Buligo Capital Ltd — Annual Report 2022

May 9, 2023

Capital Limited Annual Report 2022

Contents

3 Highlights
4 Our Company
6 Capital Drilling
9 Capital Mining
10 MSALABS
13 Capital Investments
15 Our Strategy
16 Key Facts
18 Business Review
22 Executive Chairman’s Statement
24 CEO’s Statement
26 CFO’s Review
39 Sustainability & ESG
43 Introduction
47 Environmental Commitment
60 Social Responsibility
63 Human Resources
66 Continuing to Enhancing Governance
69 Health & Safety
73 Governance
77 Board of Directors
87 Corporate Governance Report
100 Remuneration Committee Report
106 Audit and Risk Committee Report
109 Directors’ Responsibility Statement
116 Financial Statements
119 Independent Auditor’s Report
121 Consolidated Statement of Profit or Loss and Other Comprehensive Income
123 Consolidated Statement of Financial Position
125 Consolidated Statement of Changes in Equity
126 Consolidated Statement of Cash Flows
127 Notes to the Consolidated Financial Statements
169 Supplementary Information
172 Glossary and Alternative Performance Measures
175 Corporate Information

Highlights

REVENUE 28% increase
EBITDA 23% increase
EBIT 15% increase
ADJUSTED NPAT 1 16% increase
CASH FROM OPERATIONS 73% increase
DIVIDEND 8% increase
TRIFR 20% below target (1.5)

Item	FY 2022	FY 2021
Revenue	$290.3m	$90.1m
EBITDA	$59.7m	$42.5m
EBIT	$73.5m	3.9cps
Adjusted NPAT 1	$42.5m	$36.6m
Cash from Operations	$51.9m	$73.3m
Dividend	$226.8m	3.9cps
TRIFR	1.23	0.98

1 Adjusted NPAT represents the profit for the year excluding fair value gains/ losses on investments.

Capital Limited revenues have grown over 115% since 2020.

Our Company

Capital Drilling provides a complete range of drilling solutions for projects across the mining cycle from exploration to production. Our clients include Tier 1 mining operations and exploration companies based across Africa and in selected international markets. Our drilling services include air core, blast hole, delineation, dewatering, directional, deep hole directional, exploration, grade control, pre-splits, reverse circulation and underground drilling.

Capital Mining provides a fully flexible and complete mining service for mine owners. By providing a fully integrated service, we manage every stage of the process - from designing the blast to delivering the required fragmentation that optimises load and haul and down-stream ore processing operations, delivering maximum value for the mine owner. Our mining services include load and haul, maintenance services, equipment operational hire and fully integrated mining contracts tailored to the mine owners’ specific circumstances.

MSALABS is a global provider of geochemical laboratory services for the exploration and mining industries. Our analytical services are suitable for greenfield exploration through to production through to mine closure and include sample preparation, a complete range of analytical techniques and construction and management of on-site laboratories.

Capital Investments is a key component of our business development strategy and comprises a selective direct investments portfolio of both publicly traded and private companies. Direct investments into exploration and mining companies are strategically aligned with the Group’s broader operations, contributing to the activity via ‘drill for equity’ agreements and service contracts. Our investments business also supports the development of long-term relationships with our clients by providing alternative partnership models.

Capital Drilling

Third consecutive year of strong growth for core drilling business

2022 was another outstanding year for our core drilling business, driven by a further increase in the rig count and robust utilisation across the fleet. Our drilling division contributed revenue in 2022 of US$209 million up 21% on 2021 (US$173 million) following 42% YoY growth on 2020 (US$122 million).

Increasing rig count and utilisation

Our total rig count increased to 129 at the end of 2022 up from 109 at the end of 2021. Organic growth accounted for half of this rig growth, purchased to support existing and new contracts. In September 2022 we also acquired 10 rigs from African Mining Services (AMS) to facilitate rapid mobilisation onto B2Gold’s Fekola gold mine in Mali, a new material drilling contract for the Group. In addition to the increased fleet size, utilisation rates increased to 79% in 2022 (2021: 75%).

Major contract renewals and a repositioning of the portfolio

Through 2022 we took further strides to strengthen our contract portfolio:

• Major contract renewals: a three-year comprehensive drilling services contract with AngloGold Ashanti at its Geita gold mine, Tanzania, which is anticipated to generate ~US$150 million in revenue over the three-year contract term, making it the second largest award of new business in the Group’s history. In addition, we were awarded a two-year extension for underground drilling services at Barrick’s Bulyanhulu gold mine.
• Repositioning the portfolio: We also took advantage of the strength in underlying demand to focus on contract selection. Through the period we commenced operations at another of Africa’s largest gold mines, Fekola, while also reducing our exposure to short-term contracts. This focus on growing long-term partnerships with blue-chip customers remains core to our business model, irrespective of levels of activity across the market, delivering lower volatility in earnings and sustainability of the business through the cycles.

Significant growth potential at world class assets with increased commodity diversification

The outlook for our drilling business is very positive and now underpinned by new exposure to Tier-1 gold and non-gold projects with strong growth potential. In gold, these include Predictive Discovery’s Bankan project in Guinea and Perseus’s Meyas Sand (formerly Block 14) project in Sudan.# Capital Limited Annual Report 2022

However, through 2022 we also commenced drilling on a number of exciting non-gold opportunities including the Goulamina lithium project, Mali, and the Kabanga nickel project, Tanzania. In early 2023 we have also been awarded drilling contracts at FMG’s Belinga iron ore project in Gabon and Barrick’s Reko Diq copper project in Pakistan. This focus on growing long-term partnerships with blue-chip customers remains core to the business model at Capital.

Capital Mining

A year of operational delivery

In 2021 we made the transformational step into large-scale contract mining with a waste mining contract at Centamin’s Sukari gold mine in Egypt, following an initial smaller mining contract at Allied Gold’s Bonikro gold mine, Côte d’Ivoire. After ramping up ahead of schedule through 2021, we reached near peak mining rates as we entered 2022 and continued at steady state production rates through the year with the team achieving their daily production record since the project commenced in Q4 2022.

Exemplary of Capital’s broader Group strategy

The Sukari mining contract represents the Group’s first significant move into contract mining however it is also an example of the Group’s broader strategy of forming long-term partnerships with Tier-1 customers while adding services to our offering over time.

Capital commenced operations at the Sukari gold mine in 2005 with exploration drilling. Since then, we have not only been awarded numerous contract renewals, but we have also added grade control drilling, blast hole production drilling, maintenance services and now earth moving services. This is testament to both the continued partnership with Centamin’s management and the team’s continued focus on operational delivery, productivity and peer leading safety standards.

Sukari load and haul waste stripping contract – the largest award in the Company’s history

The contract consists of open-pit waste mining with load, haul and associated services as part of the Eastern Wall waste cut-back at the Sukari gold mine. The 120Mt waste mining contract commenced in January 2021 for a four-year term. In addition, the contract included a 15-month extension to the existing blast hole drilling contract to 31 December 2024.

The size of the Sukari project required a significant increase to the existing fleet. To support this project, we purchased 17 dump trucks, four excavators, seven blast hole drill rigs and further ancillary equipment such as graders and dozers. Overall, the value of the Sukari contract (mining and drilling) is estimated to be between US$235 million and US$260 million, marking it as the largest award of new business in our history.

Proven capabilities in load and haul provides a platform to grow

Our Capital Mining team set a demanding ramp up schedule at Sukari and delivered ahead of contract expectations and has now operated its first full year at steady state without interruption. This excellent performance has elevated Capital’s standing as we tender on further opportunities. We reached near peak mining rates as we entered 2022 and achieved daily production records in Q4 2022.

MSALABS

Laying the foundation for multi-year growth trajectory

2022 saw MSALABS increase its revenue 74% YoY to US$27.3 million (US$15.7 million in 2021) having grown 75% YoY in 2021. In addition, MSALABS has laid the foundation in 2022 through its increasing global reach, growing its client base and expanding its relationship with Chrysos Corporation (“Chrysos”), cementing a multi-year growth outlook that is anticipated to increase revenues to in excess of US$80 million in 2025.

Expanded global partnership with Chrysos

In April 2021, MSALABS announced its initial global partnership with Chrysos and announced the planned deployment of six PhotonAssay™ units across its global network. This rollout commenced with a unit at Barrick’s Bulyanhulu gold mine, Tanzania, and represented the first Chrysos PhotonAssay™ unit deployment outside of Australia. In July 2022, MSALABS announced an expansion of this partnership to roll out an additional 15 units over 2023 and 2024. MSALABS is currently engaged with multiple mining companies globally and continues to see exceptional demand for this revolutionary new technology.

Chrysos PhotonAssay™ – a game changer

MSALABS has become an early adopter of Chrysos PhotonAssay™ technology that we see delivering multiple advantages over the traditional fire assay process. Chrysos PhotonAssay™ uses X-ray technology to penetrate samples and provide a true bulk analysis of gold and silver, displacing older, traditional fire assay technology. We have also started routine copper analysis through the unit at Barrick’s Bulyanahulu gold mine, Tanzania.

PhotonAssay™ delivers on a number of fronts: analysis results are available in just hours and from an ESG perspective, it eliminates hazardous waste and reduces emissions associated with fire assay - a far better outcome for the environment. PhotonAssay™ also uses a much larger sample size of 500g, up to 10 times more than traditional methods, contributing to more representative results.

Expanding global laboratory network

MSALABS has continued to increase its global reach. In 2022, it expanded its footprint across Africa, most notably at Barrick’s Kibali gold mine, the largest gold mine on the continent. In addition, the Group’s footprint in the Americas, particularly Canada, also expanded with a laboratory in Val d’Or, Quebec, and prep laboratories in the Yukon region, where we see mining activity growing rapidly.

2022 saw MSALABS increase its revenue 75% YoY to $27.3 million and we anticipate revenues in excess of $80 million in 2025.

Capital Investments

A core pillar of our Group strategy

Our Group investment strategy commenced formally in January 2019. We identified a significant disconnect between the positive macro fundamentals in the mining sector and the scarce access to capital particularly for the junior mining companies in the regions where we operate. We therefore allocated funding to these companies, in a number of different forms, which created alternative partnership models and became a very successful business development tool.

Substantial returns

To date, we have invested a net of ~US$12.5 million into this strategy with the portfolio growing to US$38.7 million at the end of 2022. Notably, contracts from these investee customers generated revenue of US$51 million in 2022 (17.6% of Group revenue).

Investment strategy

Our investments have a defined mandate and must satisfy a number of criteria:
* Stand-alone investment case;
* Strategic alignment with Capital’s operations;
* Potential to gain commercial services contracts.

This strategy has proved a very successful business development tool and the possibility of generating commercial services contracts comes as a result of forming alternative partnership models with our clients which in turn creates long-term relationships. We have allocated capital within this strategy in a number of different ways:
* Early-stage property sourcing: Utilising in-house geology and drilling capabilities, we have targeted early-stage exploration properties, conducting our own field work. We then source listed entities to acquire these assets in exchange for equity;
* Capital raising: We have provided financing for early-stage mine acquisitions where financing was less readily available; and
* Equity in exchange for drilling services: We have gained equity exposure to some investments in return for our drilling services, however notably we typically receive this equity upfront so that we can participate in equity upside should the drilling campaign produce positive results.

Key holdings

Our portfolio comprised of a combination of listed companies (US$30.4 million) and unlisted companies (US$8.3 million). At 31 December 2022, key holdings include Predictive Discovery (ASX: PDI), Leo Lithium (ASX: LLL) and Allied Gold (Private), with our holding in Predictive Discovery accounting for ~50% of the portfolio value. To date, we have invested a net of ~$12.5 million with the portfolio growing to $38.7 million and investee customers generating revenue of $51 million in 2022.

Our Strategy

Premium service provider

Capital strives to be a leader in its field and has built a reputation of best-in-class execution driven by a focus on premium equipment, our people and training, and excellent standards and safety.

Sector leading safety standards

Capital is proud to have a safety record well ahead of industry standards and aims to continually deliver world class processes and procedures to position itself as a leader in the sector. The safety of employees is the number one priority both for us and the customers we service.

Sustainability focus

Sustainability is a core pillar of Capital’s strategy. This includes the full spectrum of sustainable practices, from prioritisation of local employment (our workforce comprising more than 90% national employees) to a focus on reducing our carbon footprint, with a commitment to Net Zero 2050.

Client partnerships

Forming long-term partnerships with our customers is central to our strategy and, with several customers, has generated decades of repeat revenue. This comes through consistent performance together with a shared commitment and investment alongside our customers.

End-to-end exploration to mining services solution

Capital begun with exploration drilling however quickly expanded into mine site related drilling services such as blast hole, grade control and underground drilling.# Our Strategy

Capital Limited Annual Report 2022

Key Facts At A Glance

Key Facts at a Glance

	2022	2021
Employees	2,495	2,265
Nationalisation	91%	90%

Safety Achievements

	2022	2021
Total recordable injury free rate (TRIFR)	1.23	0.98

Lost Time Injury (LTI) Free Milestones

• 14 years Mwanza (Tanzania)
• 6 years Syama gold mine (Mali)
• 6 years North Mara gold mine (Tanzania)
• 5 years Geita gold mine (Tanzania)
• 4 years Bamako, (Mali)
• 4 years Yanfolila gold mine (Mali)
• 3 years Jabal Sayid copper mine (Saudi Arabia)
• 2 years Bonikro mine (Cote D’Ivoire)
• 2 years Bankan gold project (Guinea)
• 1 year Bulyanhulu gold mine (Tanzania)
• 1 year Kabanga nickel project (Tanzania)
• 1 year Goulamina lithium project (Mali)

	2022	2021
Revenue by Region	22%	10%
West Africa
South and East Africa	11%	29%
MENA	42%	4%
Rest of the World	26%	28%
Revenue by Location	29%	13%
Mine Site	12%	33%
Non Mine Site
Revenue by Activity
Exploration
Production
Development
Underground
Drilling**
Revenue by Client Base	55%	87%
Junior
Major
Mid-Tier

**Includes mining revenue

In 2022 Capital not only delivered its third consecutive strong year of growth but also undertook strategic shifts to place the business in its strongest position to date. These enhancements have been made in all parts of the business and include further repositioning of our contract portfolio and service offering together with developing our management team, particularly with Peter Stokes joining as Chief Executive Officer (“CEO”). Capital’s reputation in the market continues to grow, with our performance in project delivery and safety remaining standout, which places the business in a very strong position to continue to grow.

Executive Chairman’s Statement

Executive Chairman Jamie Boyton

In October 2022 we welcomed Peter Stokes to the Group. Peter’s appointment as CEO marks the splitting of the Chairman/CEO role and next phase of the Group’s growth strategy. Peter’s experience in running large and complex businesses across many different markets, as well as his considerable experience in the metals and mining industry, makes him ideal to take over the leadership of the business as it continues to grow rapidly across all our key pillars. The Board and I look forward to working with Peter to further consolidate Capital as a world class mining services provider.

In November 2022 we also announced the appointment of our new CFO, Rick Robson. Rick has been a member of Capital’s senior management team since 2019 working across both corporate development and as CFO of MSALABS. Over the last three years, Rick has led all the equity and debt financings entered into by the Group and given his already extensive knowledge of the business has been able to smoothly take up the CFO role.

This is the third consecutive year Capital has delivered material growth in revenue, with full year revenues increasing 28%, following 68% YoY growth in 2021 and 18% YoY growth in 2020. This also came with a further increase to the Group’s diversification with non-drilling revenue contributing 28% of total revenue in 2022, compared with 24% in 2021 through the growth YoY in both Capital Mining and MSALABS. Importantly, the Group has maintained its strong returns with ROCE of 26% in 2022. These returns are the result of both a tight focus on our capital allocation and also our continued strategy of targeting long-life, low-cost, mine site contracts with blue-chip customers (87% of revenue in 2022).

Our drilling business had another strong year in 2022, both in terms of growth and also in strengthening and repositioning its contract portfolio. Firstly, we saw new contracts and several material contract renewals on major mine sites including a new two-year drilling services contract at B2Gold’s Fekola mine in Mali. In addition, we repositioned our rigs away from short-term contracts and commenced operations at world-class projects in gold and non-gold commodities. This expands our exposure to projects with significant multi-year growth potential. This strategic repositioning of the portfolio gives defensiveness and visibility to the top line.

Capital Mining also excelled through 2022. After ramping up the waste mining contract at Centamin’s Sukari gold mine ahead of schedule in 2021, we operated at steady state through 2022 and achieved a daily production record in the final quarter of the year. The team’s delivery record and excellent safety standards have elevated Capital Mining’s reputation which will benefit the Group as we tender on further opportunities.

Our laboratory business, MSALABS, has now laid further foundations through its expanded partnership with Chrysos Corporation (“Chrysos”) to fuel further growth. We have seen first-hand the strong demand for this disruptive technology that MSALABS will become the dominant provider of on the international market as it rolls out 21 Chrysos PhotonAssay™ units across its global network by 2025.

Our Capital Investments portfolio remained focused around key holdings and continues to be a strong business development tool. We undertook this well-timed investment strategy in 2019 and to date, we have invested a net of ~$12.5 million in the portfolio. While 2022 market volatility saw a reduction in the portfolio, it has nevertheless grown significantly from our initial investment to $38.7 million at the end of 2022. In addition, contracts from these investee customers notably generated revenue of $51 million in 2022 (17.6% of Group revenue).

The Board of Directors has declared a final dividend for 2022 of 2.6cps (~US$5 million), payable on 9 May 2023 to shareholders on the register as of 14 April 2023. This brings the total dividend declared in relation to 2022 to 3.9c per share. The dividend is a result of our solid financial and operating position.

