FINANCIAL REPORT FOR YEAR ENDED 31 DECEMBER 2018

STATEMENTS OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2018

 

		Parent		Consolidated Entity
	Note	31 Dec 2018	31 Dec 2017	31 Dec 2018	31 Dec 2017
		USD	USD	USD	USD
CASH FLOWS FROM OPERATING ACTIVITIES
Payments to suppliers and employees		(1,178,545)	-	(6,017,020)	(4,957,110)
Income tax paid		-	-	(37,030)	-
Net cash used in operating activities	14	(1,178,545)	-	(6,054,050)	(4,957,110)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for plant and equipment				(8,452)	(94,262)
Payments for exploration activities		-	-	(17,104,196)	(28,023,569)
Interest received		-	-	68,528	50,858
Net cash used in investing activities		-	-	(17,044,120)	(28,066,973)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares		12,894,392	-	12,894,392	5,000,000
Payment for share issue costs		-	-	-	(823,050)
Proceeds from issue of convertible loan note		250,000	-	250,000	-
Amounts advanced to related parties		(11,965,847)	-	-	-
Net cash provided by financing activities		1,178,545	-	13,144,392	4,176,950
Net (decrease)/increase in cash & cash equivalents held		-	-	(9,953,778)	(28,847,133)
Cash and cash equivalents at beginning of financial year		-	-	16,455,490)	42,609,786)
Foreign currency differences		-	-	(314,599)	2,692,837)
Cash and cash equivalents at end of financial year	4	-	-	6,187,113	16,455,490

 

 

The accompanying notes from pages 72 to 128 form part of these financial statements.

 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2018

 

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The Company is a public company incorporated and registered in England and Wales with primary dual listing on the AIM market and on the ASX, and a secondary listing on the JSE. The consolidated financial statements of the Company as at and for the year ended 31 December 2018 comprise the Company and its subsidiaries which are disclosed in Note 8 (together referred to as the "Group"). The Group is involved in mining exploration activity in the RoC.

 

On 31 August 2017, Kore Potash Limited announced that it proposed to re-domicile in the United Kingdom by way of a scheme of arrangement (Scheme) between Kore Potash Limited and its shareholders. The Scheme was approved by the shareholders on 27 October 2017 and the Federal Court of Australia on 6 November 2017. On 20 November 2017, the Scheme was implemented and as a result the Company is the new parent and Kore Potash Limited is the wholly-owned subsidiary of the Company.

 

The registered office of Kore Potash plc's head office in the United Kingdom is 25 Moorgate, London, United Kingdom EC2R 6AY. The registered office Kore Potash Limited in Australia is Level 3, 88 William Street, Perth 6000 WA.

 

Basis of Preparation

 

(a)   Statement of Compliance

The annual financial statements of the Company and the Group have been prepared in accordance with IFRS as adopted by the European Union. The principal accounting policies adopted by the Group and Company are set out below.

 

The financial statements were authorised for issue by the Directors on 28 March 2019.

 

(b)   Going Concern

During the year ended 31 December 2018, the Group incurred a loss of USD 6,269,366 (2017: USD 4,344,322) and experienced net cash outflows from operating and investing activities of USD 23,098,170 (2017: USD 33,024,083). Cash and cash equivalents totaled USD 6,187,113 as at 31 December 2018 (USD 16,455,490 as at 31 December 2017). The Group has no current source of operating revenue and is therefore dependent on both existing cash resources and future fund raisings to meet overheads and future exploration requirements as they fall due.

 

The Directors have prepared a cash flow forecast for the period ending 31 December 2020, which indicates that the Group will not have sufficient liquidity to meet its working capital requirements to the end of the going concern period, primarily being corporate costs, exploration expenditure, and costs related to the Kola Project. Forecast costs in the next 12 months are approximately USD 10 million. However, a significant portion of this cost base is not yet committed, pending completion of the fund raise, and further steps can therefore be taken to reduce forecast overheads if required.

 

The Directors have therefore considered mitigating actions, which include:

 

(a)   completion of a capital raising; and

(b)   managing and deferring costs where applicable to coincide with the capital raising activity outlined above to ensure all obligations can be met.

 

The Directors are planning to raise additional capital in quarter 2 of 2019 to enable the Group to continue to fund its exploration and development programme and fulfill its working capital requirements. The Directors have identified a number of funding options available to the Group, and have begun discussions with its major shareholders with regards to its near and mid-term funding requirements. The Directors note the Group has a history of successfully raising capital on the ASX and more recently on the AIM and JSE.

 

The Directors have reviewed the Group's overall position and outlook in respect of the matters identified above and are of the opinion that there are reasonable grounds to believe that funding will be secured and therefore that the operational and financial plans in place are achievable and accordingly the Group will be able to continue as a going concern and meet its obligations as and when they fall due.

 

(b)   Going Concern (Cont)

The ability of the Group to continue as a going concern is dependent on achieving the matters set out above. These conditions indicate a material uncertainty which may cast significant doubt as to the Group's ability to continue as a going concern and therefore it may be unable to realise its assets and discharge its liabilities in the normal course of business.

 

The financial report does not include adjustments relating to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that might be necessary should the Group not continue as a going concern.

 

(c)   Basis of Measurement

The consolidated financial statements have been prepared on the basis of historical cost, adjusted for the treatment of certain financial instruments, as explained in the accounting policies below. Historical cost is generally based on the fair values of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date.

 

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

·      Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

·      Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and

·      Level 3 inputs are unobservable inputs for the asset or liability.

 

(d)   Functional and Presentation Currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates. The functional currency of the ultimate parent entity (Kore Potash plc) is US dollars. The functional currency of the subsidiaries are:

 

·      Kore Potash Limited - US dollars (USD)

·      Sintoukola Potash S.A. - CFA Franc BEAC (XAF)

·      Dougou Mining S.A. - CFA Franc BEAC (XAF)

·      Kola Mining S.A. - CFA Franc BEAC (XAF)

·      Kore Potash South Africa (Pty) Ltd - South African RAND (ZAR)

 

The presentational currency of the Group is US dollars.

 

(e)   Foreign Currency Transactions and Balances

 

Transactions in foreign currencies are initially recorded in the functional currency at the exchange rates ruling at the date of the transaction. Where consideration is received in advance of revenue being recognised the date of the transaction reflects the date the consideration is received. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the reporting date.

 

All differences in the consolidated financial report are taken to the Statement of Profit or Loss and Other Comprehensive Income.

 

 

(e)   Foreign Currency Transactions and Balances (Cont)

 

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction.  Non-monetary items measured at fair value in a foreign currency are translated using the exchange rate at the date the fair value was determined.

 

As at the reporting date, the assets and liabilities of the foreign subsidiaries are translated into the reporting currency of the Company at the rate of exchange ruling at the reporting date and the profit or loss in the Statement of Profit or Loss and Other Comprehensive Income are translated at the weighted average exchange rates for the period. The exchange differences on the retranslation are taken directly to a separate component of equity.

 

On disposal of a foreign entity, the deferred cumulative amount recognised in equity is recognised in the profit or loss in the Statement of Profit or Loss and Other Comprehensive Income. The functional currency for Sintoukola is expected to change to US dollars upon the commencement of mining.

 

(f)    Basis of Consolidation

 

Subsidiaries are entities controlled by the Group. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies.

 

Control is achieved when the Company:

·      has power over the investee;

·      is exposed, or has rights, to variable returns from its involvement with the investee; and

·      has the ability to use its power to affect its returns.

 

The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. Subsidiaries are fully consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group, other than in the event of a Group re-organisation as occurred during the year as described below.

 

The acquisition of Kore Potash Limited by the Company on 20 November 2017 is considered outside the scope of IFRS 3 Business Combinations and accordingly has been accounted for as a common control transaction. The investment in Kore Potash Limited acquired by the Company as a result of the internal reorganisation was recognised at a value consistent with the carrying value of the equity items in the Kore Potash Limited accounts immediately prior to the Scheme. In the Parent entity, the difference between the carrying amount of share capital and options issued by the Company under the Scheme and the investment in Kore Potash Limited has been recognised in a Reorganisation Reserve.

 

In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses and profit and losses resulting from intra-Group transactions have been eliminated in full.

 

The acquisition of subsidiaries has been accounted for using the purchase method of accounting, other than in the Group re-organisation described above. The purchase method of accounting involves allocating the cost of the business combination to the fair value of the assets acquired and the liabilities and contingent liabilities assumed at the date of acquisition. Accordingly, the consolidated financial statements include the results of subsidiaries for the period from their acquisition.

 

Non-controlling interests represent the portion of profit or loss and net assets in subsidiaries not held by the Group and are presented separately in the consolidated Statement of Profit or Loss and Other Comprehensive Income and within equity in the consolidated Statement of Financial Position.

 

In the Company's financial statements, investments in subsidiaries are carried at cost.  A list of controlled entities is contained in Note 8 to the financial statements.

 

(g)   Income Tax

 

The charge for current income tax expenses is based on the profit for the year adjusted for any non-assessable or disallowed items. It is calculated using tax rates that have been enacted or are substantively enacted by the reporting date.

 

Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements.  No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.

 

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled.  Deferred tax is recognised in the profit or loss in the Statement of Profit or Loss and Other Comprehensive Income except where it relates to items that are recognised directly in equity, in which case the deferred tax is adjusted directly against equity. 

 

Deferred income tax assets are recognised to the extent it is probable that future tax profits will be available against which deductible temporary differences can be utilised.

 

The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the Group will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law.

 

(h)   Property, Plant and Equipment

Property, plant and equipment is carried at cost less, where applicable, any accumulated depreciation and impairment losses.

 

The carrying amount of property, plant and equipment is reviewed at each reporting date to ensure it is not in excess of the recoverable amount from those assets.  The recoverable amount is assessed on the basis of the expected net cash flows which will be received from the assets employment and subsequent disposal.

 

Depreciation

The depreciable amount of all fixed assets is depreciated on a straight line basis over their estimated useful lives to the Group commencing from the time the asset is held ready for use. The depreciation rates used for the plant and equipment is in the range of 20% - 40%. The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. Depreciation of property, plant and equipment in SPSA is included in Capitalised Exploration and Evaluation Expenditure.

 

An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount.  These gains or losses are included in the profit or loss in the Statement of Profit or Loss and Other Comprehensive Income. When revalued assets are sold, amounts included in the revaluation reserve relating to that asset are transferred to retained earnings.

 

(i)    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. See Note 1(m) for further details on the recognition and measurement of trade and other receivables and cash and cash equivalents.

 

(i)    Financial Assets

Investments other than investments in subsidiaries are classified as either held-for-trading or not at initial recognition. At the year-end date all investments are classified as not held for trading. An irrevocable election has been made to recognise changes in fair value in other comprehensive income.

 

Trade and other receivables are initially measured at fair value plus any direct attributable transaction costs. Subsequent to initial recognition, trade and other receivables are measured at amortised cost using the effective interest method, less any impairment losses.

 

Trade receivables are held in order to collect the contractual cash flows and are initially measured at the transaction price as defined in IFRS 15, as the contracts of the Group do not contain significant financing components. Impairment losses are recognised based on lifetime expected credit losses in profit or loss.

 

Other receivables are held in order to collect the contractual cash flows and accordingly are measured at initial recognition at fair value, which ordinarily equates to cost and are subsequently measured at cost less impairment due to their short term nature. A provision for impairment is established based on 12-month expected credit losses unless there has been a significant increase in credit risk when lifetime expected credit losses are recognised. The amount of any provision is recognised in profit or loss.

 

(ii)   Financial Liabilities and Equity

Financial liabilities and equity instruments issued by the Group are classified in accordance with the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

 

All other loans including convertible loan notes are initially recorded at fair value, which is ordinarily equal to the proceeds received net of transaction costs. These liabilities are subsequently measured at amortised cost, using the effective interest rate method.

 

(iii)  Effective Interest Rate Method

The effective interest rate method is a method of calculating the amortised cost of a financial asset or liability and allocating interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash flows through the expected life of the financial asset or liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

 

(j)    Impairment of Non-Financial Assets Other Than Exploration and Evaluation Assets

 

The carrying amounts of the Group's non-financial assets, are reviewed at each reporting date to determine whether there is any indication of impairment.  If any such indication exists then the asset's recoverable amount is estimated.

 

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell.  In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount.  Impairment losses are recognised in the profit or loss in the Statement of Profit or Loss and Other Comprehensive Income.  In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exist.  An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.  An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss has been recognised.

 

(k)   Revenue Recognition

Revenue is measured at the transaction price received or receivable allocated to the performance obligation satisfied and represents amounts receivable for goods and services provided in the normal course of business, net of discounts, VAT, GST and other sales related taxes. As the expected period between transfer of a promised good or service and payment from the customer is one year or less then no adjustment for a financing component has been made.

 

Sales of goods are recognised when goods are delivered and control has passed.

 

Revenue arising from the provision of services is recognised when and to the extent that the customer simultaneously receives and consumes the benefits of the Group's performance or the Group does not create an asset with an alternative use but has an enforceable right to payment for performance completed to date.

 

Interest income is recognised in the Statement of Profit or Loss and Other Comprehensive Income using the effective interest method.

 

(l)    Trade and Other Payables

These amounts represent liabilities for goods and services provided to the entity prior to the end of the financial year and which are unpaid. Trade and other payables are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, trade and other payables are measured at amortised cost using the effective interest rate method.

 

(m) Cash and Cash Equivalents

For purposes of the statement of cash flows, cash includes deposits at call with financial institutions and other highly liquid investments with short periods to maturity which are readily convertible to cash on hand and are subject to an insignificant risk of changes in value.

 

(n)   Fair Value Estimation

The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes.

 

The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and available-for-sale securities) is based on quoted market prices at the balance sheet date.  The quoted market price used for financial assets held by the entity is the current bid price; the appropriate quoted market price for financial liabilities is the current ask price.

 

The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques.  The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each reporting date.  Quoted market prices or dealer quotes for similar instruments are used for long-term debt instruments held.  Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments.

 

The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values.  The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the entity for similar financial instruments.

 

(o)   Value-Added Tax ("VAT") / Goods and Services Tax ("GST")

Revenues, expenses and assets are recognised net of the amount of VAT / GST, except where the amount of VAT / GST incurred is not recoverable from the relevant jurisdiction's Tax Office. In these circumstances the VAT / GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of VAT / GST.

 

Cash flows are presented in the Statement of Cash Flow on a gross basis, except for the VAT / GST component of investing and financing activities, which are disclosed as operating cash flows.

 

(p)   Capitalisation of Exploration and Evaluation Expenditure

 

Exploration and evaluation expenditures in relation to each separate area of interest are recognised as an exploration and evaluation asset in the year in which they are incurred where the following conditions are satisfied:

 

·      the rights to tenure of the area of interest are current; and

·      at least one of the following conditions is also met:

o  the exploration and evaluation expenditures are expected to be recouped through successful development and exploration of the area of interest, or alternatively, by its sale; or

o  exploration and evaluation activities in the area of interest have not at the reporting date reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation to, the area of interest are continuing.

 

Exploration and evaluation assets are initially measured at cost and include acquisition of rights to explore, studies, exploratory drilling, trenching and sampling and associated activities and an allocation of depreciation and amortised of assets used in exploration and evaluation activities. General and administrative costs are only included in the measurement of exploration and evaluation costs where they are related directly to operational activities in a particular area of interest.

 

Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount at the reporting date. The recoverable amount of the exploration and evaluation asset (for the cash generating unit(s) to which it has been allocated being no larger than the relevant area of interest) is estimated to determine the extent of the impairment loss (if any). Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent 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 in previous years.

 

Where a decision is made to proceed with development in respect of a particular area of interest, the relevant exploration and evaluation asset is assessed for impairment and the balance is classified as a development asset. The point at which an area of interest is considered developmental is based on finalisation of a definitive feasibility study, a bankable feasibility study and the finalisation of appropriate funding.

 

Accumulated costs in relation to an abandoned area are written off in full against profit in the year in which the decision to abandon the area is made. When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest.

 

Costs of site restoration are provided over the life of the facility from when exploration commences and are included in the costs of that stage. Site restoration costs include the dismantling and removal of mining plant, equipment and building structures, waste removal, and rehabilitation of the site in accordance with clauses of the mining or petroleum permits. Such costs have been determined using estimates of future costs, current legal requirements and technology on an undiscounted basis.

 

Any changes in the estimates for the costs are accounted on a prospective basis. In determining the costs of site restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations and future legislation. Accordingly the costs have been determined on the basis that the restoration will be completed within one year of abandoning the site.

