Audited Financial Results

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 28 February 2019

 

	Notes	Year ended 28 February 2019 £			Period ended 28 February 2018 £
Cash flows from operating activities
Loss before taxation			(1 057 520)			(1 533 834)
Adjustments for:
Depreciation property, plant and equipment	12		22 824			378
Share-based payments			205 962			552 520
Equity-settled transactions			-			48 611
Finance income	7		(13 416)			(2)
Changes in working capital:
Increase in receivables			(379 245)			(98 815)
Increase in inventory			(26 222)			-
(Decrease)/ increase in payables			(119 708)			364 078
Net cash used in operating activities			(1 367 325)			(667 064)
Cash flows from investing activities
Finance income			13 416			2
Purchase of exploration and evaluation assets	11		(570 767)			(177 747)
Cash costs relating to Dawnmin acquisition			-			(6 235)
Cash element of Greenhills and Dawnmin acquisitions			-			60 799
Purchase of property, plant and equipment	12		(4 901 993)			(515 843)
Net cash used in investing activities			(5 459 344)			(639 024)
Cash flows from financing activities
Net proceeds from issue of shares			5 682 954			4 210 855
Net cash generated from financing activities			5 682 954			4 210 855
Net (decrease)/ increase in cash and cash equivalents			(1 143 715)			2 904 767
Cash and cash equivalents at the beginning of the period			2 904 767			-
Foreign exchange differences			20 283			-
Cash and cash equivalents at the end of the period	14		1 781 335			2 904 767

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 28 February 2019

 

1.     Corporate information and principal activities

 

AfriTin Mining Limited ("AfriTin") was incorporated and domiciled in Guernsey on 1 September 2017, and admitted to the AIM market in London on 9 November 2017. The company's registered office is 18-20 Le Pollet, St Peter Port, Guernsey, GY1 1WH and operates from 2nd Floor, Building 3, Illovo Edge Office Park, Corner Harries and Fricker Road, Illovo, Johannesburg, 2116, South Africa.

 

These financial statements are for the year ended 28 February 2019 and the comparative figures are for the period from 1 September 2017 to 28 February 2018.

 

The AfriTin Group comprises AfriTin Mining Limited and its subsidiaries as noted below.

 

During the year the Company acquired 100% in Tantalum Investment Pty Limited, a company containing Namibian exploration licenses EPL5445 and EPL5670 for the exploration of tin, tantalum and other associated minerals.

 

AfriTin Mining Limited ("AML") is an investment holding company and holds 100% of Guernsey subsidiary, Greenhills Resources Limited ("GRL").

 

GRL is an investment holding company that holds investments in resource-based tin and tantalum exploration companies in Namibia and South Africa. The Namibian subsidiary is AfriTin Mining (Namibia) Pty Limited ("AfriTin Namibia") (previously named Dawnmin Africa Investments Pty Limited), in which GRL holds 100% equity interest. The South African subsidiaries are Mokopane Tin Company Pty Limited "Mokopane" and Pamish Investments 71 Pty Limited "Pamish 71", in which GRL holds 100% equity interest.

 

AfriTin Namibia owns an 85% equity interest in Uis Tin Mine Company Pty Limited "Uis Tin Mine" (previously named Guinea Fowl Investments no 27 Pty Limited). The minority shareholder in Uis Tin Mine is The Small Miners of Uis who own 15%.

 

Mokopane owns a 74% equity interest in Renetype Pty Limited "Renetype" and a 50% equity interest in Jaxson 641 Pty Limited "Jaxson".

 

The minority shareholders in Renetype are African Women Enterprises Investments Pty Limited and Cannosia Trading 62 CC who own 10% and 16% respectively.

 

The minority shareholder in Jaxson is Lerama Resources Pty Limited who owns a 50% interest in Jaxson.

 

Pamish 71 owns a 74% interest in Zaaiplaats Mining Pty Limited "Zaaiplaats". The minority shareholder in Zaaiplaats is Tamiforce Pty Limited who owns 26%.

 

As at 28 February 2019, the AfriTin Group comprised:

 

Company	Equity holding and voting rights	Country of incorporation	Functional currency	Nature of activities
AfriTin Mining Limited	N/A	Guernsey	GBP	Ultimate Holding Company
Greenhills Resources Limited1	100%	Guernsey	GBP	Holding Company
AfriTin Mining Pty Limited1	100%	South Africa	ZAR	Group support services
Tantalum Investment Pty Limited1	100%	Namibia	NAD	Tin & Tantalum Exploration
AfriTin Mining (Namibia) Pty Limited2	100%	Namibia	NAD	Tin & Tantalum Exploration
Uis Tin Mine Company Pty Limited3	85%	Namibia	NAD	Tin & Tantalum Exploration & Development
Mokopane Tin Company Pty Limited2	100%	South Africa	ZAR	Holding Company
Renetype Pty Limited4	74%	South Africa	ZAR	Tin & Tantalum Exploration
Jaxson 641 Pty Limited4	50%	South Africa	ZAR	Tin & Tantalum Exploration
Pamish Investments 71 Pty Limited2	100%	South Africa	ZAR	Holding Company
Zaaiplaats Mining Pty Limited5	74%	South Africa	ZAR	Property Owning

 

¹ Held directly by AfriTin Mining Limited

² Held by Greenhills Resources Limited

³ Held by AfriTin Mining (Namibia) Pty Limited

⁴ Held by Mokopane Tin Company Pty Limited

⁵ Held by Pamish Investments 71 Pty Limited

 

These financial statements are presented in Pound Sterling (£) because that is the currency in which the Group has raised funding on the AIM market in the United Kingdom. Furthermore, Pound Sterling (£) is the functional currency of the ultimate holding company, AfriTin Mining Limited.

2.     Significant accounting policies

 

Basis of accounting

 

These financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively "IFRS") issued by the International Accounting Standards Board ("IASB") as adopted by the European Union ("EU adopted IFRS").

 

The Group has adopted the standards, amendments and interpretations effective for annual periods beginning on or after 1 March 2018. The adoption of these standards and amendments did not have a material effect on the financial statements of the Group. See Note 3.

 

The consolidated financial statements have been prepared under the historical cost convention. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity and areas where assumptions and estimates are significant to the consolidated financial statements are discussed further in this note. The principal accounting policies are set out below.

 

Going concern

 

These financial statements have been prepared on a going concern basis. In arriving at this position, the Directors have had regard to the fact that the AfriTin Group has sufficient cash and other assets to fund administrative and other committed expenditure for a period of not less than 12 months from the date of this report.

 

On 22 May 2019, the Company completed an equity fundraising by way of a direct subscription of 99 613 074 ordinary shares of no par value in the Company at a price of 3 pence per share, to raise approximately £3 million before expenses.

 

Additionally, on 22 May 2019, a standby working capital facility of ZAR30million (c. £1.7million) was entered into between the Company and Bushveld Minerals Limited ("Bushveld"). Bushveld has agreed to a 12-month facility towards funding the general corporate and working capital requirements of the Group, including operational expenses prior to production.

 

The Directors have reviewed the Group's cashflow forecasts and sensitivities for a period of at least 12 months from the date of this report. In doing so, careful consideration was given to potential risks to the forecasts, including pricing and production ramp up. The forecasts indicate that the Group retains sufficient liquidity from existing cash resources, operating cashflows and the available standby working capital facility to meet its liabilities as they fall due under the base case cashflow forecast and reasonably possible sensitivities.