Operational and safety update

I am extraordinarily proud of our Group’s dedication through 2022. The Group delivered impressive growth through the year, however this involved both the onboarding of ~300 new employees and the fleet operating at close to its highest utilisation rates since the Company’s inception. I would like to thank all our employees for their continued efforts.

The Group’s rig count increased from 109 at the end of 2021 to 129 at the end of 2022, both through organic and inorganic growth to support existing and new contract awards. These include a three-year comprehensive drilling services extension at AngloGold Ashanti’s Geita mine in Tanzania, the second largest award in the Group’s history, and also a new two-year drilling services contract at B2Gold’s Fekola mine in Mali, amongst the largest gold mines in Africa.

Executive Chairman’s Statement

Outlook

Capital has entered 2023 with an even stronger footing across the business coupled with exciting growth prospects. Through 2022, we improved our contract portfolio, our fleet of equipment and our balance sheet flexibility. Together this gives the Group a solid platform from which to launch its next phase of growth. We remain confident in the demand we are seeing on the ground across all our business divisions and commodity prices remain at healthy levels, which gives us confidence to continue to invest. Nevertheless, our focus will remain on large-scale low-cost operations with blue-chip customers, that will continue to operate in weaker markets and ensure for us a business that is sustainable through the cycles. There are a number of growth catalysts to come which are driving further increases to our revenues and we are guiding to 2023 revenues of $320 - $340 million. Our core drilling business entered 2023 with the highest rig count in the Group’s history and we are confident in maintaining robust utilisation levels given both our long-standing relationships with our existing customers but also exposure to world-class deposits where we see significant growth potential. At Sukari, we are confident our mining operations will continue to operate at steady state production levels. MSALABS is again a source of growth for the Group as it continues its rollout of laboratories across its global network.We will continue to execute our key strategic priorities in 2023, focussing on growing our full-service mining business, developing new and innovative ancillary services, expanding capacity with our existing clients and maintaining high levels of utilisation throughout our fleet. I would like to take this opportunity to thank all our employees, business partners, shareholders, our Board of Directors and other stakeholders for their continued support of our Company.

Jamie Boyton
Executive Chairman
24 March 2023

Executive Chairman’s Statement

In addition to the increased fleet size, our rig fleet utilisation increased to 79% in 2022 from 75% in 2021, while the full year ARPOR¹ remained broadly in line with the previous year at $180,000 (2021: $181,000). At the end of the first half of 2022 with utilisations sitting at record highs, we made a strategic decision to reposition the portfolio, away from short-term contracts, towards world-class projects with significant long-term growth potential. As a result of this strategy, we have increased both our geographic reach, with the award of a drilling services contract with Barrick at the Reko Diq copper project in Pakistan, but also further increased our commodity diversification with contracts at the Goulamina lithium project, Mali, the Kabanga nickel project, Tanzania and, more recently, with Belinga iron ore project in Gabon.

In mining, our fleet utilisation has also been excellent. In 2021 we commissioned 4 excavators, 17 mining trucks and other associated vehicles, such as graders and dozers, to the Sukari gold mine in Egypt and operated at steady state production rates through 2022. We have implemented best practice maintenance processes to ensure we can achieve long asset lives and sustainable utilisation. The growth trajectory of MSALABS is underpinned by a rapid build out of laboratories across its global network housing both Chrysos PhotonAssay™ units as well as traditional geochemical testing facilities. Through 2022, this expansion continued with four PhotonAssay™ units commissioned across Africa and Canada, with three further units being commissioned in Q1 2023, including at Barrick’s Kibali gold mine. We are also now conducting routine copper analysis through the PhotonAssay™ unit at the Bulyanhulu gold mine, Tanzania, which will provide further opportunities in the coming years.

Despite all these exciting opportunities across our business divisions, it goes without saying that safety of our employees remains our number one priority. Through 2022 we maintained an outstanding safety record significantly better than industry standards, and I congratulate our employees across the Group for their efforts. Our Total Recordable Injury Frequency Rate (TRIFR) was 1.23 per 1,000,000 hours worked (2021: 0.98). We also achieved a number of site records and safety milestones during 2022 including:
* 14 years LTIF at Mwanza, Tanzania
* 6 years LTIF at the Syama gold mine, Mali
* 6 years LTIF at the North Mara gold mine, Tanzania
* 5 years LTIF at the Geita gold mine, Tanzania
* 4 years LTIF at Bamako, Mali
* 4 years LTIF at Yanfolila gold mine, Mali
* 3 years LTIF at the Jabal Sayid copper mine, Saudi Arabia
* 2 year LTIF at the Bonikro gold mine, Cote d’Ivoire
* 2 year LTIF at the Bankan gold project, Guinea
* 1 year LTIF at the Bulyanhulu gold mine, Tanzania
* 1 year LTIF at the Kabanga nickel project, Tanzania
* 1 year LTIF at the Goulamina lithium project, Mali

¹ Average revenue per operating rig
²² Capital Limited Annual Report 2022
Capital Limited Annual Report 2022 ²³

I was delighted to be appointed CEO by the Board of Capital in September 2022. I’m excited to lead Capital in its next phase of growth. Since joining Capital, I’ve had the opportunity to visit many of our key drilling operations across East and West Africa, our world class drilling and mining operations at Sukari in Egypt and MSALABS’ operations across Africa and Canada including the revolutionary PhotonAssay™ technology. Today Capital stands as a leader in its field reflected across all aspects of the business from the long-term relationships with major blue-chip partners to the world class safety performance and the high quality of equipment used as standard across all operations. The workforce also comprises more than 90% national employees, a clear indicator that the Group values making a positive contribution to the countries where we work. It is these values and strategic priorities that will be key for us to maintain as we grow our footprint and continue to expand our service offering. In 2023 Capital is taking steps forward on both these fronts. Geographically we are extending the drilling business’ footprint further out of Africa as we commence operations at Barrick’s Reko Diq mine in Pakistan. MSALABS is also expanding its global footprint, particularly across Canada through this year. We are continuing to look at opportunities both in Africa and further afield however our requirement for long-term contracts at world class assets will remain paramount. We are also looking at expanding our service offering especially focused on mining technology. Becoming early adopters of Chrysos PhotonAssay™ technology is just one example of the Group’s close focus on the evolving technology and processes in the mining space. To ensure we are able to quickly react to these opportunities we have now formalised our approach with the creation of ‘Capital Innovation’. Through this, we take advantage of the technology and innovation committee that already existed within Capital and provide it with a budget both for new technology trials and early-stage new business ventures. We have recently formed a 50:50 joint venture called Mine Power Solutions Limited with our partner, Enerwhere Limited. Through this company we aim to provide solar hybrid power solutions both to our mining customers and our own operations. A more renewable approach to power is critical in any climate strategy as we and our customers commit to net zero emissions by 2050. Capital is certainly on an impressive growth trajectory and I am very optimistic about the year ahead.

Peter Stokes
Chief Executive Officer
24 March 2023

CEO’s Statement

Capital Limited has delivered another strong performance in 2022 across all our business divisions. We have taken important steps over the past year, both operationally and financially, to ensure the business is well positioned to continue to grow. Revenue increased by 28% to US$290.3 million (2021: US$226.8 million). H2 revenue (US$152.2 million) was 10% higher than H1 revenue (US$138.1 million) primarily due to the continued ramp up of MSALABS as well as new drilling contract wins through the year, notably the material drilling services contract at B2Gold’s Fekola mine in Mali. Profitability of Group operations remained robust with a YoY EBITDA increase of 23% and a YoY EBIT increase of 15%. Our investment portfolio booked a US$19.8 million mark-to-market loss reflected in the Profit and Loss. The portfolio remains concentrated around key holdings valued at US$38.7 million at the end of 2022 (compared to a net investment to date of ~US$12.5 million). During the year we were net sellers with net proceeds of US$1.6 million. Our cash capital expenditure remained broadly in line with 2021 at US$48.5 million (2021: US$49.9 million) as we funded both organic and inorganic growth. On top of replacement rigs which we incorporate in our sustaining capex guidance, we directly purchased a number of rigs to grow our fleet towards our initial year end 2022 guidance of 120 (up from 109 rigs at the end of 2021). We subsequently raised guidance to 130 rigs following the purchase of 10 rigs and associated equipment from African Mining Services (AMS), part of Perenti Group, to facilitate the delivery of the new contract at the Fekola mine. The remainder of the Group’s growth capital expenditure funded the expansion of MSALABS.

Through 2022 we took a number of steps to improve our financial flexibility. In addition to purchasing rigs through OEM financing, we also refinanced our Macquarie asset backed loan facility, taking advantage of the excellent condition of the mining equipment at Sukari, which provided US$10.6 million of new liquidity. In addition, we renewed our corporate RCF facility with Standard Bank and increased the facility from US$15 million to US$25 million. Cash generated from operations was notably 73% higher YoY at US$73.5 million (2021: US$42.6 million) reflective of stronger fleet utilisation and the new contract wins. This is despite a large working capital outflow primarily as a result of inventory build in connection with new contracts and a decision to hold higher inventories in view of supply chain constraints globally. Closing cash was US$28.4 million (2021: US$30.6 million) with net debt of US$47.2 million (2021: US$31.9 million). The business remains very robust and is a testament to our continued focus on long-term mine site contracts which reduces the volatility of earnings. Nevertheless, we have evaluated a downside scenario to assess the aggregate effect of the reasonable downside short term risks and demonstrated that the business is robust to scenarios far worse than experienced or expected. Refer to Note 1.1 of the Financial Statements section for further detail.

Statement of comprehensive income

US$ million	2022	2021
Revenue	290.3	226.8
EBITDA¹	90.1	73.3
EBITDA Margin	31%	32%
EBIT¹	59.7	51.9
EBIT margin	21%	23%
PBT	32.6	82.0
NPAT	22.7	70.3
Basic EPS (cent)	11.1	37.0
Diluted EPS (cent)	10.7	36.4
¹ EBITDA and EBIT exclude fair value losses/gains on investments.

CFO’s Review

Average rig utilisation increased to 79% (2021: 75%) on a larger average fleet size of 118 (2021: 104).# Capital Limited Annual Report 2022

Average revenue per operating rig (ARPOR) per month remained broadly in line with the prior year at US$180,000 (2021: US$181,000). Non-drilling revenues saw another notable increase in contribution to Group revenues in 2022, driven both by the Sukari mining contract achieving its first year of continuous steady state operations as well as the continued ramp up of MSALABS. 2022 contribution to revenue from non-drilling services was 28% in 2022 (2021: 22%). EBITDA increased 23% to US$90.1 million delivering a 31% margin (2021: US$73.3 million/32%). Margins remained robust despite higher administration expenses of US$44.3 million (2021: US$33.0 million). The increase in administration expenses YoY was impacted by US$1.5 million of bad debts written off, US$3.0 million in expected credit loss provisions and US$2.6 million in other operational provisions. EBIT increased 15% to US$59.7 million delivering a 21% margin (2021: US$51.9 million/23%). Profit Before Tax (PBT) decreased by 60% to US$32.6 million (2021: US$82.0 million) however this was primarily impacted by the non-cash investment loss of US$19.8 million (2021: US$33.7 million gain). These investments, while making mark to market losses through the year, continue to be a strong business development tool for the Group with revenue from investee companies in 2022 of US$51.0 million up from US$41.0 million in 2021. Net Profit After Tax (NPAT) decreased 68% to US$22.7 million (2021: US$70.3 million) again impacted by the non-cash investment loss of our equity investments. Adjusted net profit (excluding the impact of these investments) was US$42.5 million in 2022 up 16% YoY (2021: US$36.6 million). The Effective Tax Rate for 2022 was 30.2% (2021: 14.3%). The increase in ETR in 2022 is primarily due to the significant unrealised decrease in fair value of the Group’s investment portfolio. Excluding the impacts of these investments our ETR in 2022 was 18.8% down from 24.3% in 2021. The Basic Earnings Per Share (EPS) for the year decreased 70% to 11.1 cents (2021: 37.0 cents), although this is largely a result of the mark- to-market losses on the investment portfolio. Excluding this impact, the Basic EPS (adjusted) increased 12% to 21.5 cents (2021: 19.2 cents). The weighted average number of ordinary shares used in the Basic EPS calculation was 189,653,369 (2021: 189,765,149).

Statement of financial position

US$ million	2022	2021
Non-current assets	199.0	162.4
Current assets	187.8	189.1
Total assets	386.8	351.5
Non-current liabilities	69.0	53.0
Current liabilities	78.9	75.6
Total liabilities	147.9	128.6
Shareholders’ equity	233.3	219.2
1 Attributable to equity holders of parent

Non-current assets increased by 23% YoY to US$199.0 million (2021: US$162.4 million) reflecting a net investment in the fleet (rig size increased from 109 at the end of 2021 to 129 at the end of 2022) in addition to a 69% YoY increase in the right-of-use asset base to US$16.7 million (2021: US$9.9 million) primarily in connection with the roll out of Chrysos PhotonAssay™ units in MSALABS. Current assets decreased to US$187.8 million (2021: US$189.1 million) primarily as a result of a 55% YoY increase in inventory offset by a 36% YoY decrease in the fair value of the investment portfolio. Inventory increased by US$20.8 million to US$58.7 million (2021: US$37.9 million) to accommodate both increased activity across the Group and to provide comfort to the business while we saw supply chain constraints globally. Investments held of US$38.7 million (2021: US$60.2 million) are the fair value of the equity investment portfolio. Non-current liabilities of US$69.0 million (2021: US$53.0 million) includes US$56.9 million of long-term loans (2021: US$45.6 million). Total long-term debt includes US$25 million of the renewed Revolving Credit Facility, a US$35.4 million asset backed facility with Macquarie and OEM financing direct through Epiroc and Sandvik.

26 Capital Limited Annual Report 2022

Capital Limited Annual Report 2022 27

Reconciliation of net cash (debt) position

US$ million	2022	2021
Net (debt)/cash at the beginning of the year	(31.9)	5.0
Net (decrease)/increase in cash and cash equivalents	(0.8)	(4.2)
(Increase) in long-term liabilities	(13.1)	(31.8)
Translation of foreign currency cash	(1.4)	(0.9)
Net debt at the end of the year	(47.2)	(31.9)

Net cash from operating activities reflects the strong performance of the operations with cash generated of US$73.5 million (2021: US$42.6 million), an increase of 73% year-on-year, offset in part by higher finance costs. We continued to invest through 2022 to fund the growth in the rig fleet as well as the expansion of MSALABS, although the investing cash flow have decreased slightly year-on-year. The refinancing of the Macquarie asset backed loan facility and the renewal and upsizing of the revolving credit facility with Standard Bank provided new funds of US$4.1 million, net of overall loan amortisation in 2022. Despite this, financing activities in 2022 were a cash outflow of US$9.9 million primarily as a result of lease payments, the dividend cash payment of US$7.1 million (2021: US$4.8 million) and the share buyback of US$2.5 million.

The dividend history for the past three years is as follows:

	H1 2020	FY 2020	H1 2021	FY 2021	H1 2022	FY 2022
Declaration	20 Aug 2020	18 Mar 2021	19 Aug 2021	10 Mar 2022	18 Aug 2022	16 Mar 2023
Cents per share	0.9	1.3	1.2	2.4	1.3	2.6
Dividend amount (US$m)	1.2	2.5	2.3	4.6	2.5	5.0

Current liabilities consisted of trade and other payables of US$44.9 million (2021: US$46.5 million), the current portion of long-term liabilities of US$18.0 million (2021: US$16.9 million), provisions of US$2.6 million (2021: US$ nil) and tax liabilities of US$9.1 million (2021: US$10.0 million).

Statement of changes in equity

US$ million	2022	2021
Opening equity	222.9	148.1
Share buyback	(2.5)	–
Share based payments	2.8	2.0
Total comprehensive income	22.7	70.3
Dividends paid	(7.1)	(4.8)
Gain on change in ownership	–	5.1
NCI ex business combination	–	2.2
Closing equity	238.9	222.9

As at 31 December 2022, total equity increased by 7% driven primarily by net profit for the year of US$22.7 million. The Group distributed dividends of US$7.1 million (2021: US$4.7 million) to shareholders. At the beginning of 2022 the Group also completed a share buyback of US$2.5 million.

Statement of cash flows

US$ million	2022	2021
Net cash from operating activities	56.6	30.4
Net cash used in investing activities	(47.5)	(50.1)
Net cash generated (used in)/ from financing activities	(9.9)	15.5
Net (decrease)/increase in cash and cash equivalents	(0.8)	(4.2)
Opening cash and cash equivalents	30.6	35.7
Translation of foreign currency cash	(1.4)	(0.9)
Closing cash and cash equivalents	28.4	30.6

CFO’s ReviewCFO’s Review 28 Capital Limited Annual Report 2022

Capital Limited Annual Report 2022 29

Risk

Risk Title	Risk Description	Our Response
Risk of default	The Group has financing facilities with external financiers. A default under any of these facilities could result in withdrawal of financial support or an increase in the cost of financing.	The Group has a robust system of analysing and forecasting cash and debt positions. The Group is continuing to develop a stronger facilities management system, in addition to strengthening and broadening its banking relationships.
Supply chain disruption	Disruption to border crossings; equipment being held up in customs.	The Group ensures a continual monitoring of movement of goods at all relevant borders and assesses back-up options regularly. Inventory levels are set to allow for a period of disruption. The Group also ensures a local supplier early bulk purchasing strategy.
Adverse change in local tax laws, regulations and practice	Unforeseen changes to local tax regulations leading to new or higher tax charges; unpredictable tax audit processes.	The Group employs a senior international tax specialist in the head of tax role. The Group carries out enhanced tax due diligence on incorporation with identification of strong and well-connected local tax advisers. The Group obtains written confirmation from local tax authorities in advance of undertaking major transactions. The Group ensures supporting documentation for all tax filings is complete and accurate. Access to a detailed online tax technical database (IBFD) as well as close links with local and multinational accounting firms. Experienced in-house tax and compliance resource employed in West Africa with significant regional experience and a Big-4 tax background.