 

(q)   Share Based Payments

 

Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. The fair value grant rate is independently determined using the different option pricing models that takes into account the exercise price, the term of the option, the market and non-market based vesting and performance criteria, the impact of dilution, the tradeable nature of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option.

 

The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of equity instruments that will eventually vest, with a corresponding increase in equity.

 

When share options and performance rights are exercised, the Company issues new shares. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium.

 

(r)   Employee Benefits

 

(i)    Wages, salaries and annual leave

Liabilities for wages, salaries and annual leave are recognised in respect of employees' services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled.

 

(ii)   Pension contributions

Contributions are made by the Group to pension funds as stipulated by statutory requirements and are charged as expenses when incurred.

 

(iii)  Employee benefit on costs

Employee benefit on costs, including payroll tax, are recognised and included in employee benefits liabilities and costs when the employee benefits to which they relate are recognised as liabilities.

 

(s)   Earnings per Share

 

(i)    Basic earnings per share

Basic earnings per share is determined by dividing the net profit after income tax attributable to members of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year.

 

(ii)   Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

 

(t)   Issued Capital

 

Ordinary shares and CDIs are classified as equity.

 

Costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Costs directly attributable to the issue of new shares or options incurred in connection with a business combination, are included in the cost of the acquisition as part of the purchase consideration.

 

(u)   Critical Accounting Judgements and Estimates

 

In the application of the Group's accounting policies, which are described in this note, the directors are required to make judgements (other than those involving estimations) that have a significant impact on the amounts recognised and to make estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

 

The areas involving significant accounting judgment are set out in the tables below:

 

Critical accounting judgement

Details

Impairment of exploration and evaluation assets, recovery of parent company investments and intercompany balances

The ultimate recovery of the value of exploration and evaluation assets, the Company's investment in subsidiaries, and loans to subsidiaries is dependent on the successful development and commercial exploitation, or alternatively, sale, of the exploration and evaluation assets.   On a regular basis, management consider whether there are indicators as to whether the asset carrying values exceed their recoverable amounts.  This consideration includes assessment of the following: (a)   expiration of the period for which the entity has the right to explore in the specific area of interest with no plans for renewal; (b)   substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is neither budgeted nor planned; (c)   exploration for and evaluation activities have not led to the discovery of commercially viable quantities of mineral resources and the entity has decided to discontinue such activities in the specific area; and (d)   whether sufficient data exists to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale.   Management judgement is required to determine whether the expenditures which are capitalised as exploration and evaluation assets will be recovered by future exploitation or sale or whether they should be impaired. In assessing this, management determines the possibility of finding recoverable ore reserves related to a particular area of interest, which is a subject to significant uncertainties. Many of the factors, judgements and variables involved in measuring resources are beyond the Group's control and may prove to be incorrect over time. Subsequent changes in resources could impact the carrying value of exploration and evaluation assets.   Where an impairment indicator is identified, the determination of the recoverable amount requires the use of estimates and judgement in determining the inputs and assumptions used in determining the recoverable amounts.   The key areas of judgement include: ·    Recent exploration and evaluation results and resource estimates; ·    Environmental issues that may impact on the underlying tenements; ·    Fundamental economic factors that have an impact on the operations and carrying values of assets and liabilities.   Based on the information the Company has on the above, it was concluded by management that amounts were recoverable, and that no write down of exploration and evaluation assets, the Company's investment in subsidiaries, and intercompany balances was recognised. This may change as new information becomes available.

 

(u)   Critical Accounting Judgements and Estimates (Cont)

 

Critical accounting judgement

Details

Classification of capitalised exploration and evaluation costs to date

Management judgement is required as to whether the assets associated with the Kola Project represents an exploration asset to be accounted for under IFRS 6 Exploration for and Evaluation of Mineral Resources, or a development asset to be accounted for under IAS 16 Property, Plant and Equipment or IAS 36 Impairment of Assets. A conclusion that consideration is required under IAS 16 or IAS 36 would mean that a full impairment test of the assets associated with the Kola Project would have been required during 2018.   In reaching the judgement that the assets associated with the Kola Project should remain capitalised as exploration and evaluation assets, management has assessed whether technical and commercial viability of extracting mineral resources has been demonstrated. Given the ongoing negotiation with the FC over the final construction cost, and remaining permits to be obtained from the RoC, the Group has concluded that final technical and commercial viability of the Kola Project has yet to be finalised.

 

(v)   Assumptions and Estimation Uncertainties

 

Information about assumptions and estimation uncertainties at 31 December 2018 that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities are set out in the table below.

 

Estimation Uncertainty

Details

Valuation of share-based payments and judgment on the probability and timing of achieving milestones related to share-based payment arrangements in existence

The Group issues options and performance rights as share-based payments arrangements to certain Directors, KMP and employees. The fair values of the options and performance rights are determined using the Black Scholes Option Pricing Model, the Cox, Ross and Rubinstein Binomial Option Pricing Model or the Monte Carlo Option Pricing Model that takes into account the exercise price, the term of the options and performance rights, the impact of dilution, the share price at valuation date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the options and performance rights.   The share-based payments arrangements are expensed on a straight line basis over the vesting period, based on the Group's estimate of shares that will eventually vest. At each reporting date, vesting assumptions are reviewed to ensure they reflect current expectations and immediately recognises any impact of the revision to original estimates. If fully vested share options are not exercised and expire then the accumulated expense in respect of these is reclassified to accumulated losses.

 

(w)  Segment Reporting

 

Operating segments are reported in a manner that is consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker has been identified as the Board of Directors, which is responsible for allocating resources and assessing performance of the operating segments.

 

(x)   New and Revised Accounting Standards and Interpretations Adopted

 

From 1 January 2018 the following standards and amendments are effective in the Group's financial statements:

·      IFRS 9 Financial instruments; and

·      IFRS 15 Revenue from contracts with customers.

 

The impact of adoption of these standards and the key changes to the accounting policies are disclosed below. Other amendments to IFRSs that became effective for the period beginning on 1 January 2018 did not have any impact on the Group's accounting policies.

 

Title of Standard	IFRS 9 Financial instruments
Nature of change	IFRS 9 addresses the classification, measurement and derecognition of financial assets and financial liabilities, introduces new rules for hedge accounting and a new impairment model for financial assets.
Adoption date and Impact	The Group adopted IFRS 9 from 1 January 2018 with no changes to the carrying value of financial assets and financial liabilities required. In accordance with the transition provisions in the Standard, comparatives have not been restated.
Classification of financial assets	IFRS 9 requires the use of two criteria to determine the classification of financial assets: the entity's business model for the financial assets and the contractual cash flow characteristics of the financial assets. The Standard goes on to identify three categories of financial assets - amortised cost; fair value through profit or loss ("FVTPL"); and fair value through other comprehensive income ("FVOCI").   There have been no changes to the categorisation of financial assets following the adoption of IFRS 9 and all of the Group's financial assets remain classified at amortised cost.
Impairment	IFRS 9 mandates the use of an expected credit loss model to calculate impairment losses rather than an incurred loss model, and therefore it is not necessary for a credit event to have occurred before credit losses are recognised. The new impairment model applies to the Group's financial assets.   No changes to the impairment provisions were made on transition to IFRS 9. Trade and other receivables are generally settled on a short time frame and the Group's other financial assets are due from counterparties without material credit risk concerns at the time of transition.

 

Title of Standard	IFRS 15 Revenue from contracts with customers
Nature of change	IFRS 15 replaced IAS 18 which covered revenue arising from the sale of goods and the rendering of services and IAS 11 which covered construction contracts. IFRS 15 is based on the principle that revenue is recognised when control of a good or service transfers to a customer. The standard permits either a full retrospective or a modified retrospective approach for the adoption
Adoption date and Impact	The Group adopted IFRS 15 from 1 January 2018. The implementation of IFRS 15 has not had a material impact on the Group's financial statements as it is currently a pre-revenue business.

 

(y)   New and Revised Accounting Standards and Interpretations on Issue but not yet Adopted

 

Certain new accounting standards and interpretations have been published that are not mandatory for the 31 December 2018 reporting period. Those which may have a significant impact to the Group are set out below. The Group does not plan to adopt these standards early.

 

Title of Standard	IFRS 16 Leases
Nature of change	IFRS 16 replaces the current IAS 17 Leases standard. IFRS 16 removes the classification of leases as either operating leases or finance leases - for the lessee - effectively treating all leases as finance leases. Most leases will be capitalised on the balance sheet by recognising a 'right-of-use' asset and a lease liability for the present value obligation. This will result in an increase in the recognised assets and liabilities in the statement of financial position as well as a change in expense recognition, with interest and deprecation replacing operating lease expense. The only exceptions are short-term and low-value leases.   Lessor accounting remains similar to current practice, i.e. lessors continue to classify leases as finance and operating leases.
Impact	The Group has reviewed all of the Group's outstanding leasing arrangements in light of the new lease accounting rules in IFRS 16. The standard will affect primarily the accounting for the Group's operating leases.   As at the reporting date, the Group has non-cancellable operating lease commitments of USD 216,702 (see Note 18). Of these commitments, USD 3,377 relate to a short-term lease which ended on 31 January 2019 which will be recognised on a straight-line basis as expense in profit or loss.   For the remaining lease commitments the Group expects to recognise right-of-use assets of approximately USD 208,453 on 1 January 2019 and lease liabilities of USD 208,453. No change is expected on the overall net assets and net current assets of the Group. The Group expects that net losses after tax will increase by approximately USD 4,092 for 2019 as a result of adopting the new rules. Operating cash flows will increase and financing cash flows decrease by approximately USD 172,721 as repayment of the principal portion of the lease liabilities will be classified as cash flows from financing activities.   The Group does not have any activities as a lessor and hence there will not be any impact on the financial statements in this regard.
Date of adoption by group	The changes in the Group's accounting policies from the adoption of IFRS 16 will be applied from 1 January 2019 onwards.

 

There are no other standards that are not yet effective and that would be expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.

 

 

	Parent		Consolidated Entity
	Dec 2018 USD	Dec 2017 USD	Dec 2018 USD	Dec 2017 USD
Note 2: LOSS FOR THE YEAR   Expenses
(a) Equity based payments - directors, KMP
and other employees	695,345	75,546	695,345	1,919,924
	695,345	75,546	695,345	1,919,924
(b) Administration Expenses
Accounting, company secretarial and audit fees	236,530	-	399,274	189,270
Insurance expenses	43,370	-	118,779	61,827
Legal fees	-	-	64,944	202,629
Compliance, registration and other tax feese	155,299	6,774	584,808	239,558
Marketing and investor relations	-	-	169,591	127,926
Premises and office related costs	-	-	87,002	100,940
Professional fees	-	-	143,420	24,766
Recruitment fees	179,017	-	179,017	42,253
Travel and accommodation expenses	36,353	-	417,350	673,237
Other expenses	4,066	10,000	158,991	84,197
	654,635	16,774	2,323,176	1,746,603
(c) Salaries, employee benefits and consultancy expense
Salaries and wages	-	-	409,524	719,381
Termination payment	-	-	-	100,436
Employee benefits - Health insurance benefits	-	-	147,865	234,486
Consultants	19,849	-	768,116	541,304
	19,849	-	1,325,505	1,595,607
(d) Average number of employees	Number	Number	Number	Number
Operational	-	-	17	151
Head Office	1	-	26	21
	1	-	43	172

Total staff costs for the Group in the year ended 31 December 2018 were USD 2,279,499 (2017: USD 3,433,660). The staff costs incurred during the year at a subsidiary, SPSA, of USD 1,869,975 has been capitalised as Exploration and Exploration Asset (2017: USD 2,714,279).

 

 

Note 3: INCOME TAX EXPENSE	Parent		Consolidated Entity
The components of tax expense comprise:	Dec 2018 USD	Dec 2017 USD	Dec 2018 USD	Dec 2017 USD
Current tax - foreign tax	-	-	17,039	42,969
Deferred tax	-	-	-	-
Total income tax expense	-	-	17,039	42,969

 

The prima facie income tax expense on pre-tax accounting loss from operations reconciles to the income tax expense in the financial statements as follows:

	Parent		Consolidated Entity
	Dec 2018 USD	Dec 2017 USD	Dec 2018 USD	Dec 2017 USD
Loss before tax from continuing operations	(1,715,799)	(92,320)	(6,252,327)	(4,301,353)
Parent company tax on loss from continuing operations at the UK corporation tax rate of 19% (2017: 19.25%)	(326,002)	(17, 541)	-	-
Group tax on loss from continuing operations at the Australian corporation tax rate of 30% (2017: 30%)	-	-	(1,875,698)	(1,290,406)
Different tax rates of subsidiaries operating in different jurisdictions	-	-	509,939	(23,286)
	(326,002)	(17,541)	(1,365,759)	(1,313,692)
Tax effect of:
Net non-deductible expenses	195,462	14,354	811,221	(69,485)
Deferred tax asset not recognised	130,540	3,187	571,577	1,851,349
Prior year tax losses utilised	-	-	-	(425,203)
	326,002	17,541	1,382,798	1,356,661
Income tax expense	-	-	17,039	42,969

 

The statutory tax rate of Kore Potash plc is 19% (2017: 19.25%), representing the UK corporation tax rate. The Group is subject to varying statutory rates, primarily being Australia (30%), Congo (see Note 7 regarding corporate tax concessions applicable under the new mining convention) and South Africa (28%). The current tax expense of USD 17,039 (2017: USD 42,969) arose on the pre-tax income generated in South Africa for intercompany management services.

 

No deferred tax has been recognised in respect of the Group's tax losses of USD 11,499,637 (2017: USD 9,189,501) that are available for offset against any future taxable profits in the companies in which the losses arose. Of these tax losses, USD 10,801,215 arose from the Australian entity and USD 698,422 arose from the parent entity (2017: USD 9,178,133 from the Australian entity and USD 11,368 from the parent entity).

 

The tax losses which arose from the Australian entity can be carried forward indefinitely to be offset against future years' profits. A deduction for prior years' losses will be denied where the Company cannot satisfy a 'continuity of ownership' test or, failing this, the alternative 'same business test'.

 

With effect from 1 April 2017, new tax legislation has been introduced in the UK with regard to the use of brought forward tax losses. The impact of these rules means that the tax treatment of brought forward losses may be different for losses arising before and after 1 April 2017. The majority of the tax losses which arose from the Parent entity arose after 1 April 2017, and therefore there is a potential restriction on how much these can be used to offset against any future years' profits. Generally, the amount of profit which can be offset against losses carried forward is restricted to 50% of the amount of profits in excess of GBP 5 million. Profits under the annual GBP 5 million group deduction allowance can be offset by losses in full. Where a company is in a group the USD 5 million allowance will apply to the group. Based on the Parent entity's current income tax position the majority of its tax losses can be offset against any future income in the Parent, or can be group relieved.

 

Deferred tax assets have not been recognised in respect of the losses arising from the Australian entity or the parent entity due to the uncertainty around timing of generating sufficient taxable profits in future to utilise the losses. These losses may also not be utilised to offset taxable profits elsewhere in the group

 

	Parent		Consolidated Entity
	Dec 2018 USD	Dec 2017 USD	Dec 2018 USD	Dec 2017 USD
Note 4: CASH AND CASH EQUIVALENTS
Cash at bank	-	-	6,187,113	16,455,490
	-	-	6,187,113	16,455,490
Note 5: TRADE AND OTHER RECEIVABLES
Current
Advance to employees	-	-	112,071	-
Amount due from directors in respect of preference shares issued	-	65,631	-	65,631
Interest receivable	-	-	4,345	-
Net GST, PAYE and VAT recoverable	135,121	-	82,739	28,768
Prepayments	47,073	-	56,400	91,569
Amounts due from / (due to) a subsidiary	12,499,003	(6,774)	-	-
Other receivables	-	-	89,600	95,168
	12,681,197	58,857	345,155	281,136
Non-Current
Deposits related to investments in DPM and KPM	-	-	120,922	139,163
	-	-	120,922	139,163
Total Trade and Other Receivables	12,681,197	58,857	466,077	420,299

 

The amount due to a subsidiary is interest-free and is repayable on demand.

