Katoro Gold Plc

(Incorporated in England and Wales)

(Registration Number: 9306219

Share code on the AIM: KAT

ISIN: GB00BSNBL022

("Katoro" or "the Company")

Condensed Consolidated Annual Financial Results for the year ended 31 December 2021

Dated 26 May 2022

Katoro Gold plc ("Katoro" or the "Company") (AIM: KAT), the Tanzanian focused exploration and development company is pleased to release its condensed consolidated annual financial results for the year ended 31 December 2021. The Company's Annual Report, which contains the full financial statements accompanying this announcement, is in the process of being prepared for dispatch to shareholders. A copy of this Annual Report will also be available from the Company's website at www.katorogold.com. Details of the date and venue for this year's AGM, will be announced on posting of the Annual Financial results.

Key Highlights

·      Maiden drill programme at the Haneti project commenced on December 29, 2020, and in spite of severe COVID-19 restrictions and related implications, completed 1965 metres of RAB drilling over 50 holes at Mihanza Hill and Mwaka Hill under extreme rainy conditions. 1965 samples were collected from which 776 three-metre composites were prepared for analyses at the SGS laboratory at Mwanza. Information gleaned from the RAB drilling results and the discovery of new gossanous nickel-copper-magnetite veining at Mihanza Hill, confirmed the results from previous exploration work done at Haneti, which was the primary objective of the RAB drill programme.

·      The Blyvoor project made enormous gains during the reporting period, of which the most important were the achievement of two major milestones, notably, the completion of all technical work, publication of a Competent Person's Report, and the subsequent decision to commence the process related to potentially listing the Blyvoor Joint Venture on the Standard List of the London Stock Exchange. The counterparty on the Blyvoor project however, failed to deliver all the required documentation to satisfy the last condition precedent, and as such the acquisition agreement did not become unconditional in December 2021. The Company is at the moment considering its position and options in this matter.

·      The Company strengthened its balance sheet with financing of £815,000 during the period, most notably a capital placing raise during November 2021 and based on current estimates have sufficient funding until January 2023.

·      Post period end:

o  The diamond drilling programme at Haneti, executed by an excellent drill contractor in a blistering 17 days, eventually completed 900.04 metres across three drill holes as planned and with depths of 430.24m, 245.78m and 224.02m respectively, by the first week in February 2022. Currently, all of the 428 samples prepared from drill core, is under laboratory analyses at SGS, South Africa; and

o  The Company entered into a Joint Venture Agreement with Lake Victoria Gold ('LVG') for the development of the Company's Imweru Gold Project ('Project'). Under the Agreement, LVG will earn up to 80% in the Project, with the balance of 20% being held by Katoro as a carried interest, with the JV reimbursing Katoro for previous expenditures in the amount of €792,000 on or before 31 December 2023.

For further information please visit www.katorogold.com or contact:

2021 was an intense and tumultuous year dominated by lingering COVID-19 restrictions and related issues,  especially so for the business world, and marred by unexpected and violent political unrest in South Africa. Despite these challenges, Katoro looks back on a  year of major achievements on all fronts.

Reflecting on this year, I would like to take a moment to thank the Company's Directors, business partners and shareholders for their dedication and support. As Katoro is a small Company with restricted resources, each individual and contractor had to stand up and be counted with resounding results.

Review of 2021

During this year, Katoro continued to roll out  its strategy by concluding project development  of the very promising South African Blyvoor project, as well as building up to the strategically important next step of Diamond Drilling at Haneti in Tanzania.

The Company strengthened its balance sheet with financing of £815,000 during the period, most notably a capital placing raise during November 2021.

Haneti Nickel PGM Project

The Haneti project , the early-stage exploration Joint Venture between Katoro Gold PLC (65%) and Power Metal Resources PLC (35%) has made great strides during this year.

Extensive  historic work on the Haneti Program to date, as well as the recent surface exploration work in 2020- 2021, completed the Anomaly Identification phase which was aimed at identification of nickel sulphide or other mineralization to justify advancing the program to the Anomaly  Confirmation Stage.

Based on this work and following a number of key geological conclusions on the mineral potential of Haneti,  two potential targets areas were identified for drilling: an area with one target at Mihanza and another area with two targets at Mwaka, representing good locations for diamond drilling to recover un‐weathered rocks from depth to assist with geological interpretation, and to test for fresh sulphide mineralisation at trace or more concentrated levels at depth.

The main objective of the planned drilling campaign was, through extraction of fresh rock material from depth, to confirm the anomaly identified through earlier work and to take an informed  strategic decision to undertake an intensive resource drilling programme.