Principal Risks

Capital has a disciplined and maturing enterprise risk management system. Guided by our risk-management framework, in turn premised on the principles of ISO 31000:2018, we are moving beyond enterprise risk management towards an integrated risk, sustainability, strategy and resilience roadmap. This framework is applicable to all employees at all sites. The process is governed by the Audit and Risk Committee which assists the Board in overseeing the Group’s risk management. Our top ranked risks (those seen to have a risk rating of high or above within Capital’s enterprise risk matrix), in no order of priority are:

Risk Title	Risk Description	Our Response
Reduction in levels of mining activity	The Group is highly dependent on the levels of mineral exploration, development and production activity within the markets in which it operates. A reduction in exploration, development and production activities, or in the budgeted expenditure of mining and mineral exploration companies, will cause a decline in the demand for mining services, as was evident in the 2014 and 2015 financial years.	The Group is seeking to balance this risk by building a portfolio of long-term mine-site contracts, expanding its services offering into mine-site based activities such as load and haul mining, and also expanding both its customer and geographic reach.

Some contracts can be terminated for convenience by the client at short notice and without penalty. Guidance is partly based on current contracts in hand, and the Group derives a significant proportion of its revenue from providing services under large contracts. As a result, there can be no assurance that work in hand will be realised as revenue in any future period. There could be future risks and costs arising from any termination of contract. While the Group has no reason to believe any existing or potential contracts will be terminated, there can be no assurance that this will not occur. In addition it’s important that the Group maintains its project pipeline and win rate. Any failure by the Group to continue to win new contracts will impact its financial performance and position. Contract renewal negotiations are initiated well in advance of expiry of contracts to ensure contract renewals are concluded without interruption to services. There are also a wide range of termination clauses across the Group’s contracts depending on the size, nature and client involved (i.e., not all contracts can be terminated for convenience, and some contracts must be terminated with notice and or require the client to pay us an early termination payment or demobilisation fee).

CFO’s Review

Risk Title: Risk to cash repatriation

Risk Description: Restrictive currency controls which impact ability to repatriate cash from countries of operation.
Our Response: The Group has multiple bank accounts in multiple currencies and seeks to move cash out of restrictive or high-risk jurisdictions as soon as possible.

Risk Title: Decline in minesite production levels

Risk Description: The Group’s activity levels and results are to a certain extent dependent on production levels at clients’ mines while revenues are linked to the production volumes and not to the short-term price of the underlying commodity. A significant proportion of the Group’s revenue is derived from mines which are already in production.
Our Response: The Group focuses on ensuring execution of work to a high standard and improving its operation to increase its value proposition to clients. Application of the Group tender work procurement and approval processes maximises the likelihood of achieving margins and earnings. In addition, the Group’s diversification of service offering limits the exposure to one specific area of the business.

Risk Title: Reliance on key customers

Risk Description: The Group’s business relies on a number of individual contracts and business alliances, and derives a significant proportion of its revenue from a small number of key long-term customers and business relationships with a few organisations. In the event that any of these customers fails to pay, reduces production or scales back operations, terminates the relationship, defaults on a contract or fails to renew their contract with the Group, this may have an adverse impact on the financial performance and/or financial position of the Group.
Our Response: The Group has entered into long-term contracts with its key customers for periods between two to five years. Contract renewal negotiations are initiated well in advance of expiry of contracts to ensure contract renewals are concluded without interruption to services. The Group has historically had a strong record of completing contracts to term and securing contract extensions. The Group is selective in the contracts that it enters to allow for options to extend where possible to maximise the contract period and the return on capital. The Group focuses on ensuring execution of work to a high standard and improving its operation to increase its value proposition to clients. Application of the Group tender work procurement and approval processes maximises the likelihood of securing quality work with commensurate returns for the risks taken. The Group maintains a work portfolio diversified by geography, market, activity and client to mitigate the impact of emerging trends and market volatility. The Group has and continues to monitor projects closely and invest a significant amount of time into client relationship and service level monitoring at all levels of the business. A key part of this process is the quarterly project steering committee meetings with key client stakeholders that provide a forum for monitoring and reporting on project performance and performance indicators, contractual issues, pricing and renewal.

Risk Title: Exposure to currency fluctuations

Risk Description: The Group’s contract pricing is in US dollars. However, in certain markets the funds are received in local currency and some of the Group’s costs are also in local currency or other non-US dollar currencies. Foreign currency fluctuations and exchange rate risks between the value of the US dollar and the value of other currencies may increase the cost of the Group’s operations and could adversely affect the financial results. As a result, the Group is exposed to currency fluctuations and exchange rate risks.
Our Response: To minimise the Group’s risk, the Group tries to match the currency of operating costs with the currency of revenue. Funds are pooled centrally in the head office bank accounts to the maximum extent possible. The Group has robust processes for the repatriation of funds to the Group’s head office bank accounts from jurisdictions where exchange control regulations are in effect and this remains a key focus area. Arrangements entered into with online FX broking platforms allow greater visibility of market rates for exotic currencies as well as the major hard currency trades - allows more challenge of rates being offered by our banking partners given the limited flexibility to trade with other parties that exists under the current debt facility agreement with Standard Bank.

Risk Title: Higher levels of inflation

Risk Description: Increases in cost of goods and in labour / salary costs related to higher levels of inflation.
Our Response: The Group ensures accurately pursuing contractual rights under existing rise and fall mechanisms. It ensures to price contracts with known inflationary pressures and negotiates robust rise and fall mechanisms.

Risk Title: Risk to personal security and Company property, plant and equipment

Risk Description: Potential endangerment of people, property plant and equipment exposed to high levels of terrorism or conflict.
Our Response: Constant review of 3rd party security reports, increase in security measures and/or evacuation planning.

Risk Title: Change of control of ownership of major client

Risk Description: A change of control occurs where mining operations are leased, licenced, sold, disposed of or merged or consolidated with or into a third party. Both the mining and drilling contracts remain binding in the event of a change in ownership; however, the contracts include termination clauses for convenience (mining) and economic reasons (drilling).
Our Response: Contracts are reviewed for payment, termination or consent and transfer of services (subject to due diligence).

Risk Title: Inadequate inventory control

Risk Description: Excess inventory reduces cash in the business. Insufficient inventory increases operational delays when breakdown occurs. Excessive priority air freight, resulting from late decision making.
Our Response: Implementation of revised inventory management systems, along with movement of inventory to centralised locations where rapid deployment is possible.

Risk Title: Labour costs and availability

Risk Description: The Group is exposed to increased labour costs and retention constraints in markets where the demand for labour is strong. Changes to labour laws and regulations may limit productivity and increase costs of labour. If implemented and enforced, these types of changes to labour laws and regulations could adversely impact revenues and, if costs increase or productivity declines, operating margins.
Our Response: The Group’s labour costs are typically protected by rise and fall mechanisms within client contracts, which mitigate the impact of rising labour costs.

Risk Title: Lack of equipment availability

Risk Description: The Group has a significant fleet of equipment and has a substantial ongoing requirement for consumables, including tyres, parts and lubricants. If the Group cannot secure a reliable supply of equipment and consumables, there is a risk that its operational and financial performance may be adversely affected.
Our Response: The Group continues to focus on supplier relationships including maintaining payment terms and identifying alternative sources.

Risk Title: Deterioration in health & safety record

Risk Description: Operations are subject to various risks associated with mining including, in the case of employees, personal injury, malaria and loss of life and in the Group’s case, damage and destruction to property and equipment, release of hazardous substances into the environment and interruption or suspension of site operations due to unsafe operations. The occurrence of any of these events could adversely impact the Group’s business, financial condition, results of operations and prospects, lead to legal proceedings and damage the Group’s reputation. In particular, clients are placing an increasing focus on occupational health and safety, and a deterioration in the Group’s safety record may result in the loss of key clients.
Our Response: The senior management team, led by the CEO, provide leadership to projects on the management of these risks and actively engage with employees at all levels. The Group has implemented and continues to monitor and update a range of health and safety policies and procedures including equipment standards and standard work procedures. Employees are provided with training regarding risks associated with their employment, policies and standard work procedures. Health and Safety statistics and incident reports are monitored throughout our projects by the various management structures of the Group, including the HSE committee.Where necessary, policies and procedures are updated to reflect developments and improvement needs. The Group HSEQ Manager monitors high risk events in areas of operation and distributes warnings and guidance as required. The Group is also closely engaged with its clients to ensure workplace safety and containment measures are adhered to.

Risk Title

Risk Description

Our Response

Tender and estimating risk

Operations not able to deliver on tendered margins.

The Group goes through a rigorous process to determine a price to submit as part of the tender submission based on a bottom-up costing analysis with a mark-up. The Group makes use of its extensive historical statistics and its in-house knowledge base, combined with site visits to obtain contract specific data. Where contracts are of significant scope, independent cost estimators are appointed, with their findings verified by in-house modelling. Some contracts include pricing protections by way of mechanisms that allow for annual pricing reviews and or the application of annual CPI adjustments. Many contracts also contain mechanisms to allow the Group to end the contract with minimal notice if continued performance is financially burdensome.

Adverse movements in commodity prices

Adverse movements in commodity prices may reduce both exploration budgets and the pipeline of mine-site work in the mining sector, which in turn could reduce the level of demand for the Group’s drilling and mining services. This could have a material impact on the Group’s operating and financial performance.

The Group focuses on mine-site low-cost operations where activity is less susceptible to adverse commodity price movements. In addition, the Group is implementing a diversification strategy which is focused on developing new service offerings, developing a finance/capital strategy that provides balance sheet strength and allows for organic and inorganic growth in the business, and also diversifying through M&A opportunities.

Over exposure to gold

Gold is an important commodity contributing to the Group’s order book and tender pipeline. If the gold industry were to suffer, it would have a material adverse effect on the Group’s revenues and profitability.

The Group is in the process of implementing a diversification strategy in terms of developing new service offerings, developing a finance/capital strategy that allows for organic and inorganic growth in the business, and diversifying through M&A opportunities.

CFO’s Review
Capital Limited Annual Report 2022 34
Capital Limited Annual Report 2022 35

Risk Title

Risk Description

Our Response

Political, economic and legislative risk

The Group operates in a number of jurisdictions where the political, economic and legal systems are less predictable than in countries with more developed industrial structures. Significant changes in the political, economic or legal landscape in such countries may have a material effect on the Group’s operations in those countries. Potential impacts include restrictions on the export of currency, expropriation of assets, imposition of royalties or other taxes targeted at mining companies, and requirements for local ownership. Political instability can also result in civil unrest, industrial action and nullification of existing agreements, mining permits or leases. Any of these may adversely affect the Group’s operations or results of those operations.

The Group has invested in a number of countries thereby diversifying exposure to any single jurisdiction. The Company ensures that it has a comprehensive understanding of the overseas jurisdiction before entering it. The Group monitors political and regulatory developments in the jurisdictions it operates through a number of service providers and advisers. The Group engages specialist consultants to ensure tax compliance is maintained at the highest levels and to provide assistance where tax audits are performed by the Tax Authorities. Senior management regularly reports to the Board on any political or regulatory changes in the jurisdictions we operate in. Where significant events occur, we work closely with our clients, advisors and other stakeholders to address these events.

Reduction in values of Investments held

The Group holds investments in a portfolio of both publicly traded and private companies. The accounting value of these investments is marked to market at each reporting date and the fair value adjustment is accordingly recorded in the profit and loss account as an unrealised gain or loss. The value of the investments will change and could materially alter both the Group’s reported net assets and net profit position.

The Group holds a portfolio of investments in various companies, mitigating the risk of single company weakness. The Group’s Investment Committee actively monitors existing investments for performance and strategic alignment. New investments are required to satisfy a number of criteria with non-Executive oversight. In the event of fair value investments becoming an unrealised loss, while this would affect the company’s net assets and profitability, it would not affect going concern or cash flow.

Risk Title

Risk Description

Our Response

Key employee risk

The Group’s ability to implement a strategy of pursuing expansion opportunities is dependent on the efforts and abilities of its Executive Directors and senior managers. In addition, the Group’s operations depend, in part, upon the continued services of certain key employees. If the Group loses the services of any of its existing key personnel without timely and suitable replacements or is unable to attract and retain new personnel with suitable experience as it grows, the Group’s business, financial condition, results of operations and prospects may be materially and adversely affected. In addition, business may be lost to competitors which members of senior management may join after leaving their positions with the Group.

In addition to hiring a CEO, the Group has expanded capabilities in the areas of business development, supply chain, finance, training and health and safety and continues to do so through the recruitment of senior managers in the various fields, implementing comprehensive training programmes and providing employees with international exposure in their fields. The Group has also implemented remuneration and incentive policies that seeks to recruit suitable talent and to remunerate talent at levels commensurate with market levels.

ERP system failure

ACCPAC, the current ERP system is not monitored by Sage but by internal resources, therefore minimising downtime due to necessary maintenance is reliant on having the appropriate skills internally. Project underway to implement and transfer to new ERP system.

Access to new funding sources

Inability to access bank debt and/or inability to access equity capital from the market. Debt facilities not available in time to support ongoing growth of business.

New facilities are currently being negotiated with a number of entities to ensure continued access to debt capital. Senior management continue to engage regularly with shareholders.

Adverse impact of climate change

Risks related to the physical impacts of climate change include increased incidence and severity of extreme weather events that could disrupt site operations and impact the health and safety of our workforce.

The Group monitors weather patterns in countries/ regions of operation. Fleet deployment is planned giving consideration to those weather patterns, as is scheduling of shift work. The Group ensures force majeure clauses are included within its contracts.

CFO’s Review
Capital Limited Annual Report 2022 36
Capital Limited Annual Report 2022 37

Viability Statement

The UK Corporate Governance Code requires that the Directors assess the viability of the Group over an appropriate period of time selected by them. The Board has concluded that currently the most relevant time period for this assessment is the three-year period ending December 2025, reflecting the period covered by our strategic plan, length of major contracts and aligned with the principal financing facilities which are not due for renewal until July 2025. This assessment is carried out annually before the approval of the annual Financial Statements and informed by continuous business planning processes conducted throughout the year. The review of the Group’s viability is led by the Executive Directors and involves all relevant functions including operations, finance, treasury and risk. The Board actively participates in the annual review process by means of structured Board meetings. As part of this review, the Board considered detailed forecasts in respect of liquidity and the covenants related to the Group’s banking facilities and the principal risks of the Group.

Captial Structure

The Group closed the financial year with a net debt position of US$47.2 million (2021: US$31.9 million). Both the revolving credit facility and the asset backed loan facility have the following financial covenants: interest cover, debt-equity ratio, gross debt to EBITDA and tangible net worth (borrower). The RCF is not due for renewal until July 2025. The activities of the Group, together with the factors likely to affect its future development, performance, the financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in pages 18 to 35.

Impact of Russia-Ukraine conflict

Since the invasion of Ukraine by Russia in February 2022, the global economy has been severely affected by rising inflation owing to the increase in commodity and oil prices as a result of the war. The Board has assessed the Russia / Ukrainian conflict to date, together with potential future risks and uncertainties, considering the impact on the labour force, energy prices. Our margins are protected from inflation in a number of ways.The majority of our contracts consist of rise and fall mechanisms that pass-through inflation in many of our direct costs to the customer. In addition the vast majority of our contracts have free issue fuel and therefore the Group is not materially impacted by rises in fuel prices.

Risk Assessment and Scenario Analysis

The Directors have carried out a robust assessment of the emerging and principal risks facing the Group over the coming three years, including those that would threaten its business model, future performance, solvency or liquidity. These risks and the ways they are being managed and mitigated by a wide range of actions are summarised on pages 28 to 35.

For the purpose of assessing the Group’s viability, the Board focused its attention on the Group’s principal risks. In order to determine those risks, the Board assessed the Group-wide principal external, operational and strategic risks by undertaking consultations with Senior Management. Through this analysis, the Board also identified low probability, high loss scenarios – ‘singular events’ – with the potential magnitude to severely impact the solvency and/or liquidity of the Group. The scenarios tested considered the Group’s revenue, underlying EBITDA, cash flows and covenant ratios and included:

• A 50% decrease in rig utilisation back to historic lows throughout the period to December 2025.
• A 100% decrease in Capital Mining throughout the period to December 2025.

Under the base case as well as each scenario described above, the forecasts indicate that the Group will be able to operate within the covenants set out in the respective financing agreements while also maintaining sufficient liquidity up to December 2025.

The Directors have also evaluated the impact of non-renewal of key contracts - in such a scenario, the Group would be able to continue operating and servicing the debt without breaching its covenants by implementing several mitigating measures such as reduction in inventories and capital expenditure, renegotiation of creditor terms and decrease in dividend pay-out.

The Group’s base case, as well as individual stress tested scenarios, indicate that it would be able to settle the outstanding debt, with the expectation that capital expenditure will decrease from 2024 (down to sustaining spend only) creating sufficient liquidity to settle the remaining outstanding balances.