 

Accordingly, the Directors have concluded that the going concern basis in the preparation of the financial statements remains appropriate and that there are no material uncertainties that would cast doubt on that basis of preparation.

 

 

Basis of consolidation

 

Subsidiaries

 

Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

 

The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest's proportionate share of the recognised amounts of acquiree's identifiable net assets.

 

Acquisition-related costs are expensed as incurred.

 

If the business combination is achieved in stages, the acquisition date carrying value of the acquirer's previously held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognised in profit or loss.

 

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability are recognised either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity.

 

The acquisition of subsidiaries that do not meet the definition of a business and hold early stage exploration licenses are accounted for as asset purchases with the fair value of consideration being allocated to the assets.

 

Inter-company transactions, balances and unrealised gains/losses on transactions between Group companies are eliminated. When necessary, amounts reported by subsidiaries have been adjusted to conform with the Group's accounting policies.

 

Disposal of subsidiaries

 

When the Group ceases to have control, any retained interest in the entity is measured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

 

Non-controlling interests

 

Non-controlling interests in subsidiaries are identified separately from the Group's equity therein. Those interests of non-controlling shareholders that present ownership interests entitling their holders to a proportionate share of the net assets upon liquidation are initially measured at fair value. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests' share of subsequent changes in equity. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance.

 

Segment reporting

 

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the management steering committee that makes strategic decisions.

 

Foreign currencies

 

Functional and presentational currency

 

The individual financial statements of each Group company are prepared in the currency of the primary economic environment in which they operate (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each group company are expressed in Pound Sterling, which is the functional currency of the Company, and the presentation currency for the consolidated financial statements.

 

Transactions and balances

 

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transaction or valuation date where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in other comprehensive income as qualifying cash flow hedges and qualifying net investment hedges. Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the income statement within "finance income or costs". All other foreign exchange gains and losses are presented in the income statement.

 

Group companies

 

The results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary economy) that have a financial currency different from the presentation currency are translated into the presentation currency as follows:

 

i)      assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

ii)     income and expenses for each income statement are translated at average exchange rates (unless the average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and

iii)    all resulting exchange differences are recognised in other comprehensive income.

 

Revenue recognition

 

The Group is yet to commence commercial production and thus there has been no revenue from the sale of tin during the year (the Group's primary activity).

 

The Group has however generated an immaterial amount of revenue from the sale of sand. Revenue is recognised in line with the transfer of goods and services to customers. The amount recognised reflects the amount to which the Group expects to be entitled in exchange for those goods and services. Sales contracts are evaluated to determine the performance obligations, the transaction price and the point at which there is transfer of control.

 

The transaction price is the amount of consideration due in exchange for transferring the promised goods or services to the customer and is allocated against the performance obligations and recognised in accordance with whether control is recognised over a defined period or at a specific point in time.

 

Finance income

 

Interest income is recognised when it is probable that economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount on initial recognition.

 

Taxation

 

The tax expense represents the sum of the tax currently payable and deferred tax.

 

The tax charge is based on taxable profit for the period. The Group's liability for current tax is calculated by using tax rates that have been enacted or substantively enacted by the reporting date.

 

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the "balance sheet liability" method.

 

Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Deferred tax is calculated at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled based upon rates enacted and substantively enacted at the reporting date. Deferred tax is charged or credited to profit or loss, except when it relates to items credited or charged to other comprehensive income, in which case the deferred tax is also dealt with in other comprehensive income.

 

Intangible exploration and evaluation assets

 

All costs associated with mineral exploration and evaluation, including the costs of acquiring prospecting licenses; mineral production licenses and annual license fees; rights to explore; topographical, geological, geochemical and geophysical studies; exploratory drilling; trenching, sampling and activities to evaluate the technical feasibility and commercial viability of extracting a mineral resource; are capitalised as intangible exploration and evaluation assets and subsequently measured at cost.

 

If an exploration project is successful, the related expenditures will be transferred at cost to property, plant and equipment and amortised over the estimated life of the commercial ore reserves on a unit of production basis (with this charge being taken through profit or loss). Where capitalised costs relate to both development projects and exploration projects, the Group reclassifies a portion of the costs which are considered attributable to near term production based on a percentage of the ore resource expected to be mined in the relevant phase. Where a project does not lead to the discovery of commercially viable quantities of mineral resources and is relinquished, abandoned, or is considered to be of no further commercial value to the Group, the related costs are recognised in the income statement.

 

The recoverability of deferred exploration costs is dependent upon the discovery of economically viable ore reserves, the ability of the Group to obtain necessary financing to complete the development of ore reserves and future profitable production or proceeds from the extraction or disposal thereof.

 

Impairment of exploration and evaluation assets

 

Intangible exploration and evaluation assets are reviewed regularly for indicators of impairment following the guidance in IFRS 6 "Exploration for and Evaluation of Mineral Resources" and tested for impairment where such indicators exist.

 

In accordance with IFRS 6, the Group considers the following facts and circumstances in their assessment of whether the Group's exploration assets may be impaired:

·   whether the period for which the Group has the right to explore in a specific area has expired during the period or will expire in the near future, and is not expected to be renewed; or

·   whether substantive expenditure on further exploration for and evaluation of mineral resources in a specific area is neither budgeted nor planned; or

·   whether exploration for and evaluation of mineral resources in a specific area have not led to the discovery of commercially viable deposits and the Group has decided to discontinue such activities in the specific area; or

·   whether sufficient data exists to indicate that although a development in a specific area is likely to proceed, the carrying amount of the exploration and evaluation assets is unlikely to be recovered in full from successful development or by sale.

 

If any such facts or circumstances are noted, the Group, as a next step, perform an impairment test in accordance with the provisions of IAS 36. In such circumstances, the aggregate carrying value of the mining exploration and assets is compared against the expected recoverable amount of the cash-generating unit. The recoverable amount is the higher of value in use and the fair value less costs to sell.

 

Warrants

 

The warrants issued by the Company are recorded at fair value on initial recognition net of transaction costs. The fair value of warrants granted is recognised as an expense or as share issue costs, with a corresponding increase in equity. The fair value of the warrants granted is measured using the Black Scholes valuation model, taking into account the terms and conditions under which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of warrants that vest.

 

Share-based payments

 

Where equity settled share options are awarded to Directors or employees, the fair value of the options at the date of grant is charged to the consolidated statement of comprehensive income over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Non-vesting conditions and market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition or where a non-vesting condition is not satisfied.

 

Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the consolidated statement of comprehensive income over the remaining vesting period.

 

Where equity instruments are granted to persons other than employees, the consolidated statement of comprehensive income is charged with the fair value of goods and services received.

 

Property, plant and equipment

 

Property, plant and equipment is stated at historical cost less accumulated depreciation.

 

Land is not depreciated. Depreciation is provided on all plant and equipment at rates calculated to write each asset down to its estimated residual value, using the straight-line method over their estimated useful life of the asset as follows:

 

·   The mining asset and the decommissioning asset are amortised over the life of the mine or 20 years whichever is the lesser. Depreciation begins when the asset is available for use and continues until the asset is derecognised, even if it is idle;

·   Computer equipment over three years;

·   Furniture over five years;

·   Vehicles over four years.

 

Mining assets under construction are not depreciated.

 

The estimated useful lives, residual values and depreciation methods are reviewed at each year end and adjusted if necessary.

 

Gains or losses on disposal are included in profit or loss.

 

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.

