since the date of grant: 1/3rd after 12 months; 1/3rd after 24 months; and 1/3rd after 36 months.

Total options held by Directors at year end were as follows:

The total estimated value of the share-based remuneration provided to Directors was £141k, which will be expensed over the vesting period of each tranche. These values were derived from a Black Scholes model as described in note 1.

5.    INCOME TAXES

a) Analysis of charge in the period

b) Factors affecting tax charge/(credit) for the period

The tax assessed on the loss for the period before tax differs from the standard rate of corporation tax in the UK which is 19%. The differences are explained below:

A deferred tax asset has not been recognised in respect tax losses and accelerated capital allowances, due to uncertainty that the potential asset will be recovered.

In 2021, a deferred tax liability of £1.0 million was recognised as part of the fair value accounting for the acquisition of the Alba subsidiaries, representing the taxation impact of the fair value uplift of the intangible assets acquired, which would not be an allowable deduction from tax profits in future periods.

6.    EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the loss attributed to ordinary shareholders of £1.2 million (2021: £306k) by the weighted average number of shares of 111,200,001 (2021: 27,531,396) in issue during the period. The diluted earnings per share calculation is identical to that used for basic earnings per share as warrants are not dilutive due to the losses incurred.

7.    INTANGIBLE FIXED ASSETS

No amortisation was recorded in respect of these assets.

8.    TRADE AND OTHER RECEIVABLES

VAT receivable relates to input VAT on supplies during the period. The Company registered for VAT during the year.

9.    CASH AND CASH EQUIVALENTS               

The fair value of cash at bank is the same as its carrying value.

10.  TRADE AND OTHER PAYABLES   

The fair value of trade and other payables approximates to their book value.

11.  CALLED UP SHARE CAPITAL        

No shares were issued in the year ended 30 November 2022.  The movement in shares in issue, share capital, deferred share capital and share premium during 2022 and 2021 was as follows:

12.  RESERVES

The following describes the nature and purpose of certain reserves within owners' equity:

The share-based payment reserve movement of £86k (2021: £166k) in the year consisted of £141k (2021: £39k) in respect of the fair value of employee share options, offset by £55k in respect of share options which were cancelled in the period (whose accumulated fair value was reversed through the profit and loss reserve). During 2021, the share-based payment reserve also included movement of £127k relating to warrants issued as part of the cost of listing in September 2021.

13.  CAPITAL COMMITMENTS            

As at 30 November 2022, the Company had commitments to spend approximately £470k in calendar year 2023 on its Greenland licences. However, historic expenditures in excess of minimum obligations in previous years carried forward more than offset these obligations at all of its permits with the exception of Melville Bay, for which an obligation of approximately £130k exists for 2023. 

14.  CONTINGENT LIABILITIES            

The Company had no contingent liabilities at the end of the period.

15.  FINANCIAL INSTRUMENTS

The Group's financial instruments comprise investments, cash at bank, and various items such as debtors, loans, and creditors. The Group has not entered into derivative transactions, nor does it trade financial instruments as a matter of policy.

Credit risk

The Group's credit risk arises primarily from cash at bank, other debtors, and the risk the counterparty fails to discharge its obligations.

The Company holds its cash with MetroBank Plc whose credit rating is B+.

Funding risk

Funding risk is the possibility that the Group might not have access to the financing it needs. The Group's continued future operations depend on the ability to raise sufficient working capital through the issue of equity share capital. The Directors are confident that adequate funding will be forthcoming with which to finance operations. The Directors have a strong track record of raising funds as required both as GreenRoc as well as within Alba. Controls over expenditure are carefully managed and activities planned to ensure that the Group has sufficient funding.

Liquidity risk

Liquidity risk arises from the management of cash funds and working capital. The risk is that the Group will fail to meet its financial obligations as they fall due. The Group operates within the constraints of available funds and cash flow projections are produced and regularly reviewed by management.

Interest rate risk profile of financial assets

The only financial assets (other than short term debtors) are cash at bank and in hand, which comprises money at call. The interest earned in the period was negligible. The Directors believe the fair value of the financial instruments is not materially different to the book value.

Foreign currency risk

The Group incurs costs denominated in foreign currencies (including Danish Krone and Euros) which gives rise to short term exchange risk. The Group does not currently hedge against these exposures as they are deemed immaterial and there is no material exposure as at the period end.

Market risk

The underlying value of the Group's assets is exposed to the spot price in the relevant commodities, notably graphite (Amitsoq), ilmenite (TBS), and iron ore (Melville Bay).

Categories of financial instrument

16.  CAPITAL MANAGEMENT

The Group's objective when managing capital is to safeguard the entity's ability to continue as a going concern and develop its mining and exploration activities to provide returns for shareholders. The Group's funding to date has been comprised of equity. The Directors consider the Company's capital and reserves to be capital. When considering the future capital requirements of the Group and the potential to fund specific project development via debt, the Directors consider the risk characteristics of all the underlying assets in assessing the optimal capital structure.

17.  RELATED PARTY TRANSACTIONS

Alba Mineral Resources Plc, which owns 44.7% of the Company's issued shares, charged fees for services in the period amounting to £163k (2021: £44k). These fees were calculated in accordance with the terms of the Services Agreement between the Company and Alba signed in September 2021, and relate to finance, management, exploration, technical and other professional activities, as well as the pass-through of certain costs settled by Alba on behalf of GreenRoc (for example travel expenditures for the Greenland field trips during the year). These charges were at arm's-length rates.

The Financial Statements for Alba are available on their website at www.albamineralresources.com.

18.  EVENTS AFTER THE REPORTING PERIOD

·    In January 2023 the Company announced an updated JORC Resource estimate for Amitsoq of 23.05 Mt of ore at a grade of 20.41% graphite for 4.71 Mt contained graphite, an increase of nearly three times the previous estimate.

·    In December 2022, the Company raised gross proceeds of £333k through the placing of 7.4 million shares at 4.5 pence. In March 2023, the Company raised gross proceeds of £550k through the placing of 15.7 million shares at 3.5 pence. 

There were no other significant post-balance sheet events.

**ENDS**

For further information, please visit www.albamineralresources.com or contact:  

Alba Mineral Resources Plc  

George Frangeskides, Executive Chairman                           +44 20 3950 0725 

 SPARK Advisory Partners Limited (Nomad)   

Andrew Emmott  / Neil Baldwin                                                +44 20 3368 3555 

 OvalX (Broker)  

Thomas Smith                                                                                   +44 20 7392 1494 

 St Brides Partners (Financial PR)  

Isabel de Salis / Catherine Leftley                                             [email protected] 

Alba's Projects and Investments