Conclusion

Based on the results of this analysis, the Directors believe that the Group is well placed to manage its business risks successfully as the market conditions continue to improve. The Directors have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the three-year period of their assessment.

Cautionary Statement

This Business Review, which comprises the Executive Chairman’s Statement, CEO’s Statement and CFO’s Review, has been prepared solely to provide additional information to shareholders to assess the Group’s strategies and the potential for those strategies to succeed. The Business Review contains certain forward-looking statements. These statements are made by the Directors in good faith based on the information available to them up to the time of their approval of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.

By order of the Board

Rick Robson
Chief Financial Officer
24 March 2023

Viability Statement

CFO’s Review

38 Capital Limited Annual Report 2022

Capital Limited Annual Report 2022 39

Section Capital Limited Annual Report 2022 38

Sustainability & ESG

Sustainability & ESG

Introduction from our CEO

We firmly believe that a focus on sustainability is the right thing to do and is integral to our Vision: “To be regarded as the most dynamic provider of exploration and mining services in the sector, offering comprehensive solutions that are safe, compliant and sustainable.”

The publication of our first full-scope TCFD report, after our commitment to climate change and Net Zero 2050 in our 2021 report, has set our Group on the path to determining appropriate sustainability targets and commitments that are most material to our businesses and key stakeholders. If we are not aware and do not take action to manage and mitigate against the worst impacts of climate change, we jeopardise the on-going success of our business.

At the same time, we recognise the challenges posed by climate change also create opportunity for development and innovation and we are actively investing in research and development to enable our business to capitalise on those opportunities. For us this is not environmental management or climate awareness, it is simply good business. Our Group values strive toward minimal environmental impact. We recognise this is vital to protect the natural environment in which we work and for the long-term sustainability of the Group, our clients and local communities.

40 Capital Limited Annual Report 2022

Sustainable Development Goals (SDGS)

The commodities produced by Capital’s customers are an integral part of our society and contribute to many aspects of modern life. These commodities also have important roles in emerging solutions that support a lower-carbon future and contribute to aspirations articulated in the United Nations Sustainable Development Goals (SDGs).

As a responsible mining services Group, Capital is committed to the continued progression of the Group Sustainability Framework, including the identification of select SDGs. We will work alongside our clients to contribute positively to the implementation of a number of the SDGs, which we believe will materially improve the communities in which we operate.

Corporate Governance: Sustainability

We established our Sustainability Committee in 2021, composed of voluntary Board and management members. The primary function of the committee was to identify and develop environmental, social and governance (ESG) recommendations that will inform sustainable development and help deliver on the Group’s strategy. During December 2021, the Board approved the Sustainability Committee Board Charter that set out a number of duties. The full Charter can be found at (www.capdrill.com) with a summary being:

• Review and monitor the ESG policies, standards, systems, strategies and initiatives, to ensure compliance;
• Review monthly, quarterly and annual sustainability and environmental reports;
• Monitor community and environmental responses to compliance issues and incidents and ensure appropriateness;
• Assist management in short and long-term policy development;
• Monitor identified risks and impacts related to the environmental and climate, social and communities, and governance aspects and report to the Board as appropriate;
• Monitor ESG trends, evaluate possible impact to the Group, and integrate relevant performance indicators;
• Be familiar with all the operations, their objectives and ESG performance;
• Recommend to the Board ESG aspects of acquisitions and disposals with material implications;
• Guide relationship management with local governments and communities; and
• Guide the engagement with shareholders and other stakeholders of the Company on ESG issues.

Sustainability & ESG

Our approach to Sustainability and ESG

Context, frameworks and reporting

The Group’s sustainability reporting process is informed by regulatory guidelines, frameworks, industry initiatives and codes of good practice applicable to our sector and our listing on the London Stock Exchange. We consider sustainable value creation in the context of a number of international frameworks, with Capital committing to:

• LSE Listing requirement
• Task Force on Climate-related Financial Disclosures (TCFD)
• United Nations Sustainable Development Goals (UN SDGs)
• IFRS Foundation’s Integrated Reporting Framework
• ISO 14001:2015 Environmental Management System

Sustainability & ESG

Capital Limited Annual Report 2022 41

42 Capital Limited Annual Report 2022

Capital Limited Annual Report 2022 43

Determining material matters for Capital

During 2022, a series of engagements, including facilitated discussions, with senior executives and various stakeholders were conducted to identify material matters for Capital, and to inform the sustainability reporting process. For the purposes of sustainability our definition of materiality aligns with the new GRI double materiality guidance and considers both the impact of our activities on sustainability aspects such as climate change, and the impact of those aspects on our business, both from an impact or societal perspective, as well as a financial perspective. The outcomes defined the strategic priorities and provided refinement to our existing frameworks.

Material Matters	Current themes	Capital Response
Business Conduct, ethics and compliance	Trust and transparency. Establishing and operationalizing ethical business practices. Creating marketing campaigns that are ethical and contribute to social and environmental sustainability.	Review our commitments to our Code of Conduct, Human Rights Policy and new Modern Slavery Policy. ISO 14001:2015 Environmental Management System for MSALABs.
Corporate financial performance	Innovation Delivering value to our customers. Customer satisfaction.	The Group has a budgeted allocation to innovation to position us well for future opportunities. Ramp-up production volumes where possible with a focus on MSALABs and the rollout of Chrysos PhotonAssay™ units.
Attracting, developing, rewarding and retaining employees	Diversity, inclusion and belonging. Work/life balance.	Focused initiatives on skills development and training.
Social Impacts	Ensuring all people have access to appropriate information and that a communication plan is in place to manage community expectations, and limit potential unrest.

Sustainability & ESG

Environmental commitment

Capital Limited is committed to delivering the highest standards of environmental performance across all our operations. Our Group values strive toward minimal environmental impact. We recognise this is vital to protect the natural environment in which we work and for the long-term sustainability of the Group, our clients and local communities. We as Capital Limited are committed to:

• Protecting the environment by applying proven industry practices to preventing pollution and mitigating environmental impacts.
• Continual improvement of our environmental performance with specific input from our internal innovation and technology committee, and Next Generation Fleet program.
• Complete compliance with all relevant environmental legislation and regulations and any other requirements necessary.
• Applying proven best practice to protect the environment in the absence of applicable regulations.
• Undertake transparent communication and engagement concerning our environmental performance with international and affected stakeholders.

Climate change strategy

From the sites where we operate to our boardroom, aspects pertaining to a changing climate are integrated into the majority of our strategic discussions and decision-making processes, and in particular for those related to:

• Risk management;
• Infrastructure investment, development and management;
• Research and development;
• Resource availability and efficiency;
• Mergers, acquisitions and divestments; and
• Compliance with laws and regulations.

During 2021, we worked to develop a climate change strategy for our business. The fundamental objectives of the strategy are:

• Identification and understanding of the climate change related risks and opportunities for our business, over the short, medium and long term;
• Development of steps to manage and mitigate identified negative impacts;
• Research, investigation and investment into new and existing cleaner technologies to reduce our overall carbon footprint and limit exposure to increasing regulation, stakeholder scrutiny and physical climate risks, and future proof our business against changing client demands;
• Determining our scope 1 and 2 greenhouse gas (GHG) emissions baseline and emissions intensity as well as the development of short, medium and long-term targets to improve our emissions intensity;
• Diversification of our business to different commodities, with a focus on metals and minerals crucial to decarbonisation such as copper and lithium.

In 2022 our focus shifted from strategy development to implementation. One of the key actions we took to help drive implementation of our Climate Change Strategy was to appoint a dedicated Sustainability Manager to our senior management team. Other steps taken include undertaking climate change scenario risk analysis, which is detailed later in this disclosure. We are committed to reducing our emissions to contribute to stemming the worst impact of climate change and are taking action to build a climate resilient business. Alongside these risks, we know that there are also extensive and exciting new opportunities. We are working to adjust our products and services to ensure we not only remain relevant and competitive in the contract mining services sector but continue to grow in a sustainable manner.

Tackling climate change is the defining challenge of our time. Our underlying principle is to reduce carbon going into the atmosphere and we have set out a number of pathways to achieve this. These include the ongoing diversification of our portfolio towards those metals and minerals which support a greener, cleaner, more sustainable world; reducing our energy consumption and intensity, and increased use of renewable energy. We believe that climate change and its impacts are so pervasive and risky for businesses globally that it can and should not be considered in a silo or as simply the work of a sustainability team, but rather it must be integrated into overall risk processes and overall strategic thinking and decision-making.

Governance of climate-related matters

Climate risk is managed through Capital’s enterprise risk management system as an integrated business process. This allows material climate risks to be integrated into long-term strategy development. Furthermore, through the development of climate scenario analysis long-term impacts are integrated into the risk register. Capital’s approach to the governance of climate-related aspects is consistent with the recommendations of the TCFD. We are taking climate change seriously, acknowledging both the fact that our activities are contributing to climate change and that climate change can have adverse impacts on our operations and workforce. Climate change governance needs to be driven from the Board and senior management through to the employees on the ground. Our governance structures and climate change considerations are set up to achieve this. The results from our climate scenario analysis are used to inform prioritisation of risk mitigation, our adaptation strategies, as well as identifying opportunities to increase the company’s overall resilience to a physical world that is changing and a shifting regulatory and economic landscape.

Board

The Board is ultimately responsible for the oversight over climate-related strategy, performance, risks, vulnerabilities and opportunities. The Board is assisted in this by the Sustainability Committee.

Focus areas in 2022

• Develop, review and monitor the Group’s long-term and sustainable business strategies and provide strategic direction to management and ensure that the necessary financial and human resources are in place to meet the Group’s objectives;
• Determine the nature and extent of the significant risks and conduct a review of the effectiveness of the Group’s risk management and internal control system including all material controls, financial, operational and compliance controls; and
• Assess and monitor the Group’s risk management and internal control systems to ensure their effectiveness.

Sustainability Committee

Our Board-level Sustainability Committee is responsible for overseeing our environmental policies, programmes and performance, including matters of climate change. It reports directly to the Board, and is comprised of Ms Boggs (Chair), Mr Davidson, Mr Stokes and Mr Boyton (further information about the Committee can be found in the Corporate Governance Report on page 81 of this report).

Focus areas in 2022:

• Review of ESG initiatives to ensure compliance and alignment to company and stakeholder requirements;
• Implementation of reporting standards and frameworks;
• Setting of the Group’s net-zero target by 2050;
• Integration of Climate Scenario Analysis into Risk Management Process.

Chief Executive Officer

Our CEO serves as the bridge between the Board and the management team, and is accountable at management level for the implementation of our policies and delivery of strategy, including for climate change related aspects.

Executive Leadership Team

Our Executive Leadership Team supports the Board and the CEO by developing our climate change strategy and policy for consideration and approval. It also executes the Board’s mandate by driving the implementation of strategy against key objectives and performance indicators, and our risk management plans. Members of the Executive Leadership Team (ELT) meet with the Sustainability Committee on a regular basis to review our exposure to and management of all relevant sustainability issues, including those related to the climate. The ELT is tasked with managing such risks, as well as the preparation of associated disclosures.

Focus areas in 2022:

• Development and implementation of a climate change process to formalise the assessment of progress against climate change targets on an annual basis.

Group Sustainability Manager

Recognising the growing importance of sustainability and climate change among our business and stakeholders, in 2022 we appointed a dedicated sustainability specialist to advise on and drive sustainability aspects for our business. Aspects considered by this function include our overarching sustainability strategy, water, energy and climate aspects, and our ESG reporting.

Focus areas in 2022:

• Conducting climate change scenario analysis and presenting the results to the Board;
• Improving our TCFD disclosure in line with recommendations from the Financial Conduct Authority;
• Providing strategic and timely climate education to the Board;
• Analysing options for emissions reductions and efficiencies; and
• Improving the quality of climate calculations and establishing an initial emissions target.

Technology and Innovation Steering Committee

Development and implementation of climate strategy ideas are discussed in the technology and innovation committee meetings.Some members of the ELT together with the Business Innovation Manager sit on the committee. This committee provides feedback to the rest of the leadership team to ensure progress against strategy is being monitored.

Focus areas in 2022
* Creation of a joint venture with Enerwhere, Mine Power Solutions, to roll out solar hybrid temporary power solutions across Africa.

Site level
Although we are not owners of the sites where we operate, we do need to align with the approach of our clients on their sites. We constantly review new technologies to align with client requirements and collaborate to elevate their operations through new technology implementation. We work with our client’s site teams in partnership to ensure our on-site teams are sensitised to the site or client-specific climate programmes. This collaborative relationship provides feedback to our Management Team, creating a positive loop of progress for our Group.

Summary of Task force on Climate-Related Financial Disclosures (TCFD)

Capital has made climate-related financial disclosures consistent with the TCFD recommendations as summarised below:

Pillar & Recommended disclosure	a	b	c	N/A
Governance	Compliant	Not fully compliant
Strategy
Risk Management
Metrics & Targets

Our climate change disclosure complies with the requirements of seven of the eleven recommended disclosures of the TCFD. Details of our compliance, including areas for improvement and plans to close gaps are set out in the table below.

Theme: Governance

| TCFD Recommendation | What Capital Does # b) Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks.

Scopes 1 and 2 GHG emissions are disclosed on an annual basis in the Company’s Annual Report. We are working with our supply chain to determine an accurate and representative Scope 3 footprint, which will be incorporated into our footprint and reduction strategy over the coming year. See Annual Report pages 58 to 59.

c) Describe the targets used by the organisation to manage climate related risks and opportunities and performance against targets.

Other than a commitment to Net Zero by 2050, this is an area where Capital does not yet fully comply with the recommendations of TCFD. The Group aims to set both short-term targets on an annual basis and medium-term targets which aim to reduce the Company’s carbon footprint over five-year intervals. Performance against these targets will be presented at Board level and will be included in the Company’s future reporting. See Annual Report pages 58 to 59.

Section Managing Climate Change

These newly identified risks help us better plan, adapt, and mitigate the impacts of climate change on our business and risk management processes.

• Net Zero +1.5°C: A scenario which sets out a pathway for the global energy sector to achieve net zero CO2 emissions reductions from outside the energy sector to achieve goals. Universal access to electricity and clean cooking are achieved by 2030. IEA Net Zero Energy 2050 (NZS) – for transition risks related to an ambitious, immediate and smooth climate change response.
• Announced Pledges +2.1°C: A scenario that assumes that all climate commitments made by governments around the world, including Nationally Determined Contributions (NDCs) and longer term net zero targets, as well as targets for access to electricity and clean cooking will be met in full and on time. IEA Announced Pledges (APS)- for transition risks that conform with currently announced global and national pledges and policies.
• SSP5-8.5 +4.3°C: Current CO2 emissions levels roughly double by 2050. The global economy grows quickly, this growth is fuelled by fossil fules and energy-intensive lifestyles. by 2100, the average global temperature is 4.3C higher. IPCC SSP5-8.5 – for physical risks related to a high emission scenario.

During 2021, we began to consider the business impact of climate change which has been increasingly integrated into our formal risk management process. During 2022, this was augmented during the scenario analysis work we undertook. Climate risks have been incorporated into the corporate risk register and include; weather related disruption to operations, a slow response to energy transition, and non- compliance with climate related reporting regulations. Each risk is regularly monitored as discussed by the ELT, the Sustainability Committee, and the Board in terms of its relative impact on the business; proposed mitigation strategies with progress against specific actions also regularly reviewed.

Our Scenario Analysis

Our scenario analysis followed TCFD recommendations, exploring three different scenarios and considering the material risks and opportunities identified for Capital’s activities arising from projected physical hazards, as well as global and national climate responses. Conducting climate change scenario analyses has enabled us to identify, assess, and manage our exposure to climate-related risks in our operations across Egypt, Tanzania, and several West African countries.

Environmental Commitment

Environmental Commitment
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Risk Type	Risk / Opportunity	Impact on Capital	Responses	Risk Term
Cost of carbon	Using Capital’s 2022 diesel consumption values, the cost of carbon in the The International Energy Agency (IEA) Net Zero Energy by 2050 scenario (NZS) will increase diesel-related expenses for Capital: • In the Middle East and North Africa, on average, by an additional $1.9 million per year in 2030 and $14.0 million per year in 2050, in the NZS scenario; • In West Africa, on average, by an additional $1.3 million per year in 2030 and $9.4 million per year in 2050; and • In East Africa, on average, by an additional $360,000 per year in 2030 and $2.6 million per year in 2050.	Continue to actively consider expanding emission reduction technologies for all equipment (fuel switching, EVs and inspecting processes to identify efficiency improvements). Consider offsetting hard to abate emissions where reduction technologies are currently not a viable alternative.	Long Term
Incentives to reduce GHG emissions	Incentives that encourage the development and deployment of various GHG emission reduction activities such as research and development of alternative fuels and waste minimisation.	Cost optimisation exercise between emission reduction opportunities and off sets	Medium Term
Technology	Improvements in the manufacture of alternative fuels	Increased availability and reduction in the cost of using alternative fuels, such as hydrogen.	Initiate piloting of these solutions to determine benefits.	Medium Term
	Retrofitting the existing vehicle fleet to run on natural gas will increase capital costs in the short term but could save money in the medium to long term due to reduced operating costs, especially when taking into account the potential cost of carbon.	Consider optimized use of electrical equipment and biofuels will lower emissions and operating costs, leading to a competitive advantage over companies that do not.	Short to Medium Term
	Significant advances in EV technologies	Equipment currently in use will either need to be upgraded or be replaced during the term of operational contracts. Furthermore, the resale value of fossil fuel dependent assets will be much lower than in the current market.	Plan now for the transition to alternative fuel/energy sources in the future.	Short to Medium Term
Reputation /Market	Removal from preferred supplier lists – not awarded contracts	If Capital is to remain a GHG emission intensive company, this may hinder it from being a preferred service provider.	Implement GHG emission reduction initiatives.	Short Term
Diversify commodity exposure	There will be an increased demand for a wider variety of commodities. Capital can use this to diversify the commodities for which it provides services.	Seek more drilling and mining contracts in commodities critical to the clean energy transition, such as graphite. Expand Capital’s geochemical laboratory services for a wider range of commodities.	Short to Medium Term

Key Impacts and Responses to Climate Risks

At Capital, we regard climate change as both a company and global concern. We recognise that the impacts of climate change, including shifts in temperature, precipitation, and more frequent severe weather events, could affect our clients and, by extension, our business in a range of possible ways:

• The stability and effectiveness of infrastructure and equipment.
• Environmental protection requirements and client demands such as demand for green or cleaner fleets.
• Regulatory changes such as more widespread carbon tax regimes.
• The stability and cost of energy and water supplies.