 

 

Note 6: PROPERTY, PLANT AND EQUIPMENT
Plant and equipment - at cost	-	-	1,855,971	1,947,447
Less accumulated depreciation	-	-	(1,553,716)	(1,533,646)
	-	-	302,255	413,801
Reconciliation:
Opening balance	-	-	413,801	374,316
Additions	-	-	8,452	97,091
Depreciation capitalised under exploration and evaluation	-	-	(90,023)	(87,961)
Depreciation expensed	-	-	(7,078)	(16,612)
Disposals	-	-	(5,500)	-
Foreign exchange differences	-	-	(17,347)	46,967
Closing balance at period end	-	-	302,255	413,801

 

 

Note 7: EXPLORATION AND EVALUATION EXPENDITURE	Parent		Consolidated Entity
	Dec 2018 USD	Dec 2017 USD	Dec 2018 USD	Dec 2017 USD
Opening balance	-	-	140,254,520	95,798,269
Exploration and evaluation expenditure capitalised during the year	-	-	16,107,446	30,688,177
Foreign exchange differences	-	-	(6,498,643)	13,768,074
Closing balance at period end	-	-	149,863,323	140,254,520
Exploration and evaluation expenditure relating to:
Kola mining project	-	-	128,878,868	118,082,437
Dongou mining project	-	-	20,984,455	22,172,083
	-	-	149,863,323	140,254,520

 

(i)    On 8 June 2017, a new mining convention was signed by the Group and the Government of the RoC. The convention governs the conditions of construction, operation and mine closure of the Kola and Dougou (including Dougou Extension) mining projects. The terms and conditions of the mining convention include key investment promotion provisions, including the following:

 

·     Corporate tax concessions applicable for the first 10 years of each mining permit as production capacity is extended, which includes zero corporation tax for the first five years from profitability, and a corporation tax rate of 7.5% for the next five years;

·     An ongoing corporation tax rate of 15% for the rest of the life of mine;

·     Exemptions from withholding taxes including interest, dividends and capital gains during the term of the mining convention;

·     VAT and import duty exemptions (including all subcontractors) during construction;

·     Royalties of 3% payable to the RoC, which is based on an equivalent to EBITDA;

·     Guarantee from the RoC that it will facilitate and support the implementation of the project, as defined in the convention (for example, in granting the necessary consents to permit export of the final product through the use of a dedicated jetty); and

·     The RoC to be granted a 10% carried equity interest in the project companies, which are currently wholly-owned by Kore Potash Limited's subsidiary, SPSA.

 

The mining convention has a term which covers the life of the Kola and Dougou mining permits including any extension (25 years plus 15 year extension, renewable indefinitely upon proven mineable ore resources). The Group was awarded the Sintoukola 2 Exploration Permit dated 9 February 2018 by the government of the RoC.

 

(ii)  The ultimate recoupment of costs carried forward for exploration expenditure phases is dependent on the successful development and commercial exploitation, or alternatively, the sale of the respective areas of interest.

 

Note 8: CONTROLLED ENTITIES		Percentage Owned	Investment	Percentage Owned	Investment
	Country of	31 Dec 2018	31 Dec 2018	31 Dec 2017	31 Dec 2017
Controlled Entities	Incorporation	%	USD	%	USD
Held directly:
Kore Potash Limited	Australia	100	139,350,094	100	139,350,094
Held through Kore Potash Limited:
Sintoukola Potash S.A. ("SPSA")	Republic of Congo	97	9,387,413	97	9,387,413
Kore Potash South Africa (Pty) Ltd	South Africa	100	1,192	100	1,192
Held through Sintoukola Potash S.A.:
Kore Potash Mining S.A. ("KPM")	Republic of Congo	100	18,264	100	18,264
Dougou Potash Mining S.A. ("DPM")	Republic of Congo	100	18,264	100	18,264

 

The principal activity of Kore Potash Limited during the financial year was for administrational and operational support for the exploration for potash minerals prospects. The registered office of Kore Potash Limited is Level 3, 88 William Street, Perth WA 6000.

 

The principal activity of SPSA and its two subsidiaries, KPM and DPM, during the financial year was exploration for potash minerals prospect. The registered office for the three entities is 24 Avenue Charles de Gaulle, Immeuble Atlantic Palace BP 662 Pointe Noire, République du Congo.

 

The principal activity of Kore Potash South Africa (Pty) Ltd during the financial year was for South African administrative and operational support for the exploration for potash minerals prospects. The registered office is 33 Ballyclare Drive, Ballywoods Office Park, Cedarwood House, Bryanston 2021 South Africa.

 

 

	Parent		Consolidated Entity
	Dec 2018 USD	Dec 2017 USD	Dec 2018 USD	Dec 2017 USD
Note 9: TRADE AND OTHER PAYABLES
Current
Trade and other creditors	-	-	388,350	502,684
Accruals	144,217	10,000	1,293,613	2,710,325
Income tax payable	-	-	20,429	45,045
Total Trade and Other Payables	144,217	10,000	1,702,392	3,258,054

 

Trade and other creditors are non-interest bearing and are normally settled on 30 day terms.

 

 

Note 10: DERIVATIVE FINANCIAL INSTRUMENTS	Parent		Consolidated Entity
	Dec 2018 USD	Dec 2017 USD	Dec 2018 USD	Dec 2017 USD
Equity warrants exercisable at AUD 0.30 each expiring on 29 March 2021	503,398	-	503,398	-
	503,398	-	503,398	-

 

The above amounts relate to the following:

The value of the free-attaching warrants provided to shareholders who participated in the share issue completed on 29 March 2018 (83,523,344 shares issued at AUD 0.20 each). A total of 12,894,659 equity warrants exercisable at AUD 0.30 expiring 29 March 2021 were issued with a Black & Scholes valuation method of USD 0.0476 per warrant.

 

The derivative financial liability was revalued at 31 December 2018 using the Black Scholes valuation method with the net change in fair value of the derivative financial liability of USD 110,114 taken to the statement of profit or loss and other comprehensive income.

 

The inputs used in the measurement of these warrants were as follows:

 

Input into the model	At grant date	At 31 Dec 2018
Spot price	AUD 0.145	GBP 0.072
Expected volatility	91.67%	110.60%
Life of warrants	3 years	2.24 years
Fair value per warrant	USD 0.0476	USD 0.039

 

 

Note 11: ISSUED CAPITAL	Parent		Consolidated Entity
	Dec 2018 USD	Dec 2017 USD	Dec 2018 USD	Dec 2017 USD
860,852,693 Fully Paid Ordinary Shares at par value of USD 0.001 each (31 December 2017: 771,395,766 Fully Paid Ordinary Shares at par value of USD 0.001)	860,852	771,396	860,852	771,396
Fully Paid Ordinary Shares	860,852	771,396	860,852	771,396

 

 

NOTE 11: ISSUED CAPITAL (CONT)

 

Movement in Share Capital of Consolidated Entity

 

Date	Details	No. of Shares)	USD)
1 Jan 2017	Opening balance (i)	728,944,470	200,572,926
3 Feb 2017	Vesting of performance rights	4,850,060	-
27 Apr 2017	Share placement at AUD 0.25 each	26,504,000	5,000,000
	Less: Costs of issuing free attaching options	-	(239,680)
	Less: Costs of raising capital	-	(1,646,050)
29 May 2017	Shares issued in relation to the balance of a consultant's fee at AUD 0.21 each	5,193,522	823,000
30 Jun 2017	Vesting of performance rights	2,666,090	-
20 Nov 2017	Balance prior to Scheme of Arrangement implementation (ii)	768,158,142	204,510,196
20 Nov 2017	Recognition of surplus value over nominal value of Kore Potash plc shares in Merger Reserve (ii) (iii)	-	(203,738,800)
20 Dec 2017	Vesting of performance rights (ii) (iii)	3,237,624	-
31 Dec 2017	Balance at 31 Dec 2017 (ii) (iii)	771,395,766	771,396
29 Mar 2018	Capital raising at AUD 0.20 each (iv)	83,523,344	83,523
29 Mar 2018	Share-based capital raising costs at AUD 0.12 each (v)	4,315,333	4,315
27 Jul 2018	Conversion of USD 250,000 convertible loan note calculated by reference to the price of shares being at AUD 0.20 per share (vi)	1,618,250	1,618
31 Dec 2018	Closing balance	860,852,693	860,852

 

(i)    At 31 December 2016, Kore Potash Limited was the parent company of the Group and had 728,944,470 Fully Paid Ordinary Shares in issuance with a nominal value of USD 200,572,926.

 

(ii)  The Company became the Group's parent company on 20 November 2017 in accordance with the Scheme of Arrangement with Kore Potash Limited and its shareholders ('the Scheme'). In line with UK Company Law, the Company's shares have a par value of USD 0.001. Under the Scheme, the Company issued 768,158,142 ordinary shares (initially to be held in the form of Chess Depositary Interests (CDIs)) as consideration for the transfer of Kore Potash Limited shares to the Company. Subsequently on 20 December 2017, 3,237,624 ordinary shares (CDIs) were issued by the Company on conversion of certain Performance Rights.

 

(iii) As a result, the Group's Fully Paid issued capital has a nominal value of USD 771,396 at 31 December 2018. The shares in the Company were issued on a 1:1 basis with shares in Kore Potash Limited which had a nominal value of USD 204,510,196 at the date of the commencement of the Scheme. The surplus value of USD 203,738,800 compared to the nominal value of the Company's shares has been recognised in a new Merger Reserve. Please refer to Note 12(d) for details.

 

(iv)  On 29 March 2018, a total of USD 12,894,659 was raised from existing and new investors through the placing and direct subscription of 83,523,344 ordinary shares in the Company at a placing price of AUD 0.20 per new ordinary share. The par value of the 83,523,344 ordinary shares was USD 83,523.

 

(v)   On 29 March 2018, 4,315,333 ordinary shares were issued to Canaccord Genuity Ltd and Rencap Securities (Pty) Limited as part of their placing fee at a deemed issued price of AUD 0.12 per ordinary share. The par value of the 4,315,333 ordinary share was USD 4,315.

 

(vi)  On 26 March 2018, the Company entered into a convertible loan note with the Chairman, David Hathorn, to lend USD 250,000 to the Company. The convertible loan note did not attract interest and was unsecured. At the Company's AGM on 27 June 2018, the shareholders approved the conversion of the convertible loan note into 1,618,250 shares at AUD 0.20 per share and 250,000 free-attaching warrants. The shares and warrants were issued on 27 July 2018.

 

 

Note 12: RESERVES	Parent		Consolidated Entity
	Dec 2018 USD	Dec 2017 USD	Dec 2018 USD	Dec 2017 USD
SBP reserve (a)	12,161,843	11,814,770	12,161,843	11,814,770
Share premium reserve (b)	13,054,936	-	13,054,936	-
Foreign currency translation reserve (c)	-	-	(15,310,945)	(8,747,747)
Merger reserve (d)	203,738,800	203,738,800	203,738,800	203,738,800
Reorganisation reserve (e)	(76,011,124)	(76,899,326)	-	-
Total Reserve	152,944,455	138,654,244	213,644,634	206,805,823

 

(a)        SBP Reserve

Opening balance	11,814,770	-	11,814,770	36,279,828
Transfer from Kore Potash Limited (i)	-	11,739,224	-	-
Value of lapsed options transferred to accumulated losses (ii)	(888,202)	-	(888,202)	(26,624,662)
Share based payment vesting expense (iii)	1,235,275	75,546	1,235,275	1,919,924
Free attaching options issued (iv)	-	-	-	239,680
Closing balance	12,161,843	11,814,770	12,161,843	11,814,770

 

(i)    In accordance with the Scheme of Arrangement between Kore Potash Limited and its shareholders, 58,191,226 Unlisted Options and 48,077,728 Performance Rights/Shares, valued at USD 11,739,224 were issued on 20 November 2017 from the Company to the holders of Unlisted Options or Performance Rights/Shares in Kore Potash Limited in consideration for the cancellation of those Kore Potash Limited Unlisted Options and Performance Rights/Shares.

 

(ii)   For further details, refer to Note 12(e).

 

(iii)  The value of the above Parent entity's SBPs for the year ended 31 December 2017 refer to the value of Performance Rights vested/cancelled after the Unlisted Options and Performance Rights/Shares were transferred from Kore Potash Limited to the Company. On 20 December 2017, 3,237,624 Performance Rights and Performance Shares vested and converted into 3,237,624 Chess Depositary Interests (CDI's) and 2,245,000 Performance Rights previously granted were cancelled following the resignation of Werner Swanepoel (Project Director). The share based payments of these Performance Rights and Shares was USD 75,546. Further details of the SBP vesting expense for the year ended 31 December 2018 is included in Note 23.

 

(iv)  The cost of USD 239,680 in 2017 relates to the value of the free attaching unlisted options provided to shareholders who participated in the rights issue completed on 27 April 2017 (26,504,000 shares issued at AUD 0.25 each). A total of 5,000,000 unlisted options exercisable at AUD 0.30 expiring 15 November 2019 were issued with a Black Scholes valuation method of AUD 0.0642 per option. The volatility used was 85.68% with risk-free interest rate of 1.76%.

 

(v)   For parameters used in the valuation of for the above options and performance rights see Note 23.

 

 

(a)   SBP Reserve (Cont)

 

Movement in SBP Reserve of the Consolidated Entity

 

Date	Details	No. of Options	No. of Rights	USD
1 Jan 2017	Opening balance	53,441,226	36,717,020	32,279,828
3 Feb 2017	Exercise of performance rights	-	(7,516,150)	-
27 Apr 2017	Issue of free attaching unlisted options	5,000,000	-	239,680
22 May 2017	Lapsing of unlisted options	(250,000)	-	-
29 May 2017	Issue of performance rights	-	18,216,858	-
1 Jun 2017	Issue of performance rights	-	660,000	-
30 Jun 2017	SBP vesting expenses	-	-	906,265
20 Dec 2017	Exercise of performance rights	-	(3,237,624)	-
20 Dec 2017	Cancellation of performance rights	-	(2,245,000)	-
1 Dec 2017	SBP vesting expenses	-	-	1,013,659
31 Dec 2017	Transfer value of lapsed options to Accumulated Losses	-	-	(26,624,662)
31 Dec 2017	Balance at 31 Dec 2017	58,191,226	42,595,104	11,814,770
30 Jun 2018	Lapsing of unlisted options (value of lapsed options transferred to Accumulated Losses)	(8,191,226)	-	(888,202)
30 Jun 2018	SBP vesting expenses (vi)	-	-	676,255
1 Aug 2018	Issue of unlisted options (vii)	21,200,000	-	-
1 Aug 2018	Cancellation of performance rights (viii)	-	(14,000,000)	-
1 Aug 2018	Issue of performance rights (viii)	-	4,500,000	-
1 Aug 2018	Cancellation of performance rights (ix)	-	(1,025,000)	-
31 Dec 2018	SBP vesting expenses	-	-	559,020
31 Dec 2018	Closing balance	71,200,000	32,070,104	12,161,843

 

(vi)  The shareholders approved the issue of 500,000 and 1,050,000 Performance Rights to Sean Bennett at the Company's AGM to recognise his contribution to the Company and the transition of his position as CEO to a successor and his role in successfully implementing the re-domicile of the Group in the United Kingdom, the listing of the Company on the AIM and the JSE and the recent completion of a capital raising. These Performance Rights vested upon Mr Bennett's resignation. The Performance Rights are yet to be issued and converted into shares. The SBP vesting expenses includes the value of these Performance Rights of USD 115,785.

 

(vii) At the Company's AGM on 27 June 2018, the shareholders approved the grant of 17,200,000 unlisted options to Brad Sampson and the grant of 4,000,000 unlisted options to David Hathorn. The unlisted options were subsequently issued on 1 August 2018. See information on Option Series 31 and Option Series 32 in Note 23 for further details on these options.

 

(viii)      The shareholders also approved the cancellation of the below existing Performance Rights and the grant of new Performance Rights to the below Non-Executive Directors at the Company's AGM.

 

Director	Number of existing Performance Rights	Number of new Performance Rights
David Hathorn	11,000,000	1,500,000
Jonathan Trollip	2,000,000	750,000
Leonard Math	1,000,000	750,000
David Netherway	Nil	750,000
Timothy Keating	Nil	750,000

 

The old Performance Rights were subsequently cancelled and the new Performance Rights subsequently issued on 1 August 2018. See information on Rights Series 16 to Rights Series 20 (inclusive) in Note 23 for further details on these Performance Rights.

 

(ix)  1,025,000 Performance Rights were cancelled upon Mr Bennett's resignation

 

(a)   SBP Reserve (Cont)

 

The SBP reserve is used to accumulate proceeds received from the issuing of options and accumulate the value of options and performance rights issued in consideration for services rendered and to record the fair value of options and performance rights issued but not exercised. The reserve is transferred to accumulated losses upon expiry or recognised as share capital if exercised.