In order to minimise risk, the decision was taken to proceed with a two-stage maiden drilling programme, notably, Stage 1, a Rotary Air Blast ("RAB")  programme aimed at providing better detail on the subsurface shape and orientation of the ultramafic body, thereby  allowing for better planning and placing of diamond drill holes,  and Stage 2,  diamond drilling programme,  to obtain fresh rock samples from depth. These samples, as they become available, will be sent for geochemical  and petrological  analysis to obtain further geological knowledge on the nature of the ultramafic body with the express aim of better understanding its potential to host a nickel sulphide deposit and to confirm the existence of sulphide mineralisation.

The above conclusions and planning defined execution of the two-stage 2020-2021 drilling program. Regrettably, the second stage diamond drilling programme was slightly delayed and only completed during Q1, 2022.

RAB Drilling Programme

This maiden drill programme that commenced on December 29, 2020, and in spite of severe COVID-19 restrictions and related implications, completed 1965 metres of RAB drilling  over 50 holes at Mihanza Hill and Mwaka Hill under extreme rainy conditions. 1965 samples were collected from which 776 three-metre composites were prepared for analyses at the SGS laboratory at Mwanza.

Information gleaned from the RAB drilling results and the discovery of new gossanous nickel-copper-magnetite veining at Mihanza Hill, confirmed the results from previous exploration work done at Haneti, which was the primary objective of the RAB drill programme. This provided the required confirmation to take the next step in the Haneti  exploration strategy, which was to proceed with the stage 2, deep diamond drilling to assess the potential for possible economic nickel sulphide mineralisation at Haneti.

Diamond Drilling Programme

Stage 2 of the Anomaly  Confirmation Stage, a diamond drilling programme, was planned to commence during late Q4, 2021, but was delayed by a mandatory license renewal  process as a necessary pre-curser to continued field work.  Although this delay was administrative by nature, the consequence was a renewed seven year life of the tenement programme, but a regrettably delayed drilling commencement  date of mid-January 2022.

Blyvoor Tailings Project

The South African Blyvoor Tailings Project, subject of a 50/50 unincorporated Joint Venture between Katoro Gold PLC and Blyvoor Gold Operations, the legal owner of the project,  is aimed at the exploitation of potentially viable deposits of gold and any other minerals from six gold tailings dams containing a SAMREC compliant resource of c. 1.4Moz gold at an average grade of c. 0.30g/t Au.  The project, subject to funding, targets operations to process 500,000 tonnes of tailings material per month, at an average Life of Mine ("LoM") gold grade of 0.29 g/t and confirmed recovery of up to 60%.

Led by veteran gold miner and former CEO of Harmony Gold, Graham Briggs, the Blyvoor project made enormous gains during the reporting period, of which the most important were the achievement of two major milestones, notably, the completion of all technical work,  publication of a Competent Person's Report, and the subsequent decision to commence the process related to the potential listing the Blyvoor Joint Venture on the Standard List of the London Stock Exchange. The counterparty on the Blyvoor project however, failed to deliver all the required documentation to satisfy the last condition precedent, and as such the acquisition agreement did not become unconditional in December 2021. The Company is at the moment considering its position and options in this matter.

Competent Persons Report

On 4 May 2021, the Company announced its  Competent Person's Report ("CPR"), reporting on the results and findings of additional technical and financial work conducted on the Blyvoor Gold Tailings Project in response to the recommendations and findings of the Blyvoor Scoping Study, previously completed.  The CPR, a comprehensive and detailed study on the Blyvoor TSF 1, 6 and 7 and Doornfontein TSF 1, 2 and 3 gold tailings storage facilities, comprised an advanced Pre-Feasibility level study, a SAMREC compliant reserve and resource statement, and a South African Mineral Asset Valuation ("SAMVAL") report on these  gold tailings storage facilities.

The CPR reported a 1,410,000 oz gold resource with 35.5% in the measured, 26.1% in the indicated and 38.4% in the inferred categories respectively  with TSF 6 and 7 upgraded to probably reserve status containing 424,000 oz gold and 392,000 oz gold respectively. The mine plan was reported at 1,352,822 oz gold and with a projected 51% recovery rate, aims at production of 675 842 oz gold over a 25-year Life of Mine.

The project financials reported by the CPR comprised of an unlevered NPV (7.9%) of USD 114 million, 33% IRR and ROI of 64%, underpinned by a USD 1610 gold price, all - in cost of USD 1067 per oz, project capital cost totalling USD 152million and peak funding requirement of USD 69 million.