Key sensitivities and opportunities to the business were identified for each scenario to assist us in planning for resilience and preparedness for possible future events. Identified negative impacts (orange), the opportunities (blue) and the suggested responses are set out in the table below.

Environmental Commitment
Environmental Commitment
Risks Opportunities
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Risk Type	Risk / Opportunity	Impact on Capital	Responses	Risk Term
Physical (Acute and Chronic)	Increased extreme heat incidents	Adverse health impacts and potential injury/death of workers. Heat stress could risk 2.2% of Capital’s annual revenue. Operating certain machinery when ambient temperatures regularly exceed 40°C degrees, with peak temperatures approaching 50°C can lead to a 7% increase in fuel consumption. At an average temperature increase of about 2°C, this increases annual fuel costs by $65,000 per year. # Environmental Commitment

Through the scenario analysis, it was identified that the severity of physical risks relating to temperature and rainfall varied depending on geographic location. This is highlighted in the table below to provide further detail.

Risk Period	Trend	Impact	Northeast Africa	West Africa	East Africa
Increased Heat	Excessive heat creates unsafe working conditions impacting worker health and safety. Examples include, but are not limited to, fatigue, dehydration, heat stroke, respiratory and cardiovascular disorders, increased hospital admissions and increased absenteeism.	Short Term	Excessive heat can lead to reduced productivity, increased safety incidents and reduced revenue.
	Increased energy consumption for cooling of equipment, vehicles, offices and ventilation (underground portion of the operations).	Long Term
	Infrastructure disruptions due to extreme heat events can adversely impact water and power supply and transportation. These disruptions can lead to productivity losses or decreases in operational efficiency	Long Term
Increased variability of rainfall	Increased flooding leading to operational and supply chain disruptions as well as increased risks for worker health and safety. Impacts on Capital’s clients such as flooding of pits, underground and washing away water supply dams.	Medium Term
	Increased droughts leading to declining availability of potable and industrial water. Increased operational costs and potential delays in the up-stream value chain, due to increased water prices, water shortages or product delivery delays.	Long Term
	Increased cyclonic impacts, specifically related to flooding and/or supply chains.	Long Term
	Increased wildfires as a result of increased heat and increased time between rainfall events (variability).	Medium Term

Environmental Commitment

Capital Limited Annual Report 2022

In line with the TCFD, Capital is in the process of collating and analysing scope 3 emissions from both upstream and downstream of our operations, focusing on our most material scope 3 categories.

GHG Emissions

We began to track our carbon footprint in terms of our scope 1 (direct) and scope 2 (indirect) emissions in alignment with the GHG Protocol Corporate Accounting methodology. We currently use the US Environmental Protection Agency’s (EPA) Emission Factors (Efs) for emission calculations, along with the IPCC AR6 Global Warming Potential (GWP) factors. We acknowledge that US EPA Efs are not as representative as country specific Efs, our current countries of operation have limited factors available. As part of our ongoing improvement in our footprint calculations, these factors will be reviewed annually to ensure the most representative data is utilised. For a number of our operations fuel usage is not currently recorded, and as such we rely on fuel consumption estimates based on hours of operation for equipment.

The following table sets out the relative contribution of emissions based on consumption estimates:

Emission Source	% Emissions from Estimated Consumption
Scope 1 – Stationary	82%
Scope 1 – Mobile	33%
Scope 2	0%
Total Scope 1 and 2	38%

We have engaged with our clients and suppliers to collect actual fuel consumption information to improve accuracy and robustness of emission calculations, however this is still an ongoing process, which will continue into 2023. Due to this reliance on consumption estimates and emission factors, we have engaged with an independent consulting firm, Digby Wells, to review our methodology and estimates to ensure correctness.

Our emissions factor calculations use the following Global Warming Potentials (GWP’s):

GHG	GWP	Reference
CO₂	1	IPCC AR6 Working Group 1 – Chapter 7 – GWP-100
CH₄	29.8	IPCC AR6 Working Group 1 – Chapter 7 – GWP-100
N₂O	273	IPCC AR6 Working Group 1 – Chapter 7 – GWP-100
CO₂e	1	IPCC AR6 Working Group 1 – Chapter 7 – GWP-100

As shown in the graphic below our total scope 1 and 2 emissions for 2022 were 135,665 tCO₂e for the year. This is a 60% increase compared to our emissions for 2021 (84,950 tCO₂e). The bulk of our emissions flow from mobile diesel consumption, that is the diesel used in our trucks, fuel tankers and other vehicles used by our business on site. Because of this and the growth of our business during the year this increase was anticipated.

GHG Emissions (tCO₂-e)	2022	2021
Scope 1	134,843	83,727
Scope 2	822	1,223
Total Emissions (Scope 1 and 2)	135,665	84,950

Emission Reduction and Decarbonisation Pathways

With 90% of our Scope 1 emissions resulting from our drilling and mobile fleet, we are working closely with our equipment suppliers to identify new technologies which will allow us to reduce our dependency on fossil fuels. Achieving net zero in the short to medium term is not feasible for Capital for two primary reasons – current technologies adopted by our equipment manufacturers cannot as yet achieve net zero and our customers are unlikely to pay a premium for zero carbon services. The cost of decarbonisation would therefore have to be borne by Capital and would not be economically viable until carbon markets adjust. As we better understand the technological advances made by our suppliers and the accessibility of alternative fuels, our emission goal will be revised and we will set further official reduction targets.

Our decarbonisation pathway therefore requires innovation and our long-term commitment to achieving net zero. To meet this the following strategies have been put in place to date.

Short term

Due to the nature of our business where a large proportion of our carbon emissions are as a result of fossil fuel use in our equipment, and the relatively slower progress toward cost-effective and reliable electric / alternative fuel haul trucks and drill rigs, we anticipate any growth in our business to result in an increase – at least in the short term – in overall emissions. A better focus for us in the short term is to ensure that we are as fuel-efficient as possible with our current fleet. We continually investigate opportunities to reduce the diesel needs of our machines focussing on areas where technology is already proven, such as:

• Continued installation of Chrysos PhotonAssay™ technology within our laboratory business, which not only reduces our carbon footprint, but also eliminates the need for lead in the process;
• Continued fleet replacement programme involving the purchase of electric drill rigs;
• Continued replacement of steel trays on our dump trucks with lighter aluminium trays to increase load capacity and reduce the number of journeys required each day;
• Through our Mine Power Solutions JV, development and installation of solar hybrid temporary power solutions for both mine sites and exploration camps;
• Purchase and use of electric vehicles as field support vehicles;
• Installation of solar lighting systems to eliminate the need for small scale diesel generators to be utilised on site;
• Installation of Atmospheric Water Generators (AWG) to reduce reliance on water transportation to remote sites; and
• Integrate and retrofit technology to drive enhanced fuel efficiency.

There is a trend with our customers for the need to reduce emissions and environmental impacts and we believe that by transitioning quicker than our peers in the short-term, Capital’s services will be seen as a more attractive option.

Medium Term

In the medium term (3-10 years) we believe that our heavy vehicle manufacturers will being to commercialise the electric fleets that they are currently developing and testing. The incorporation of electric drill rigs and mine haul vehicles will have the largest impact on our carbon footprint, as currently they account for almost 90% of our emissions. In anticipation of this we have begun the process of preparing for the rollout of our next generation fleet, through our eMining strategy.

As the rollout of the next generation fleet will be done over a number of years, Capital is identifying and investing in a number of offset programmes, in order to further reduce our footprint. This approach allows for the reduction in emissions, as we manage fleet replacement, taking age of units, cost etc into consideration. As the eMining Strategy accounts for a large proportion of our Scope 1 Mobile emissions, our aim is to achieve a 50% reduction in emissions from the 2022 baseline over this period. We are however cognisant of the limited influence we play in regard to our OEM equipment suppliers, and this target is therefore dependent on their buy-in and aligned with their commitments.

Long Term

In the long term (greater than 10 years) we will continue to:

• Engage with our suppliers to ensure the availability of feasible decarbonisation technologies relevant to our operations;
• Engage with our suppliers and partners to get buy-in and ensure alignment with their commitments, provided these are in line with our overall level of ambition;
• Collaborate across our value chains to determine the most appropriate role we can play in contributing to net zero scope 3 emissions;
• Offsetting ‘hard to abate emissions where necessary; and
• Update our 2050 target in line with updates should specific countries of operation require.

Biodiversity

We are considerate of the land and ecosystems in which we operate and we continually seek to minimise our impact.We seek to adopt nature-based solutions, managing a range of interconnected issues - from climate and biodiversity to social impact and health, to predict environmental impacts and help us adjust operational planning accordingly. Our environmental work involves protecting the biodiversity of areas in which we operate, particularly during exploration drilling. Biodiversity action plans and biodiversity management programmes are in place at all operations through studies conducted as part of local environmental authorisation requirements for mining permits. These are pivotal environmental management instruments that include commitments to conserve protected areas such as wetlands, zones of endemism, archaeological and heritage sites, as well as protected and endangered species identified prior to operations being undertaken at site. Biodiversity training is provided to employees and contractors as part of their induction process to raise awareness of sensitive and endangered species around our operations.

Environmental Commitment

Section 60 Capital Limited Annual Report 2022

Environmental commitment

Social Responsibility

Community management is a key enabler of Capital’s global success. Whilst the organisation continues to grow, the Group prides itself on having a unique culture which adapts to local laws, customs and way of life, whilst adopting centrally held processes, policies and systems which support the success of our local operations. We aim to be an organisation which meets the highest standards of ethical practices and behaviours in everything we do. To do this, we promise to commit to four key pillars of Community Management:

• Employment & People Management
• Corporate Social Responsibility (CSR)
• Code of Business Conduct and Ethical Work Practices
• Health, Safety and Environment

We will achieve our objectives through a security, community and crisis response management framework which will:

• Be guided by ISO 26000 Social Responsibility and ISO 27000 Information Security;
• Comply with the laws and regulations of the countries we operate in;
• Assess security risks and establish controls to ensure threats are reduced to as low as reasonably possible and uphold the Voluntary Principles on Security and Human Rights;
• Establish ethical networks and relationships with local authorities, community groups and professional crisis support organizations;
• Manage performance on projects through setting and reviewing security incidence targets, allocate resources, develop community engagement programs to continually improve our performance and relationships with community, local supplier and government representatives;
• Through the risk management process, identify risks and plan/train for a security threat, crisis and business continuity scenarios;
• Ensure remote mining sites and personnel are appropriately secured to meet an assessed security threat level;
• Engage reputable asset protection firms with internationally recognized security management systems;
• Hire local employees and develop their skills to fit our business needs;
• Prioritize sourcing commercially sensible materials and supplies locally;
• Support livelihood development programs that directly impact the health, welfare and lifestyle of indigenous workers and their community; and
• Work with clients to resolve third party grievances raised by virtue of our operations.

Corporate social responsibility

Community development is a commitment deeply embedded across the Capital Group and has been a priority since the Group was established and continues to be a significant aspect of Capital’s philosophy as the organisation continues its growth. Community, for us, is in everything we do and extends across our global team. Specifically, it’s the communities we work within which are the stakeholders we hope to benefit by our work.

Through our Community Management Processes, we identify programmes and events where sponsorship is required, or where Capital is specifically approached for such sponsorship. Where funding is required, a dedicated committee reviews the request, to ensure all aspects of Capital’s Code of Business Conduct and Ethical work practices are adhered to. Over the past years, this sponsorship has included local sports teams, international women’s day events, scholarships, and fundraising events. The graph below shows Capital’s CSR spend over the years.

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Spend (US$)	2021	2022
	250,000
	200,000
	150,000
	100,000
	50,000
	0
	2021	2022

CASE STUDIES

Alexandra Rugby Club

We have continued our sponsorship of the Alexandria Rugby Club (“Alexandra”) in Egypt for the 22/23 season. The team ended the 20/21 season as champions of the 15s and 7s, after many disruptions caused by COVID, with a victory over long-time rival Cairo by the 15s with a score of 50:0. The 15s maintained this momentum for the first game of the new season, again playing Cairo and winning 46:26. The second game against the AUC wolves was highly competitive, and the Wolves came out as winners with a close score of 17:20. Alexandra played ten young, new players during the match, providing them with excellent experience and therefore this was a result to be proud of. We are proud to continue supporting such a progressive club that develops young players and provides opportunities to participate in rugby at an elite level and wish the team the best of luck for the remainder of the season.

Richard Osman Scholarship

The Richard Osman Memorial Fund was established in 2018 in memory of our friend, colleague and passionate geologist. The scholarship is available to students pursuing a Masters in mining and geology at the University of Exeter, Camborne School of Mines. The grant provides full financial aid to two outstanding students each year. This fund has been founded by Richard’s former employer, Centamin, with a consortium of other benefactors including Altus Strategies, Ariana and Capital also contributing. Below is a selection of initiatives which receive ongoing support from Capital.

Stakeholder Consultation

We recognise our local communities as critical partners when it comes to the viability of our operations, providing us with a talented workforce and our social licence to operate. Ensuring the communities and countries where we operate benefit from our presence is core value for Capital. One of our core values is to develop respectful, transparent, trust-based, and mutually beneficial partnerships with the communities closest to our operations. To foster such relationships with the communities nearest our operation, we have a dedicated Community Officer and have open channels of communication with our local and national governmental departments. To emphasise continuous improvement towards stronger community relations, we have internally identified short- and medium-term goals and are rolling out a new Community Management Process across all operations in 2023.

Human Resources

Number and rate of employment

Total headcount within the Group has rapidly grown from 855 in January 2018 to 2,585 in January 2023. At its peak in June 2022, Capital employed 2,706, the most employed by the Group at any one time. The nationalisation rate has also improved in the last five years, with expatriate employees making up for 23% in January 2018 of the total workforce, with this number now being 8.9% in January 2023 (across all entities within the Group).

Diversity and Inclusion

As the mining industry continues to develop and Capital also grows, the organisation acknowledges the need to tackle various social challenges, including diversity and inclusion. In addition, the ageing demographic of the industry further helps drive the focus on employee populations and how to prepare for the next generation of employee, with nearly half the technically skilled workforce in the industry due to retire in the next decade (PWC, 2015). Capital’s inclusion of various cultures, ethnicities and nationalities across its operations is demonstrated by a healthy nationalisation percentage of 91.1% in January 2023, up from 88% in January 2022 and 75% in 2013. There is an acknowledgement that Capital as a group must do more to attract female talent into operational and site-based roles, in accordance with country specific labour laws and practices. Capital has made progress in the recruitment of female operators in Mali, bringing onboard a trainee in the maintenance division at the Bamako yard, as well as supporting the introduction of female sanitary facilities at Sukari, a first step in welcoming female employees onto the site and to take up operational roles. The Female population is strongly represented in the support function departments, accounting for 44% of employees across Finance, HR, IT and Enterprise Resource Planning (ERP) teams.

Gender equality

Whilst the Group continues to take positive steps to increase the representation of female employees across the Group, Capital acknowledges more focus needs to be placed on the issue of Gender Equality within business and the societies we work in. Capital takes a zero-tolerance approach to any and all forms of discrimination and harassment, which is reaffirmed in various Company training materials, handbooks and policies for employees and line managers. Capital is committed to ensuring each employee can carry out their work in a safe and respectful environment, which treats people with dignity and allows their voices to be heard.We encourage line managers to champion equality and are proud of the diversity of our support functions (44.4% female), middle management and having female representation at board level, also. We understand how we are a key figure in the drive to change industry wide practices and work in collaboration with various stakeholders to benefit equality, particularly in areas which have significant under-representation, such as in operational roles, in which less than 1% of site positions are held by female employees. The work Capital carried out in collaboration with our client and other partners at Sukari Gold Mine in Egypt paved the way for a landmark multi-day site visit of female employees from our Head Office in Mauritius, demonstrating the progress of the site in making it more accessible for females to be welcomed on site in the same way their male colleagues would expect. In addition, 2023 marked the first year the Group engaged in International Women’s Day campaigns across our sites and office locations, with management commitment to ensuring this date to embrace equity becomes a key event in our Group calendar moving forward. These small steps are examples of how we can take positive action with our relevant partners to improve the structures and processes in place which have perhaps traditionally been a barrier to female talent entering the industry.

Capital Limited Annual Report 2022

People Process Development

Whilst Capital will always adhere to the local labour laws and requirements of the various jurisdictions we work in, we understand the value which can be added in standardising core processes across the Group and its various operations. Standardised procedures in core processes of the employee life cycle ensure consistency in practice, such as recruitment, onboarding, employee development, performance management and disciplinary action. In addition, learning from Capital’s experiences operating across the globe means continuous improvements to processes, adapting and absorbing the best practices from each project, which enable Capital to be compliant with the legal and ethical requirements of the host country, and have a standard above this adding value to the organisation and experiences of the local workforce.

