Strategic Report

The Company was readmitted to trading on AIM on 13 January 2021, following the successful acquisition of 100% of Capital Metals Limited ("CML") in conjunction with a placing of new ordinary shares in the Company to raise £2.08 million before costs, to advance the Project, including permitting approvals, drilling programme and complete an updated scoping and development study (Development Study).

Eastern Minerals Sands Project Overview

In April 2016, CML (via its subsidiaries) acquired 100 per cent. of Damsila Exports (Pvt) Limited ("DEL") and Eastern Minerals (Pvt) Limited ("EML"), the entities which own the exploration licenses that comprise the Eastern Minerals Project ("EMP" or "Project").   Further details of the transaction and related acquisition terms are outlined in the Admission Document dated 23 December 2020 on the Company's website.

The EMP is located in the Ampara District of the Eastern Province of Sri Lanka, approximately 360 km east of Colombo. The EMP comprises the Project Licenses which cover 84 km². An additional nine applications have also been made in respect of new exploration licenses covering a further 623 km². The EMP is divided into two sub-project areas:

·           the northern area (Eastern North), was held by DEL through exploration license EL168/R/4 which expired on 31 October 2020 (the "DEL License") and which is now subject to the Industrial Mining License ("IML") Applications; and

·           the southern area (Eastern South) (which was recently renewed) held by EML through exploration license EL199/R/4 (the "EML License").

The DEL License is now subject to its first formal application for an IML over 111.5 hectares located within the DEL License area ("First IML Application"), the approval of which is currently a key focus of the Company.

In connection with this application, an EIA report was submitted to the Coast Conservation & Coastal Resources Management Department ("CCD") on 26 September 2019 and the EIA is close to final approval with all of the regulatory authorities' requests for reports and responses to questions having been completed.   The EIA review and approval process was delayed earlier this year due to COVID-19 causing greatly reduced Government activity. However, the Company announced on 19 July 2021 that the Company was able to attend several, previously delayed, meetings with the relevant government authorities and reported that good progress is being made with the environmental approval.

On 3 February 2021, the Company announced that the Group had been granted a further 2-year extension of its exploration licence EL-199 which covers the southern portion of the Project. This ensures continuity of tenure over the entire Project in the medium term and enables the Company to move ahead with the exploration programmes in the licence area.

In  September 2016, DEL and EML made nine additional exploration license applications, covering an area of 623 km², surrounding EL 168 and EL 199 both onshore (over 272km²) and offshore (over 351km²). The Group will look to recommence the approval process of these applications as soon as the Sri Lankan government departments return to normal activity levels.

The Group has been initiating an updated independent Development Study and economic analysis which is due to be completed by the end of H2 2021. The study will be based on all technical work completed to date.  The base case plan is for an estimated 1.65 million tonne per annum mining operation with relevant operational parameters, including capital and operating costs, to be provided as part of the study.

The Project's 84 km² licence area on Sri Lanka's eastern seaboard has a JORC Resource of 17.2 Mt with an average grade of 17.6% Total Heavy Minerals, an estimate making it one of the highest-grade mineral sands' deposits in the world, with nearly three times the average grade of comparable projects. 85% of the Resource estimate is classified in the JORC code's higher level Measured and Indicated categories.

Source: Capital Metals plc JORC 2012 Resource Report

Opportunities to Upgrade the Resource

Although the current estimate, based on 1,643 shallow auger drill holes totalling 2,621 metres of drilling, is sufficient to economically commence construction and mining operations, the Company believes compelling opportunities exist to significantly upgrade the Resource.

The inherent physical limitations of auger drilling mean the Project area has so far only been drilled to an average depth of three metres. Exploratory sonic drilling undertaken in 2018 indicated that mineralisation continues at deeper levels across much of the Resource, including holes recording 26.3% THM at a depth of 14 metres and 26.6% at 8 metres.

Further potential exists beyond the narrow coastal strip that has been the primary focus of drilling to date, comprising a 100 to 300 metre wide north-south corridor running alongside the sea that accounts for less than 10% of the total Project area. The Project's perimeter extends up to two to three kilometres inland, covering terrain that may encompass marine sediments.