 

Impairment of property, plant and equipment

 

At each statement of financial position date, the Group reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

 

Where there has been a change in economic conditions that indicate a possible impairment in a cash-generating unit, the recoverability of the net book value relating to that mine is assessed by comparison with the estimated discounted future cash flows based on management's expectations of future commodity prices and future costs.

 

The recoverable amount is the higher of fair value less costs to sell and value in use. 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 for which the estimates of future cash flows have not been adjusted.

 

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease to the extent that it reverses gains previously recognised in other comprehensive income.

 

Where conditions giving rise to impairment subsequently reverse, the effect of the impairment charge is also reversed as a credit to the income statement, net of any depreciation that would have been charged since the impairment.

 

Inventories

 

Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value. Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

 

Weighted average cost is used to determine the cost of ordinarily interchangeable items.

 

Financial instruments

 

Financial instruments are recognised in the Group's statement of financial position when the Group becomes a party to the contractual provisions of the instrument.

 

Financial assets

 

Financial assets are classified as at amortised cost only if the asset is held to collect the contractual cash flows and the contractual terms of the asset give rise to cash flows that are solely payments of principal and interest. At subsequent reporting dates, financial assets at amortised cost are measured at amortised cost less any impairment losses.

 

Impairment of financial assets

 

The Group assesses on a forward-looking basis the expected credit losses, defined as the difference between the contractual cash flows and the cash flows that are expected to be received, associated with its assets carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. For trade receivables only, the simplified approach permitted by IFRS 9 is applied, which requires expected lifetime losses to be recognised from initial recognition of the receivables. Losses are recognised in the income statement. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through the income statement. In the prior year, under IAS 39, impairment provisions were recognised when there was objective evidence that the Group will be unable to collect all of the amounts due under the terms of the receivable, the amount of such a provision being the difference between the carrying amount and the present value of the future expected cash flows associated with the impaired receivable.

 

Trade and other receivables

 

Trade and other receivables are initially recognised at the fair value of the consideration receivable less any impairment.

 

Trade and other receivables are subsequently measured at amortised cost, less any impairment.

 

Cash and cash equivalents

 

Cash and cash equivalents comprise cash at hand and deposits on a term of not greater than three months.

 

Financial liabilities

 

Financial liabilities include trade and other payables, derivatives and other longer-term financing, classified into one of the following categories:

 

Fair value through profit and loss

 

The liabilities are carried in the statement of financial position at fair value with changes in fair value recognised in the consolidated income statement.

 

Financial liabilities carried at amortised cost

 

Trade and other payables

 

Trade and other payables are initially recognised at fair value. They are subsequently measured at amortised cost using the effective interest rate method.

 

Rehabilitation costs

 

The net present value of estimated future rehabilitation costs is provided for in the financial statements and capitalised within property, plant and equipment on initial recognition. Rehabilitation will generally occur on closure or after closure of a mine. Initial recognition is at the time of the construction or disturbance occurring and thereafter as and when additional construction or disturbances take place. The estimates are reviewed annually to take into account the effects of inflation and changes in the estimated cost of the rehabilitation works and are discounted using rates that reflect the time value of money. Annual increases in the provision due to the unwinding of the discount are recognised in the statement of comprehensive income as a finance cost. The present value of additional disturbances and changes in the estimate of the rehabilitation liability are recorded to mining assets against an increase/decrease in the rehabilitation provision. The rehabilitation asset will be amortised over the life of the mine once production commences. Rehabilitation projects undertaken, included in the estimates, are charged to the provision as incurred. Environmental liabilities, other than rehabilitation costs, which relate to liabilities arising from specific events, are expensed when they are known, probable and may be reasonably estimated.

 

Critical accounting estimates and judgements

 

In the application of the Group's accounting policies, the Directors are required to make judgements, 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. In particular, information about significant areas of estimation uncertainty considered by management in preparing the financial statements is described below:

 

Estimates and judgements are continually evaluated. Revisions to accounting estimates are recognised in the year in which the estimates are revised if the revision affects only that year, or in the year of revision and in future years if the revision affects both current and future years.

 

i)      Decommissioning and rehabilitation obligations

 

Estimating the future costs of environmental and rehabilitation obligations is complex and requires management to make estimates and judgements as most of the obligations will be fulfilled in the future and contracts and laws are often not clear regarding what is required. The resulting provisions (see Note 16) are further influenced by changing technologies, political, environmental, safety, business and statutory considerations.

 

The Group's rehabilitation provision is based on the net present value of management's best estimates of future rehabilitation costs. Judgement is required in establishing the disturbance and associated rehabilitation costs at year end, timing of costs, discount rates and inflation. In forming estimates of the cost of rehabilitation which are risk adjusted, the Group assessed the Environmental Management Plan and reports provided by internal experts. Actual costs incurred in future periods could differ materially from the estimates and changes to environmental laws and regulations, life of mine estimates, inflation rates and discount rates could affect the carrying amount of the provision. The carrying amount of the rehabilitation obligations for the Group at 28 February 2019 was £75 180 (February 2018: £nil).

 

ii)     Acquisition of Greenhills Resources Limited ("Greenhills") in the prior period

 

On 8 November 2017, the Group completed the acquisition of Greenhills which through its subsidiaries has interests in tin exploration projects in South Africa. The total cost of the acquisition was £3 328 813. Due to the lack of processes and outputs relating to Greenhills at the time of purchase, the Board did not consider the entities acquired to meet the definition of a business. As such, the Group has accounted for the acquisition of Greenhills as an asset purchase. Further details are disclosed in Note 10.

 

iii)    Acquisition of Dawnmin Africa Investments Pty Limited ("Dawnmin") in the prior period (now known as AfriTin Mining (Namibia) Pty Limited)

 

On 9 November 2017, the Group completed the acquisition of Dawnmin which through its subsidiary has interests in tin exploration projects in Namibia. The total cost of the acquisition was £2 749 349. Due to the lack of processes and outputs relating to Dawnmin at the time of purchase, the Board did not consider the entities acquired to meet the definition of a business. As such, the Group has accounted for the acquisition of Dawnmin as an asset purchase. Further details are disclosed in Note 10.

 

iv)   Acquisition of Tantalum Investment Pty Limited ("Tantalum") in the current year

 

On 2 October 2018, the Group completed the acquisition of Tantalum which has interests in tin exploration projects in Namibia. The total cost of the acquisition was £850 000. Due to the lack of processes and outputs relating to Tantalum at the time of purchase, the Board did not consider the entity acquired to meet the definition of a business. As such, the Group has accounted for the acquisition of Tantalum as an asset purchase. Further details are disclosed in Note 10.

 

v)    Impairment of exploration & evaluation assets

 

Determining whether an exploration and evaluation asset is impaired requires an assessment of whether there are any indicators of impairment, including by reference to specific impairment indicators prescribed in IFRS 6 Exploration for and Evaluation of Mineral Resources. If there is any indication of potential impairment, an impairment test is required based on value in use of the asset. The valuation of intangible exploration assets is dependent upon the discovery of economically recoverable deposits which, in turn, is dependent on future tin prices, future capital expenditures and environmental, regulatory restrictions and the successful renewal of licenses. The directors have concluded that there are no indications of impairment in respect of the carrying value of intangible assets at 28 February 2019 nor 28 February 2018 based on planned future development of the projects and current and forecast tin prices. Exploration and evaluation assets are disclosed fully in Note 11.