 

 

(b)   Share Premium Reserve	Parent	Parent	Consolidated Entity
Movements during the period	Dec 2018 USD	Dec 2017 USD	Dec 2018 USD	Dec 2017 USD
Opening balance	-	-	-	-
Capital raising on 29 March 2018 at AUD 0.20 each	12,810,869	-	12,810,869	-
Share-based capital raising costs on 29 March 2018 at AUD 0.12 each	395,685	-	395,685	-
Less: Capital raising costs	(400,000)	-	(400,000)	-
Conversion of USD 250,000 convertible loan note on 27 July 2018 calculated by reference to the price of shares being at AUD 0.20 per share	248,382	-	248,382	-
Closing balance	13,054,936	-	13,054,936	-

 

The share premium reserve is used to record the difference between the monies received from capital raising and the par value of the Company's shares, being USD 0.001 per fully paid ordinary share (see Note 11).

 

 

(c)   Foreign Currency Translation Reserve	Parent	Parent	Consolidated Entity
Movements during the period	Dec 2018 USD	Dec 2017 USD	Dec 2018 USD	Dec 2017 USD
Opening balance	-	-	(8,747,747)	(22,338,631)
Currency translation differences arising during the year	-	-	(6,563,198)	13,590,884)
Closing balance	-	-	(15,310,945)	(8,747,747)

 

The foreign currency translation reserve is used to record currency differences arising from the translation of the financial statements of the foreign subsidiary.

 

 

(d)   Merger Reserve

 

As described above in Note 11, as part of the Scheme the Company issued 771,395,768 shares with a par value of USD 0.001 each in respect of the shares on Kore Potash Limited, which had issued share capital at the date of the transaction with a value of USD 204,510,196. As a result of this transaction, a Merger Reserve of USD 203,738,800 was created in both the Parent and Consolidated Entity.

 

(e)   Reorganisation Reserve

 

In accordance with the Scheme of Arrangement, the Company became the new parent on 20 November 2017 and Kore Potash Limited is the wholly-owned subsidiary of the Company. The Company elected to account for the acquisition of Kore Potash Limited as a common control transaction. As a consequence, no acquisition accounting under IFRS 3 Business Combination has arisen. The investment in Kore Potash Limited acquired by the Company as a result of the internal reorganisation was recognised at a value consistent with the carrying value of the equity items in the Kore Potash Limited accounts immediately prior to the Scheme. In the Parent entity, the difference between the carrying amount of share capital and options issued by the Company under the Scheme and the investment in Kore Potash Limited totalling USD 76,899,326 was recognised in a Reorganisation Reserve in the parent company accounts during the year ended 31 December 2017.

 

During the year, 8,191,226 SBP options expired during the year. The value of the options of USD 888,802 was transferred to Accumulated Losses in the Australian subsidiary Kore Potash Limited, and to the Reorganisation Reserve in the Parent company.

	Parent		Consolidated Entity
Movements during the period	Dec 2018 USD	Dec 2017 USD	Dec 2018 USD	Dec 2017 USD
Opening balance	(76,899,326)	-	-	-
Share issuance under Scheme of Arrangement	-	(76,899,326)	-	-
Value of share-based payment options expired during the year	888,202	-	-	-
Closing balance	(76,011,124)	(76,899,326)	-	-

 

 

Note 13: DIVIDENDS

No dividends have been proposed or paid during the year ended 31 December 2018 (2017: Nil).

 

 

Note 14: NOTES TO STATEMENT OF CASH FLOWS	Parent		Consolidated Entity
	Dec 2018 USD	Dec 2017 USD	Dec 2018 USD	Dec 2017 USD
Reconciliation of cash flows from operating activities:
Loss for the year	(1,715,799)	(92,320)	(6,269,366)	(4,344,322)
Adjustments for:
Depreciation expensed	-	-	7,078	16,612
Loss on asset disposals	-	-	5,974	-
Equity compensation benefits	695,345	75,546	695,345	1,919,924
Net realised foreign exchange gain	-	-	3,793	(2,864,226)
Interest received not classified as operating activities cash inflow	-	-	(72,873)	(50,858)
Fair value change in derivative financial liability	(110,114)	-	(110,114)	-
Operating loss before changes in working capital
(Increase)/Decrease in receivables	(149,775)	-	(150,283)	(8,176)
Increase in tax payable	-	-	(19,990)	42,970
Increase in payables	101,798	16,774	(143,613)	330,966
Net cash used in operating activities	(1,178,545)	-	(6,054,050)	(4,957,110)

 

 

Note 15: FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS

 

Overview

The Group has exposure to the following risks from their use of financial instruments:

·      market risk,

·      credit risk, and

·      liquidity risks.

 

The Group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the business. The Group will use different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange and other price risks and ageing analysis for credit risk.

 

This note presents information about the Group's exposure to each of the above risks, their objectives, policies and processes for measuring and managing risk, and the management of capital. The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. Management monitors and manages the financial risks relating to the operations of the Group through regular reviews of the risks.

 

(a)     Market Risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

 

(i)      Foreign currency risk

The Group undertakes certain transactions denominated in foreign currency and are exposed to foreign currency risk through foreign exchange rate fluctuations.

 

Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities denominated in a currency that is not the entity's functional currency. The risk is measured using sensitivity analysis and cashflow forecasting.

 

(a)     Market Risk (Cont)

 

(i)      Foreign currency risk (cont)

As a result of the operating activities in the RoC and the ongoing funding of overseas operations from Australia, the Group's Statement of Financial Position can be affected by movements in the Australian Dollar (AUD) / US Dollar (USD) exchange rate, British Pound (GBP) / US Dollar (USD) exchange rate, Congolese Franc (XAF) / US Dollar (USD) exchange rate, Euro (EUR) / US Dollar (USD) exchange rate and the South African Rand (ZAR) / US Dollar (USD) exchange rate. Funds in EUR is held to hedge the Definitive Feasibility Study (DFS) payments.

 

A substantial portion of the Group's transactions are denominated in USD, with historically, the majority of costs relating to drilling activities also denominated in the unit's functional currency.

 

The summary quantitative data about the Group's financial instruments' exposure to significant currency risk as presented in USD is as follows:

 

	31 December 2018						31 December 2017
	EUR	GBP	XAF	ZAR			EUR	AUD	ZAR	GBP
FINANCIAL ASSETS
Cash at bank	1,143,346	-	309,789	61,406			13,805,462	49,158	100,778	-
Receivables	-	102,702	321,103	9,302			-	47,031	-	65,631
FINANCIAL LIABILITIES
Payables	(553,000)	(185,730)	(300,369)	(203,418)			(2,184,134)	(189,924)	(846)	(52,956)
Derivative financial liability	-	(503,398)	-	-			-	-	-	-
Net exposure	590,346	(586,426)	330,523	(132,710)			11,621,328	(93,735)	99,932	12,675

 

The Group did not have significant currency risk from net exposure to financial instruments' denominated in AUD at 31 December 2018 (31 December 2017: no significant currency risk from net exposure to financial instruments' denominated in XAF).

 

Sensitivity analysis (Group)

A reasonably possible strengthening (weakening) of the EUR, GBP, XAF and ZAR against USD at 31 December 2018 would have affected the measurement of financial instruments denominated in a foreign currency and affected equity and profit or loss for the Group by the amounts shown below. This analysis assumes all other variables, in particular interest rates, remain constant. The impact of the possible strengthening (weakening) of the AUD and any other currencies against USD is minimal and is not analysed.

 

	Equity		Profit or Loss
	Strengthening	Weakening	Strengthening	Weakening
	Gain/(Loss)	Gain/(Loss)	(Gain)/Loss	(Gain)/Loss
	USD	USD	USD	USD
31 December 2018
EUR (5% movement)	29,517	(29,517)	(29,517)	29,517
GBP (5% movement)	(29,321)	29,321	29,321	(29,321)
XAF (5% movement)	16,526	(16,526)	(16,526)	16,526
ZAR (5% movement)	(6,636)	6,636	6,636	(6,636)

 

 

(a)     Market Risk (Cont)

 

(i)      Foreign currency risk (cont)

The summary quantitative data about the Parent's financial instruments' exposure to significant currency risk as presented in USD is as follows:

 

	31 December 2018						31 December 2017
	EUR	GBP	XAF	ZAR			EUR	AUD	ZAR	GBP
FINANCIAL ASSETS
Cash at bank	-	-	-	-			-	-	-	-
Receivables	-	102,702	-	-			-	-	-	65,631
FINANCIAL LIABILITIES
Payables	-	(111,798)	-	-			-	-	-	(10,000)
Derivative financial liability	-	(503,398)	-	-			-	-	-	-
Net exposure	-	(512,494)	-	-			-	-	-	55,631

 

Sensitivity analysis (Parent)

A reasonably possible strengthening (weakening) of the GBP against USD at 31 December 2018 would have affected the measurement of financial instruments denominated in a foreign currency and affected equity and profit or loss for the Parent by the amounts shown below. This analysis assumes all other variables, in particular interest rates, remain constant.

 

	Equity		Profit or Loss
	Strengthening	Weakening	Strengthening	Weakening
	Gain/(Loss)	Gain/(Loss)	(Gain)/Loss	(Gain)/Loss
	USD	USD	USD	USD
31 December 2018
GBP (5% movement)	(25,625)	25,625	25,625	(25,625)

 

 

(ii)     Interest rate risk

The Group is exposed to movements in market interest rates on short term deposits.

 

The Group's exposure to interest rate risk and the effective weighted average interest rate for each class of financial assets and financial liabilities is set out in the following table:

 

	Weighted Average Effective Interest Rate		Fixed Interest Rate		Floating Interest Rate		Non-Interest Bearing
	Dec 2018	Dec 2017	Dec 2018	Dec 2017	Dec 2018	Dec 2017	Dec 2018	Dec 2017
	%	%	USD	USD	USD	USD	USD	USD
FINANCIAL ASSETS
Cash at bank	1.45%	0.04%	4,000,000	-	2,187,113	16,455,490	-	-
Receivables			-	-	-	-	409,677	346,993
Total financial assets			4,000,000	-	2,187,113	16,455,490	409,677	346,993
FINANCIAL LIABILITIES
Payables (non-derivative)			-	-	-	-	1,198,994	3,267,317
Derivative financial liablity			-	-	-	-	503,398	-
Total financial liabilities			-	-	-	-	1,702,392	3,267,317

 

Sensitivity analysis

A change of 100 basis point in interest rates at the reporting date would have increased (decreased) equity or profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. This analysis is performed the same basis for the Consolidated Entity for 2017.

 

	Profit or Loss
	100bp	100bp
	Increase	Decrease
	USD	USD
31 December 2018
Variable rate instrument	21,871	(21,871)
31 December 2017
Variable rate instrument	164,555	(164,555)

 

All receivables and payables in the Parent at 31 December 2018 and at 31 December 2017 are non-interest bearing.

 

Financial assets

Trade receivables from other entities are carried at cost less any allowance for doubtful debts. Other receivables are carried at cost. Interest is recorded as income using the effective interest rate method.

 

Financial liabilities

Liabilities are recognised for amounts to be paid in the future for goods and services received, whether or not billed to the group.

 

Net fair value of financial assets and liabilities

The carrying amount of financial assets and liabilities at 31 December 2018 and 31 December 2017 is equivalent to the fair value.

 

(b)    Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group's receivables from customers and cash and investment deposits. The Group has adopted the policy of only dealing with credit worthy counterparties and obtaining sufficient collateral or other security where appropriate, as a means of mitigating the risk of financial loss from defaults. 

 

The Group does not have any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics.  The carrying amount of financial assets recorded in the financial statements, net of any provisions for losses, represents the Group's maximum exposure to credit risk.

 

(c)     Liquidity and capital risk

The Group's total capital is defined as the shareholders' net equity plus any net debt. The objectives when managing the Group's capital is to safeguard the business as a going concern, to maximise returns to shareholders and to maintain an optimal capital structure in order to reduce the cost of capital.

 

The Group does not have a target debt / equity ratio, but has a policy of maintaining a flexible financing structure so as to be able to take advantage of investment opportunities when they arise. There are no externally imposed capital requirements.

 

There have been no changes in the strategy adopted by management to control the capital of the Group since the prior year.

 

(c)     Liquidity and capital risk (cont)

 

The table below analyses the Group's financial liabilities into maturity groupings based on the remaining period from the balance date to the contractual maturity date. 

 

31 Dec 2018	Within 1 Month	1-3 Months	3-12 Months
	USD	USD	USD
Non-derivatives
Non-interest bearing
Trade and other payables	451,184	1,285,455	-
Total Financial Liabilities	451,184	1,285,455	-
31 Dec 2017	Within 1 Month	1-3 Months	3-12 Months
	USD	USD	USD
Non-derivatives
Non-interest bearing
Trade and other payables	3,267,317	-	-
Total Financial Liabilities	3,267,317	-	-

 

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation.

 

The Group manages liquidity risk by maintaining adequate reserves by continuously monitoring forecast and actual cash flows.

 

If the Group anticipates a need to raise additional capital within 6 months to meet forecasted operational activities, then the decision on how the Company will raise future capital will depend on market conditions existing at that time.

 

(d)    Fair Value of Financial Instruments

 

This note provides information about how the Group determines fair values of various financial assets and financial liabilities.

 

The Directors consider that carrying amounts at financial assets and financial liabilities recognised in the consolidated financial statements approximate to their fair value.

 

	Fair value hierarchy as at 31 December 2018				Amortised
	Level 1	Level 2	Level 3	Total	Cost
	USD	USD	USD	USD	USD
Financial assets
Financial assets held at amortised cost
-       Trade and other receivables	-	-	-	-	409,677
Total	-	-	-	-	409,677
Financial liabilities
Financial liabilities held at amortised cost:
-       Trade and other payables	-	-	-	-	1,702,392
Financial liabilities held at fair value:
-       Derivative financial liability	-	503,398	-	503,398	-
Total	-	503,398	-	503,398	1,702,392
	Fair value hierarchy as at 31 December 2017				Amortised
	Level 1	Level 2	Level 3	Total	Cost
	USD	USD	USD	USD	USD
Financial assets
Financial assets held at amortised cost
-       Trade and other receivables	-	-	-	-	346,993
Total	-	-	-	-	346,993
Financial liabilities
Financial liabilities held at amortised cost:
-       Trade and other payables	-	-	-	-	3,267,317
Total	-	-	-	-	3,267,317

 

The information on the fair values of various financial assets and financial liabilities for the Parent are as follows:

 

	Fair value hierarchy as at 31 December 2018				Amortised
	Level 1	Level 2	Level 3	Total	Cost
	USD	USD	USD	USD	USD
Financial assets
Financial assets held at amortised cost
-       Trade and other receivables	-	-	-	-	12,634,124
Total	-	-	-	-	12,634,124
Financial liabilities
Financial liabilities held at amortised cost:
-       Trade and other payables	-	-	-	-	144,217
Financial liabilities held at fair value:
-       Derivative financial liability	-	503,398	-	503,398	-
Total	-	503,398	-	503,398	144,217
	Fair value hierarchy as at 31 December 2017				Amortised
	Level 1	Level 2	Level 3	Total	Cost
	USD	USD	USD	USD	USD
Financial assets
Financial assets held at amortised cost
-       Trade and other receivables	-	-	-	-	65,631
Total	-	-	-	-	65,631
Financial liabilities
Financial liabilities held at amortised cost:
-       Trade and other payables	-	-	-	-	16,774
Total	-	-	-	-	16,774

 

Note 16: SEGMENT INFORMATION

 

Management has determined that the Company and the Group has one reporting segment being mineral exploration in Central Africa.

 

As the Group is focused on mineral exploration in Central Africa, management make resource allocation decisions by reviewing the working capital balance, comparing cash balances to committed exploration expenditure and reviewing the current results of exploration work performed. This internal reporting framework is the most relevant to assist the Board with making decisions regarding the Group and its ongoing exploration activities, while also taking into consideration the results of exploration work that has been performed to date and capital available to the Company.

 

 

Note 17: EVENTS SUBSEQUENT TO REPORTING DATE

 

On 29 January 2019 the Company publicly announced the outcomes of the Kola DFS on the AIM market, ASX and on JSE. The Kola DFS was undertaken by the FC during 2017 and 2018. The highlights of the Kola DFS are detailed on pages 10 to 11 of the Annual Report and the full announcement can be found on the Company's website.

 

The FC who undertook the Kola DFS was contracted to deliver a proposal for an EPC contract within 3 months of the completion of the DFS. The FC submitted an EPC proposal on 23 March 2019 which was past the agreed due date of 28 February 2019. The Company is now assessing its options for the way forward on the Kola Project which could include seeking competitive EPC proposals from European companies.

 

On 13 February 2019, 1,886,996 Class C Performance Rights were converted into 1,886,996 fully paid ordinary shares following satisfaction of vesting conditions.

 

There are no other significant events that have occurred since reporting date requiring separate disclosure.

 

 

Note 18: OPERATING LEASE ARRANGEMENTS

 

Leasing Arrangements

Operating leases relate to leases of offices and other property with lease terms of up to 5 years. The Group does not have an option to purchase the leased property at the expiry of the lease periods.