The limited drilling further inland undertaken to date suggests significant mineralisation. This territory is readily accessible to environmentally sensitive drilling, with minimal need to disturb vegetation prior to mining.

The Group has engaged the GSMB in Sri Lanka to undertake a drilling program on its southern exploration licence EL199. The proposed drilling program is a combination of infill and resource extensions and aims to confirm previous drill work and test with extension and step out drilling. This will assist the Company to delineate the key areas for any mining licence applications over EL199.  It is anticipated that this drilling campaign will commence in Q3 2021.

The Project benefits from robust infrastructure already in place, connecting the Project through a network of sealed roads to a commercial port at Oluvil, just 30 kilometres north of the licence area.  The Oluvil Port was opened in 2013 as part of the Sri Lankan government's ongoing programme to upgrade the country's infrastructure. The port, which is currently being used by the regional fishing industry, offers facilities and shipping capacity of 8,000 to 10,000 tonnes and is approximately 11 metres deep, easily meeting the Project's requirements. The port has all the essential infrastructure to serve as a commercial harbour, being equipped with grid power, scheme water, offices, workshops, storage facilities, residential quarters, and secure perimeter walls and fencing.

The Group is in discussions with the Sri Lankan Port Authority ("SLPA") to use the port for its operations, where it intends to construct a dry mineral separation plant to separate the HMC into value added minerals before shipping.  The Group has offered to assist SLPA with any required dredging of accumulated sands resulting from longshore drift for the benefit of all users of the port, including commercial shipping and the local fishing industry.

Mineral Sands Markets

The mineral sands products that the Project will produce include ilmenite & rutile (together titanium dioxide minerals), zircon and garnet, which are an integral part of everyday life.  The key end products in the mineral sands market are:

·           Paint: which contains titanium dioxide (TiO₂) found in ilmenite and rutile.

·           Ceramics: including materials required for housing and construction (bathrooms, tiling, kitchens) require zircon.

·           Abrasives: garnet has a range of industrial applications in the abrasives markets, such as sand paper, sand blasting and cutting steel with water jets and significantly increasing use in metal fabrication.

These minerals are also used in many other areas, including high end titanium metal, industrial chemical applications and chemical industries. However, the paint (TiO₂) and ceramic (zircon) industries are the main end users. It is anticipated that both of these industries will be well supported during all the global stimulus initiatives that are underway.

The global paints and coatings market size was valued at USD 146.2 billion in 2019 and is expected to grow at a compound annual growth rate ("CAGR") of 4.3% from 2020 to 2027. The market is expected to be driven by the increasing product consumption in the construction, automotive, and general industries application sectors. Rapid urbanization and industrialization in the emerging countries, such as India, China, and Southeast Asia, are anticipated to fuel the product demand in various applications.

The global ceramics market was valued at USD 229.1 billion in 2018 and is projected to grow at lucrative CAGR of 8.6% from 2019 to 2025. Increasing government spending on infrastructure and rising construction activities around the world are the key drivers for the market.

The global abrasives market size is projected to grow from USD 46.4 billion in 2020 to USD 58.0 billion by 2025, at a CAGR of 4.5% from 2020 to 2025. The growth of this market is attributed to the growing automotive, metal fabrication, machinery, electronics, electrical, medical, and construction industries.

The global market for mineral sands has been growing steadily with solid price increases over the last 5 years. The industry growth and pricing did pause in 2020 due to COVID-19, however, the medium-term growth outlook is positive due to economic stimulus activity as well as decreasing supply from existing mines which may not be fully replaced by future projects.

This supply issue is important as opening up new mines is not something that happens overnight. Years of time and effort, including drilling, test work, technical and ESG studies must be undertaken before a mining project can move into production.

The Group has an excellent mix of different products in its Resource. Over 50% of its basket of goods is ilmenite and a further 35% is the higher value items of zircon and rutile. Set out below is the summary of the different products that make up its' Resource.

Given the continued strength in mineral sands prices, the Group has commenced offtake discussions following several approaches from strategic and industrial groups. The COVID-19 pandemic-fuelled surge in homebuilding and home improvements has contributed to healthy demand for mineral sands products such that mineral sands consumers are seeking additional security of supply.