 

vi)   Transfer of capitalised exploration costs to property, plant and equipment

 

On 28 February 2019, the Group transferred the Uis Phase One exploration and evaluation asset to mine development costs. The determination that the project had reached a stage of being commercially viable and technically feasible for extraction represented a key judgement. In forming this judgement, the Board considered factors including: a) the mine permit had been awarded; b) the Project had secured funding

for development and construction of the plant; c) the production phase due to commence shortly is anticipated to be profitable and cash generative; d) the mine development plan had been established; and e) the results of exploration data including internal and external assessments.

 

Where capitalised costs relate to both development projects and exploration projects, the Group reclassifies a portion of the costs which are considered attributable to near-term production based on a percentage of the ore resource expected to be mined in the relevant phase. Judgement was involved in determining the percentage split of capitalised costs between exploration expenditure and costs that relate to the development stage asset and should be transferred to PPE. In calculating the percentage split, the key inputs were total ore resource, ore resource for Phase One, nameplate capacity of the plant and estimated timing for Phase Two.

 

3.     Adoption of new and revised standards

 

The Company adopted IFRS 9 "Financial Instruments" and IFRS 15 "Revenue from Customers" in the year, following the standards becoming effective for periods commencing on or after 1 January 2018.

 

IFRS 9 "Financial instruments" addresses the classification and measurement of financial assets and financial liabilities and replaces the guidance in IAS 39 that relates to the classification and measurement of financial instruments. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortised cost, fair value through other comprehensive income (OCI) and fair value through profit or loss. The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the financial asset. There is now a new expected credit loss model that replaces the incurred loss impairment model used in IAS 39. The Group has applied the modified retrospective approach to transition. The adoption of IFRS 9 did not result in any material change to the consolidated results of the Group. Following assessment of the consolidated financial assets and liabilities no changes to classification of those financial assets or liabilities was required, apart from the change in classification of financial assets from loans and receivables to amortised cost. The Group has applied the expected credit loss impairment model to its financial assets.

 

IFRS 15 introduced a single framework for revenue recognition and clarified principles of revenue recognition. This standard modifies the determination of when to recognise revenue and how much revenue to recognise. The core principle is that an entity recognises revenue to depict the transfer of promised goods and services to the customer of an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Whilst the Group is not yet revenue generating from its primary activity (the sale of tin), the Group does generate immaterial revenue from the sale of sand. The adoption of IFRS 15 has had the result of income from the sale of sand being reclassified from other income to revenue.

 

Accounting standards and interpretations not applied

 

Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group:

 

Amendments to existing standards

 

IFRIC 23	1 January 2019	IFRIC 23 Uncertainty over Income Tax Treatments
IFRS 9	1 January 2019	Amendments to IFRS 9: Prepayment Features with Negative Compensation
IAS 28	1 January 2019	Amendments to IAS 28: Long-term interests in Associates and Joint Ventures
	1 January 2019	Annual Improvements to IFRSs (2015-2017 Cycle)
IAS 19	1 January 2019	Amendments to IAS 19: Plan Amendment, Curtailment or Settlement
	1 January 2020	Amendments to References to the Conceptual Framework in IFRS Standards
IFRS 3	1 January 2020	Amendments to IFRS 3 Business Combinations - Definition of a Business
	1 January 2020	Definition of Material - Amendments to IAS 1 and IAS 8

 

The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group based on current operations.

 

New standards

 

IFRS 16 Leases

1 January 2019

IFRS 16 introduces a single lease accounting model. This standard requires lessees to account for all leases under a single on-balance sheet model. Under the new standard, a lessee is required to recognise all lease assets and liabilities on the balance sheet; recognise amortisation of leased assets and interest on lease liabilities over the lease term; and separately present the principal amount of cash paid and interest in the cash flow statement.

 

The requirements of IFRS 16 extend to certain service contracts, such as mining contractors in which the contractor provides services and the use of assets, which may impact the Group going forward as it moves into production and enters into new contracts. The Group is currently assessing the impact of IFRS 16.

 

4.     Segmental reporting

 

The reporting segments are identified by the management steering committee (who are considered to be the chief operating decision-makers) by the way that the Group's operations are organised. As at 28 February 2019, the Group operated within two operating segments, tin exploration activities in Namibia and South Africa.

 

Segment results

 

The following is an analysis of the Group's results by reportable segment.

 

	South Africa		Namibia		Total
	£		£		£
Year ended 28 February 2019
Results
Revenue	26 782		-		26 782
Associated costs	(13 623)		(93 711)		(107 334)
Segmental profit/(loss)	13 159		(93 711)		(80 552)
Period ended 28 February 2018
Results
Revenue	17 826		-		17 826
Associated costs	(51 654)		(36 574)		(88 228)
Segmental profit/(loss)	(33 828)		(36 574)		(70 402)

 

The reconciliation of segmental gross loss to the Group's loss before tax is as follows:

 

	Year ended 28 February 2019 £			Period ended 28 February 2018 £
Segmental loss		(80 552)			(70 402)
Unallocated costs		(990 384)			(1 463 434)
Finance Income		13 416			2
Loss before tax		(1 057 520)			(1 533 834)

 

Unallocated costs mainly comprise of corporate overheads and costs associated with being listed in London.

 

In the prior period, unallocated costs mainly comprised one-off professional fees in relation to the incorporation and listing of the Company as well as a one-off cost of issuing shares to staff at £nil consideration.

 

Other segmental information

	South Africa		Namibia		Total
	£		£		£
As at 28 February 2019
Intangible assets - exploration and evaluation	3 214 042		3 798 275		7 012 317
Other reportable segmental assets	89 103		6 061 366		6 150 469
Other reportable segmental liabilities	(70 203)		(286 546)		(356 749)
Unallocated net assets	-		-		1 818 211
Total consolidated net assets	3 232 942		9 573 095		14 624 248
As at 28 February 2018
Intangible assets - exploration and evaluation	3 359 388		2 941 476		6 300 864
Other reportable segmental assets	109 903		538 209		648 112
Other reportable segmental liabilities	(116 087)		(171 039)		(287 126)
Unallocated net assets	-		-		2 687 730
Total consolidated net assets	3 353 204		3 308 646		9 349 580

 

Unallocated net assets are mainly comprised of cash and cash equivalents which are managed at a corporate level.

5.     Expenses by nature

 

The loss for the period has been arrived at after charging:

 

	Year ended 28 February 2019 £			Period ended 28 February 2018 £
Staff costs (See Note 6)		519 823			855 621
Depreciation of property, plant & equipment		22 824			378
Operating lease expense		20 332			-
Professional fees		75 076			479 753
Travelling expenses		105 939			74 252
Other costs		313 724			121 262
Auditor's remuneration		40 000			50 000
Currency translation differences		-			(29 604)
		1 097 718			1 551 662

 

6.     Staff costs

 

	Year ended 28 February 2019 £			Period ended 28 February 2018 £
Staff costs capitalised under property, plant and equipment		570 042			-
Staff costs capitalised under intangible assets		75 005			-
Staff costs recognised as administrative expenses		313 860			303 101
Shares issued (including amounts capitalised)		65 297			552 520
Share-based payment charge (including amounts capitalised)		157 008			-
Pension fund contributions		-			-
		1 181 212			855 621

 

 

Key management personnel have been identified as the Board of Directors, Frans van Daalen (Chief Operating Officer of the Group) and Robert Sewell (Chief Financial Officer of the Group). Details of key management remuneration are shown in Note 23.