 

Non-Cancellable Operating Lease Commitments

	Parent	Parent	Consolidated Entity
	Dec 2018 USD	Dec 2017 USD	Dec 2018 USD	Dec 2017       USD
Not later than 1 year	-	-	176,097	115,483
Later than 1 year and not later than 5 years	-	-	40,604	85,632
Later than 5 years	-	-	-	-
	-	-	216,702	201,115

 

No liabilities have been recognised in respect of non-cancellable operating leases.

 

 

Note 19: COMMITMENTS FOR EXPENDITURE

 

Exploration and Evaluation Expenditure Commitments

 

In order to maintain current rights of tenure to exploration permits, the Group is required meet minimum expenditure requirements by performing exploration and development work. As at year end, the minimum expenditure requirement has not yet been determined with respect to the Group's Sintoukola 2 exploration permit. However, when the minimum expenditure requirement is confirmed this will need to be satisfied over a period of 3 years.

 

The are no minimum expenditure requirements with respect to the Group's mining licences. One of the key investment promotion provisions for the Mining Convention includes that the RoC is to be granted a 10% carried equity interest in the project companies, which are currently wholly-owned by the Group's subsidiary, SPSA.

 

If the Group decides to relinquish certain licences and/or does not meet the obligations of the new mining convention, assets recognised in the statement of financial position may require review to determine the appropriateness of the carrying values. The sale, transfer or farm-out of exploration rights to third parties will reduce or extinguish these obligations.

 

Kola DFS Commitment

 

On 28 February 2017 the Company signed a contract with TechnipFMC, VINCI Construction Grands Projets, Egis and Louis Dreyfus Armateur (the FC), for the implementation of the DFS. 

 

At the date of this report, the Group had the following DFS commitment:

	Parent	Parent	Consolidated Entity
	Dec 2018 USD	Dec 2017 USD	Dec 2018 USD	Dec 2017 USD
Not later than 1 year	-	-	935,563	9,259,776
Later than 1 year and not later than 5 years	-	-	1,575,750	-
Later than 5 years	-	-	-	-
	-	-	2,511,313	9,259,776

 

 

Note 20: AUDITORS' REMUNERATION

	Parent		Consolidated Entity
	Dec 2018 USD	Dec 2017 USD	Dec 2018 USD	Dec 2017 USD
Fees payable to the Company's auditor and their associates for the audit of the Company's annual accounts
Deloitte - External Audit	105,000	35,000	165,108	103,679
Total audit fees	105,000	35,000	165,108	103,679
Fees payable to the Company's auditor and their associates for other non-audit services to the Group
Half-year review	39,217	-	57,665	40,763
Review of prior years for South African subsidiary	-	-	6,546	-
Services in connection with the AIM listing	-	-	148,632	411,015
Tax, Research and Development consulting	-	-	113,866	34,188
Total non-audit services	39,217	-	326,709	485,966
Total fees payable to the Company's auditor and their associates	144,217	35,000	491,817	589,645

 

 

Note 21: RELATED PARTY TRANSACTIONS

 

Directors remuneration

The expense of USD 812,575 recognised (2018: USD 365,371) includes directors fees paid and remuneration for the current and outgoing Chief Executive Officer.

 

The Company paid USD 6,050 (2017: USD 13,652) to Piaster Pty Ltd as trustee for the Trollip Family Superannuation Fund for Mr Jonathan Trollip's director fees. Mr Trollip is a director of and has a beneficial interest in Piaster Pty Ltd.

 

On 27 June 2018, the shareholders approved the grant of 17,200,000 unlisted options to Brad Sampson, valued at a total of USD 1,171,320 and 4,000,000 unlisted options to David Hathorn, valued at a total of USD 145,600 at the Company's AGM.

 

The shareholders also approved the cancellation of the below existing Performance Rights and the grant of new Performance Rights to the below Non-Executive Directors at the Company's AGM.

 

Director	Number of existing Performance Rights	Number of new Performance Rights
David Hathorn	11,000,000	1,500,000
Jonathan Trollip	2,000,000	750,000
Leonard Math	1,000,000	750,000
David Netherway	Nil	750,000
Timothy Keating	Nil	750,000

 

The new Performance Rights have a total value of USD 336,150.

 

On 27 June 2018, the shareholders also approved the issue of 500,000 and 1,050,000 Performance Rights to Sean Bennett at the Company's AGM to recognise his contribution to the Company and the transition of his position as CEO to a successor and his role in successfully implementing the re-domicile of the Group in the United Kingdom, the listing of the Company on the AIM and the JSE and the recent completion of a capital raising. These Performance Rights have a total value of USD 115,785.

 

The details of the unlisted options and Performance Rights granted are in the Company's Notice of General Meeting announced on 1 June 2018.

 

No other director has entered into a material contract (apart from employment) with the Company since the incorporation of the Company and there were no material contracts involving directors' interests at the half-year end. Remuneration arrangements of KMP are disclosed in the Directors' Remuneration Report on pages 27 to 29 of this Annual Report.

 

Loans to KMP and its related parties

David Hathorn (Chairman) and Sean Bennett (previous CEO) were each issued with 25,000 Redeemable (Non-Voting) Preference Shares at GBP 1.00 each in the Kore Potash plc (held directly). Under the Scheme of Arrangement, both Directors gave an irrevocable undertaking to pay the Company the sum of GBP 25,000 on or before the date that is five years from the date of the undertaking or, if sooner, immediately upon a written demand or demands by the Company. At 31 December 2017, the amount owing by the two Directors to the Company was USD 65,631 (GBP 50,000). Upon completion of the Scheme of Arrangement, and upon the Company's capital raising on 23 March 2018, the Redeemable Preference Shares were redeemed and the amounts payable by the Directors were offset by an amount payable by the Company back to the Directors.

 

On 26 March 2018, the Company entered into a convertible loan note agreement with the Chairman to lend USD 250,000 to the Company. The convertible loan note did not attract interest and was unsecured. At the Company's AGM on 27 June 2018, the shareholders approved the conversion of the convertible loan note into 1,618,250 shares at AUD 0.20 per share and 250,000 free-attaching warrants. The shares and warrants were issued on 27 July 2018.

 

Other transactions with the Company and the Group

No KMP has entered into a material contract (apart from employment) with the Company and the Group. Please refer to the Remuneration Report in the Directors' Report for the remuneration paid to the KMP. No amount of remuneration is outstanding at 31 December 2018 (31 December 2017: nil).

 

Nexia Perth Pty Ltd is engaged to provide accounting, administrative and company secretarial services for the Group on commercial terms. Mr Henko Vos, who is based in Perth, Australia has been appointed as joint company secretary and is also currently an employee with Nexia Perth. During the year, the total amount paid to Nexia Perth by the Group for providing accounting, administration and company secretarial services was USD 163,445 (2017: USD 117,387).

 

FKW Consulting Ltd was engaged to provide company secretarial services for the Company on commercial terms prior to Mrs Francesca Wilson's resignation as joint company secretary on 30 September 2018. Mrs Francesca Wilson, who is based in London, UK was appointed as joint company secretary up until 30 September 2018 and is also currently an employee with FKW Consulting Ltd during the year. During the year, the total amount paid to FKW Consulting Ltd by the Group for providing company secretarial services was USD 11,134 (2017: 13,383).

 

Following Mrs Francesca Wilson's resignation as joint company secretary on 30 September 2018, St James's Corporate Services Limited was appointed on 1 October 2018, and engaged to provide company secretarial services for the Company on commercial terms. During the year, the total amount paid to St James's Corporate Services Limited by the Group for providing company secretarial services was USD 29,100.

 

There were no other transactions with KMP and its related parties.

 

Note 22:  KMP DISCLOSURES

The following were KMP of the Company and the Group at any time during the reporting period and unless otherwise indicated were KMP for the entire period.

 

Executive Directors
Brad Sampson	Chief Executive Officer (appointed on 4 June 2018)
Sean Bennett	Chief Executive Officer (appointed on 20 November 2015, resigned on 4 June 2018)
Non-Executive Directors
David Hathorn	Non-Executive Chairman (appointed on 20 November 2015)
Jonathan Trollip	Non-Executive Director (appointed on 21 April 2016)
Leonard Math	Non-Executive Director (appointed on 24 April 2014)
Timothy Keating	Non-Executive Director (appointed on 15 November 2016)
David Netherway	Non-Executive Director (appointed on 12 December 2017)
José Antonio Merino	Non-Executive Director (appointed on 23 May 2018)
Pablo Altimiras	Non-Executive Director (appointed on 15 November 2016, resigned on 23 May 2018)
Executives
Henko Vos	Joint Company Secretary (appointed on 16 November 2016)
St James's Corporate Services Limited	Joint Company Secretary (appointed on 1 October 2018)
Francesca Wilson	Joint Company Secretary (appointed on 29 November 2017, resigned on 30 September 2018)
John Crews	Chief Financial Officer (appointed on 22 May 2017)
Julien Babey	Business Development and Head of RoC (appointed on 1 January 2016)
Gavin Chamberlain	Chief Operating Officer  (appointed 1 October 2017)
Lawrence Davidson	Chief Financial Officer and Risk Officer (resigned on 1 January 2018)
	Joint Company Secretary                            (resigned on 25 January 2018)

 

(i)   David Hathorn and Sean Bennett were appointed as the directors of Kore Potash plc on the date of incorporation of the Company on 25 August 2017.

(ii)  In accordance with the Scheme of Arrangement between Kore Potash Limited and its shareholders, Jonathan Trollip, Leonard Math, Timothy Keating and Pablo Altimiras were appointed as the directors of the Company on 17 November 2017.

 

KMP compensation

The KMP compensation included in "Directors Remuneration", "Equity Compensation Benefits" "Employee and Consultant Expenses" and "Exploration Expenditure" is as follows:

 

		Consolidated Entity
		Dec 2018 USD	Dec 2017 USD
Short-term employee benefits		1,807,001	1,510,100
Post-employment benefits		6,050	13,652
Termination benefits		325,705	256,986
Equity compensation benefits		981,042	1,286,133
		3,119,798	3,066,871

 

There were seven directors who held office at the end of the 2018 and 2017 years. Details of directors' remuneration are provided in the Directors' Remuneration Report on pages 27 to 44 of this Annual Report.

 

Individual directors and executives compensation disclosures

Information regarding individual directors and executives' compensation and equity instruments disclosures is provided in the Remuneration Report section of the Directors' Report. Apart from the details disclosed in this note, no director has entered into a material contract with the Company or the Group since the end of the previous financial year and there were no material contracts involving directors' interests existing at year-end.

 

Note 23: SHARE-BASED PAYMENTS

 

Recognised share-based payments

The expense recognised for employee and consultant services during the year is shown in the table below:

 

	Parent		Consolidated Entity
	Dec 2018 USD	Dec 2017 USD	Dec 2018 USD	Dec 2017 USD
Expense arising from equity-settled share-based payment transactions	695,345	75,545	695,345	1,919,924

 

In addition, the amounts capitalised to exploration and evaluation expenditure from share-based payment transactions for staff whose services are directly attributable to the operational activities of the Kola and Dougou mining projects are as follows:

	Parent		Consolidated Entity
	Dec 2018 USD	Dec 2017 USD	Dec 2018 USD	Dec 2017 USD
Amounts capitalised to exploration and evaluation expenditure arising from equity-settled share-based payment transactions	539,930	-	539,930	-

 

Parent

In accordance with the Scheme of Arrangement between Kore Potash Limited and its shareholders, 58,191,226 Unlisted Options and 48,077,728 Performance Rights/Shares were issued on 20 November 2017 from the Company to the holders of Unlisted Options or Performance Rights/Shares in Kore Potash Limited in consideration for the cancellation of those Kore Potash Limited Unlisted Options and Performance Rights/Shares.

 

The value of the above Parent entity's share-based payments in 2017 refer to the value of Performance Rights vested/cancelled after the Unlisted Options and Performance Rights/Shares were transferred from Kore Potash Limited to the Company. On 20 December 2017, 3,237,624 Performance Rights and Performance Shares vested and converted into 3,237,624 Chess Depositary Interests (CDI's) and 2,245,000 Performance Rights previously granted were cancelled following the resignation of Werner Swanepoel (Project Director). The share based payments of USD 75,545 in 2017 relate to KMP.

 

Consolidated Entity

The Group granted shares rights and options to KMP and other employees as part of as an incentive for future services and as a reward for past services. The table above shows the vesting expense recognised during the year of USD 695,345 (2017: USD 1,919,924) and vesting expenses capitalised to exploration and evaluation expenditure of USD 539,930 (2017: Nil).

 

Details of the share options outstanding during the year are as follows:

	2018		2017
	Number of share options	Weighted average exercise price	Number of share  options	Weighted average exercise price
Outstanding at beginning at year	8,191,226	AUD 0.33	8,441,226	AUD 0.35
Granted during the year	21,200,000	GBP 0.11	-	-
Forfeited during the year	-	-	-	-
Exercised during the year	-	-	-	-
Lapsed during the year	(8,191,226)	AUD 0.33	(250,000)	AUD 0.90
Outstanding at the end of the year	21,200,000	GBP 0.11	8,191,226	AUD 0.33

 

The share options outstanding at 31 December 2018 had a weighted average exercise price of GBP 0.11 and a weighted average contractual life of 8 years.

 

Details of options and performance rights issued to KMP

 

Option Series 19 to 21

 

During the 2013 financial year, 250,000 options exercisable at AUD 0.90 expiring 22 May 2017 were issued to a previous Director, Mr Robert Franklyn, following shareholder approval at the AGM held on 22 May 2013. The details of the options are as per below.

 

The options were valued using the Black Scholes Option Pricing Model. The table below shows the fair value of the options and the inputs used in determining the fair value.

 

Inputs into the model	Tranche 1 (Series 19)	Tranche 2 (Series 20)	Tranche 3 (Series 21)
Grant date	22 May 2013	22 May 2013	22 May 2013
Share price at grant date	AUD 0.39	AUD 0.39	AUD 0.39
Exercise price	AUD 0.90	AUD 0.90	AUD 0.90
Expiry date	22 May 2017	22 May 2017	22 May 2017
Expected volatility	100%	100%	100%
Dividend yield	0%	0%	0%
Risk free rate	2.75%	2.75%	2.75%
Vesting date	22 May 2014	22 May 2015	22 May 2016
Vesting period (years)	0.90	1.90	2.90
Fair value per option calculated based on above inputs	AUD 0.2181	AUD 0.2181	AUD 0.2181
Number of options	83,333	83,333	83,334

 

The above options expired during the 2017 financial year on 22 May 2017.

 

 

Option Series 22 to 24

 

On 9 April 2014, the Company granted 6,509,013 Options exercisable at AUD 0.33 expiring 15 April 2018 to employees under the Group's Employee Share Option Plan.

 

The options were subject to the following vesting conditions:

·    1/3^rd which vested on 15 April 2014;

·    1/3^rd which vested on 15 April 2015; and

·    1/3^rd which vested on 15 April 2016.

 

None of the options had any voting rights, any entitlement to dividends or any entitlement to the proceeds of liquidation in the event of a winding up.

 

The fair value of the equity-settled share options granted was estimated as at the grant date using the Binomial Option Pricing Model taking into account the terms and conditions upon which the instruments were granted. Expected volatility was based on the historical share price volatility over the previous years.

 

Details of options and performance rights issued to KMP (cont)

 

Option Series 22 to 24 (Cont)

The input used in the measurement of the fair value at grant date of equity settled share based payments plan were as follows:

 

Inputs into the model	Tranche 1 (Series 22)	Tranche 2 (Series 23)	Tranche 3 (Series 24)
Grant date share price	AUD 0.26	AUD 0.26	AUD 0.26
Exercise price	AUD 0.33	AUD 0.33	AUD 0.33
Expected volatility	100%	100%	100%
Option life	4 years	4 years	4 years
Dividend yield	0%	0%	0%
Risk free interest rate	2.5%	2.5%	2.5%
Weighted average grant date fair value	AUD 0.1242	AUD 0.1391	AUD 0.1522
Number of options	2,169,671	2,169,671	2,169,671

 

During the 2014 year, a total of 817,787 of options lapsed, 408,893 from Tranche 2 (Option Series 23) and 408,894 from Tranche 3 (Option Series 24).

 

The remaining options expired during the 2018 financial year on 15 April 2018.

 

 

Option Series 25 to 27

On 12 May 2014, the Company granted 1,000,000 options exercisable at AUD 0.33 expiring 15 April 2018 to an employee under the Group's Employee Share Option Plan.