Environmental, Social and Governance

The Project has the potential to open significant new economic opportunities in eastern Sri Lanka, and the Group's work with local communities and commitment to ecologically sensitive production procedures that ensures all mining areas are fully rehabilitated.  Some benefits to the local community from development of the Project include:

·           New high-quality construction, mining and processing work for local workers as well as demand for local contracting services. The Group's construction, mining and processing work will employ local workers, who will be trained and supported by local and foreign mining experts. Demand for contractor services is expected to create a multiplier effect benefiting the wider economy and skills/knowledge transfer to the local work force.

·           Community initiatives include waste disposal programmes, ongoing financial and logistical support for a new pre-school, new drinking water infrastructure, sponsorship of female entrepreneurship, and COVID-19 support.

·           Full consultation with the local community on any potential environmental impact from the Project, and commitment to state-of-the-art mineral sands processing integrating land rehabilitation into the mining process.

·           Potential to free up the port for the local fishing industry and commercial shipping by removing the significant volume of sand that has filled the port area due to the coastal currents depositing sand in the harbour.

·           Taxes and royalties flowing from the Group's operations will generate government revenues for reinvestment in Sri Lanka's continued economic development.

·           The Country will also benefit from foreign direct investment to bring the mine into production and export earnings from the sale of the products into the international market.

The economic activity stimulated by the Project will be complemented by the Group's ongoing engagement with the Eastern Province's local community. The Company has already demonstrated its commitment to the coastal environment in which it will operate by organising beach cleaning programmes with community leaders, including the Sivan temple at Thambiluvil, with the collected plastic waste transported to the local council refuse centre for ecological disposal.

For the past three years, the Group has sponsored a new pre-school in the village of Umiri, currently supporting 15 students and two teachers, where residents have struggled for years for the resources to secure a good education for their children. The Group has worked in partnership with the local authority and village council to furnish a village hall with new furniture, stationery and equipment, and provides ongoing support through building maintenance, payment of school staff salaries, replenishment of school stationery, transportation, and the supply of safe drinking water through drier months. The Group is currently working with the village to provide long term drinking water facilities.

The Group is working closely with local communities in the Project area, to empower female entrepreneurs supplying furniture, chairs, and other essentials for the Women's Rural Development Society. Another initiative helps members of the Society and other local women embrace sustainable agricultural practices through home gardening and small-scale farming projects.

The Group is also contributing to local efforts to manage the impact of COVID-19. Many families have needed financial support to continue to pursue their livelihoods. The Group has worked with community leaders to source and distribute dry ration packages to more than 250 families since the lockdown commenced, ensuring the operation adheres to guidelines set by local health authorities. At all times the Group's work is designed to complement the wider programmes run by local and national governments and international development agencies.

Environmentally sensitive mining

The Group is committed to pursuing a state-of-the-art mineral sands mining process that will respect the coastline along which the Project will operate.

The Project's commercial mineral sands will be extracted using proven non-chemical processing methods. The proposed mining method is staged mining of small 150m x 50m cells, with each cell continuously rehabilitated after mining and then fully available for alternative uses such as agriculture and tourism, or to remain as a wilderness.

Well-regulated mineral sands programmes integrate land rehabilitation into the mining process. The shallow depth of mineral sands deposits allow them to be mined using conventional surface mining methods including bulldozers, excavators and trucks. Topsoil, subsoil and clay is removed and stockpiled separately to allow it to be progressively returned after the mining process. The mineral sand deposit is then removed from the ground and then pumped as a slurry to a processing plant where the valuable heavy minerals are separated from the sand. The waste sand (mostly silica) is pumped back to the mining cell, where it is returned to the ground. Subsoil and topsoil are then replaced and the land rehabilitated back to its original use.

Directors' statement under section 172 (1) of the Companies Act 2006

The Companies (Miscellaneous Reporting) Regulations 2018 require Directors to explain how they considered the interests of key stakeholders and the broader matters set out in section 172(1) (a) to (f) of the Companies Act 2006 ("S172") when performing their duty to promote the success of the Company under S172. This includes considering the interest of other stakeholders which will have an impact on the long-term success of the company.