 

The average number of staff during the year was 22 (February 2018: 12) with an average total cost for the year of £52 693 (February 2018: £16 309).

 

Emoluments of £172 210 including £45 562 of share options and shares to be issued (February 2018: £124 050 including £78 000 worth of shares issued at listing) were paid in respect of the highest paid Director during the year.

 

7.     Finance income

	Year ended 28 February 2019 £			Period ended 28 February 2018 £
Bank interest		13 416			2

 

8.     Taxation

 

The tax expense represents the sum of the tax currently payable and deferred tax.

 

	Year ended 28 February 2019			Period ended 28 February 2018
Factors affecting tax for the year/period:		£			£
The tax assessed for the year/period at the Guernsey corporation tax charge rate of 0%, as explained below:
Loss before taxation		(1 057 520)			(1 533 834)
Loss before taxation multiplied by the Guernsey corporation          tax charge rate of 0%		-			-
Effects of:
Differences in tax rates (overseas jurisdictions)		(160 094)			(91 730)
Tax losses carried forward		160 094			91 730
Tax for the period		-			-

 

Accumulated losses in the subsidiary undertakings for which there is an unrecognised deferred tax asset are £842 560 (February 2018: £322 353).

 

9.     Loss per share

 

From continuing operations

 

The calculation of a basic loss per share of 0.23 pence (February 2018: loss per share of 0.83 pence), is calculated using the total loss for the period attributable to the owners of the Company of £1 050 074 (February 2018: £1 533 464) and the weighted average number of shares in issue during the year/period of 465 473 041 (February 2018: 184 033 537).

 

Due to the loss for the year, the diluted loss per share is the same as the basic loss per share. The number of potentially dilutive ordinary shares, in respect of share options, warrants and shares to be issued is 48 566 727 (February 2018: 1 897 922). These potentially dilutive ordinary shares may have a dilutive effect on future earnings per share.

 

99 613 074 ordinary shares with no par value were issued on 22 May 2019. Refer to Note 22 for further details.

 

10.  Asset acquisitions

 

Acquisition of Greenhills Resources Limited ("Greenhills") in the prior period

 

On 8 November 2017, the Group completed the acquisition of Greenhills which through its subsidiaries has interests in tin exploration projects in South Africa. The consideration of £3 328 313 was satisfied by the issue of 85 341 358 ordinary shares of the company which were issued partially to Bushveld Minerals Limited, a company listed on the AIM market in London, the previous owner of Greenhills and partially to Bushveld Minerals shareholders. Due to the lack of processes and outputs relating to Greenhills at the time of purchase, the Board does not consider the entities acquired to meet the definition of a business. As such, the Group has accounted for the acquisition of Greenhills as an asset purchase.

 

The relative fair values of the identifiable assets and liabilities acquired and included in the consolidation are:

 

	£
Intangible assets - exploration and evaluation	3 349 614
Property, plant and equipment	15 366
Receivables	21 537
Cash	17 512
Other liabilities	(75 716)
	3 328 313

 

Acquisition of Dawnmin Africa Investments Pty Limited ("Dawnmin") in the prior period (now known as AfriTin Mining (Namibia) Pty Limited)

 

On 9 November 2017, the Group completed the acquisition of Dawnmin which through its subsidiary has interests in tin exploration projects in Namibia. The consideration of £2 749 349 was satisfied by the issue of 70 336 290 ordinary shares of the company which were issued to Naminco Limited, the previous owner of Dawnmin as well as stamp duty costs. Due to the lack of processes and outputs relating to Dawnmin at the time of purchase, the Board does not consider the entities acquired to meet the definition of a business. As such, the Group has accounted for the acquisition of Dawnmin as an asset purchase.

 

The relative fair values of the identifiable assets and liabilities acquired and included in the consolidation are:

 

	£
Intangible assets - exploration and evaluation	2 773 503
Property, plant and equipment	7 538
Other tax and social security costs	1 335
Cash	43 287
Other liabilities	(76 314)
	2 749 349

 

Acquisition of Tantalum Investment Pty Limited ("Tantalum Investment") in the current year

 

On 2 October 2018, the Group completed the acquisition of Tantalum Investment which has interests in tin exploration projects in Namibia. The consideration of £850 000 was settled by way of issue of 25 000 000 ordinary shares of the Company which were issued to a group of sellers. Due to the lack of processes and outputs relating to Tantalum Investment at the time of purchase, the Board does not consider the entity acquired to meet the definition of a business. As such, the Group has accounted for the acquisition of Tantalum Investment as an asset purchase.

 

The relative fair values of the identifiable assets and liabilities acquired and included in the consolidation are:

 

	£
Intangible assets - exploration and evaluation	850 000

 

11.  Intangible exploration and evaluation assets

	£
As at 1 September 2017	-
Additions for the period - acquisition of Greenhills Resources Limited	3 349 614
Additions for the period - acquisition of AfriTin Mining Namibia Pty Limited	2 773 503
Additions for the period - other expenditure	177 747
As at 28 February 2018	6 300 864
Additions for the period - other expenditure	570 767
Additions for the year - acquisition of Tantalum	850 000
Reclassification to property, plant and equipment	(488 891)
Foreign exchange difference	(220 423)
As at 28 February 2019	7 012 317

 

For the purposes of impairment testing, the intangible exploration and evaluation assets are allocated to the Group's cash-generating unit, which represents the lowest level within the Group at which the intangible exploration and evaluation assets are measured for internal management purposes, which is not higher than the Group's operating segments as reported in Note 4.

 

The amounts for intangible exploration and evaluation assets represent costs incurred on active exploration projects. Amounts capitalised are assessed for impairment indicators under IFRS 6 at each period end as detailed in the Group's accounting policy. In addition, the Group routinely reviews the economic model and reasonably possible sensitivities and considers whether there are indicators of impairment.

 

The directors have concluded that there are no indications of impairment in respect of the carrying value of exploration and evaluation assets at 28 February 2019 and 28 February 2018 based on planned future development of the projects and current and forecast tin prices. In making this assessment a tin price of USD 20 600/tonne (February 2018: USD 20 000/tonne) was used.

 

The Company's subsidiary, Greenhills Resources Limited has the following:

i)      a 74% interest in Renetype Pty Limited ("Renetype") which holds an interest in Prospecting Right 2205.

ii)     an 85% interest in Uis Tin Mine Company Pty Limited ("Uis Tin Mine") which holds an interest in mining rights, ML129, ML133 and ML134.

iii)    a 50% interest in Jaxson 641 Pty Limited ("Jaxson") which holds an interest in Prospecting Right 428.

iv)   a 74% interest in Zaaiplaats Mining Pty Limited ("Zaaiplaats") which holds an interest in Prospecting Right 183.

 

The Company has a 100% interest in Tantalum Investment Pty Limited ("Tantalum") which holds an interest in Exclusive Prospecting Licence 5445 and Exclusive Prospecting Licence 5670.