 

The options were subject to the following vesting conditions:

·    1/3^rd which vested on 15 April 2014;

·    1/3^rd which vested on 15 April 2015; and

·    1/3^rd which vested on 15 April 2016.

 

None of the options had any voting rights, any entitlement to dividends or any entitlement to the proceeds of liquidation in the event of a winding up.

 

The fair value of the equity-settled share options granted was estimated as at the grant date using the Binomial Option Pricing Model taking into account the terms and conditions upon which the instruments were granted. Expected volatility was based on the historical share price volatility over the past years.

 

Option Series 25 to 27 (Cont)

The input used in the measurement of the fair value at grant date of equity settled share based payments plan were as follows:

 

Inputs into the model	Tranche 1 (Series 25)	Tranche 2 (Series 26)	Tranche 3 (Series 27)
Grant date share price	AUD 0.22	AUD 0.22	AUD 0.22
Exercise price	AUD 0.33	AUD 0.33	AUD 0.33
Expected volatility	100%	100%	100%
Option life	4 years	4 years	4 years
Dividend yield	0%	0%	0%
Risk free interest rate	2.5%	2.5%	2.5%
Weighted average grant date fair value	AUD 0.0948	AUD 0.1073	AUD 0.1194
Number of options	333,333	333,333	333,333

 

The above options expired during the 2018 financial year on 15 April 2018.

 

 

Option Series 28 to 30

On 30 May 2014, the Company issued 1,500,000 Options exercisable at AUD 0.33 expiring 26 June 2018 to the following previous Directors under the Group's Employee Share Option Plan

 

Mr John Iain Macpherson                 1,100,000 Options

Mr Robert Samuel Middlemas          400,000 Options

 

The options were subject to the following vesting conditions:

·    1/3^rd which vested on 15 April 2014;

·    1/3^rd which vested on 15 April 2015; and

·    1/3^rd which vested on 15 April 2016.

 

None of the options had any voting rights, any entitlement to dividends or any entitlement to the proceeds of liquidation in the event of a winding up.

 

The fair value of the unlisted options granted was estimated as at the grant date using the Binomial Option Pricing Model taking into account the terms and conditions upon which the instruments were granted. Expected volatility was based on the historical share price volatility over the previous years.

The input used in the measurement of the fair value at grant date of equity settled share based payments plan were as follows:

 

Inputs into the model	Tranche 1 (Series 28)	Tranche 2 (Series 29)	Tranche 3 (Series 30)
Grant date share price	AUD 0.25	AUD 0.25	AUD 0.25
Exercise price	AUD 0.33	AUD 0.33	AUD 0.33
Expected volatility	100%	100%	100%
Option life	4 years	4 years	4 years
Dividend yield	0%	0%	0%
Risk free interest rate	2.5%	2.5%	2.5%
Weighted average grant date fair value	AUD 0.1177	AUD 0.1303	AUD 0.1432
Number of options	500,000	500,000	500,000

 

The above options expired during the 2018 financial year on 26 June 2018.

 

 

Option Series 31 and 32

At the Company's AGM on 27 June 2018, the Company's shareholders approved the grant of 17,200,000 unlisted options to Brad Sampson and 4,000,000 unlisted options to David Hathorn. The vesting conditions for the unlisted options include milestones being achieved in relation to the Kola Project, as follows:

 

Vesting conditions	Brad Sampson (Option Series 31)	David Hathorn (Option Series 32)
Completion of project financing	5,733,333	4,000,000
Completion of project	11,466,667	-
Total	17,200,000	4,000,000
Expiry	27/06/2028	27/06/2020

 

The fair value at grant date of the unlisted options issued to Brad Sampson and to David Hathorn was estimated at GBP 0.0518 and GBP 0.0241 respectively, using the Black Scholes Option Pricing Model taking into account the terms and conditions as set out above. The input used in the measurement of the fair value at grant date of the unlisted options were as follows:

 

Input into the model	Option Series 31	Option Series 32
Grant Date Share Price	GBP 0.06	GBP 0.06
Expected Volatility	108.90%	108.90%
Options Life	10 years	2 years
Grant date fair value	GBP 0.0518	GBP 0.0241

 

Rights Series 4 to 6

On 17 September 2015, the Company issued 7,998,270 Performance Rights to the following employees of the Group under the Group's Employee Performance Rights Plan.

 

Employee	Class A	Class B	Class C
Lawrence Davidson	376,374	376,374	376,374
Julien Babey	521,957	521,957	521,957
Other employees	1,767,759	1,767,759	1,767,759
Total	2,666,090	2,666,090	2,666,090

 

Rights and each class' vesting conditions is as follows:-

 

Rights Series 4 - Class A Performance Rights (Employee)

Performance Rights vest as one Share for each Performance Right subject to the satisfaction of the following performance criteria within 24 months from the date of issue:-

·       the Company's market capitalisation averaging over a period of 60 consecutive days of trading a daily average of not less than AUD 85 million; and 

·       completing 12 months of continuous service with the Company.

 

Rights Series 5 - Class B Performance Rights (Employee)

Performance Rights vest as one Share for each Performance Right subject to the satisfaction of the following performance criteria within 36 months from the date of issue:

·       the Company's market capitalisation averaging over a period of 60 consecutive days of trading a daily average of not less than AUD 100 million; and 

·       completing 24 months of continuous service with the Company.

 

Rights Series 6 - Class C Performance Rights (Employee)

Performance Rights vest as one Share for each Performance Right subject to the satisfaction of the following performance criteria within 48 months from the date of issue:

·       the Company's market capitalisation averaging over a period of 60 consecutive days of trading a daily average of not less than AUD 120 million; and 

·       completing 36 months of continuous service with the Company.

 

The fair value of the performance rights granted was estimated as at the grant date using the Monte-Carlo Pricing Model taking into account the terms and conditions upon which the instruments were granted.

 

The input used in the measurement of the fair value at grant date of the performance rights were as follows:

 

Inputs into the model	Series 4 - Class A	Series 5 - Class B	Series 6 - Class C
Grant date share price	AUD 0.185	AUD 0.185	AUD 0.185
Expected volatility	80%	80%	80%
Rights life	2 years	3 years	4 years
Grant date fair value	AUD 0.1451	AUD 0.1507	AUD 0.1510

 

During the 2017 and 2018 years, the Class A, Class B and Class C Performance Rights vested and the following shares were subsequently issued to the following employees of the Group:

 

Employee	Shares (i)	Shares (ii)	Shares (iii)
Lawrence Davidson	376,374	376,374	376,374
Julien Babey	521,957	521,957	521,957
Other employees	1,767,759	1,767,759	1,767,759
Total	2,666,090	2,666,090	2,666,090

 

(i)   The shares from Class A Performance Rights were issued during the 2017 year.

(ii)  The shares from Class B Performance Rights were issued during the 2018 year.

(iii) The shares from Class C Performance Rights were issued subsequent to year end on 13 February 2019.

 

 

Rights Series 7 - Performance Rights (Previous Project Director)

On 29 February 2016, the Company granted 5,000,000 Performance Rights to Mr Werner Swanepoel, Project Director, under the Group's Employee Performance Rights Plan. The rights were contractually agreed to on 7 December 2015 pursuant to Mr Swanepoel's employment agreement. The Performance Rights vest as one Share for each Performance Right subject to the satisfaction of the following:

 

Vesting Conditions
Joining K2P
(1) -  sign on bonus	250,000
(1) -  allocated after 1 year service	250,000
(1) -  allocated after 2 years service	250,000
(1) -  allocated after 3 years service	250,000
Kola Resource & Mine
(2) - DFS Completion	1,000,000
(3) - Off-take secured to support debt finance for mine build	500,000
(4) - Complete finance package for mine build	500,000
Dougou Resource
(5) - Development advanced to commencement of DFS	500,000
Yangala Resource
(6) - Development advanced to completion of PFS	500,000
Share Price Allocation Matrix	1,000,000
25% initial tranche (Note 1(a))	250,000
straight line between AUD 0.50 and AUD 2.00 (Note 1(b))
100%	1,000,000
TOTAL	5,000,000

 

Note 1: Share Price Allocation Matrix

Performance Rights vest on the basis of one Share for each Performance Right vesting, calculated as follows:

 

(a)    For the first Vesting Period (6 months) following issue, the number of Shares to be issued is:

(i)      where the 30 day average daily VWAP is less than AUD 0.50, nil;

(ii)    where the 30 day average daily VWAP is AUD 0.50 or more, the Initial Tranche plus 500 Shares for each one tenth of a cent that the 30 day average daily VWAP exceeds AUD 0.50.

 

(b)    For the remainder of the Performance Rights Term (5 years), the number of Shares to be issued at the end of each Vesting Period (6 months) is:

(i)      where the Initial Tranche has not been issued and the 30 day average daily VWAP for the current Vesting Period is AUD 0.50 or more, the Initial Tranche plus 500 Shares for each one tenth of a cent that the 30 day average daily VWAP exceeds AUD 0.50 on the basis of one Share for each Performance Right.

(ii)    where the 30 day average daily VWAP is less than the 30 day average daily VWAP for any pervious Vesting Period, nil.

(iii)   where the 30 day average daily VWAP is equal to or more than the highest previous 30 day average daily VWAP, 500 Shares for each one tenth of a cent that the 30 day average daily VWAP exceeds the highest previous 30 day average daily VWAP.

 

The fair value of the operational performance rights granted (4,000,000) is calculated based on the share price at grant date. The fair value of these operational performance rights is AUD 0.19.

 

The fair value of the remaining performance rights granted with a share price threshold (1,000,000) is estimated as at the grant date using the Monte-Carlo Pricing Model taking into account the terms and conditions upon which the instruments were granted.

 

The input used in the measurement of the fair value at grant date of the performance rights were as follows:

 

Inputs into the model	Series 7
Grant date share price	AUD 0.19
Expected volatility	80%
Rights life	5 years
Grant date fair value	AUD 0.1167

 

On 29 February 2016, 250,000 Fully Paid Ordinary Shares were issued following the vesting of the Performance Rights as a sign on bonus for the Project Director. In addition, subsequent to year end on 3 February 2017, 250,000 Fully Paid Ordinary Shares were issued to the Project Director following the vesting of the Performance Rights due to one year of service being completed on 7 December 2016. On 18 December 2017, 2,245,000 Performance Rights was cancelled upon Mr. Swanepoel's resignation. The remaining 2,255,000 Performance Rights were outstanding as at 31 December 2018.

 

Rights Series 8 - Performance Rights (Chairman)

On 2 March 2016, following shareholders' approval, the Company granted 13,000,000 Performance Rights to Mr David Hathorn under the Group's Employee Performance Rights Plan. Performance Rights vested as one Share for each Performance Right subject to the satisfaction of the following:

 

Vesting Conditions
Joining K2P
(1) -  allocated after 1 year service	1,000,000
(1) -  allocated after 2 years service	1,000,000
(1) -  allocated after 3 years service	1,000,000
Share Price Allocation Matrix	10,000,000
20%	2,000,000
straight line between AUD 0.50 and AUD 2.00 (Note 1(b))
100%	10,000,000
TOTAL	13,000,000

 

Note 1: Share Price Allocation Matrix

Performance Rights vest on the basis of one Share for each Performance Right vesting, calculated as follows:

 

(a)    For the first Vesting Period (6 months) following issue, the number of Shares to be issued is:

(i)      where the 30 day average daily VWAP is less than AUD 0.50, nil.

(ii)    where the 30 day average daily VWAP is AUD 0.50 or more, the Initial Tranche plus 5,333 Shares for each one tenth of a cent that the 30 day average daily VWAP exceeds AUD 0.50.

 

(b)    For the remainder of the Performance Rights Term (5 years), the number of Shares to be issued at the end of each Vesting Period (6 months) is:

(i)      where the Initial Tranche has not been issued and the 30 day average daily VWAP for the current Vesting Period is AUD 0.50 or more, the Initial Tranche plus 5,333 Shares for each one tenth of a cent that the 30 day average daily VWAP exceeds AUD 0.50 on the basis of one Share for each Performance Right.

(ii)    where the 30 day average daily VWAP is less than the 30 day average daily VWAP for any previous Vesting Period, nil.

(iii)   where the 30 day average daily VWAP is equal to or more than the highest previous 30 day average daily VWAP, 5,333 Shares for each one tenth of a cent that the 30 day average daily VWAP exceeds the highest previous 30 day average daily VWAP.

 

The fair value of the operational performance rights granted (3,000,000) was calculated based on the share price at grant date. The fair value of these operational performance rights was AUD 0.20.

 

The fair value of the remaining performance rights granted with a share price threshold (10,000,000) is estimated as at the grant date using the Monte-Carlo Pricing Model taking into account the terms and conditions upon which the instruments were granted.

 

The input used in the measurement of the fair value at grant date of these performance rights were as follows:

 

Inputs into the model	Series 8
Issue date share price	AUD 0.165
Expected volatility	80%
Rights life	5 years
Grant date fair value	AUD 0.1475

 

On 3 February 2017 and on 20 December 2017, 2,000,000 Fully Paid Ordinary Shares were issued to the Chairman following the vesting of the Performance Rights due to his one and two years of service being completed on 20 November 2016 and 20 November 2017, respectively.

 

The remaining 11,000,000 Performance Rights were cancelled following shareholder approval at the Company's AGM on 27 June 2018.

 

 

Rights Series 9 - Performance Rights (Previous CEO) 

On 2 March 2016, following shareholders' approval, the Company granted 8,500,000 Performance Rights to Mr Sean Bennett under the Group's Employee Performance Rights Plan. Performance Rights vest as one Share for each Performance Right subject to the satisfaction of the following:

 

Vesting Conditions
Joining K2P
(1) -  sign on bonus	531,250
(1) -  allocated after 1 year service	531,250
(1) -  allocated after 2 years service	531,250
(1) -  allocated after 3 years service	531,250
Kola Resource & Mine
(2) - DFS Completion	850,000
(3) - Off-take secured to support debt finance for mine build	850,000
(4) - Complete finance package for mine build	850,000
Dougou Resource
(5) - Development advanced to commencement of DFS	850,000
Yangala Resource
(6) - Development advanced to completion of PFS	850,000
Share Price Allocation Matrix	2,125,000
25% initial tranche (Note 1(a))	531,250
straight line between AUD 0.50 and AUD 2.00 (Note 1(b))
100%	2,125,000
TOTAL	8,500,000

 

Note 1: Share Price Allocation Matrix

Performance Rights vest on the basis of one Share for each Performance Right vesting, calculated as follows:

 

(a)    For the first Vesting Period (6 months) following issue, the number of Shares to be issued is:

(i)      where the 30 day average daily VWAP is less than AUD 0.50, nil;

(ii)    where the 30 day average daily VWAP is AUD 0.50 or more, the Initial Tranche plus 1,062 Shares for each one tenth of a cent that the 30 day average daily VWAP exceeds AUD 0.50.

 

(b)    For the remainder of the Performance Rights Term (5 years), the number of Shares to be issued at the end of each Vesting Period (6 months) is:

(i)      where the Initial Tranche has not been issued and the 30 day average daily VWAP for the current Vesting Period is AUD 0.50 or more, the Initial Tranche plus 1,062 Shares for each one tenth of a cent that the 30 day average daily VWAP exceeds AUD 0.50 on the basis of one Share for each Performance Right.

(ii)    where the 30 day average daily VWAP is less than the 30 day average daily VWAP for any pervious Vesting Period, nil.

(iii)   where the 30 day average daily VWAP is equal to or more than the highest previous 30 day average daily VWAP, 1,062 Shares for each one tenth of a cent that the 30 day average daily VWAP exceeds the highest previous 30 day average daily VWAP.

 

The fair value of the operational performance rights granted (6,375,000) is calculated based on the share price at grant date. The fair value of these operational performance rights is AUD 0.20.

 

The fair value of the remaining performance rights granted with a share price threshold (2,125,000) is estimated as at the grant date using the Monte-Carlo Pricing Model taking into account the terms and conditions upon which the instruments were granted.

 

The input used in the measurement of the fair value at grant date of the performance rights were as follows:

 

Inputs into the model	Series 9
Issue date share price	AUD 0.165
Expected volatility	80%
Rights life	5 years
Grant date fair value	AUD 0.1469

 

The following Fully Paid Ordinary Shares were issued to the previous CEO during the 2017 and 2018 years:

 

Date	Shares
2 March 2016	531,250	Following vesting due to sign-on bonus.
3 February 2017	531,250	Following 1 year of service being completed on 20 November 2016.
20 November 2017	531,250	Following 2 years of service being completed on 20 November 2017.
Total	1,593,750

 

On 4 June 2018, 1,025,000 Performance Rights were cancelled following the resignation of the previous CEO. The remaining 5,881,250 was outstanding at year end.