This S172 statement explains how the Directors have regard to:

(a)        the likely consequences of any decision in the long term,

(b)        the interests of the Company's employees,

(c)        the need to foster the Company's business relationship with suppliers, customers and others,

(d)        the impact of the Company's operations on the community and environment,

(e)        the desirability of the Company maintaining a reputation for high standards of business conduct, and

(f)         the need to act fairly as between members of the Company.

The S172 statement focuses on matters of strategic importance to the Company and the Group, and the level of information disclosed is consistent with the size and the complexity of the business.

General confirmation of Directors' duties

The Board has a clear framework for determining the matters within its remit and has approved Terms of Reference for the matters delegated to its Committees. Certain financial and strategic thresholds have been determined to identify matters requiring Board consideration and approval. When making decisions, each Director ensures that they act in good faith in the way most likely to promote the Company's success for the benefit of its members as a whole.

S172(1) (a) "The likely consequences of any decision in the long term"

The application of the Section 172 (1) requirements can be demonstrated in relation to some of the key decisions made during the reporting period, including

·           completion of reverse takeover, raising of new capital and readmission to AIM

·           completion of EIA report and submissions towards obtaining EIA approval and final permitting towards grant of Industrial Mining Licence for the Project

·           commitment to an updated scoping and development study for the Project

·           commitment to developing an exploration strategy for the Project towards increasing the overall resource and target of high value areas of the Project

·           continued assessment of corporate overheads and expenditure

The Group is focused on the development of the Eastern Minerals Project in Sri Lanka. The RTO, raising of new capital and readmission to AIM, advances the Company's objective, facilitating access to a significant and globally respected financial market to raise funds from London's deep pool of institutional and private investors, towards the development of the Project, whilst providing important liquidity to shareholders.  The Group consulted with its shareholders, stakeholders and investors on the RTO, providing a detailed Admission Document and received overwhelming support and approval for the successful completion of the RTO and fund raising.

The completion and submission of the EIA report and responses to the regulatory authorities requests, is required to obtain EIA approval and final permitting towards grant of an IML, which is a key milestone towards the development of the Project and driving significant further shareholder value.

The undertaking of an updated scoping and development study will enhance the technical and economic understanding of the Project towards progressing its commercial development and the significant economic and social benefit to stakeholders.    

Although the current resource is of sufficient size for commercial mining operations, the Group is to develop an exploration strategy towards increasing the size of the resource and target of high value areas, enhance the economics of the Project and drive further value to shareholders, as well as further socio-economic benefits to stakeholders through increased production. The undertaking of further significant drilling will be subject to procuring sufficient further funding. 

Management assesses overheads and expenditure on an ongoing basis towards the most effective utilisation of funds to meet Group business and strategic objectives to the benefit of shareholders.   

S172(1) (b) "The interests of the company's employees"

The Company during the reporting period and to date, had 7 employees, in addition to the Directors. The Board recognises that the Company's employees, are fundamental and core to our business and delivery of our strategic ambitions. The success of our business depends on attracting, retaining and motivating employees. From ensuring that we remain a responsible employer, from pay and benefits to our health, safety and workplace environment, the Directors factor the implications of decisions on employees and the wider workforce, where relevant and feasible.

S172(1) (c) "The need to foster the company's business relationships with suppliers, customers and others"

Delivering on our strategy to develop the Project requires strong mutually beneficial relationships with suppliers, customers, governments, and local partners. We aim to have a positive and enduring impact on the communities in which we operate, including engagement with local suppliers, and through payments to governments in taxes and other fees.  The Group values all of its suppliers and aims to build strong positive relationships through open communication and adherence to trade terms.  The Group is committed to being a responsible entity and doing the right thing for its customers, suppliers and business partners. 

S172(1) (d) "The impact of the company's operations on the community and the environment"

As a mineral sands Group operating in Sri Lanka, the Board takes seriously its ethical responsibilities to the communities and environment in which it works. We abide by the local and relevant UK laws on anti-corruption and bribery.  The Group is committed to following international best practice on environmental aspects of our work and the development of the Project. We actively engage with the local communities in order to ensure we maintain our social licence to operate and develop the Project. Management and employees conduct site visits and hold external stakeholder engagements.  Wherever possible, local communities are engaged in the Group's activities and the development of the Project will provide much needed employment and wider socio-economic benefits to the local communities. 