Pay equity and Wage Level

Capital adheres to local salary structures as per the national labour office requirements or collective agreements as outlined by local legislation or labour bodies. All of Capital subsidiaries pay levels are well above the minimum wage requirement of operating country regulations.

Training

Capital has a commitment to training and development across all locations. The training matrix for each position in operations (and operational support function on site) ensures employees attend appropriate trainings for their role and equip them with skills and knowledge which will prepare them for their duties. In addition to mandatory skills, there is an opportunity for key talent identified by country specific senior management to progress on a leadership programme coined by Capital as the ‘Walk in My Shoes Program’. The training program provides further training and development opportunities, above the employees’ current job role. In addition, a mentor – a senior leader within the organisation, is assigned to the identified employee. 34 national employees have been identified as high potential employees and the future leaders of Capital, across functions. These individuals are currently undergoing the additional trainings to propel them forward into their next position, which may be a position within their home location or as an expatriate in a host country. In 2022, Capital invested US$0.1 million in external training, this was in addition to the internal training programs that are delivered as part of the core competency matrix to meet Group, national and client training requirements. External vendors provided a range of training, from health and safety, drilling operations, firefighting, incident investigations and driver training, across all project locations and upskilling 200+ operational employees. In 2023, Capital will be launching an online Learning Management System (LMS), which will be accessible to all employees across the group. The LMS will enable training and knowledge content to be made available 365 days a year and will include learning packages which extend beyond the core requirements of an individuals’ job role. The LMS will help to drive the upskilling of all employees and continue our organisational development, succession and nationalisation efforts.

Internationally accredited training and apprenticeship programs

At Capital, we have a long history of providing professional development and training for our national employees. To facilitate an improvement in the standards of training available to our team across Africa, we have acquired a Tanzanian- based technical training entity, International Apprenticeship and Competency Academy Limited (IACA). IACA will offer apprenticeship programs and accreditation for Levels 1-3 Technical Trades qualifications at its network of technical training centres. Courses offered by IACA will be accredited by the Engineering, Construction, Industry Training Board (ECITB) UK under its partnership with Safety Works. This will provide graduates with an internationally recognised trade skill and international standard competency levels, allowing Tanzanians to participate in significantly broader employment opportunities both within Tanzania and abroad.

Human Resources

Child labour and fair labour practices

We respect the rights to freedom of association and collective bargaining, and our commitment to this is codified in our Human Rights policy. We also embody the ideals of fair labour practices, treating our people with dignity, care, and respect whilst providing a workplace that is conducive to our workforce’s wellbeing. We have fostered open communication with our employees and unions alike, which has resulted in no strike action or lockouts at any of our operations. We hope to address any concerns our employees may have openly and productively and continue to reduce any risk of strike action in the long term. Capital is committed to ensuring that all employees, as well as suppliers, are above legal age to be employed. Where legal age, or employment by parental consent is below the age of 18, a minimum age for all employees will be 18 years of age.

Enhancing Corporate Governance

Continuing to Enhance Governance

During 2022, the Sustainability Committee reviewed and continued to strengthen the Group’s governance framework. The Sustainability Committee oversees various Group policies, including:

Modern slavery

At Capital, we are committed to doing business responsibly and we take a zero-tolerance approach to all forms of modern slavery in our business and supply chain. In accordance with section 54(1) of the UK Modern Slavery Act, the statement describes the steps that we have taken to date to identify and mitigate the risk of modern slavery occurring in any part of our business or supply chain. We recognise that we operate in countries where there is a perceived medium to high risk of modern slavery (e.g. Côte d’Ivoire, Egypt, Guinea, Kenya, Mauritania, Nigeria, Saudi Arabia and Tanzania) and that the mining industry, in particular, in Africa, is prone to modern slavery issues. As part of our initiative to identify and mitigate risk, we have put the following due diligence procedures in place within our organisation:

• Due diligence questionnaires for potential suppliers; and
• Inclusion of robust anti-modern slavery clauses in all supply contracts and any other agreements with suppliers, vendors and others.

We also have in place systems to:

• Identify and assess potential risk areas in our supply chains;
• Mitigate the risk of slavery and human trafficking occurring in our supply chains;
• Investigating potential breaches to help ensure compliance with our anti-slavery and associated policies; and
• Protect whistle blowers.

We continue to train our workforce on mitigating risks of modern slavery in supply chains. We expect the same high standards from all of our contractors, suppliers and other business partners, and as part of our contracting processes. We expect that our suppliers will hold their own suppliers to the same high standards. Our Modern Slavery Statement for the financial year ending 2022 can be found on our website at www.capdrill.com

Anti-bribery and corruption policy

We are committed to conducting all our business activities and those of our subsidiaries in an honest and ethical manner. We have a zero-tolerance approach to bribery and corruption. We are committed to acting professionally, fairly and with integrity in all our business dealings and relationships wherever we operate and implementing and enforcing effective systems to counter bribery and corruption. Our policy can be found in the Corporate Governance section of our website.

Human rights policy

We are committed to respecting human rights and support the Universal Declaration of Human Rights and the United Nations’ Guiding Principles on Business and Human Rights. We recognise and support the International Labour Organization’s core labour standards. We strive to ensure that the rights of every individual within our workforce, and every individual or community with whom we interact, are upheld and respected. We recognise that in many situations economic development and environmental responsibility are fundamental to the realisation of rights and the importance of working, where appropriate and feasible, in partnership with governments, civil society and other businesses.# Ethical Behaviour

A copy of our policy can be found in the Corporate Governance section of our website.

Other policies overseen by the Sustainability Committee

Additional policies with input from the Sustainability Committee (and where appropriate, the HSSE Committee) include policies on Safety, Health and Wellbeing, Workforce Diversity, Social Responsibility and Environmental. These policies can be found in the Corporate Governance section of our website.

68 Capital Limited Annual Report 2022 Capital Limited Annual Report 2022 69

Ethical behaviour

Capital strives to be recognised for the strength and commitment from our employees to live our Code of Business Conduct. We acknowledge that winning and delivering successful projects is dependent on the way we behave. Our Code ensures all personnel are informed of and agree to the minimum standard of social behaviour and conduct expected of them when working as, or with a Capital Limited employee. The Company aims to foster a long-term harmonious working relationship with Employees, Sub-Contractors, Governments, Suppliers and Clients. We believe demonstrating integrity, fairness and transparency in our transactions fosters trust and protects the reputation of our employees and the Company. We are committed to doing business in an ethical manner. The Board regularly monitors and seeks to improve our corporate governance practices through evaluation of regulatory developments with respect to corporate governance and the transparency of public company disclosure. We have in place relevant policies and standards, including our Business Conduct (with separate guidelines to the policy) which are the foundation of our internal governance. They provide clear guidance on the behaviour employees, and those engaged in activities on our behalf, must demonstrate at all times in their dealings with stakeholders. This includes behaving ethically, acting with integrity and transparency, respecting human rights and complying with applicable laws and regulations. We believe demonstrating integrity, fairness and transparency in our transactions fosters trust and protects the reputation of our employees and the Company.

69 Capital Limited Annual Report 2022

Health and Safety

Continuing to Enhance Governance

70 Capital Limited Annual Report 2022 Capital Limited Annual Report 2022 71

Health and Safety

The health and safety of our employees is always our number one priority. Our approach and commitment to safety and operating responsibly aims to eliminate the risks and potential hazards both within the business and in the various regions where we operate.

Safety performance

Our safety performance remains world class with the Group remaining Loss Time Injury (LTI) free across seventeen sites through 2022, seven of which have remained LTI free more than three years:

Date	Country	Site	Milestone
13-Dec-22	Mali	Goulamina-Firefinch	1 Year LTI Free
5-Dec-22	Guinea	PDI	2 Year LTI Free
30-Nov-22	Tanzania	Tembo Nickel	1 Year LTI Free
29-Nov-22	Saudi	Jabal Sayid	3 Year LTI Free
16-Sep-22	Tanzania	Bulyanhulu	1 Year LTI Free
16-Aug-22	Egypt	El Sid	1 Year LTI Free
26-Jul-22	Mali	Morila-Firefinch	1 Year LTI Free
29-Jun-22	Mali	Syama	6 Years LTI Free
4-Mar-22	Tanzania	North Mara	6 Years LTI Free
26-Mar-22	Tanzania	Geita	5 years LTI Free
17-Mar-22	Mauritania	Tasiast	1-year LTI Free
10-Feb-22	Mali	Bamako	4 years LTI Free
13-Jan-22	Tanzania	Mwanza	14 Years LTI Free
31-Jan-22	Mali	Sadiola	1 Year LTI Free
8-Jan-22	IVC	Bonikro	2 Years LTI Free
31-Jan-22	IVC	Perseus	1 Year LTI Free
1-Jan-22	Mali	Hummingbird	4 Years LTI Free

The Group also achieved a Total Recordable Injury Frequency Rate (TRIFR) of 1.23 for 2022. This result is outstanding given an ncrease of c.2.5 million working hours, an 10% increased headcount, 230 new employees in 2022.

Health and Safety

Health, safety and environment (HSE) management system

We apply ISO 45001 and ISO 9001 standards to reduce risks to as low as reasonably possible. This includes applying new technology and the hierarchy of controls to eliminate risk and creating management plans and safe (HS&Q) work procedures to control risks and hazards  associated with work being performed.

Health and wellbeing policy

We are committed to protecting the health, safety and wellbeing of our employees, host communities, suppliers, business partners and visitors. All Directors, employees and any third- party workers, sub-contractors, business partners or visitors to our sites have a duty of care to take reasonable care of their own health, safety and wellbeing and that of others who may be affected  by their actions. We are committed to promoting wellbeing and healthy lifestyles through education on fatigue risk management and fitness and nutrition. Our Health, Safety and Wellbeing Policy can be found in the corporate governance section of our website.

	2018	2019	2020	2021	2022
TRIFR	10.6m	0.70	0.77	0.98	1.23
Work Hours KPI	1.5	0.45	4m	4.30m	5.17m
KPI					8.19m

72 Capital Limited Annual Report 2022 Capital Limited Annual Report 2022 73Capital Limited Annual Report 2022 72

Health and Safety

Governance

Board of Directors

Jamie Boyton

Executive Chairman

Jamie Boyton is Chairman of the Company, having been appointed in January 2009. In his role as Chairman, he is responsible for overseeing the Company’s strategic and business development, which includes advising on capital markets requirements and strategic growth opportunities. He was previously an Executive Director at Macquarie Bank, where he was the Head of Asian Equity Syndication and Corporate Broking, based in Hong Kong. Jamie has a Bachelor of Commerce (Accounting and Finance) degree from the University of Western Australia.

Peter Stokes

Chief Executive Officer

Peter is Chief Executive Officer and an Executive  Director, having been appointed in October 2022. Peter is responsible for leading the operational management of the business along with the development and implementation of strategy, as the Company enters the next chapter of its development, growing rapidly across all its key pillars. Peter is a senior executive leader with more than 25 years’ experience across the resources and logistics sectors. His expertise includes managing large, complex multi-national organisations, delivering company-wide transformation and turnaround, business development, operational management and strategic planning. Most recently Peter held the role of President Global Logistics for Toll Group, a key operational role for one of the largest logistics and transport businesses in Asia. Prior to this, he was CEO for Barminco Limited, an international leader in mechanised hard-rock underground mining. He has also held executive management roles for Linfox and Accenture, where he focussed on the resources sectors. Peter holds an Advanced Management Program qualification from Harvard  Business School (Boston) together with an MBA (Bond University, Queensland), MAppSc (WA School of Mines) and BSc (UWA, Western Australia).

The Group’s Executive and Non-Executive Directors bring a broad range of business, commercial and other relevant experience to the Board.

74 Capital Limited Annual Report 2022 Capital Limited Annual Report 2022 75

Board of Directors

Brian Rudd

Executive Director

Brian Rudd is a founder of the Company and an Executive Director, with a focus on business development and client relations. He was appointed as a Director in May 2005. As a founder of the Company, Brian has been instrumental in the successful establishment and development of the Company since 2005. Brian has over 37 years of experience in the mining industry in both Australia and Africa. Before establishing the Company, Brian held various senior positions for private and listed drilling companies in Australia and Africa. Brian is a Non-executive Director of Hardy Metals and an adviser to Minexia.

David Abery

Senior Independent Non-Executive Directorr

David Abery is the Senior Independent Non- Executive Director, being appointed in January 2018. David joined the Company in October 2017 when he was appointed as an Independent Non-Executive Director and as Chairman of the Audit Committee. David has over 15 years’ experience as a Finance Director of London quoted companies, and over 20 years’ experience in senior finance and general management  roles. He has extensive experience of financial,  commercial and strategic matters in African and UK corporate environments at both board and operational level, as well as experience of corporate governance, regulatory and investor relations best practice. David has a BA (Hons) in Finance and Accountancy and is a Chartered Accountant (ICAEW).

Alexander Davidson

Independent Non-Executive Director

Alex Davidson is an Independent Non-Executive Director and was appointed in May 2010. He has over 41 years’ experience in designing, implementing and managing gold and base metal exploration and acquisition programmes throughout the world. Alex was Barrick Gold Corporation’s Executive Vice President, Exploration and Corporate Development with responsibility for its international exploration programmes and Barrick’s corporate development activities. Alex is a director of a number of London and Toronto listed companies, including Yamana Gold and Americas Gold & Silver. He has a B.Sc. and M.Sc. in Economic Geology from McGill University. It was recently announced that Alex has become a 2023 Canadian Mining Hall of Fame Inductee, recognising his inspiring achievements and visionary leadership in elevating the stature of Canadian mining.

Catherine (Cassie) Boggs

Independent Non-Executive Director

Catherine (Cassie) Boggs is an Independent Non-Executive Director and was appointed in September 2021. She has over 39 years’ experience in General Counsel and senior leadership roles for companies in the mining sector.Previously, she spent eight years with renowned global mining investment firm, Resource Capital Funds, in the role of Partner, Vice President and General Counsel. Cassie also held the role of Senior Vice President, Corporate Development for Barrick Gold Corporation. During this time, she served as General Counsel to its LSE-listed subsidiary, African Barrick Gold and as Regional President of its African Business Unit. She was also an International Partner for global law firm Baker McKenzie, also holding the role of the Head of Global Mining Group with the company. Cassie is currently Chair of multi-billion dollar company, Hecla Mining Company following her appointment to the Board as an Independent Director in 2017.

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Capital Limited Annual Report 2022 77

Board of Directors

Michael Rawlinson

Independent Non-Executive Director

Michael Rawlinson is a Non-Executive Director and was appointed in August 2018. He is a former investment banker with over 27 years’ of experience focused on the mining and metals sector. He was previously Global Co-Head of Mining and Metals at Barclays investment bank having joined from the boutique investment bank, Liberum Capital - a business he helped found in 2007. He has experience as both a corporate financier and research analyst covering the mining sector and has extensive capital markets experience having worked on IPOs and follow-on offerings for a number of companies. He is also Senior Independent Non-Executive Director at Hochschild Mining PLC, Chairman of Adriatic Metals PLC and is a Non-Executive Director of Andrada Mining Limited.

Corporate Governance Report

Capital Limited recognises that a continual commitment to the highest standards of corporate governance, ethics and integrity is essential in delivering sustainable success for our stakeholders. Strong corporate governance is core to our culture, which ultimately benefits the long-term interests of all of our stakeholders.

In line with our commitment to maintaining best practices of corporate governance, the Board confirms that for the year ended 31 December 2022 Capital Limited applied the principles and complied with all of the provisions of the UK Corporate Governance Code issued by the Financial Reporting Council in July 2018 (the “2018 Code”), save as disclosed in this Corporate Governance report.

It should also be noted that Capital Limited falls outside the FTSE 350 Share Index and is therefore a “smaller listed company” for the purposes of the 2018 Code. The 2018 Code is available at www.frc.org.uk.

Details of the Group’s corporate governance policies and procedures (including the charters of each of its corporate governance committees) can be found on http://www.capdrill.com/investors/corporate-governance.

Statement of compliance with the 2018 Code

The 2018 Code places greater emphasis on relationships between companies, shareholders and stakeholders. It also promotes the importance of establishing a corporate culture that is aligned with the company purpose, business strategy, promotes integrity and values diversity.

It is the intention of Capital Limited to comply as closely as possible with the 2018 Code as a smaller quoted company, in order to facilitate the most effective balance between entrepreneurial and prudent management with the ultimate strategy of delivering long-term value to all the Group’s stakeholders.

As well as outlining our corporate governance structures in this section of the Annual Report, we also explain where and why the Company does not apply the provisions of the 2018 Code and the alternative procedures in place that achieve the same outcome.

The Company has identified compliance shortfalls and provided mitigating/alternative procedures for Provision 2 (explanation of the Company’s approach to investing in and rewarding its workforce), Provision 5 (Workforce and Stakeholder Engagement), Provision 19 (Chair remaining in post beyond nine years) and Provision 41 (engagement with the workforce in terms of how executive remuneration aligns with wider company pay policy).

Corporate Governance Report
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Capital Limited Annual Report 2022 79

Corporate Governance Report

Responsibilities of the Board

The Board is led by the Chairman, who promotes a culture of openness and debate and is responsible for the leadership of the Board and its overall effectiveness. The Chairman also facilitates constructive Board relations and the effective contribution of all Non-Executive and Executive Directors, and ensures that Directors receive accurate, timely and clear information.