 

 

Rights Series 10 - Performance Rights (Non-Executive Director - J Trollip)

On 6 July 2016, following shareholders' approval, the Company granted 2,000,000 Performance Rights to Mr Jonathan Trollip under the Group's Employee Performance Rights Plan. Performance Rights vest as one Share for each Performance Right subject to the satisfaction of the following:

 

Vesting Conditions
Share Price Allocation Matrix	2,000,000
25% initial tranche (Note 1(a))	500,000
straight line between AUD 0.50 and AUD 2.00 (Note 1(b))
100%	1,500,000
TOTAL	2,000,000

 

 

Note 1: Share Price Allocation Matrix

Performance Rights vest on the basis of one Share for each Performance Right vesting, calculated as follows:

 

(a)    For the first Vesting Period (6 months) following issue, the number of Shares to be issued is:

(i)      where the 30 day average daily VWAP is less than AUD 0.50, nil;

(ii)    where the 30 day average daily VWAP is AUD 0.50 or more, the Initial Tranche plus 1,000 Shares for each one tenth of a cent that the 30 day average daily VWAP exceeds AUD 0.50.

 

(b)    For the remainder of the Performance Rights Term (5 years), the number of Shares to be issued at the end of each Vesting Period (6 months) is:

(i)      where the Initial Tranche has not been issued and the 30 day average daily VWAP for the current Vesting Period is AUD 0.50 or more, the Initial Tranche plus 1,000 Shares for each one tenth of a cent that the 30 day average daily VWAP exceeds AUD 0.50 on the basis of one Share for each Performance Right.

(ii)    where the 30 day average daily VWAP is less than the 30 day average daily VWAP for any pervious Vesting Period, nil.

(iii)   where the 30 day average daily VWAP is equal to or more than the highest previous 30 day average daily VWAP, 1,000 Shares for each one tenth of a cent that the 30 day average daily VWAP exceeds the highest previous 30 day average daily VWAP.

 

The fair value of the performance rights granted with a share price threshold (2,000,000) was estimated as at the grant date using the Monte-Carlo Pricing Model taking into account the terms and conditions upon which the instruments were granted.

 

The input used in the measurement of the fair value at grant date of the performance rights were as follows:

 

Inputs into the model	Series 10
Issue date share price	AUD 0.190
Expected volatility	80%
Rights life	5 years
Grant date fair value	AUD 0.1258

 

The above Performance Rights were cancelled following shareholder approval at the Company's AGM on 27 June 2018.

 

 

Rights Series 11 - Performance Rights (Non-Executive Director - L Math)

On 6 July 2016, following shareholders' approval, the Company granted 1,000,000 Performance Rights to Mr Leonard Math under the Group's Employee Performance Rights Plan. Performance Rights vest as one Share for each Performance Right subject to the satisfaction of the following:

 

Vesting Conditions
Share Price Allocation Matrix	1,000,000
25% initial tranche (Note 1(a))	250,000
straight line between AUD 0.50 and AUD 2.00 (Note 1(b))
100%	750,000
TOTAL	1,000,000

 

 

Note 1: Share Price Allocation Matrix

Performance Rights vest on the basis of one Share for each Performance Right vesting, calculated as follows:

 

(a)    For the first Vesting Period (6 months) following issue, the number of Shares to be issued is:

(i)      where the 30 day average daily VWAP is less than AUD 0.50, nil;

(ii)    where the 30 day average daily VWAP is AUD 0.50 or more, the Initial Tranche plus 500 Shares for each one tenth of a cent that the 30 day average daily VWAP exceeds AUD 0.50.

 

(b)    For the remainder of the Performance Rights Term (5 years), the number of Shares to be issued at the end of each Vesting Period (6 months) is:

(i)      where the Initial Tranche has not been issued and the 30 day average daily VWAP for the current Vesting period is AUD 0.50 or more, the Initial Tranche plus 500 Shares for each one tenth of a cent that the 30 day average daily VWAP exceeds AUD 0.50 on the basis of one Share for each Performance Right.

(ii)    where the 30 day average daily VWAP is less than the 30 day average daily VWAP for any pervious Vesting Period, nil.

(iii)   where the 30 day average daily VWAP is equal to or more than the highest previous 30 day average daily VWAP, 500 Shares for each one tenth of a cent that the 30 day average daily VWAP exceeds the highest previous 30 day average daily VWAP.

 

The fair value of the performance rights granted with a share price threshold (1,000,000) is estimated as at the grant date using the Monte-Carlo Pricing Model taking into account the terms and conditions upon which the instruments were granted.

 

The input used in the measurement of the fair value at grant date of the performance rights were as follows:

 

Inputs into the model	Series 11
Issue date share price	AUD 0.190
Expected volatility	80%
Rights life	5 years
Grant date fair value	AUD 0.1258

 

The above Performance Rights were cancelled following shareholder approval at the Company's AGM on 27 June 2018.

 

 

Rights Series 12

On 29 May 2017, the Group granted 2,000,000 performance rights to its employees, under the Group's Employee Performance Rights Plan, to recognise their overall contribution and performance during 2016. These performance rights vest as one fully paid ordinary share for each performance right in 2 years on 31 May 2019, on the condition that the employee is still employed by the Group.

 

The fair value of the performance rights was estimated at AUD 0.17 per performance rights, calculated based on the share price at grant date using the Cox, Ross and Rubinstein Binomial Option Pricing Model.

 

The inputs used in the measurement of the fair value at grant date of these performance rights were as follows:

 

Inputs into the model	Rights Series 12
Grant date spot price	AUD 0.17
Expected volatility	75%
Life of performance share	2 years
Grant date fair value	AUD 0.17

 

 

Rights Series 13

In addition, following shareholders' approval at the Group's 2017 AGM on 31 May 2017, the Group granted 660,000 performance rights to Mr Sean Bennett, the Group's previous CEO, under the Group's Employee Performance Rights Plan. These performance rights were granted on the same basis as the 2,000,000 Performance Shares as detailed above. The 660,000 performance rights vested in full upon Mr Bennett's resignation on 4 June 2018.

 

The fair value of the performance rights was estimated at AUD 0.17 per performance rights, calculated based on the share price at grant date using the Cox, Ross and Rubinstein Binomial Option Pricing Model.

 

The inputs used in the measurement of the fair value at grant date of these performance rights were as follows:

 

Inputs into the model	Rights Series 13
Grant date spot price	AUD 0.17
Expected volatility	75%
Life of performance share	2 years
Grant date fair value	AUD 0.17

 

 

Rights Series 14

On 29 May 2017, the Group announced that under an STIP the Board resolved and agreed to issue up to 4,482,005 performance rights for employees for 2017. Under the STIP, the final amount of performance rights issued may be reduced by the Board (in its sole discretion) depending upon each employee's performance during the 2017 year. Under the STIP, in accordance with the Group's remuneration strategy, the employee's performance is assessed by the Board against a range of objectives including delivery of the Kola DFS on time and in budget, progressing the Kola ESIA and maintaining control of costs within the business. The performance rights vest a third on award, a third after 1 year of continuous service and a third after 2 years continuous service, as one fully paid ordinary share for each performance right.

 

The fair value of the performance rights was estimated at AUD 0.17 per performance right, calculated based on the share price at grant date using the Cox, Ross and Rubinstein Binomial Option Pricing Model.

 

The input used in the measurement of the fair value at grant date of the performance rights were as follows:

 

Inputs into the model	Rights Series 14
Grant date spot price	AUD 0.17
Expected volatility	75%
Life of performance share	2 years
Grant date fair value	AUD 0.17

 

During the 2018 year, the Board approved the allocation of 2,845,314 STIP performance rights to various KMP and other employees. In addition, during the 2017 year, at the Board's discretion, 735,000 was allocated to two employees (including Mr Werner Swanepoel, who was allocated 490,000 STIP performance rights), which vested immediately and were converted into fully paid ordinary shares upon their resignation.

 

Rights Series 15

On 29 May 2017, the Group announced that the Board resolved and agreed to issue up to 11,734,853 performance rights available to employees under the LTIP. These performance rights vest as one fully paid ordinary share for each performance right, of which the final amount issued may be reduced by the Board (in its discretion) depending upon the employee's performance against the following objectives:

 

Non-market performance conditions

·      Completing the DFS in line with the Group's objectives and milestones

·      Successful completion of the financing of the Kola Project

·      Achieving the appropriate level of off-take for the Kola Project

 

Market performance conditions

·      The Company's share price being between AUD 0.50 and AUD 2.00 (or GBP equivalent), vesting on the basis of one fully paid ordinary share for each performance right vesting, and calculated using a Share Price Allocation Matrix (straight-line basis).

 

The fair value of the performance rights attached to the non-market performance conditions is estimated at AUD 0.17 per performance right, calculated based on the share price at grant date using the Cox, Ross and Rubinstein Binomial Option Pricing Model.

 

The input used in the measurement of the fair value at grant date of the performance rights attached to non-market performance conditions were as follows:

 

Inputs into the model	Rights Series 15
Grant date spot price	AUD 0.17
Expected volatility	75%
Life of performance share	5 years
Grant date fair value	AUD 0.17

 

The fair value of the performance rights attached to the market performance condition is estimated at AUD 0.104 per performance right at grant date, using the Monte-Carlo Simulation Model, and taking into account the terms and conditions upon which the performance rights were granted.

 

The input used in the measurement of the fair value at grant date of the performance rights attached to market performance conditions were as follows:

 

Inputs into the model	Rights Series 15
Grant date spot price	AUD 0.17
Expected volatility	75%
Life of performance share	5 years
Grant date fair value	AUD 0.104

 

As at reporting date, the Board has not yet determined the allocation of the LTIP performance rights. The allocation will be determined against each objective for each employee on a case by case basis.

 

Rights Series 16 to 20

At the Company's AGM on 27 June 2018, the Company's shareholders approved the grant of performance rights to the following Non-Executive Directors:

 

Series	Director	Number of Performance Rights
Rights Series 16	David Hathorn	1,500,000
Rights Series 17	Jonathan Trollip	750,000
Rights Series 18	Leonard Math	750,000
Rights Series 19	David Netherway	750,000
Rights Series 20	Timothy Keating	750,000

 

The performance rights are a one-off award and will unconditionally vest in three equal tranches on the first, second and third anniversary of the Company's admission to the AIM market. They will vest as one fully paid ordinary share for each performance right, and will expire on 22 May 2022.

 

The fair value of the performance rights granted was estimated as at the grant date at GBP 0.0564 per performance right, using the Black Scholes Option Pricing Model taking into account the terms set out above.

 

The input used in the measurement of the fair value at grant date of the performance rights were as follows:

 

Inputs into the model	Rights Series 16	Rights Series 17	Rights Series 18
Grant date share price	GBP 0.06	GBP 0.06	GBP 0.06
Expected volatility	90.12%	90.12%	90.12%
Rights life	4 years	4 years	4 years
Grant date fair value	GBP 0.0564	GBP 0.0564	GBP 0.0564

 

Inputs into the model	Rights Series 19	Rights Series 20
Grant date share price	GBP 0.06	GBP 0.06
Expected volatility	90.12%	90.12%
Rights life	4 years	4 years
Grant date fair value	GBP 0.0564	GBP 0.0564

 

Rights Series 21 and 22

At the Company's AGM on 27 June 2018, the Company's shareholders approved the grant 500,000 (Rights Series 21) and 1,050,000 (Rights Series 22) performance rights to Sean Bennett, the Company's previous CEO, to recognise his contribution to the Company and the transition of his position as CEO to a successor and his role in successfully implementing the re-domicile of the Group in the United Kingdom, the listing of the Company on the AIM and JSE and the recent completion of a capital raising.

 

The performance rights have no vesting conditions and will be exercisable on and from the date of their issue, with each performance right being convertible into one fully paid ordinary share.

 

At reporting date, both parcels of performance rights were yet to be issued and converted to shares.

 

The fair value at grant date of the performance rights was estimated at GBP 0.0564 per performance right, using the Black Scholes Option Pricing Model. The input used in the measurement of the fair value at grant date of the performance rights were as follows:

 

Input into the model	Rights Series 21	Rights Series 22
Grant date share price	GBP 0.06	GBP 0.06
Expected volatility	90.12%	90.12%
Rights life	4 years	4 years
Grant date fair value	GBP 0.0564	GBP 0.0564

 

The following options from share based payment arrangements were in existence during the current and prior periods:

 

	Grant Date	Vesting Date	Number of Options	Expiry Date	Fair Value at Grant Date	Exercise Price
Option Series 19 *	22/05/2013	22/05/2014	83,333	22/05/2017	AUD 0.2181	AUD 0.90
Option Series 20 *	22/05/2013	22/05/2015	83,333	22/05/2017	AUD 0.2181	AUD 0.90
Option Series 21 *	22/05/2013	22/05/2016	83,334	22/05/2017	AUD 0.2181	AUD 0.90
Option Series 22 **	9/04/2014	10/04/2014	2,169,671	15/04/2018	AUD 0.1242	AUD 0.33
Option Series 23 **	9/04/2014	10/04/2015	1,760,778	15/04/2018	AUD 0.1391	AUD 0.33
Option Series 24 **	9/04/2014	10/04/2016	1,760,777	15/04/2018	AUD 0.1522	AUD 0.33
Option Series 25 **	12/05/2014	10/04/2014	333,333	15/04/2018	AUD 0.0948	AUD 0.33
Option Series 26 **	12/05/2014	10/04/2015	333,333	15/04/2018	AUD 0.1073	AUD 0.33
Option Series 27 **	12/05/2014	10/04/2016	333,334	15/04/2018	AUD 0.1194	AUD 0.33
Option Series 28 **	30/05/2014	10/04/2014	500,000	26/06/2018	AUD 0.1177	AUD 0.33
Option Series 29 **	30/05/2014	10/04/2015	500,000	26/06/2018	AUD 0.1303	AUD 0.33
Option Series 30 **	30/05/2014	10/04/2016	500,000	26/06/2018	AUD 0.1432	AUD 0.33
Option Series 31 ***	27/06/2018	Refer below	17,200,000	27/06/2028	GBP 0.0518	GBP 0.11
Option Series 32 ***	27/06/2018	Refer below	4,000,000	27/06/2020	GBP 0.0241	GBP 0.11

 

*    Option Series expired during the previous financial year.

 

**  Option Series expired during the current financial year.

 

***          These options were issued to Brad Sampson (Option Series 31) and David Hathorn (Option Series 32). The vesting conditions for these Options include milestones being achieved in relation to the Kola Project. The fair value of the options granted was estimated as at the grant date using the Black Scholes Option Pricing Model taking into account the terms and conditions upon which the instruments were granted. The input used in the measurement of the fair value at grant date of the options were as follows:

 

Input into the model	Option Series 31	Option Series 32
Grant Date Share Price	GBP 0.06	GBP 0.06
Expected Volatility	108.90%	108.90%
Options Life	10 years	2 years
Grant date fair value	GBP 0.0518	GBP 0.0241

 

The following Performance Rights from share based payment arrangements were in existence during the current and prior periods:

 

	Grant Date	Vesting Date	Number of Rights	Expiry Date	Fair Value at Grant Date
Rights Series 4 (1)	17/09/2015	1 Dec 2016	2,666,090	16/09/2017	AUD 0.1451
Rights Series 5 (2)	17/09/2015	Refer below	2,666,090	16/09/2018	AUD 0.1507
Rights Series 6 (3)	17/09/2015	Refer below	2,666,090	16/09/2019	AUD 0.1510
Rights Series 7 (4)	07/12/2015	Refer below	5,000,000	06/12/2020	AUD 0.1753
Rights Series 8 (5)	20/11/2015	Refer below	13,000,000	01/03/2021	AUD 0.1596
Rights Series 9 (6)	20/11/2015	Refer below	8,500,000	01/03/2021	AUD 0.1867
Rights Series 10 (7)	6/07/2016	Refer below	2,000,000	30/06/2021	AUD 0.1258
Rights Series 11 (7)	6/07/2016	Refer below	1,000,000	30/06/2021	AUD 0.1258

 

(1)     Fully vested on 1 December 2016 pursuant to the satisfaction of performance criteria. Performance Rights were converted to fully paid ordinary shares on 3 February 2017.

 

(2)     On 3 February 2017, 402,720 Performance Rights vested and were converted into fully paid ordinary shares. In addition, on 30 June 2017, 2,263,370 Performance Rights vested and were converted into fully paid ordinary shares.

 

(3)     On 30 June 2017, 402,720 Performance Rights vested and were converted into fully paid ordinary shares. In addition, on 20 December 2017, 376,374 Performance Rights vested and were converted to fully paid ordinary shares on the resignation of Mr Lawrence Davidson. The remaining 1,886,996 Performance Rights vested on 17 May 2018 pursuant to the satisfaction of performance criteria and were converted into fully paid ordinary shares on 13 February 2019.