 

12.  Property, plant and equipment

 

	Land	Mining asset under construction	Decommissioning asset	Computer Equipment	Furniture	Vehicles	Total
Cost
As at 1 September 2017	-	-	-	-	-	-	-
Additions for the period - acquisition of Greenhills	15 366	-	-	-	-	-	15 366
Additions for the period - acquisition of AfriTin Namibia	-	7 538	-	-	-	-	7 538
Additions for the period - other expenditure	-	511 303	-	4 540	-	-	515 843
As at 28 February 2018	15 366	518 841	-	4 540	-	-	538 747
Additions for the period - other expenditure	-	4 721 734	78 168	64 701	74 065	88 902	5 027 570
Transfer from exploration and evaluation asset	-	488 891	-	-	-	-	488 891
Foreign exchange differences	(1 927)	(233 695)	(2 988)	(3 043)	(2 831)	(3 398)	(247 882)
As at 28 February 2019	13 439	5 495 771	75 180	66 198	71 234	85 504	5 807 326
Accumulated Depreciation
As at 1 September 2017	-	-	-	-	-	-	-
Charge for the period	-	-	-	378	-	-	378
As at 28 February 2018	-	-	-	378	-	-	378
Charge for the period	-	-	-	11 135	4 280	7 409	22 824
Foreign exchange differences	-	-	-	(473)	(164)	(282)	(919)
As at 28 February 2019	-	-	-	11 040	4116	7 127	22 283
Net Book Value
As at 28 February 2019	13 439	5 495 771	75 180	55 158	67 118	78 377	5 785 043
At 28 February 2018	15 366	518 841	-	4 162	-	-	538 369
As at 1 September 2017	-	-	-	-	-		-

 

13.  Trade and other receivables

	28 February 2019 £			28 February 2018 £
Trade receivables		42 463			35 065
Other receivables		83 615			13 828
VAT receivables		348 885			72 794
		474 963			121 687

 

The Directors consider that the carrying amount of trade and other receivables approximates to their fair value due to their short-term nature. No allowance for any expected credit losses against any of the receivables is provided.

 

The total trade and other receivables denominated in South African Rand amount to £80 662 (February 2018: £55 102) and denominated in Namibian Dollars amount to £316 307 (February 2018: £57 335).

 

14.  Cash and cash equivalents

	28 February 2019 £			28 February 2018 £
Cash on hand and in bank		1 781 335			2 904 767

 

Cash and cash equivalents (which are presented as a single class of assets on the face of the Statement of Financial Position) comprise cash at bank and other short-term highly liquid investments with an original maturity of three months or less. The Directors consider that the carrying amount of cash and cash equivalents approximates their fair value. The total cash and cash equivalents denominated in South African Rand amount to £82 287 (February 2018: £151 514), the total cash and cash equivalents denominated in Namibia Dollars amount to £660 190 (February 2018: £56 275) and the total cash and cash equivalents denominated in US Dollars amount to £132 (February 2018: £132).

 

15.  Trade and other payables

	28 February 2019 £			28 February 2018 £
Trade payables		266 184			308 699
Other payables		110 716			145 962
Accruals		2 550			61 446
		379 450			516 107

 

Trade and other payables principally comprise amounts outstanding for trade purchases and on-going costs. The average credit period taken for trade purchases is 30 days.

 

The Group has financial risk management policies in place to ensure that all payables are paid within the pre-arranged credit terms. No interest has been charged by any suppliers as a result of late payment of invoices during the period.

 

The Directors consider that the carrying amount of trade and other payables approximates to their fair value.

 

The total trade and other payables denominated in South African Rand amount to £149 684 (February 2018: £214 352) and £179 394 (February 2018: £171 039) is denominated in Namibian Dollars.

 

16.  Environmental rehabilitation liability

 

	28 February 2019 £			28 February 2018 £
As at 1 March 2018		-			-
Increase in provision		78 168			-
Foreign exchange differences		(2 988)			-
As at 28 February 2019		75 180			-

 

Provision for future environmental rehabilitation and decommissioning costs are made on a progressive basis. Estimates are based on costs that are regularly reviewed and adjusted appropriately for new circumstances. The environmental rehabilitation liability is based on disturbances and the required rehabilitation as at 28 February 2019.

 

The rehabilitation provision represents the present value of decommissioning costs relating to the dismantling and sale of mechanical equipment and steel structures related to the Phase 1 Pilot Plant, the demolishing of civil platforms and reshaping of earthworks. The provision is based on management's estimates and assumptions based on the current economic environment. Actual rehabilitation and decommissioning costs will ultimately depend upon future market prices for the necessary rehabilitation works and timing of when the mine ceases operation.

 

17.  Share capital

	Number of ordinary shares of no par value issued and fully paid	Share Capital £
Balance at 1 September 2017	-	-
"Greenhills" acquisition	85 341 358	3 328 313
"AfriTin Namibia" acquisition	70 336 290	2 743 115
Initial Public Offering	89 743 584	3 500 000
Convertible loan notes converted into shares	36 629 947	1 000 000
Shares issued to staff and service provider for nil consideration	15 413 613	601 131
Warrants exercised 16 January 2018	1 348	-
Warrants exercised 2 February 2018	15 789	-
Share issue costs - excluding warrants	-	(289 145)
Share issue costs - fair value of warrants	-	(29 783)
Balance at 28 February 2018	297 481 929	10 853 631
Capital raise - 14 June 2018	220 515 292	5 953 913
Share issue costs - excluding warrants	-	(325 858)
Share issue costs - fair value of warrants	-	(48 868)
Shares issued to Hannam & Partners - 17 August 2018	1 591 304	54 900
"Tantalum" acquisition - 2 October 2018	25 000 000	850 000
Balance at 28 February 2019	544 588 525	17 337 718

 

Authorised: 673 396 387 ordinary shares of no par value

Allotted, issued and fully paid: 544 588 525 shares of no par value

 

On 23 May 2018, an accelerated bookbuild and subscription process was undertaken and gross proceeds of £6m was raised. The Placing of 220 515 292 shares was done at a price of 2.7p per share. A resolution to issue the new ordinary shares was passed at a General Meeting on 14 June 2018.

 

On 17 August 2018, 1 591 304 ordinary shares of no par value were issued to Hannam & Partners Advisory Limited at 3.45p in lieu of a payment of £54 900, being part of their fees in relation to the capital raise that took place in June 2018.

 

On 2 October 2018, AfriTin Mining Limited acquired the entire issued share capital of Tantalum Investment Pty Limited, containing Namibian exploration licenses EPL5445 and EPL5670 for the exploration of tin, tantalum and other associated minerals from Jan Jonathan Serfontein. The purchase price of £850 000 was settled by way of issue of 25 000 000 ordinary shares in the Company, at a price of 3.40p.

 

18.  Warrants

 

The following warrants were granted during the year ended 28 February 2019:

 

Date of grant	23 January 2019
Number granted	3 800 000
Contractual life	2 years
Estimated fair value per warrant (£)	0.01286

 

The following warrants were granted during the period ended 28 February 2018:

 

Date of grant	9 November 2017
Number granted	1 871 939
Contractual life	3 years
Estimated fair value per warrant (£)	0.01591

 

The estimated fair values were calculated by applying the Black Scholes pricing model. The model inputs were:

 

Date of grant	23 January 2019	9 November 2017
Share price at grant date (pence)	4.15	3.90
Exercise price (pence)	4.50	3.90
Expected life	2 years	3 years
Expected volatility	60%	60%
Expected dividends	Nil	Nil
Risk-free interest rate	1.24%	1.24%

 

In accordance with the terms of a Demerger Agreement between Bushveld Minerals Limited and AfriTin Mining Limited (see Note 10), Bushveld warrant holders are entitled to exercise the same amount of warrants in AfriTin for £nil consideration subject to the demerger ratio of 0.0899. This agreement effectively gave rise to 43 120 AfriTin warrants on admission. In the period to 28 February 2018, 17 137 of these warrants were exercised. The remaining 25 983 of these warrants expired during the year ended 28 February 2019.