The Board concentrates on devising and implementing strategy, monitoring Group performance and oversees governance, risk and control issues. Governance, risk and control structures are looked at with a view to aligning the Group’s culture with the Group’s purpose and strategy.

Certain areas of the Board’s responsibilities are delegated to the Executive Directors. However, the Group has established guidelines requiring specific matters to be subject to decision by a majority of the full Board, including material acquisitions and disposals, investments and capital projects. The Group’s delegation of Authority was reviewed in depth during the course of 2022 and refreshed following the outcome of the review.

The Board meets regularly, and eight meetings were held in 2022. All Directors are supplied, in advance of meetings, with appropriate information covering matters which are to be considered. The Chairman also meets with the Non-Executive Directors in the absence of the other Executive Directors.

There is a formal schedule of decisions reserved for the Board. This includes approval of the following: the Group’s strategy; the annual operating plan and budget; the annual and interim financial statements; significant transactions; approval of material contracts; major capital expenditures; risk management policies; the authority levels vested in management; Board appointments; and remuneration policies.

As described below, the review of certain matters is delegated to Board Committees, which make recommendations to the Board in relation to those matters. Ultimately, however, the Board is responsible for adopting the recommendations of the Board Committees. No decision of any consequence is made other than by the Directors.

Composition of the Board

The Board comprises:

Executive Directors
* Jamie Boyton – Executive Chairman
* Peter Stokes – Chief Executive Officer (appointed 1 October 2022)
* Brian Rudd – Executive Director

Non-Executive Directors
* David Abery – Senior Independent Director
* Alex Davidson – Independent Director
* Michael Rawlinson – Independent Director
* Catherine (Cassie) Boggs – Independent Director

The Executive and Non-Executive Directors are satisfied that the Group operates an effective Board which is collectively responsible for the success of the Group. Together, the Executive and Non-Executive Directors bring a broad range of business, commercial and other relevant experience to the Board, which is vital to the management of an expanding Group.

Pages 73 to 76 contain descriptions of the background of each Director.

As per the Company’s Workforce Diversity Policy the Company has entrenched the importance of diversity into its employment structures, as is reflected by the increase of culturally and gender diverse appointments in the last three years. Further information on our culturally diverse workforce can be found on page 63 of this Annual Report.

Whilst progress was made in 2021 with gender diversity at Board level with the appointment of Catherine (Cassie) Boggs, the Company is mindful of the new Listing Rule on diversity & inclusion which comes into force for periods commencing on or after 1 April 2022. This has been a key item on the agenda in two of the Nomination Committee meetings throughout the year when it was discussed in some detail. Upon recommendation by the Nomination Committee to the Board, the Board will shortly undertake a search process with an external search consultancy for a suitable candidate, to comply with the provisions of the new Listing Rule, whilst also acknowledging that women are under- represented in the mining sector compared with other industries. The Board also acknowledges that ethnic diversity is also equally key in this search process which is an integral part of the new Listing Rule.

Senior Independent Non-Executive Director

The 2018 Code advises that the Board should appoint one of its Independent Non-Executive Directors to be the Senior Independent Non-Executive Director. The Senior Independent Non-Executive Director should be available to shareholders if they have concerns that contact through the normal channels of Chairman, Chief Executive Officer or Chief Financial Officer has failed to resolve or for which such contact is inappropriate.

Throughout 2022, Mr Abery acted as Senior Independent Non-Executive Director and was available to address any queries or concerns from shareholders. The Senior Independent Director also ensures there is a clear division of responsibility between the Executive Chairman and the Chief Executive Officer, and as necessary, acts as a conduit between the Board’s Non-Executive Directors and Executive Directors. The Board is satisfied that Mr Abery demonstrates complete independence in the role.

Role of the Executive Chairman and appointment of new CEO

Since 2017, Mr Boyton acted as the Group’s Executive Chairman, fulfilling the roles of both Chairman and Chief Executive Officer. The Board was conscious that combining the role of Chairman and Chief Executive Officer was not compliant with Provision 9 of the 2018 Code and therefore actively sought to address this issue during 2022. Additionally, the rapid growth of the Company and its increased complexity was another key driver for the splitting of the roles.# Corporate Governance Report

Board Appointment and Succession

Action was taken to address this shortfall in 2022 and the Board was delighted to appoint Mr Peter Stokes as the new Chief Executive Officer, who joined the Company on 1 October. Mr Stokes brings with him a wealth of expertise and his biography can be found on page 73 of this report. For this formal search process where a number of candidates were interviewed, the Company used an independent consultancy, London Search Associates, which has no connection with the Company or any of its directors. The search process was undertaken by way of a formal, rigorous and transparent procedure based on merit and objective criteria including diversity. Mr Boyton remains as Executive Chairman but will be stepping down to 4 days a week (further details of this are in the Remuneration Committee report on page 97). Whilst still in an executive position and there being a risk of a conflict of interest between Board and management activities, the Board is satisfied that there are sufficient controls in place at Board level. There is a clear division of responsibilities between the running of the Board and the executive responsibility for the running of the Company’s business, including the Chairman excusing himself from any vote where a conflict of interest may occur. Moreover, with Mr Stokes’ arrival as Chief Executive Officer, there is now a very distinct division of responsibilities between the role of Chief Executive Officer and the role of Chairman. Mr Boyton, as Chairman, will continue with a strategic and business development focus, whilst Mr Stokes will concentrate more on the operational management of the business and the development and implementation of strategy.

The Board is aware that remaining in post beyond nine years is not compliant with Provision 19 of the Code. This was considered by the Nomination Committee and the Board in 2022. The Board agreed that, bearing in mind the Company’s stage of evolution and its current trajectory, it is still in the best interests of the Company for Mr Boyton to remain as Executive Chairman. Additionally, having consulted with shareholders, the message received was that Mr Boyton should continue to have an executive role in the Company given his skills in providing strategic guidance to the business.

Directors’ Independence

The 2018 Code recommends that the Chairman of the Board should be independent. The Directors do not consider Mr Boyton to be independent because of his historic ties with the Group, his employment with the Company as Executive Chairman and his significant shareholding in the Group and so the Group will not satisfy this requirement of the 2018 Code. However, in view of his knowledge of the Group and specific strategic role within the Group, the Board considers it appropriate at this stage to retain Mr Boyton as Executive Chairman.

The 2018 Code recommends that at least half the Board, excluding the Chairman, should comprise Independent Non-Executive Directors. The Board considers that Mr Abery, Mr Davidson, Mr Rawlinson and Ms Boggs are independent, and therefore the Group considers that it satisfies the independence requirements of the 2018 Code. Notwithstanding the fact that Mr Davidson has served on the Board as a Non-Executive Director for more than ten years, the Board considers him to be independent. He fully understands the importance of being a strong and objective voice on the Board and on the Board Committees, continuing to demonstrate integrity and independence in judgement, character and action.

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Capital Limited Annual Report 2022 81

Jamie Boyton and Brian Rudd collectively hold 19.19% of the Company’s voting share capital. The Board does not consider the Company to have a controlling shareholder for the purposes of the Listing Rules.

Board Commitment

The Board is satisfied that each of the Non-Executive Directors committed sufficient time throughout 2022 for the fulfilment of their duties as members of the Board and of the Board Committees. None of the Directors has any conflict of interests that have not been disclosed to the Board. None of the Executive Directors hold any non-executive directorships in a FTSE 100 company. Details of attendance at Board meetings and Board Committee meetings are set out below. On appointment, and throughout their tenure, all Directors receive appropriate training and regular presentations are made to the Board by senior management and external advisers. All Directors are authorised to obtain, at the Group’s expense and subject to the Chairman’s approval, independent legal or other professional advice where they consider it neceessary. All Directors have access to the Company Secretary, who oversees their ongoing training and development. The Executive Directors’ service contracts and the terms and conditions of appointment of the Non-Executive Directors are available for inspection at the Group’s London office and will also be at the Annual General Meeting. Brief details of these terms and conditions are also set out in the Remuneration Committee Report.

Board Committees

The 2018 Code recommends that a UK listed company should establish an Audit Committee, a Remuneration Committee and a Nomination Committee. The Group has each of these committees, the terms of reference of which are described in further detail below. Additionally in view of the utmost importance which the Group places on health and safety and the social and environmental impact of the business, the Board now has a well-established Health, Safety, Social and Environmental Committee as well as a Sustainability Committee formed in 2021. Additionally, the Board also considered it prudent to formally implement an Investment Committee for Capital DI Limited, a 100% directly owned subsidiary of the Group, from early 2022.

All Committee Chairs report orally on the proceedings of their Committees at the meetings of the Board. Where appropriate, the Committee Chairs also make recommendations to the Board in accordance with their relevant terms of reference (which are reviewed by each Committee and the Board on an annual basis. The Terms of Reference for each Committee can be found in the governance section of the website: https://www.capdrill.com/investors/corporate-governance). In addition, the minutes and papers of the Committee meetings are made accessible to all Board members in advance of Committee meetings.

Audit and Risk Committee

The Audit and Risk Committee comprises Mr Abery (Chair), Mr Davidson and Mr Rawlinson. The membership and workings of the Audit and Risk Committee are set out in the separate Audit and Risk Committee Report. The 2018 Code recommends that the Chair of the Audit and Risk Committee should be an Independent Non-Executive Director (who is not the Chair) and who has relevant experience for the role. Throughout 2022, Mr Abery was the Chair of the Audit and Risk Committee. The Board is satisfied that Mr Abery has appropriate and relevant experience to chair the Audit and Risk Committee.

Remuneration Committee

The Remuneration Committee comprises Mr Rawlinson (Chair), Mr Abery, Mr Davidson and Ms Boggs. The membership and workings of the Remuneration Committee, together with details of the Directors’ remuneration, interest in options, together with information on service contracts, are set out in the Remuneration Committee Report. No Director is involved in the decision of his or her own remuneration. The 2018 Code recommends that the Chair of the Remuneration Committee should be independent and have previously served a period of at least 12 months on a remuneration committee before appointment. Mr Rawlinson, as Chair of the Remuneration Committee, is considered to be an Independent Non-Executive Director. In addition, Mr Rawlinson exceeds the required 12 months serving on a remuneration committee prior to his appointment. The Board is satisfied that Mr Rawlinson has appropriate and relevant experience for the Chair of the Remuneration Committee. The Remuneration Committee report is set out on page 87 to 99 of this report.

Nomination Committee

The Nomination Committee comprises Mr Abery (Chair), Mr Davidson, Mr Rawlinson and Ms Boggs. The Nomination Committee deals with appointments to the Board, monitors potential conflicts of interest and reviews annually the independence of the Non-Executive Directors. The Nomination Committee is also responsible for proposing candidates for appointment to the Board having regard to the balance and structure of the Board. In 2022, the Nomination Committee ran the process of the search for the new CEO from beginning to end, providing its recommendations to the Board for approval. On 1 October 2022 Peter Stokes was appointed a CEO following an external search process, externally led by London Search Associates. Further information on Mr Stokes’ background can be found in the Directors’ profiles section on page 73.

In 2022 the Nomination Committee worked closely with the Audit and Risk Committee in supporting the Board’s appointment of a new Chief Financial Officer (CFO), Rick Robson, as announced on 1 November 2022. The Nomination Committee recognises the need for diversity and succession planning at Board level. As mentioned on page 78 of this report, one of the Committee’s main priorities in 2022 has been how to address the targets of the new Listing Rule on Diversity and Inclusion coming into force for periods commencing on or after 1 April 2022. As previously mentioned, the Board has now instructed an external recruitment agency to carry out an extensive search to match the requirements stipulated in this new rule (including both gender and ethnic diversity), in an industry where female representation at all levels is particularly sparse. During 2022, the Committee has continued to review succession planning and the active engagement and development of the Company’s staff.# Corporate Governance Report

Nomination Committee

The 2018 Code recommends that the majority of members of the Nomination Committee should be Independent Non-Executive Directors. Mr Davidson, Mr Abery, Mr Rawlinson and Ms Boggs were members of the Nomination Committee and are all considered to be Independent Non-Executive Directors. The Group therefore complies with the 2018 Code in this respect. The 2018 Code also recommends that an Independent Non-Executive Director chairs the Nominations Committee. Mr Abery is considered independent and accordingly is compliant with the 2018 Code.

Health, Safety, Social and Environment Committee (“HSSE Committee”)

The Health, Safety, Social and Environment comprises of Mr Davidson (Chair), Mr Rudd, Ms Boggs, and Mr Stokes. Invited to the Committee each meeting are Mr Court, (CEO – Operations) Mr Monaghan (Executive – HSEQ) and Mr North (Chief Operating Officer – Drilling). The HSSE Committee is responsible for formulating and recommending to the Board a policy on health, safety, social and environmental issues related to the Group’s operations. In particular, the HSSE Committee focuses on compliance with applicable standards to ensure that an effective system of health, safety, social and environmental standards, procedures and practices is in place at each of the Group’s operations. The HSSE Committee is also responsible for reviewing management’s investigation of incidents or accidents that occur and to assess whether policy improvements are required. The Committee members take soundings from the workforce in connection with this responsibility. While the HSSE Committee is expected to make recommendations, the ultimate responsibility for establishing the Group’s health, safety, social and environmental policies remain with the Board. During 2022 the Committee met four times.

Sustainability Committee

The Sustainability Committee comprises of Ms Boggs (Chair), Mr Davidson, Mr Stokes and Mr Boyton. In an effort to strengthen and enhance the Company’s sustainability capability in 2022, the Company recruited a Sustainability Manager, Stuart Thompson, who joined in July 2022. Mr Thompson spearheads the meeting content for review by the Committee. The Committee is, in turn responsible for assisting the Board in developing and making recommendations in connection with the Company’s strategy, standards, processes and approach to environmental, social and governance matters that could affect the business activities, assets, performance and reputation of the Company (collectively, “ESG”) and for the Company’s ongoing sustainable development. Further information on work carried out by the Sustainability Committee in 2022 can be found on pages 41 to 45. The Committee members take soundings from the workforce in connection with this responsibility. While the Sustainability Committee is expected to make recommendations, the ultimate responsibility for establishing the Group’s Sustainability Committee policies remain with the Board. During 2022 the Committee met four times.

Corporate Governance Report

82 Capital Limited Annual Report 2022

Capital Limited Annual Report 2022 83

Investment Committee

The Investment Committee, formally inaugurated in early 2022 for the Company’s separate investments arm, Capital DI Limited, comprises of Mr Rawlinson (Chair), Mr Boyton, Mr Davidson and a non-Director member - Mr Rowley (Investor Relations and Corporate Development Manager). The Committee is responsible for both monitoring existing investments for performance and strategic alignment, as well as evaluating new opportunities.

Board and Committee meetings and attendance

The number of Board and Committee meetings during 2022 was as follows:

	Number of meetings held in 2022	Jamie Boyton	Peter Stokes	Brian Rudd	David Abery	Michael Rawlinson	Catherine (Cassie) Boggs
Board meetings	8	8	1	2	3	8	8
Audit and Risk Committee meetings	5	Invitee	2	6	7	5	–
Remuneration Committee meetings	3	Invitee	Invitee	–	4	3	3
Nomination Committee meetings	6	–	–	–	3	6	6
HSSE Committee meetings	4	4	1	–	5	–	4
Sustainability Committee meetings	4	2	1	4	4	–	4
Investment Committee meetings	2	–	–	–	1	2	2

1 Mr Stokes joined the Board on 1 October 2022 and has attended all Board and Committee meetings (where he is a member) since joining, in addition to attending Committee meetings as an invitee.

2 Mr Rudd was absent from 2 board meetings (held on consecutive days) due to health reasons.

3 Mr Abery was absent from 1 board meeting and 2 committee meetings (all 3 meetings held on the same day) due to health reasons.

Re-election of Directors

In accordance with the 2018 Code, all Directors are required to submit themselves for re-election annually. The last Annual General Meeting in April 2022 approved the re-appointment of all six current Directors who were directors at that time: Mr Abery, Mr Boyton, Mr Davidson, Mr Rawlinson, Mr Rudd and Ms Boggs. All six Directors in addition to Mr Stokes (appointed on 1 October 2022) will submit themselves for re-election at the Annual General Meeting in 2023. Biographies of each of the Directors can be found on pages 73 to 76 of this report.

Evaluation of the Board

The Board annually evaluates the performance of individual Directors, the Board as a whole and each of its Committees. The evaluation comprises of both a detailed questionnaire for each Board member and structured interviews led by the Executive Chairman and the Senior Independent Non-Executive Director with the other Directors. The performance of the Executive and Non-Executive Directors was appraised by the Executive Chairman, taking into account the views of the other Directors. Led by Mr Abery, as Senior Independent Non-Executive Director, the performance of the Chairman was assessed by the Non-Executive Directors, taking into account the views of the other Executive Directors. The internal Board evaluation for FY22 was carried out in May 2022, in which each Board member was given the opportunity to provide input by means of a questionnaire covering the following topics: objectives, strategy and remit, performance measurement, risk management, Board/Committee composition and process, and individual performance. Separate questions were also asked with regard to each of the committees, to each of the respective Committee members. The results were collated and analysed, and a report was provided to the Board. As a result of the evaluation process, it was concluded that, whilst the Board remains effective for the size of the business, the following areas of improvement were identified: succession planning for the Chairman/CEO into separate roles, gender and ethnic diversity on the Board, in-person meetings had proved challenging due to Covid but moving forward this would change, and Board sites visits had also been less feasible due to Covid. Following the outcome of the Board evaluation, the Board took the appropriate action to recruit a Chief Executive Officer and as already mentioned on page 81 of this report, the Company welcomed Peter Stokes in October 2022. Additionally, regular in-person meetings resumed again and a Board site visit has already been confirmed for Q2 2023. The Board composition will continue to be regularly reviewed based on the Company’s size and requirements. The reviews will continue to consider composition and diversity (both gender and ethnic) as a key part of the criteria. In line with the 2018 Code, the Board will keep under review the need to conduct an externally facilitated board evaluation periodically. As mentioned on page 79 of this report, the Board has made notable progress in 2022 by separating the role of Chairman and CEO, previously held by Mr Boyton, with the appointment of Mr Peter Stokes as CEO. Mr Boyton remains as Executive Chairman. Further details of their backgrounds, expertise and their roles at Capital can be found on pages 73 to 76.