 

(4)     250,000 Performance Rights vested and were converted to fully paid ordinary shares on 29 February 2016. In addition, on 3 February 2017, 250,000 fully paid ordinary shares were issued to Mr Werner Swanepoel following the vesting of the Performance Rights due to one year of service being completed on 7 December 2016. On 20 December 2017, 2,245,000 of these Performance Rights were cancelled following his resignation. The remaining 2,255,000 Performance Rights of this series has not yet vested.

 

(5)     On 3 February 2017, 1,000,000 fully paid ordinary shares were issued following vesting of one year service conditions on 20 November 2016. On 20 December 2017, 1,000,000 fully paid ordinary shares were issued to Mr David Hathorn following the vesting of the Performance Rights due to his two years of service being completed on 20 November 2017. The remaining 11,000,000 Performance Rights were cancelled on 27 June 2018 following shareholder approval at the Company's AGM.

 

(6)     531,250 performance rights vested and converted to fully paid ordinary shares on 2 March 2016. In addition, on 3 February 2017, 531,250 fully paid ordinary shares were issued to Mr Sean Bennett following vesting of one year service condition on 20 November 2016. On 20 December 2017, 531,250 Fully Paid Ordinary Shares were issued to him following the vesting of the Performance Rights due to two years of service being completed on 20 November 2017. On 4 June 2018, 1,025,000 of these Performance Rights were cancelled following his resignation. Out of the remaining 5,881,250 Performance Rights of this series, 531,250 vested on 4 June 2018 (upon resignation) and is yet to be converted into shares, and the remaining has not yet vested.

 

(7)     These Performance Rights were cancelled on 27 June 2018 following shareholder approval at the Company's AGM.

 

 

The following Performance Rights from share based payment arrangements were in existence during the current and prior periods (cont):

 

	Grant Date	Vesting Date	Number of Rights	Expiry Date	Fair Value at Grant Date
Rights Series 12 (8) (9)	29/05/2017	Refer below	2,000,000	31/05/2019	AUD 0.1700
Rights Series 13 (8) (10)	31/05/2017	4 June 2018	660,000	31/05/2019	AUD 0.1700
Rights Series 14 (8) (11)	29/05/2017	Refer below	4,482,005	31/05/2020	AUD 0.1700
Rights Series 15 (12)	29/05/2017	None vested	11,734,853	31/05/2022	AUD 0.17 / AUD 0.104

 

(8)     The fair value of the performance rights granted was estimated as at the grant date using the Cox, Ross and Rubinstein Binomial Option Pricing Model taking into account the terms and conditions upon which the instruments were granted. The input used in the measurement of the fair value at grant date of the performance rights were as follows:

 

Input into the model	Rights Series 12	Rights Series 13	Rights Series 14
Grant date share price	AUD 0.17	AUD 0.17	AUD 0.17
Expected volatility	75.00%	75.00%	75.00%
Rights life	2 years	2 years	2 years
Risk free rate	1.66%	1.66%	1.66%
Grant date fair value	AUD 0.1700	AUD 0.1700	AUD 0.1700

 

(9)     The On 20 December 2017, 595,000 Performance Rights vested and were converted into ordinary shares following the resignation of certain employees.

 

(10)   These Performance Rights fully vested on 4 June 2018 following Mr Sean Bennett's resignation, and are yet to be converted into fully paid ordinary shares as at 31 December 2018.

 

(11)   On 20 December 2017, 735,000 Performance Rights vested and were converted into ordinary shares following the resignation of certain employees. In addition, 948,438 Performance Rights vested on 21 May 2018 following Board assessment and approval of the award portion of these rights, and are yet to be converted into fully paid ordinary shares at reporting date. The remaining 2,798,567 Performance Rights have not yet been vested.

 

(12)   The fair value of the performance rights granted was estimated as at the grant date using the Cox, Ross and Rubinstein Binomial Option Pricing Model (for performance rights with performance conditions) and the Monte Carlo Simulation Model (for performance rights with market conditions) taking into account the terms and conditions upon which the instruments were granted. The input used in the measurement of the fair value at grant date of the performance rights were as follows:

 

Input into the model	Rights Series 15 (Performance Conditions)	Rights Series 15 (Market Conditions)
Grant date share price	AUD 0.17	AUD 0.17
Expected volatility	75.00%	75.00%
Rights life	5 years	5 years
Risk free rate	2.05%	2.05%
Grant date fair value	AUD 0.1700	AUD 0.1040

 

 

The following Performance Rights from share based payment arrangements were in existence during the current and prior periods (cont):

 

	Grant Date	Vesting Date	Number of Rights	Expiry Date	Fair Value at Grant Date
Rights Series 16 (13)	27/06/2018	None vested	1,500,000	22/05/2022	GBP 0.0564
Rights Series 17 (13)	27/06/2018	None vested	750,000	22/05/2022	GBP 0.0564
Rights Series 18 (13)	27/06/2018	None vested	750,000	22/05/2022	GBP 0.0564
Rights Series 19 (13)	27/06/2018	None vested	750,000	22/05/2022	GBP 0.0564
Rights Series 20 (13)	27/06/2018	None vested	750,000	22/05/2022	GBP 0.0564

 

(13)   These performance rights were issued to the following Non-Executive Directors following shareholder approval at the Company's AGM on 27 June 2018:

Series	Director	Number
Rights Series 16	David Hathorn	1,500,000
Rights Series 17	Jonathan Trollip	750,000
Rights Series 18	Leonard Math	750,000
Rights Series 19	David Netherway	750,000
Rights Series 20	Timothy Keating	750,000

 

The performance rights are a one-off award and will unconditionally vest in three equal tranches on the first, second and third anniversary of the Company's admission to the AIM market. These performance rights will expire on 22 May 2022.

The fair value of the performance rights granted was estimated as at the grant date using the Black Scholes Option Pricing Model taking into account the terms and conditions upon which the instruments were granted. The input used in the measurement of the fair value at grant date of the performance rights were as follows:

Input into the model	Rights Series 16 to 20 (Inclusive)
Grant date share price	GBP 0.06
Expected volatility	90.12%
Rights life	4 years
Grant date fair value	GBP 0.0564

 

The Performance Rights outstanding at 31 December 2018 had a weighted average remaining contractual life of 1.3 years.

 

 

Note 24: LOSS PER SHARE

 

Classification of securities as ordinary shares

The Company has only one category of ordinary shares included in basic earnings per share.

 

Classification of securities as potential ordinary shares - share options and rights outstanding

The Company has granted share options in respect of a total of 71,200,000 ordinary shares at 31 December 2018 (31 December 2017: 58,191,226), 13,144,659 equity warrants (31 December 2017: None) and 32,070,104 performance rights (31 December 2017: 42,595,104). Options, equity warrants and rights are considered to be potential ordinary shares. However, as the Company and Group are in a loss position they are anti-dilutive in nature, as their exercise will not result in a diluted earnings per share that shows an inferior view of earnings performance of the Company and Group than is shown by basic earnings per share.  The options, warrants and performance rights have not been included in the determination of basic earnings per share.

 

	Parent		Consolidated Entity
	Dec 2018 USD Cents	Dec 2017 USD Cents	Dec 2018 USD Cents	Dec 2017 USD Cents
Basic and diluted loss per share from continuing operations	(0.00)	(0.00)	(0.75)	(0.57)

 

	Parent		Consolidated Entity
Earnings reconciliation	Dec 2018 USD	Dec 2017 USD	Dec 2018 USD	Dec 2017 USD
Loss attributable to ordinary shareholders	(1,715,799)	(92,320)	(6,249,696)	(4,344,322)

 

	Parent		Consolidated Entity
	Dec 2018 Number	Dec 2017 Number	Dec 2018 Number	Dec 2017 Number
Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share	838,752,968	756,305,819	838,752,968	756,305,819

 

Headline earnings/loss per share

It is a JSE listing requirement to disclose headline earnings/loss per share, a non-IFRS measure. It is considered to be a useful metric as it presents the earnings/loss per share after removing the effect of re-measurements to assets and liabilities (for example impairment of property, plant and equipment) otherwise recognised in the profit/loss for the year. During the current and prior year there was no difference between earnings/loss per share and headline earnings/loss per share and therefore no reconciliation between the two measures has been presented.

 

Note 25: CONTINGENT LIABILITIES AND ASSETS

 

As at the date of this report, the Company's subsidiary, SPSA, has been in litigation before the Administrative Chamber of the Supreme Court of the Republic of Congo and before the Labour Tribunal. These two proceedings result from an action taken by a former employee, as well as a group of 30 claimants following the retrenchment of these 31 employees on 20 November 2014.

 

On 14 June 2018 the Supreme Court confirmed that the retrenchments had followed due process and cancelled the previous decision of the Minister of Labour against SPSA. The Labour Tribunal action is anticipated to be favourably concluded following the Supreme Court findings. In order to bring to a conclusion the litigation and ensure equitable treatment following the amicable settlement with 4 employees, who waived any further recourse whatsoever, SPSA proposed to make an offer to remaining employees. This offer was made and was subject to acceptance by all staff within a set timeframe. The offer lapsed on 5 September 2018 as the criteria were not met.

 

On 28 August 2018, 25 former employees working on the exploration site from 2009 to 2013 instituted further action before the Labour Tribunal, claiming compensation for unpaid overtime and damages. The legal proceedings are ongoing, with the next scheduled court date being on 13 May 2019.

 

The Directors have concluded that any possible exposure and cash flow out from the Group as a result of the two legal proceedings would be immaterial.

 

There are no other significant contingent liabilities or assets.

 

GLOSSARY

 

Acronym / Term	Stands For / Meaning	Definition and/or Additional Information
$	Denotes USD or United States dollars.	The USD is the functional and presentation currency of the Company and the Group.
2016 UK Code	2016 UK Corporate Governance Code	The UK corporate governance code that is applicable to this reporting period.
2018 UK Code	2018 UK Corporate Governance Code	The UK corporate governance code that came into effect on 1 January 2019 and applies to accounting reference periods commencing on and after that date.
AGM	Annual General Meeting	The mandatory yearly gathering of the Company's interested shareholders. The latest AGM was held on 27 June 2018.
AIM	Alternative Investment Market	AIM (formerly the Alternative Investment Market) is a sub-market of the LSE.
ASX	Australian Securities Exchange	The ASX is Australia's primary securities exchange.
AUD	Australian dollars	The official currency of the Commonwealth of Australia.
Board	The board of directors of Kore Potash plc	As listed on page 18 of the Annual Report.
Carnallitite	A rock type comprised predominantly of the potash mineral carnallite (KMgCl3·6H2O) and halite (NaCl).	Carnallitite may be replaced by the word carnallite for simplicity.
CDIs	CHESS Depositary Interests	CDIs are instruments traded on the ASX that allow non-Australian companies to list their shares on the exchange and use the exchange's settlement systems. In the Company's case, one CDI is equivalent to one share traded on the AIM market or on the JSE.
CEO	Chief Executive Officer	As listed on page 18 of the Annual Report.
CFR	Cost and Freight	"Cost and Freight" means that the seller must pay the costs and freight necessary to bring the goods to the named port of destination but the risk of loss of or damage to the goods, as well as any additional costs due to events occurring after the time the goods have been delivered on board the vessel is transferred from the seller to the buyer when the goods pass the ship's rail in the port of shipment.
Company	Kore Potash plc	Kore Potash plc is public company incorporated and registered in England and Wales (registered number 10933682).
CRU	Commodity Research Unit
DFS	Definitive Feasibility Study	A DFS is an evaluation of a proposed mining project to determine whether the mineral resource can be mined economically.
Dougou	Denotes the Dougou Project	The Dougou Project (including the Dougou Extension Project) is part of the Sintoukola Potash Project.
DPM	Dougou Potash Mining S.A.	DPM is one of the subsidiaries of SPSA.
DUP	Déclaration d'Utilité Publique	A DUP, or, translated as a "declaration of public utility", is a formal recognition in Congolese law that a proposed project has public benefits.
EBITDA	Earnings Before Interest, Taxes, Depreciation and Amortization
EPC	Engineering, Procurement and Construction	A particular form of contracting arrangement used in some industries where the EPC contractor is made responsible for all the activities from design, procurement, construction, commissioning and handover of the project to the end-user or owner.
EPCM	Engineering, Procurement and Construction Management	As opposed to EPC which the Contractor is responsible for the construction directly, not only the management of it.
ESIA	Environmental and social impact assessment	A process for predicting and assessing the potential environmental and social impacts of a proposed project, evaluating alternatives and designing appropriate mitigation, management and monitoring measures.
FC	The French Consortium of Engineering Companies	The FC is a consortium of engineering companies who undertook the DFS on the Kola Project. The FC consists of TechnipFMC, VINCI Construction Grands Projets, Egis and Louis Dreyfus Armateur.
GBP	British pound sterling	The official currency of the United Kingdom.
Granular MoP	The selling description for compacted MoP.
Group	Kore Potash plc and its controlled entities	A list of the controlled entities within the Group are on page 88 under Note 8.
Insoluble material	Here refers to clays, organic material and other insoluble components of the sylvinite.	Low insoluble content is considered advantageous.
JORC	Australasian Joint Ore Reserves Committee	JORC is sponsored by the Australian mining industry and its professional organisations.
JORC Code	The Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves	The JORC Code is one of the most accepted standards for the reporting of a company's Mineral Resources and Ore Reserves.
JSE	Johannesburg Stock Exchange	The exchange operated by JSE Limited.
KCI	Potassium Chloride
KMP	Key Management Personnel	Refers to those persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, including any director (whether executive or otherwise) of the Group.
Kola	Denotes the Kola Project.	The Kola Project is part of the Sintoukola Potash Project.
Kore Potash	Kore Potash plc	See definition for "Company" above.
KPM	Kola Potash Mining S.A.	KPM is one of the subsidiaries of SPSA.
LSE	London Stock Exchange	The LSE is the primary stock exchange in the United Kingdom.
LTIP	Long Term Incentive Plan
Mt	Million tonnes
Mining Convention	Denotes the mining convention signed by the Group and the government of RoC.	The mining convention governs the conditions of construction, operation and mine closure of the Kola and Dougou (including Dougou Extension) mining projects.
MoP	Muriate of Potash	The saleable form of potassium chloride (KCl), comprising of a minimum 95% KCl.
NPV	Net Present Value	NPV10 denotes the Net Present Value calculated at a 10% discount rate.
Placees	Denotes the existing and new investors through which the Company raised USD 12.89 million on 26 March 2018.
Placing Shares	Denotes the placing and direct subscription of 83,523,344 ordinary shares in the Company on 26 March 2018.
Potash	Refers to potassium compounds, especially those of potassium chloride (MoP) or sulfate (SoP)	Refer to MoP and SoP for the definitions on the two main types of potash.
RoC	Republic of Congo	The RoC is where the Group's exploration activities are located.
Rock-salt	In this case, a rock comprised predominantly of the mineral halite (NaCl)
SBP	Share-Based Payment(s)
SGRF	The State General Reserve Fund of Oman	SGRF, is a sovereign wealth fund in Oman, and is one of the Company's substantial shareholders. Their investment in the Company is held in the name of Princess Aurora Company Pte.
Sintoukola Potash Project	Denotes the large potash project operated by the Group through SPSA located in the Kouilou Province of the Republic of Congo.	The Sintoukola Potash Project includes the Kola Project, the Dougou Project and the Dougou Extension Project (previously known as the Yangala Project).
SJCS	St James's Corporate Services Limited	SJCS, together with Henko Vos, is the Company's joint company secretary.
SoP	Sulfate of Potash	Also called potassium sulphate, arcanite, or archaically known as potash of sulfur. SoP is the inorganic compound with formula K2SO4. It is a white water-soluble solid. It is commonly used in fertilizers, providing both potassium and a source of sulfur.
SPSA	Sintoukola Potash S.A.	SPSA is the Company's 97%-owned subsidiary located in the RoC, owned through the Company's Australian subsidiary.
SQM	Sociedad Quimica y Minera de Chile S.A.	SQM is a New York listed Chilean lithium & potash company and is one of the Company's substantial shareholders.
Standard MoP	The selling description for uncompacted MoP.
STIP	Short Term Incentive Plan
Sylvinite	A rock type comprised predominantly of the potash mineral sylvite (KCl) and halite (NaCl)
Transshipment	Transshipment or transhipment is the shipment of goods or containers to an intermediate destination, then to another destination.
USD	United States dollars	The official currency of the United States of America and its territories, as well as being the functional and presentation currency of the Company and the Group.