Completion of the technical work and especially the independent SAMVAL valuation of the project reconfirmed the robustness of the project.

Post Year-End Statement

Post reporting period, the Company has continued to make significant progress on all aspects of the business.

The diamond drilling programme at Haneti, executed by an excellent drill contractor in a blistering 17 days, eventually completed  900.04 metres across three drill holes as planned and with depths of 430.24m, 245.78m and 224.02m respectively, by the first week in February 2022.    Currently, all of the 428 samples prepared from drill core, is under laboratory analyses at SGS, South Africa.

The Company entered into a Joint Venture Agreement with Lake Victoria Gold ('LVG') for the development of the Company's Imweru Gold Project ('Project'). Under the Agreement, LVG will earn up to 80% in the Project, with the balance of 20% being held by Katoro as a carried interest, with the JV reimbursing Katoro for previous expenditures in the amount of €792,000 on or before 31 December 2023.

Conclusion

In conclusion it remains to be said that 2021 was an extremely challenging year but was rewarded with excellent project development results. This was made possible by tremendously competent and dedicated project management and technical teams and partners who grinded out results despite many difficulties.  The progress of 2021 prepared the Company with an optimistic outlook for 2022 and beyond.

This report was approved on 26 May 2022 by:

Louis Coetzee

Executive Chairman

This announcement contains inside information as stipulated under the Market Abuse Regulations (EU) no. 596/2014.

The Board of Directors present their strategic report together with the audited annual financial statements for the year ended 31 December 2021 of Katoro Gold PLC (the "Company") and its subsidiaries (collectively the "Group").

Principal activities

The principal activity of the Group is gold and nickel focussed exploration activities in Tanzania and South Africa.

Review of business in the year

The Group is in its early stage of development and details of the operational activities of the Group are included in the Chairman's report. 

Financial activities

The decrease in the loss year-on-year, as disclosed in the table above and in the statement of comprehensive income, is mainly owing to the following causes:

•     Decrease in administrative expenses due to decrease in operational activities during the current period; and

•     Decrease in exploration expenditure due to the completion of the CPR Report on the Blyvoor Joint Venture exploration early in the financial period, following which further exploration was stagnant.

Key performance indicators

Management does not consider there to be any key financial KPI's at this stage, other than the loss per share for the period, which is included in the statement of comprehensive income. As and when operational activities increase management will reconsider the key financial KPI's and update the necessary disclosures accordingly. Non-financial KPI's comprise the measure of advancement with respect to the various key exploration projects over the medium to long term.

Principal Risks and Uncertainties

The realisation of exploration and evaluation assets is dependent on the discovery and successful development of economic mineral reserves and is subject to a number of significant potential risks summarised as follows, and described further below:

•     Financial instrument & Foreign exchange risk;

•     Strategic risk;

•     Funding risk;

•     Commercial risk;

•     Operational risk;

•     Speculative Nature of Mineral Exploration and Development;

•     Political Stability; and

•     Foreign investment risks including increases in taxes, royalties and renegotiation of contracts.

Financial instrument and foreign exchange risk

The Company and Group are exposed to risks arising from financial instruments held and foreign exchange transactions entered into throughout the period. These are discussed in Note 19 to the Annual Financial Statements.

Strategic risk

Significant and increasing competition exists for mineral acquisition opportunities throughout the world. As a result of this competition, the Group may be unable to acquire rights to exploit additional attractive mining properties on terms it considers acceptable. Accordingly, there can be no assurance that the Group will acquire any interest in additional operations that would yield reserves or result in commercial mining operations. The Company expects to undertake sufficient due diligence where warranted to help ensure opportunities are subjected to proper evaluation.

Funding risk

In the past the Group has raised funds via equity contributions from new and existing shareholders, thereby ensuring the Group remains a going concern until such time that revenues are earned through the sale or development and mining of a mineral deposit. There can be no assurance that such funds will continue to be available on reasonable terms, or at all in future. The Directors regularly review cash flow requirements to ensure the Group can meet financial obligations as and when they fall due.

The Group currently generates no revenue and had net assets of £922,426 as at 31 December 2021 (31 December 2020: £121,876). As at year end, the Group had liquid assets in the form of cash and cash equivalent and other financial asset balances receivable of £827,956 and £48,702 respectively.

The Directors have reviewed budgets, projected cash flows and other relevant information, and on the basis of this review and the below, they are confident that the Company and the Group will have adequate financial resources to continue in operational until January 2023, whereafter further funding will be required.  