More information on this can be found within our Environmental, Social and Governance (ESG) Statement.

S172(1) (e) "The desirability of the company maintaining a reputation for high standards of business conduct"

The Group aims to achieve the development of the Project in ways which are economically, environmentally and socially responsible. The Board periodically reviews and approves clear frameworks, such as the Company's Code of Business Ethics, to ensure that its high standards are maintained both within the Group and the business relationships we maintain. This, complemented by the various ways the Board is informed and monitors compliance with relevant governance standards, help ensure its decisions are taken and that the Group acts in ways that promote high standards of business conduct.

S172(1) (f) "The need to act fairly as between members of the company"

After weighing up all relevant factors, the Directors consider which course of action best enables delivery of our strategy over the long-term, taking into consideration the impact on stakeholders. The Directors believe they have acted in the way they consider most likely to promote the success of the Company for the benefit of its members as a whole.

The Board is committed to maintaining good communication and having constructive dialogue with its shareholders. The Company has close ongoing relationships with key private shareholder, analysts and brokers, providing the opportunity to discuss issues and provide feedback at meetings with the Company. All shareholders are encouraged to attend the Company's Annual General Meeting and any general meetings held by the Company, subject to any COVID-19 restrictions.

Key performance indicators

Given the straightforward nature of the Group's activities, the Company's directors are of the opinion that analysis using key performance indicators is not necessary for an understanding of the development, performance or position of the business at the present time.

Principal risks and uncertainties

The management of the business and the execution of the Group's strategy are subject to a number of risks. The key business risks affecting the Group are outlined below.

The Company continuously monitors its risk exposures and reports to the Board on a regular basis. Risks are reviewed by management and the Board, and appropriate processes are put in place to monitor and mitigate them. If more than one event occurs, it is possible that the overall effect of such events would compound the possible adverse effects on the Group.

i)          Conversion into mining rights and receipt of other permits

The DEL Exploration License was first issued to DEL on 5 June 2010 and had previously been renewed on 6 July 2012, 17 September 2014, 1 November 2016 and 31 October 2018. The DEL Exploration License expired on 31 October 2020. The forms of application that are included in the regulations issued under the laws of Sri Lanka have been formulated to indicate that the fourth renewal of an exploration license is the final application that may be made for renewal of an Exploration License.

The Geological Survey and Mines Bureau ("GSMB") has represented to DEL that, following the expiry of an exploration license, the GSMB in practice, allows the former exploration license holder for a period of two years from the date of expiry:

·           Exclusive right over the former exploration license area to submit further IMLs should the former license holder wish to do so (in this case DEL, in respect of the DEL License area); and

·           Exclusivity over the former exploration license area by refraining from accepting applications for any new exploration licenses from third parties.

DEL has submitted a formal application for an Industrial Mining License and such application is currently pending. In connection with this application, DEL has submitted an environmental impact assessment ("EIA") report, prepared by an independent and multi-disciplinary team of consultants.  An approved EIA is required for the grant of an Industrial Mining Licence for the Project and the Group is in the final stages of the EIA process. 

Notwithstanding the representations given by the GSMB, upon expiry of the DEL License, DEL will not hold any exploration rights in respect of the area covered by the DEL License until such time as an IML is granted.

Before the EMP can be brought into production, the IML Applications will need to be approved by the GSMB and further IML applications will need to be made by EML. In addition, the Group will require additional permits to extract and sell its production.

Accordingly, there is a risk that should the Group fail to obtain IMLs or attain any of the additional permits required to extract and sell its production, there is a risk that the Group would not achieve its key objective of developing the Project into commercial production.  The Group is mitigating this risk by active engagement with the government and input from its multi-disciplinary team of consultants.

ii)         Exploration, evaluation and development risk

Mineral resources are estimates and no assurance can be given that any particular grade or tonnage will be realised or that they will be converted into reserves or result in a commercially mineable deposit which can be legally and economically exploited. As a result of these uncertainties, there can be no assurance that mineral resources defined by the Group's exploration and evaluation programmes will result in profitable commercial mining operations.

