Unaudited condensed consolidated interim statement of cash flow

For the six months ended 30 June 2021

Notes to the unaudited condensed consolidated interim financial statements

For the six months ended 30 June 2021

Note 1             General information

                         Katoro Gold plc ("Katoro" or the "Company") is incorporated in England & Wales as a public Ltd company. The Company's registered office is located at 60 Gracechurch Street, London EC3V OHR.

The principal activity of Katoro, through its subsidiaries (together the 'Group'), is to carry out evaluation and exploration studies within a licenced portfolio area with a view to generating commercially viable Mineral Resources, namely gold and nickel mines. In Haneti, the Group has one nickel mining project, which has mineral exploration licences currently held by Eagle Exploration Ltd. In addition, in South Africa the Group has entered into binding conditional agreement to form a 50/50 unincorporated joint venture pertaining to gold tailing project.

The condensed interim consolidated financial statements do not represent statutory accounts within the meaning of section 435 of the Companies Act 2016.

The condensed interim financial information is unaudited and has been prepared on the basis of the accounting policies as set out in the audited financial statements for the period ended 31 December 2020.

Accounting policies applied are consistent with those of the previous financial period.

The seasonality or cyclicality of operations does not impact on the interim financial statements.

Note 2             Going concern

                         The Company currently generates no revenue and had net assets of £421,129 as at 30 June 2021.

Following the recent successful placing and subscription of new ordinary shares, where the Group raised in cash the amount of £892,800, the Group has adequate cash and cash equivalents (financial resources) to ensure the Group is able to continue as a going concern for the foreseeable future.

                         Furthermore, after reviewing the Group's financial projections, the directors of the Company (the "Directors") have a reasonable expectation that the Group will have adequate resources to continue in operational existence for the foreseeable future.

For this reason, they adopted the going concern basis in preparing the Group Financial Information.

The effective implementation of COVID-19 vaccination protocol within the key areas the Group operations has led to an increase in operational activity for the Group. As at the time of preparing these results, the Group does not anticipate any further significant foreseeable disruption from the COVID-19 pandemic, and expects operational activities to normalise in the coming months.

Post period end there has been a period of limited political unrest in South Africa, however the impact on the groups operations have been temporary and limited in this regard.

Note 3             Trade and other payables

Note 4            Earnings per share

  The calculation of loss per share is based on the following loss and number of shares:

The Group presents basic and diluted EPS data on the basis that the current structure has always been in place. Therefore the number of Katoro shares in issue as at the period end has been used in the calculation. Basic Earnings/loss per share is calculated by dividing the Profit/loss for the period from continuing operations of the Group by the weighted average number of shares in issue during the period.

The Company had in issue warrants and options at 30 June 2021, the inclusion of such warrants and options in the weighted average number of shares in issue would be anti-dilutive and therefore they have not been included for the purpose of calculating the loss per share.

Note 5             Unaudited results

These condensed consolidated interim financial results have not been audited or reviewed by the Group's auditors.

Note 6             Share Capital

The called-up and fully paid share capital of the Company is as follows:

A reconciliation of share capital is set out below:

Note 7            Warrant and Share based payment reserve

Warrants

The following reconciliation serves to summarise the composition of the warrant reserve as at period end:

Reconciliation of the quantity of warrants in issue:

During the current year the following warrants have been issued over the Company's Ordinary Shares:

48,000,000 warrants to various funders in respect of placing and subscription of 48,000,000 ordinary shares of 1.0p each issued on 15 January 2021. Each Financing Share has an attaching warrant to subscribe for a further new Ordinary Share at a price of 3p, with a life to expiry of 3 years from the Financing Shares admission to trading on AIM ('Admission'), creating 48,000,000 new warrants.

Share Options

The following reconciliation serves to summarise the composition of the share based payment reserve as at period end:

Reconciliation of the quantity of Share options in issue:
 

During the current year the remaining 50% of the share options issued in August 2020 has vested.

Note 8             Exploration and evaluation assets

Exploration and evaluation assets consist solely of separately identifiable prospecting assets held by Kibo Nickel and its subsidiaries.

The following reconciliation serves to summarise the composition of intangible prospecting assets as at period end:

Haneti comprises tenements (prospecting licences, offers and applications) prospective for nickel, platinum-group-elements and gold. It covers an area of approximately 5,000 sq. km in central Tanzania and forms a near contiguous project block. The project area straddles the Dodoma, Kondoa and Manyoni districts all within the Dodoma (Administrative) Region. The main prospective belt of rocks within the project, the Haneti-Itiso Ultramafic Complex (HIUC), is centred on the small town of Haneti, located 88 kilometres north of Tanzania's capital city Dodoma. The HIUC sporadically crops out over a strike length of 80 kilometres with most outcrop exposure occurring 15 kilometres east of Haneti village where artisanal mining of the semi-precious mineral chrysoprase (nickel stained chalcedonic quartz) is being carried out at a few localities.

Note 9             Board of Directors

There were no changes to the board of directors during the interim period, or any other committee's composition.