The Group has limited funds available post year end following from the continued exploration activities undertaken throughout the Group, which based on current estimation would be sufficient to continue operations until January 2023, therefore further capital raising will be required to advance the underlying projects of the Group beyond the foreseeable future, and continue operations.

The Directors though continue to review the Group's options to secure additional funding for its general working capital requirements, alongside its ongoing review of potential acquisition targets and corporate development needs.

The Group and Company will require additional finance in order to progress work on its current assets and bring them to commercial development and cash generation. Such development is dependent on successful explorations and technical reports and then on securing further funding.  The Directors are confident in this light that such funding will be available, although there is no guarantee as to the terms of such funding or that such funding will be available. As a result, the Directors continue to monitor and manage the Company's cash and overheads carefully in the best interests of its shareholders. 

Whilst the Directors continue to consider it appropriate to prepare the financial statements on a going concern basis the above constitutes a material uncertainty that shareholders should be aware of. 

Commercial risk

The mining industry is competitive and there is no assurance that, even if commercial quantities of minerals are discovered, a profitable market will exist for the sale of such minerals. There can be no assurance that the quality of the minerals will be such that the Group properties can be mined at a profit. Factors beyond the control of the Group may affect the marketability of any minerals discovered. Mineral prices are subject to volatile price changes from a variety of factors including international economic and political trends, expectations of inflation, global and regional demand, currency exchange fluctuations, interest rates and global or regional consumption patterns, speculative activities and increased production due to improved mining and production methods. Ultimately, the Group expects that prior to a development decision, a project would be the subject of a feasibility analysis to ensure there exists an appropriate level of confidence in its economic viability.

Operational risk

Mining operations are subject to hazards normally encountered in exploration, development and production. These include unexpected geological formations, rock falls, flooding, dam wall failure and other incidents or conditions which could result in damage to plant or equipment or the environment and which could impact any future production throughout. Although it is intended to take adequate precautions to minimise risk, there is a possibility of a material adverse impact on the Group's operations and its financial results. The Company will develop and maintain policies appropriate to the stage of development of its various projects.

Staffing and Key Personnel Risks

Recruiting and retaining qualified personnel is critical to the Group's success. The number of persons skilled in the acquisition, exploration and development of mining properties is limited and competition for such persons is intense. While the Company has good relations with its employees, these relations may be impacted by changes in the scheme of labour relations which may be introduced by the relevant governmental authorities. Adverse changes in such legislation may have a material adverse effect on the Group's business, results of operations and financial condition. Staff are encouraged to discuss with management matters of interest to the employees and subjects affecting day-to-day operations of the Group.

Speculative Nature of Mineral Exploration and Development

In addition to the above there can be no assurance that the current exploration programmes will result in profitable mining operations.

The recoverability of the carrying value of exploration and evaluation assets is dependent on the successful discovery of economically recoverable reserves, the achievement of profitable operations, and the ability of the Group to raise additional financing, if necessary, or alternatively upon the Company's ability to dispose of its interests on an advantageous basis. Changes in market conditions could require material write downs of the carrying value of the Group's assets.

Development of the Group's mineral exploration properties is, amongst others, contingent upon obtaining satisfactory exploration results and securing additional adequate funding. Mineral exploration and development involves substantial expenses and a high degree of risk, which even a combination of experience, knowledge and careful evaluation may not be able to adequately mitigate. The degree of risk reduces substantially when a Group's properties move from the exploration phase to the development phase.

The discovery of mineral deposits is dependent upon a number of factors including the technical skill of the exploration personnel involved. The commercial viability of a mineral deposit, once discovered, is also dependent upon a number of factors, including the size, grade and proximity to infrastructure, metal prices and government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals, and environmental protection. In addition, several years can elapse from the initial phase of drilling until commercial operations are commenced.

Political Stability

The Company is conducting its activities in Tanzania and South Africa. The Directors believe that the Governments of Tanzania and South Africa support the development of natural resources by foreign investors and the Directors actively monitor the situation on an ongoing basis. However, there is no assurance that future political and economic conditions in Tanzania and South Africa will not result in the respective governments adopting different policies regarding foreign development and ownership of mineral resources. Any changes in policy affecting ownership of assets, taxation, rates of exchange, environmental protection, labour relations, repatriation of income and return of capital, may affect the Company's ability to develop the projects.

Uninsurable Risks

The Group may become subject to liability for accidents, pollution and other hazards against which it cannot insure or against which it may elect not to insure because of prohibitive premium costs or for other reasons, such as amounts which exceed policy limits.