The commercial viability of mineral deposits of the kind located and believed to be located at the EMP area is dependent upon a number of factors, including, but not limited to, the market price of the component heavy minerals, the quality, size, grade and other attributes of the deposits and the proximity to, and availability of, infrastructure necessary to develop, exploit and transport minerals on a commercial scale.

The EMP benefits from close proximity to the Oluvil port, which the Group has determined will be the optimal route for production to be transported from the EMP to global customers.  For the Group to use this port, it will require dredging and the receipt of necessary permits and authorisation, which cannot be guaranteed as forthcoming.

Whilst an IML would grant the Group the right to enter and possess any area of land covered by that IML, where lands are owned privately or by a state organisation, rights to access those lands will need to be obtained from such landowners. DEL has previously entered into exploration agreements with private landowners regarding its exploration activities and is therefore hopeful of reaching access agreements with such landowners in the future. However, any issues in obtaining the land access agreements could materially and adversely affect the Group's operations and objective of developing the Project into commercial production.

The Directors are confident that they in place the team of management, consultants and advisors to assess and mitigate the above risks and issues, as they arise.

iii)        Environmental risk

There may be unforeseen environmental liabilities resulting from both future or historic exploration or mining activities, which may be costly to remedy. In addition, potential environmental liabilities as a result of unfulfilled environmental obligations by the previous owners may impact the Group. If the Group is unable to fully remedy an environmental problem, it may be required to stop or suspend operations or enter into interim compliance measures pending completion of the required remedy.

Environmental management systems are in place to mitigate environmental risks, including the engagement of an independent and multi-disciplinary team of consultants.  

iv)         Government regulation, political and country risks

The EMP is located in Sri Lanka, where the Group's activities may be affected in varying degrees by political stability, governmental regulations and economic stability. Any changes in regulations or shifts in political attitudes in these countries or any other countries in which the Group may operate are beyond the control of the Group and may adversely affect its operations.

The Group actively monitors political and regulatory developments through its team of management, local partners, consultants and advisors.

v)          Liquidity and market risks

The Group will need to raise additional capital in the future to fund the development of the EMP to the point at which it becomes operational, and future heavy mineral prices, revenues, taxes, capital expenditures and operating expenses and geological success will all be factors which will have an impact on the amount of additional capital required.

If the Group is unable to obtain additional financing as and when needed, it could result in a delay or indefinite postponement of exploration, evaluation and development activities which may result in loss of the EML License or any IML granted if the minimum work programmes under such permit cannot be met.

The Group actively monitors its liquidity position.  The Board regularly reviews the Group's cash flow forecasts and the availability or adequacy of its current cash resources to meet the Group's business objectives and cash flow requirements.

The Company through its listing on AIM, has access to a significant and globally respected financial market to raise funds from London's deep pool of institutional and private investors.  The Company maintains positive and close relations with its brokers towards positively positioning the Company for future fund raisings.

vi)         COVID-19

The COVID-19 pandemic has had a dramatic global impact and significant impact on the activities of the Group. The Group's EIA review and approval process has been significantly delayed due to COVID-19 causing greatly reduced Sri Lanka Government activity during the reporting period. At the date of this report, Sri Lanka was still subject to COVID-19 lockdowns and travel restrictions making meetings with, and between government officials, very difficult.  Whilst Sri Lankan authorities have been very cooperative and have made great efforts to hold a number of virtual meetings to continue the approval process, however, COVID-19 continues to present a risk to the Group's activities and timelines for obtaining the EIA and IML approvals and the development of the Project.  Towards mitigating this risk, management is actively engaged with the various government departments, including holding virtual meetings to further the process during lockdowns.