 

The warrants in issue during the year are as follows:

 

Outstanding at 1 September 2017	-
Arising as a result of Demerger Agreement	43 120
Granted during the period	1 871 939
Exercised during the period	(17 137)
Outstanding at 28 February 2018	1 897 922
Exercisable at 28 February 2018	1 897 922
Granted during the year	3 800 000
Expired during the year	(25 983)
Exercised during the year	-
Outstanding at 28 February 2019	5 671 939
Exercisable at 28 February 2019	5 671 939

 

The warrants outstanding at the period-end have an average exercise price of £0.043, with a weighted average remaining contractual life of 1.83 years.

 

In the period ended 28 February 2019, the Group recognised a charge amounting to £48 868 (February 2018: £29 783) which was deducted from share capital as the warrants were issued as consideration for professional fees in relation to the issue of shares.

 

19.  Share-based payments reserve

 

Director share options

 

The following director share options were granted during the year ended 28 February 2019:

 

Date of grant	14 June 2018	14 June 2018	14 June 2018
Number granted	8 750 000	4 375 000	4 375 000
Vesting period	1 year	18 months	2 years
Contractual life	5 years	5 years	5 years
Estimated fair value per option (pence)	1.1040	0.9090	0.7280

 

The estimated fair values were calculated by applying the Black Scholes pricing model. The model inputs were:

 

Date of grant	14 June 2018	14 June 2018	14 June 2018
Share price at grant date (pence)	2.8	2.8	2.8
Exercise price (pence)	4.5	6.0	8.0
Expiry date	14 June 2023	14 June 2023	14 June 2023
Expected volatility	60%	60%	60%
Expected dividends	Nil	Nil	Nil
Risk-free interest rate	1.24%	1.24%	1.24%

 

The director share options in issue during the period are as follows:

 

Outstanding at 1 March 2018	-
Granted during the year	17 500 000
Forfeited during the year	-
Exercised during the year	-
Expired during the year	-
Outstanding at 28 February 2019	17 500 000
Exercisable at 28 February 2019	17 500 000

 

The director share options outstanding at the year-end have an average exercise price of £0.058, with a weighted average remaining contractual life of 4.29 years.

 

The director must remain as a director of the Company for the share options to vest. There are no market-based vesting conditions on the share options.

 

Employee share options

 

The following employee share options were granted during the year ended 28 February 2019:

 

Date of grant	1 October 2018	1 October 2018	1 October 2018
Number granted	11 250 000	5 625 000	5 625 000
Vesting period	1 year	18 months	2 years
Contractual life	5 years	5 years	5 years
Estimated fair value per option (pence)	1.5750	1.3240	1.0830

 

The estimated fair values were calculated by applying the Black Scholes pricing model. The model inputs were:

 

Date of grant	1 October 2018	1 October 2018	1 October 2018
Share price at grant date (pence)	3.5	3.5	3.5
Exercise price (pence)	4.5	6.0	8.0
Expected life	30 September 2023	30 September 2023	30 September 2023
Expected volatility	60%	60%	60%
Expected dividends	Nil	Nil	Nil
Risk-free interest rate	1.24%	1.24%	1.24%

 

The employee share options in issue during the period are as follows:

 

Outstanding at 1 March 2018	-
Granted during the year	22 500 000
Forfeited during the year	-
Exercised during the year	-
Expired during the year	-
Outstanding at 28 February 2019	22 500 000
Exercisable at 28 February 2019	22 500 000

 

The employee share options outstanding at the year-end have an average exercise price of £0.058, with a weighted average remaining contractual life of 4.59 years.

 

The employee must remain in employment with the Company for the share options to vest. There are no market-based vesting conditions on the share options.

 

Director shares to be issued

 

Directors fees of £24 050 are owing to the directors at the end of the year (February 2018: £nil). These fees will be settled through issuing a fixed number of shares. The corresponding credit has been recorded in the share-based payment reserve.

 

Employee shares to be issued

 

Employee salaries of £41 248 are owing to employees at the end of the year (February 2018: £nil). These fees will be settled through issuing a fixed number of shares. The corresponding credit has been recorded in the share-based payment reserve.

 

20.  Financial instruments

 

The Group is exposed to the risks that arise from its use of financial instruments. This note describes the objectives, policies and processes of the Group for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements.

 

Capital Risk Management

 

The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximizing returns to shareholders. In order to maintain or adjust the capital structure, the Group may issue new shares or arrange debt financing.

 

The capital structure of the Group consists of cash and cash equivalents and equity, comprising issued capital and retained losses.

 

The Group is not subject to any externally imposed capital requirements.

 

Significant accounting policies

 

Details of the significant accounting policies and methods adopted including the criteria for recognition, the basis of measurement and the bases for recognition of income and expenses for each class of financial asset, financial liability and equity instrument are disclosed in note 2.

 

Principal financial instruments

 

The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:

·      Trade and other receivables

·      Cash and cash equivalents

·      Trade and other payables

 

Categories of financial instruments

 

The Group holds the following financial assets:

	Year ended 28 February 2019 £			Period ended 28 February 2018 £
Measured at amortised cost:
Trade and other receivables		126 805			48 893
Cash and cash equivalents		1 781 335			2 904 767
Total financial assets		1 908 140			2 953 660

 

The Group holds the following financial liabilities:

	Year ended 28 February 2019 £			Period ended 28 February 2018 £
Measured at amortised cost:
Trade and other payables		379 450			516 108
Total financial liabilities		379 450			516 108

 

General objectives, policies and processes

 

The Board has overall responsibility for the determination of the Group's risk management objectives and policies. The Board receives reports through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets.

 

The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group's competitiveness and flexibility. Further details regarding these policies are set out below:

 

Credit risk

 

The Group's principal financial assets are bank balances and trade and other receivables.

 

Credit risk arises principally from the Group's cash balances with further risk arising due to its trade receivables. Credit risk is the risk that the counterparty fails to repay its obligation to the Group in respect of amounts owed. The Group gives careful consideration to which organisations it uses for its banking services in order to minimize credit risk. Other than a limited amount of sales of sand, the Group has no sales hence credit risk relating to other receivables is minimal. There are no formal procedures in place for monitoring and collecting amounts owed to the Group. A risk management framework will be developed over time, as appropriate to the size and complexity of the business.

 

The concentration of the Group's credit risk is considered by counterparty, geography and by currency. The Group has a significant concentration of cash held on deposit with large banks in South Africa, Namibia and Mauritius with A ratings and above (Standard & Poor's).

 

The concentration of credit risk was as follows:

	Year ended 28 February 2019 £			Period ended 28 February 2018 £
Currency
Sterling		1 038 726			2 696 846
USD		132			132
South African Rand		82 287			151 514
Namibian Dollars		660 190			56 275
TOTAL		1 781 335			2 904 767

 

There are no other significant concentrations of credit risk as at the balance sheet date.

 

At 28 February 2019, the Group held no collateral as security against any financial asset. The carrying amount of financial assets recorded in the financial statements, net of any allowances for losses, represents the Group's maximum exposure to credit risk without taking account of the value of any collateral obtained. At 28 February 2019, no financial assets were past their due date. The Group applies IFRS 9 to measure expected credit losses for receivables and these are regularly monitored and assessed. There has been no impairment of financial assets during the year. Management considers the above measures to be sufficient to control the credit risk exposure.