Note 10           Subsequent events

Blyvoor Joint Venture Project

A period of limited political unrest in South Africa temporarily delayed the funding process when some of the short-listed parties requested additional time to re-assess the country risk profile as a result of the unrest. However, the Company is pleased to announce that discussions with these potential funders have since resumed and the joint venture partners hope to conclude a final funding arrangement for Blyvoor during the latter part of 2021.

Note 11           Commitments and contingencies

There are no material contingent assets or liabilities as at 30 June 2021.

Note 12          Segment report

Segmental disclosure per category

Segmental disclosure per geographical location

Notable changes from the prior interim report has been the addition of a new geographical location in which the Group prospecting operation has been initiated which is South Africa where the Group has entered into binding conditional agreement to form a 50/50 unincorporated joint venture pertaining to gold tailing project.

Note 13           Other financial assets

On 30 June 2020, the last condition precedent related to the disposal of Reef Miners Ltd ("Reef") as per the SPA, comprising the Imweru gold project and the Lubando gold project in northern Tanzania, was met resulting in the effective disposal of the subsidiary to Lake Victoria Gold Ltd ("LVG").

The following profit on disposal of the subsidiary was recognised in the audited annual report at 31 December 2020:

The amount receivable from Lake Victoria Gold will be due and payable on the following dates:

1.   US$100,000 upon the satisfaction of the Condition Precedent;

2.   US$100,000 upon registration of Reef in the name of LVG; 

3.   US$100,000 four months from the date of the SPA;

4.   US$200,000 nine months from the date of the SPA; and

5.   US$500,000 upon the earlier of the commissioning of the first producing mine of LVG in the Tanzania or the date 24 months from the date of the SPA.

As at 31 December 2020, funds of $100,000 have been received from Lake Victoria Gold in respect of the sale of Reef Miners Ltd ("Reef")

The receivable in Lake Victoria Gold has been fully impaired at 31 December 2020 due to the significant increase in credit risk, which is as a result of payments 1, 3 and 4 not being received as they become due and is still outstanding at the date of this interim report.

Blyvoor Joint Venture

On 30 January 2020, the Group entered into a Joint Venture Agreement with Blyvoor Gold Mines (Pty) Ltd, whereby Katoro Gold plc and Blyvoor Gold Mines (Pty) Ltd would become 50/50 participants in an unincorporated Joint Venture.

In accordance with the requirements of the Joint Venture Agreement, the Katoro Group was to provide a ZAR15.0 million loan (approximately £790,000) to the JV ('the Katoro Loan Facility'), which will fund ongoing development work on the Project.

As at 31 December 2020, the Group has advanced funding in the amount of £1,201,767 of which 100% relate to expenditure allocated to the Joint Venture operations, carried by the Katoro Gold plc Group.

Furthermore, the Group has continued to advance funding in the amount of £97,207 of which 100% relate to expenditure allocated to the Joint Venture operations, carried out by the Katoro Gold plc Group.

The Katoro Loan Facility shall form part of the development capital project financing that Katoro shall procure in accordance with its obligations contained in the Agreement, as detailed below, provided that:

· the balance of the Katoro Loan Facility then outstanding shall be subordinated to third party creditors participating in the development capital project financing;

· the Katoro Loan Facility will bear interest at the 12-month London Inter Bank Offered Rate, or its successor; and

· the Katoro Loan Facility will be repayable within 12 months after:

- the last third-party creditor participating in the project financing shall have been paid; or

- any earlier date on which the Parties may agree.

Note 14         Related parties

Relationships

Name                                                           Relationship

Kibo Energy plc                                           Significant shareholder and controlling parent 

Power Metal Resources plc                         Common shareholding

Related parties of the Group comprise subsidiaries, significant shareholders, and the Directors.

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation.

Transactions with related parties are effected on a commercial basis and related party debts are repayable on a commercial basis.

The transactions during the period between the Company and its subsidiaries included the settlement of expenditure to/from subsidiaries, working capital funding, and settlement of the Company's liabilities through the issue of equity in subsidiaries. The loans to/from Group companies do not have fixed repayment terms and are unsecured.

Note 15           Principal risks

The principal risks and uncertainties identified in the last Annual Report of Katoro Gold plc, issued in May 2021, have not materially changed/altered in the interim period.

Note 16           Use of Estimates and Judgements

The preparation of these condensed interim consolidated financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.

The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources.

In particular, there are significant areas of estimation, uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements.

• Valuation of share options and warrants;

• Credit loss allowance for other financial assets; and

• Valuation of mining licence in Kibo Nickel Ltd.

Note 17          Financial instruments - Fair value and Risk Management

The carrying amount of all financial assets and liabilities approximates the fair value. Directors consider the carrying value of financial instruments of a short-term nature, that mature in 12 months or less, to approximate the fair value of such assets or liability classes.

The carrying values of longer-term assets are considered to approximate their fair value as these instruments bear interest at interest rates appropriate to the risk profile of the asset or liability class.

The Group does carry any unlisted financial instruments measured in the statement of financial position at fair value at 30 June 2021.