Financial review   

The Group loss for the period ended 31 March 2021 was $7,886,000 (2020⁽¹⁾: loss of  $1,024,000), including a deemed reverse acquisition expense of $5,454,000 (refer Note 5) reflecting the difference between the deemed fair value of the shares issued by Capital Metals Limited to acquire Capital Metals Plc and the fair value of the net assets of Capital Metals Plc.  It is noted that under the reverse acquisition accounting, Capital Metals Limited is treated in consolidation as the accounting acquirer and the parent company, Capital Metals Plc, is treated as the accounting subsidiary.

Total administration costs increased from $1,030,000 in the year ended 31 March 2020⁽¹⁾ to $1,432,000 for the reporting period, primarily driven by costs associated with the reverse acquisition and readmission to AIM, as well as increased director remuneration. Share based payments expense for the reporting period of $1,111,000 (2020⁽¹⁾: Nil)  are in respect of the issue of 11,750,000 options to Directors, management and consultants (refer to Note 19) and the issue of certain warrants in respect of the RTO.

The Group net cash outflow from operating activities increased from $567,000 in the year ended 31 March 2020⁽¹⁾ to $1,596,000 during the reporting period, primarily reflecting increased administration costs and costs of the RTO. The net cash inflow from investing activities of $133,000 (2020⁽¹⁾: $194,000 outflow) reflects the cash acquired in the reverse acquisition during the reporting period and E&E expenditure of $133,000. The Group raised $3,059,000 during the reporting period from share placements (2020⁽¹⁾: $351,000) net of costs.  During the year ended 31 March 2020⁽¹⁾, the Group received proceeds from borrowings of $428,000, with repayments of borrowings during the reporting period of $453,000. Cash and cash equivalents as at 31 March 2021 was $1,797,000 (2020⁽¹⁾: $114,000). 

The Group total net assets and net current assets as at 31 March 2021 were $6,831,000 (2020⁽¹⁾: $4,596,000) and $1,205,000 (2020⁽¹⁾: net current liabilities of $218,000) respectively. 

⁽¹⁾ Restated, refer to Note 4.

Our people

Our people are a key element in our success and the Company aims to attract, develop and retain talented people and to create a diverse and inclusive working environment, where everyone is accepted, valued and treated equally without discrimination, taking into account the current size of the Company. 

Currently the Company comprises six directors, one key manger and 6 employees, with the workforce by gender summarised below:

COVID-19

During the reporting period and subsequently, the COVID-19 pandemic has had a dramatic global impact and significant impact on the activities of the Group. The situation is continually developing and will need constant attention as it continues to evolve over time.

The Group's EIA review and approval process was significantly delayed due to COVID-19 causing greatly reduced Sri Lanka Government activity during the reporting period.  These have been extremely challenging times in Sri Lanka with COVID-19 extending widely across the country and strict lockdowns and travel restrictions making meetings with, and between government officials, very difficult.  However, as announced by the Company on 19 July 2021 that the Company, we were able to attend several, previously delayed, meetings with the relevant government authorities and reported that good progress is being made with the environmental approval.

Although Sri Lanka at the date of this report was still subject to COVID-19 lockdowns, the economic recovery from the COVID-19 pandemic is underway in key economic regions, on the back of strong fiscal stimulus, highly accommodative monetary policy, and the vaccine rollout, which has had a positive impact on commodity prices. We are pleased to note that the Sri Lankan authorities have been very cooperative and have made great efforts to hold a number of virtual meetings to continue the approval process, however, COVID-19 continues to present a risk to the Group's activities and timelines for obtaining the EIA and IML approvals.

Outlook

Whilst the reporting period saw the significant impacts of COVID-19, we have made positive progress towards the major milestones of the approval of the EIA and IML, which we anticipate being completed in Q4 2021. 

As stated in the Company's Admission document, and in common with many exploration and evaluation entities, the Group will need to raise further funds within the next 12 months, in order to meet its expected expenditures, and progress the Group into the next phase of definitive feasibility, and then into construction and finally into production. The success of the Company's readmission to the AIM market of the London Stock Exchange in January 2021, provides access to major financial markets to take the Project forward to production. 

We look forward to reporting further on the EIA and IML and towards the next phase of the Project, including the potential expansion of the Resource, as well as further technical, engineering and economic studies towards construction and bringing the Project into production.

Michael Frayne

Chief Executive Officer

30 September 2021