 

Liquidity risk

 

Liquidity risk is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. Ultimate responsibility for liquidity risk management rests with the Board of Directors. The Board manages liquidity risk by regularly reviewing the Group's gearing levels, cash-flow projections and associated headroom and ensuring that excess banking facilities are available for future use.

 

The Group maintains good relationships with its banks, which have high credit ratings and its cash requirements are anticipated via the budgetary process. At 28 February 2019, the Group had £1 781 335 (February 2018: £2 904 767) of cash reserves.

 

Market risk

 

The Group's activities expose it primarily to the financial risk of changes in foreign currency exchange rates and interest rates.

 

Interest rate risk

 

The Group was exposed to minimal interest rate risk during the period. For this reason, no sensitivity analysis has been performed regarding interest rate risk.

 

Foreign exchange risk

 

The Group has foreign currency denominated assets and liabilities. Exposure to exchange rate fluctuations therefore arise. The carrying amount of the Group's foreign currency denominated monetary assets and liabilities, all in Pound Sterling, are shown below.

 

	Year ended 28 February 2019 £			Period ended 28 February 2018 £
Cash and cash equivalents		742 609			207 921
Other receivables		48 811			39 643
Trade and other payables		(329 078)			(385 391)
		462 342			(137 827)

 

The Group is exposed to a level of foreign currency risk. Due to the minimal level of foreign exchange transactions, the Directors currently believe the foreign currency risk is at an acceptable level.

 

The Group does not enter into any derivative financial instruments to manage its exposure to foreign currency risk.

 

The following table details the Group's sensitivity to a 10% increase and decrease in the Pound Sterling against the Rand and the Namibian Dollar. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management's assessment of the reasonable possible change in foreign currency rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the year-end for a 10% change in foreign currency rates.

 

	Rand denominated monetary items £		Rand currency impact Strengthening £		Rand currency impact Weakening £
Assets		128 300		141 130		115 470
Liabilities		(149 684)		(164 653)		(134 716)
		(21 384)		(23 523)		(19 246)
	Namibian Dollar denominated monetary items £		Namibian Dollar currency impact Strengthening £		Namibian Dollar currency impact Weakening £
Assets		662 987		729 286		596 689
Liabilities		(179 394)		(197 333)		(161 454)
		483 593		531 953		435 235

 

21.  Operating Lease Commitments

 

The Group had total commitments at the reporting date under non-cancellable operating leases falling due as follows:

 

	28 February 2019 Land and buildings £			28 February 2018 Land and buildings £
Within one year		70 702			-
Between one and five years		318 615			-
		389 317			-

 

The operating lease commitments relate to office rent in Illovo, Johannesburg. The lease was agreed on 1 December 2018 for a period of five years. Please refer to Note 23 for more details.

 

22.  Events after Balance Sheet Date

 

Equity Fundraising

 

On 22 May 2019, the Company completed an equity fundraising by way of a direct subscription of 99,613,074 ordinary shares of no par value in the Company at a price of 3 pence per share, to raise approximately £3 million before expenses.

 

Working Capital Facility

On 22 May 2019, a standby working capital facility of ZAR30,000,000 (c. £1.7million) was entered into between the Company and Bushveld Minerals Limited ("Bushveld"). Bushveld is a shareholder of AfriTin, which holds 9.5% of the issued share capital in the Company.

Bushveld has agreed to a 12-month facility of ZAR30,000,000 (c. £1.7 million) (the "Facility") towards funding the general corporate and working capital requirements of the Group. The security for this Facility is a general notarial bond to be registered in favour of Bushveld over the Plant. The Facility is repayable after 12 months and bears a ZAR300,000 facility fee. Interest on the Facility accrues at a rate of 12.5% per annum (payable quarterly) on drawn amounts. Furthermore, the Facility may be repaid at any time at no cost prior to the final repayment date.

Subject to AfriTin's shareholders resolving to increase the Company's authorised share capital at the AfriTin annual general meeting to be held in June 2019, Bushveld has the right, in the event of AfriTin defaulting in repaying the facility, to elect to convert any outstanding loan amount at the maturity of the Facility into AfriTin ordinary shares of no par value at a 20-day VWAP for such shares discounted by 10%.

23.  Related-party transactions

 

Balances and transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

 

Goldiblox Pty Limited ("Goldiblox") is a related party due to Frans van Daalen, key management personnel of Afritin Mining Limited being a 50% shareholder of Goldiblox. During the year, Goldiblox charged the Group £66 554 (February 2018: £119 973) for management services. At year end, the Group did not owe Goldiblox any funds.

 

Bushveld Minerals Limited ("Bushveld") is a related party due to Anthony Viljoen, Chief Executive Officer being a Non-Executive Director on the Bushveld Board. During the year, Bushveld charged the Group £22 477 (February 2018: £nil) for rent, £18 592 (February 2018: £nil) for employee costs and £nil (February 2018: £77 537) for admin related costs. At year end, the Group owed Bushveld £77 537. Post year-end, Bushveld provided the Group a standby working capital facility (see Note 22).

 

The remuneration of the key management personnel of the Group, which includes the Directors, Frans van Daalen and Robert Sewell, is set out below.

 

28 February 2019	Shares/Share Options £		Director Fees/Salary £		Other Fees £		Total £
Non-Executive Directors
Glen Parsons (Chairman)		27 433		-		-		27 433
Terence Goodlace		12 583		21 996		-		34 579
Laurence Robb		16 591		12 000		-		28 591
Roger Williams		20 291		-		-		20 291
Executive Director
Anthony Viljoen (Chief Executive Officer)		45 562		126 648		-		172 210
Other key management personnel
Robert Sewell (Chief Financial Officer)		17 620		83 851		-		101 471
Frans van Daalen (Chief Operating Officer)*		26 546		112 302		-		138 848
		166 626		356 797		-		523 423

 

* Salary cost of £28 266 was paid to Frans van Daalen via Goldiblox.

 

28 February 2018	Shares/Share Options £		Director Fees/Salary £		Other Fees £		Total £
Non-Executive Directors
Glen Parsons (Chairman)		40 000		-		-		40 000
Terence Goodlace		-		-		-		-
Laurence Robb		12 500		4 000		-		16 500
Roger Williams		25 000		-		2 809		27 809
Executive Director
Anthony Viljoen (Chief Executive Officer)*		78 000		46 050		-		124 050
Other key management personnel
Robert Sewell (Chief Financial Officer)		-		-		-		-
Frans van Daalen (Chief Operating Officer)**		78 000		41 445		-		119 445
		233 500		91 495		2 809		327 804

 

* The salary cost of £46 050 was paid to Anthony Viljoen via VM Investments.

** The salary cost of £41 445 was paid to Frans van Daalen via Goldiblox.

 

 

24.  Reserves within equity

 

Share capital

 

Ordinary shares are classified as equity. Incremental cost directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

 

Warrant reserve

 

The warrant reserve represents the cumulative charge to date in respect of unexercised share warrants at the balance sheet date.

 

Share-based payment reserve

 

The share-based payment reserve represents the cumulative charge to date in respect on unexercised share options at the balance sheet date as well as fees/salaries owed to directors/employees to be settled through the issuing of shares.

 

Foreign currency translation reserve

 

The foreign currency translation reserve comprises all foreign exchange differences arising from the translation of entities with a functional currency other than Pound Sterling.

 

Retained earnings/accumulated deficit

 

The retained earnings/accumulated deficit represent the cumulative profit and loss net of distribution to owners.