Foreign investment risks including increases in taxes, royalties and renegotiation of contracts

The Group is subject to risk arising from the ever-changing economic environment in which its subsidiaries operate, mainly driven by the changing regulatory environment governing corporate taxation, transfer pricing and other investment related operational activities. The Group continues to re-assess its investment decisions in order to limit exposure to the ever-changing regulatory environment in which it operates.

Section 172 Report

Section 172(1)(a) to (f) of the Companies Act 2006 requires each director to act in the way he or she considers would be most likely to promote the success of the Company for the benefit of its members as a whole, with regard to the following matters: 

a.     The likely consequences of any decision in the long-term

Katoro is a mining exploration and development Company. By their natures mining exploration and development projects are complex, capital intensive, last many years and involve a varied group of stakeholders. As such it is extremely important that the board considers all decisions made by the Company in the context of their long-term impact on the Company. Consequences of such decisions include (but are not limited to) the impact on all stakeholders (with particular care towards local communities), impact on environmental issues in and around project areas and the financial impact on the Company and its ability to function effectively. Katoro Gold is meticulous in its planning, as is required for permitting processes in the mining exploration and development sector. As such, the Company prepares detailed planning documents before initiating any major work programme.  Such planning documents assess a variety of factors from community and environmental issues to technical geological and project funding matters.

Where appropriate the Company provides copies of these reports on its website (www.katorogold.com) or releases excerpts via the London Stock Exchange's Regulatory News Service.

b.     The interests of the company's employees

The health and safety of Katoro Gold's employees is of paramount concern to the board. It is imperative that Katoro Gold provides a safe and secure working environment for all staff. The Company conducts regular Health & Safety reviews and ensures that any operational plans are subject to rigorous scrutiny in their creation and constant monitoring during their implementation.

The Company is a responsible employer in respect to the approach it takes towards employee pay and benefits. These are constantly reviewed.

c.     The need to foster the company's business relationships with suppliers, customers and others

Mining exploration and development projects involve a diverse and varied group of stakeholders. These include (but is not limited to) the Company's employees, government officials, local communities, financial backers, shareholders and other suppliers. The Company adopts a transparent and open stance in its dealings with all stakeholders to help build trust. Mining exploration and development projects can only succeed with the full support of all involved.

The board has oversight of the procurement and contract management processes in place and receives regular updates on any matters of significance, as well as approving the awarding of large contracts. The board ensures the Company fully adheres to the Bribery Act 2010.

d.     The impact of the company's operations on the community and environment

Mining exploration and development projects can have a significant impact on local communities and the environment. The board constantly reviews the impact of its operations on local communities and the environments. Where required, the Company completes detailed surveying work (such as Environmental Impact Assessments) and, where necessary, applies for relevant permits. Such processes require diligence and concentrated effort.

The board ensures it maintains positive relations with local communities, by engaging in local programmes and providing secure employment opportunities.

e.     The desirability of the company maintaining a reputation for high standards of business conduct

As a listed Plc, Katoro Gold's reputation for the high standards of its business conduct is paramount. The board makes every effort to ensure it maintains these.

The Company is subject to the disclosure requirements of the AIM Rules for Companies and Financial Conduct Authority's Disclosure Transparency Rules. These comprehensive set of rules enforce a strict discipline upon the Company in terms of the manner, timeliness, subjectivity and content of its public disclosures.

Katoro Gold is also required to complete an annual audit. This is a rigorous analysis of the Company's operations and review of the Company's policies. The results of this are published each year in the Company's Annual Report.

Katoro Gold also publishes on its website an "AIM 26 Disclosure" (https://katorogold.com/?page_id=19), which details much of the manner in which the Company is run.

Katoro Gold is committed to corporate governance and adheres to the QCA Corporate Governance Code. The Company's corporate governance statement can be found here -  https://katorogold.com/wp-content/uploads/2018/10/QCA-Statement.pdf.

f.      The need to act fairly as between members of the company

As a listed Company, Katoro Gold is committed to treating its shareholders fairly and delivering shareholder value.

Katoro Gold is registered in England and Wales and is subject to the Companies Act 2006. The Company is also subject to the UK City Code on Takeovers and Mergers. The Company's articles of association, which help define some of the actions between the Company and its shareholders, can be found here https://katorogold.com/?page_id=31

This report was approved by the Board on 26 May 2022 and signed on its behalf by:

Louis Coetzee

Executive Chairman