CONDENSED CONSOLIDATED INTERIM CASH FLOW STATEMENT for the six months ended 30 June 2021

Notes to the condensed consolidated interim financial statements

1.             General information

These condensed consolidated interim financial statements of Metals Exploration and its subsidiaries (the "Group") were approved by the Board of Directors on 17 September 2021. Metals Exploration is the parent company of the Group. Its shares are quoted on AIM market of the London Stock Exchange plc. The registered address of Metals Exploration plc is 200 Strand, London, WC2R 1DJ.

The condensed consolidated interim financial statements for the period 1 January 2021 to 30 June 2021 are unaudited. In the opinion of the Board of Directors, the condensed consolidated interim financial statements for the period presents fairly the financial position, and results from operations and cash flows for the period in conformity with the generally accepted accounting principles consistently applied. The condensed consolidated interim financial statements incorporate unaudited comparative figures for the interim period from 1 January 2020 to 30 June 2020 and the audited financial year ended 31 December 2020.

The financial information set out in this interim report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The Group's statutory accounts for the year ended 31 December 2020, which were prepared under International Financial Reporting Standards, were filed with the Registrar of Companies. The auditors reported on these accounts and their report was unqualified and did not contain a statement under either Section 498 (2) or Section 498 (3) of the Companies Act 2006.

2.             Basis of preparation

The interim financial information in this report has been prepared using accounting policies consistent with UK-adopted international accounting standards. The financial information has been prepared based on UK-adopted international accounting standards that the Board of Directors expect to be applicable as at 31 December 2021.

These condensed consolidated interim financial statements have been prepared under the historical cost convention. There have been no changes in accounting policies as described in the 2020 annual financial statements.

3.             Going concern

These condensed consolidated interim financial statements of the Group have been prepared on a going concern basis, which contemplates the continuity of business activities, the realisation of assets and the settlement of liabilities in the normal course of business.

To date the Group has managed to limit the impact of COVID-19 on its operations. The main impact to have arisen during the COVID-19 crises is the limitation on movement of personnel to/from the project site and in/out of the Philippines. Although the pandemic continues throughout the Philippines, including the Group recording numerous on-site positive cases of COVID-19 during the half-year, COVID-19 related pressures are being well managed. The longer the impacts of the pandemic continue the greater the risk to operations. However, the Group's ability to keep the project in a positive cash flow position since the commencement of the pandemic gives reason to believe the impact of COVID-19 will not affect the future going concern status of the Group.

Although as at 30 June 2021, the Group's current liabilities continue to exceed its current assets, primarily due to the estimated external borrowings the Group expects to repay within the next 12 months, there is no obligation to adhere to a set loan principal or interest repayment schedule.

The Group's October 2020 debt restructure removed any set principal or interest repayment schedule. Excess free cashflow will be paid to lenders on a minimum quarterly basis only when net working capital is in excess of US$5million. In addition, the Group is not in default if it is unable to make a quarterly payment to the lenders. As a result of this debt restructure, and the ongoing existence of a US$5million positive net working capital balance, together with the sustained positive cash flows being produced by the Runruno Project, the Directors believe there is no material uncertainty over the Group's going concern.

The continuing viability of the Group and its ability to operate as a going concern and to meet its commitments as and when they fall due is dependent upon the ability of the Group to operate the Runruno Project successfully so as to generate sufficient cash flows to enable the Group to settle its liabilities (including the restructured debt facilities) as they fall due.

On the basis of the above, the Board of Directors believe that the Runruno Project will continue to operate successfully and produce positive cash flows. As a result the Board of Directors consider it appropriate that the half-year financial information should be prepared on a going concern basis.

4.             Earnings per share

The earnings per share was calculated on the basis of net profit/(loss) attributable to equity shareholders divided by the weighted average number of ordinary shares.

5.             Impairment charges

* Other receivables include VAT/Import duties on importations and other goods and services and stamp duties. Although until July 2022 the Group operates under an exemption from these paying taxes the Group continues to have little success in advancing its legal challenges to recover these past paid government imposts, and accordingly an impairment charge has been raised. In addition an impairment charge has been raised against advances made to associates.

6.             Loans

On 28 May 2015, the Company entered into a loan with two foreign international resource banks for US$83,000,000 in project finance (the "Facility Agreement"). In January 2020 the Facility Agreement was acquired by companies associated with the Mezzanine Lenders (the "New Lenders").

On 23 October 2020 the Group completed a debt restructuring with the New Lenders, whereby the Group no longer has an obligation to meet any fixed interest and principal repayment schedule (the "New Senior Debt"). The Group's repayment obligation under the New Senior Debt is now limited to making a quarterly repayment of that amount which equals the available net working capital ("NWC") over and above a minimum US$5 million NWC buffer. NWC is defined as the Group's available cash on hand plus gold sales proceeds due, and gold doré on hand or in transit, less all current liabilities (including budgeted operational, CAPEX and exploration expenses, taxes, hedging costs and government charges, but excluding all unpaid debt principal and interest).

The principal plus capitalised interest balance owing by the Group under the Facility Agreement as at 30 June 2021 was US$42,410,937 (30 June 2020: US$70,818,508).

Since 2015 the Company has entered into numerous facility agreements with two major shareholders, MTL (Luxembourg) Sarl and Runruno Holdings Limited (the "Mezzanine Lenders"). The purpose of these unsecured advances was for general corporate and working capital requirements of the Company and to enable completion of the Runruno Project.

In October 2020 under the debt restructuring the various original mezzanine facilities were consolidated into two new facilities (the "New Mezzanine Facilities") and a £100,000 revolving credit facility. There is no obligation to make any repayment of any amounts due under the New Mezzanine Facilities until the New Senior Debt is fully repaid. The New Mezzanine Facility interest rate will initially be 15% per annum, reducing to 7% per annum once the New Senior Debt has been fully repaid. The principal and accrued interest/fees balance owing by the Company to the Mezzanine Lenders as at 30 June 2021 was US$73,314,888 (30 June 2020: US$62,014,689).

The Group's outstanding loan positions were:

* Given the Group is not subject to a fixed repayment schedule then, in accordance with the restructured debt facilities, there is no certainty as to what amount of debt will be repaid within one year from period end. Thus the determination of what debt is deemed current and what is deemed non-current is subject to estimation. In making this calculation the Group has taken into account the Group's estimate of what principal repayments will be made during the next 12 month period.

7.             Contingent liabilities

The Group has no contingent liabilities identified as at 30 June 2021 (2020: US$nil).

8.             Subsequent events

There have been no subsequent disclosable events.