Stakeholder Engagement

Ongoing engagement with our stakeholders remains a priority and is critical to Capital’s success. Capital Limited is an exempted company incorporated under the laws of Bermuda and the full requirements of Section 172 of the UK Companies Act 2006 (Section 172) are additional to the directors’ current obligations under Bermuda Law. The Board of Directors of Capital Limited consider, both individually and together, that they have acted in the way they consider, in good faith, would be most likely to promote the success of the Company for the benefit of its members as a whole (having regard to the stakeholders and matters set out in s172 of the Companies Act 2006 (“section 172”)) in the decisions taken during the year ended 31 December 2022. In doing so, the Directors have taken account of the likely long-term consequences of decisions made in the year, the interests of Capital’s employees, the Company’s business relationships with its clients, suppliers, and the impact of the Company’s operations on the community and the environment. The Directors have also acted with regard to the desirability of Capital maintaining a reputation for high standards of business conduct, and the need to act fairly as between members of the Company. When formulating the Company’s strategy, the Directors consider the longer-term and broader consequences and implications of its business on key stakeholders and factors relating to climate change. The need to be a responsible mining services company is embedded in Capital’s corporate purpose and is the focus of the Company’s ESG strategy. As part of Capital’s commitment to effective stakeholder engagement, and in accordance with section 172, the Company sets out its key stakeholder groups and corresponding approach to engagement with them. Capital’s stakeholder engagement strategies are tailored for each of these key audiences to continue a mutually beneficial dialogue with those who are invested in, or impacted by, the Company’s operations.# Corporate Governance Report

Engagement with Shareholders

Historically the Chairman has been the Group’s sole principal spokesperson and point of contact with investors, analysts, fund managers, the press and other interested parties. However with the appointment of Mr Stokes on 1 October 2022 as new CEO, the CEO now shares this responsibility as spokesman and principal point of contact. Access is available to the Chief Financial Officer, Senior Independent Director and other Non-Executive Directors if required. The Board is kept informed about shareholder relations and in particular the Senior Independent Director is kept informed of the views of major shareholders. This is done by a combination of reports to the Board on meetings held and feedback to the Board from the Group’s advisers.

The Group holds briefing meetings with analysts and institutional shareholders, usually following the half year and final results announcements, to ensure that the investing community receives a balanced and complete view of the Group’s performance and the issues faced by the business. The Group provides financial statements to all shareholders twice a year when its half year and full year results are announced and provides two further Trading Updates post the completion of the first and third quarters of trading throughout the fiscal year. These results and all other stock exchange announcement information are available on the Group’s website www.capdrill.com. Management presentations as well as other information relevant to investors are also available on the website.

All shareholders are given at least 21 working days’ notice of the Annual General Meeting. It is standard practice for all Directors to attend the Annual General Meeting to which all shareholders are invited and at which they may raise questions to the Chairs of the Board Committees or the Board generally. The proxy votes for and against each resolution, as well as abstentions (which may be recorded on the proxy form accompanying the notice of Annual General Meeting) are counted before the Annual General Meeting commences and are made available to shareholders at the close of the formal business of the meeting. The proxy votes are announced via the LSE and posted on the Company’s website shortly after the close of the meeting.

The Company’s 2022 Annual General Meeting was held on 28 April 2022. A summary of the proxy voting for the Annual General Meeting was made available via the London Stock Exchange and on the corporate website as soon as reasonably practicable on the same day as the meeting and a link to the results can be accessed here: https://www.capdrill.com/media/investors/Announcements/CAPD-2022-04-Results-of-AGM-2022_RNS_FINAL_WEBSITE_20220428.pdf. There were no resolutions where 20% or more votes were cast against the Board’s recommendation for a resolution.

During the year, there have been a number of shareholder engagements via the Annual General Meeting, investor calls, investor roadshows and interviews with the Chairman with in-person meetings in London and Canada. This includes three separate multi-day sessions engaging with shareholders and investments, the Annual General Meeting, nine media engagements and four moderated investor calls.

Shareholder Communication

The Board of Directors aims to ensure that Shareholders of the Company are provided with important information in a timely manner through written and electronic communications, in accordance with the requirements of the Financial Conduct Authority’s (FCA) Listing Rules, the Disclosure and Transparency Rules and the UK Market Abuse Regulation.

Workforce and other stakeholders’ engagement

As referred to above, the importance of health and safety as well as the Group’s social and environmental impact are key issues that are kept under constant review. In doing so, the HSSE and Sustainability Committees take soundings from the Group’s workforce, so that the Board is kept fully appraised of health and safety, environmental social and governance concerns. The Board has encouraged the Executive Leadership Team and senior management in each location to engage with staff, suppliers, customers and the community in order to assist the Board in discharging its obligations. Board members also carry out site visits enabling staff to raise issues directly with them and to enable them to meet key stakeholders when necessary. As a result of the FY22 Board evaluation as described above, a full Board site visit to one of Capital’s operations is planned in Q2 of this year where Board members will participate in a variety of communication forums with the workforce and spend time listening to their views and ideas.

During 2022 both the Chairman and Executive Director visited a number of the Company’s operational sites and offices including Tanzania, Egypt, Mali, London, Canada and Australia where they met both the workforce and clients. In the first three months of joining the newly appointed Chief Executive, as part of his Company formal induction process, travelled to operational sites and offices including Tanzania, Egypt, Mali, London and Canada to meet with both clients and employees on the ground. Mr Stokes has had one-on-ones with each member of the Board, Executive Leadership Team and senior executives in each of the Company’s offices and operations he has visited. Each of the Executive Directors held a number of structured meetings with workforce on the ground during 2022. Workforce engagement is channelled via the Executive Leadership Team and the Company has a very transparent culture with regular staff engagement initiatives in addition to an open reporting line which encourages staff participation. Taking this transparency and proactivity of the Executive Directors, with the size and nature of the business into account, it was considered that it is an unnecessary step at this time to formalise the current arrangement into a formal workforce engagement scheme. The Board will keep this under review, taking into account Capital’s size and legal and regulatory requirements in its locations.

Clients and Suppliers

The Company ensures consistent communication with each client by way of regular meetings (both in-person and virtual), presentations and emails on status of the project, involving the key team members from both parties. For our larger projects, a Steering Committee Meeting takes place each quarter covering HSE performance (e.g, HSE metrics), Rig performance (e.g. operational shift metrics), standby hours: causes, work time hours: causes; and Initiatives/ discussion/open forum. These meetings are very much a two-way discussion rather than Capital just presenting, as it is important we know any change in our clients’ plans and to have honest feedback. For all clients, there are touch points at every level between our employees and the clients’ employees, from the respective Executive Directors to the respective operational teams on the ground. Capital’s performance against its contracts enables the Company to deliver against its strategy.

With regards to suppliers, the Company follows its procurement policy and issues its supplier code of conduct at the outset. Fair and transparent contracting processes, fair payment terms and consistency of application of business ethics practices have all been key engagement topics in order for the supply chain to run efficiently and smoothly.

Whistleblowing

The 2018 Code recommends that there should be a means for the workforce to raise concerns in confidence and anonymously, with the Board reviewing and ensuring arrangements for proportionate and independent investigation and for follow-up action. Any submissions (using a web reporting portal for anonymity) are handled by the Senior Independent Non-Executive Director, Mr Abery. The Whistleblowing policy can be found on the Company’s website in the Corporate Governance Section: http://www.capdrill.com/investors/corporate-governance

Share dealing policy

The Company has a share dealing code in place which applies to all employees at all times.

Governance work relating to the Sustainability Committee

As previously mentioned in this report, the Board launched its new Sustainability Committee in 2021. Please refer to pages 41 to 45 detailing the work the Committee has carried out with regard to strengthening its governance framework in this area. This includes its Modern Slavery Statement, updating its Anti-Bribery and Corruption Policy, and further policies including Human Rights.

Remuneration Committee Report

The report has been prepared by the Remuneration Committee (the ‘Remuneration Committee’ or the ‘Committee’) and approved by the Board. The Remuneration Committee comprises Michael Rawlinson (Chair of the Committee), David Abery, Alex Davidson and Catherine (Cassie) Boggs. The profiles of the Committee members are included on pages 73 to 76. The Code recommends that the majority of members of the Remuneration Committee should be Independent Non-Executive Directors. All Committee members were considered to be Independent Non-Executive Directors during the period under review and therefore the Group complied with the Code for smaller quoted companies.

Dear Shareholder,

I am pleased to present the report of the Remuneration Committee in my capacity as Chair of the Remuneration Committee. The Remuneration Committee sets the remuneration packages for the Executive Directors, including basic salary, bonuses, and other incentive compensation payments and awards. It approves the policy and framework proposals made by the Executive Directors in respect of the remuneration for the executive leadership team of the Group.# Remuneration Committee Report

The Remuneration Committee further approves all share and option grants. The Remuneration Committee is assisted by the Company Secretary and takes advice as appropriate from external advisers. Since 2018, the Company has taken advice on remuneration from h2glenfern Remuneration Advisory on an ad hoc basis which has no connection with the Company nor with any of its Directors. Independent judgement is exercised when evaluating the advice of external third parties, and when receiving views from Executive Directors and senior management. The annual report on remuneration sets out the remuneration outcomes and decisions made for the year and follows the description of policy.

Performance in year

As set out earlier in this Annual Report, the Company performed strongly in 2022. Full year revenue for the year reached US$290.3 million (2021: US$226.8 million), above the 2022 revenue guidance given to the market in March 2022 of US$270 – US$280 million; EBITDA increased to US$90.1 million (2021: US$73.3m) and adjusted NPAT (excluding fair value gains/ losses on investments) by US$5.9 million to US$42.5 million (2021: US$36.6 million).

The Remuneration Committee is satisfied that the Group delivered a strong performance for the year in what was still a very challenging operating environment. This is the third consecutive year Capital has delivered growth in revenue and in 2022 it took strategic shifts to place the business in its strongest position to date. Our drilling business saw new contracts and multiple material contract renewals on major mine sites including a new two-year drilling services contract at B2Gold’s Fekola mine in Mali. Our laboratory business, MSALABS has further expanded its partnership with Chrysos Corporation, becoming the dominant international provider of Chrysos PhotonAssay™ units across its global network.

Remuneration Committee Report

88 Capital Limited Annual Report 2022
Capital Limited Annual Report 2022
89

Remuneration Committee Report

Decisions in year

In 2022, the Executive Chairman (Jamie Boyton)’s base salary was US$500,000 and Executive Director (Brian Rudd)’s salary was US$360,000 per year. Our new CEO Peter Stokes was appointed on 1st October 2022 at a base salary of $450,000 per year. Reflecting the agreed performance targets achieved relating to EBIT Return on Capital Employed, Safety and Nationalisation metrics, the Remuneration Committee determined to award a scheme bonus payment in respect of 2022 of 141.3% of salary to the Executive Chairman and 84.8% to the Executive Director (Brian Rudd), as detailed later in this report.

The Company made two grants of LTIP awards under the long-term incentive structure to the Executive Chairman and Executive Director (Brian Rudd) during the first half of 2022. The CEO did not receive any share awards upon joining the Company. The Company intends to make a further grant in the first half of 2023. The structure of these awards is disclosed in further detail later in this report. The Committee believes the policy operated as intended in terms of Company performance and quantum during 2022.

Remuneration in 2023

There will be no significant changes to the structure of Executive Remuneration in 2023 following the implementation of the new structure which we introduced from 2022 following extensive shareholder consultation.

2022 Annual General Meeting

At our AGM in April 2022, 105.0m shares were voted to approve the resolution on remuneration (82% of votes cast) with 23.7m shares voted against the resolution (18%). Proxy advisers noted a number of matters in relation to Executive remuneration including Executive Director (Brian Rudd) salary increases ahead of inflation, the payment of the 2021 annual bonuses ahead of the normal maximums, the increase from 2022 in the maximum annual bonus to 150% of salary for the Executive Chairman and to 90% of salary for the Executive Director (Brian Rudd) to reflect stretch targets, such caps from 2022 being hard caps, the introduction of an additional LTIP award from 2022 based solely on highly demanding total shareholder return targets and the application of a post vesting two-year holding period for LTIP awards made to executive directors and made points in respect of some disclosures on remuneration.

These changes were intended to strengthen retention, incentivisation and to support the Company’s next phase of growth. The Company consulted extensively with its major shareholders in early 2022 on these changes, contacting shareholders (excluding directors) representing approximately 40% of its register and was pleased with the level of support received. The Committee has noted points made by proxy advisers.

The Company is not required to put its Remuneration Policy to a binding shareholder vote as it is not UK-incorporated. The Company sees that the annual vote its Remuneration Report provides an appropriate and effective mechanism for shareholders to express their views on remuneration given the Company’s current size and dynamic growth phase. No significant changes are proposed for 2023. The salary of our Executive Chair will be reduced effective 1 April 2023 reflecting his reduced time commitment following the appointment of our CEO during 2022. The salary of the Executive Director (Brian Rudd) will not increase from April 2023. We have made additional disclosures in the Remuneration Policy section and Annual Report on Remuneration in response to comments made by proxy advisers. The Remuneration Committee welcomes all shareholder feedback on remuneration and will continue with its approach of extensive shareholder consultation where significant changes are considered. No significant changes are proposed for 2023.

Remuneration Policy

The Group’s policy on Directors’ remuneration has been set with the objective of attracting, motivating and retaining high calibre Directors, in a manner that is consistent with best practice and aligned with the interests of the Group’s shareholders. The policy on Directors’ remuneration is that the overall remuneration package should be sufficiently competitive to attract and retain individuals of a quality capable of achieving the Group’s objectives. Remuneration policy is designed such that individuals are remunerated on a basis that is appropriate to their position, experience and value to the Company. The main components of the remuneration policy for the years ending 31 December 2022 and 2023 and how they are linked to and support the Company’s business strategy are summarised below.

Element	Link to remuneration policy/strategy	Operation	Maximum opportunity	Performance metric
Base Salary	Core element of remuneration. To set at a level which is sufficient ly competitive to recruit and retain individuals of the appropriate calibre and experience.	Basic salary is reviewed annually as at 1 January with reference to Company performance; the performance of the individual Executive Director; the individual Executive Director’s experience and responsibilities; and pay and conditions throughout the Company. May be paid in different currencies as appropriate to reflect their geographic location.	There is no prescribed maximum annual base salary or salary increase. The Committee is guided by the general increase for the broader employee population, but has discretion to decide to a lower or a higher increase. The Committee considers individual and Company performance when setting base salary
Other Benefits	To help recruit and retain high performing Executive Directors. To provide market competitive benefits.	The Company does not provide any fringe benefits or pensions to Executive Directors, other than to comply with local statutory requirements. CEO will be located in Australia from April 2023 and from this date will receive superannuation at 10% of salary in line with Australian requirements.	N/A
Annual bonus	To incentivise the achievement of a range of short-term performance targets that are key to the success of the Company. To align the interests of the Executives and shareholders to the full year targets.	Parameters, performance criteria, weightings and targets are set at the start of each year. Bonuses can be paid to Executives to support the achievement of annual operational, financial, strategic and personal objectives. Payments are made in cash and shares following completion of the year subject to the Committee’s assessment of performance against targets and other matters it deems relevant. Any bonus is subject to achieving agreed KPIs. 50% of any bonus is settled immediately in cash, 50% is awarded in shares and deferred for one year. Annual bonus awards are subject to malus and clawback provisions	For the Executive Chairman and CEO, 100% of the bonus is subject to corporate and financial performance objectives. For the Executive Director (Brian Rudd) and other members of the Executive Leadership Team, 80% is subject to corporate and financial performance objectives. The remaining 20% is based on individual performance targets. The annual bonus structure contains a financial and HSE underpin, whereby the Remuneration Committee can determine that no bonus is to be paid if the underpin targets are missed.	The maximum bonus opportunity for the Executive Chairman and CEO is 150% of salary for stretch performance, with 100% of salary paid for on-target performance. The maximum bonus opportunity for the Executive Director (Brian Rudd), is 90% of base salary for stretch performance with 60% of salary paid for on-target performance. There is no ability for the Company to pay discretionary bonuses above the stated maxima.

Remuneration Committee Report
90 Capital Limited Annual Report 2022
Capital Limited Annual Report 2022
91# Remuneration Committee Report

Remuneration Policy

Element

Link to remuneration policy/strategy

Operation

Maximum opportunity

Performance metric

Long-term incentive awards

To support retention, long- term performance and increase alignment between the executives and shareholders. The Company intends to make awards under this structure annually. The Executive Chairman, Executive Directors and senior members of the Executive Leadership team are eligible to receive awards under the Long-Term Incentive Plan at the discretion of the Committee. Awards are granted as nil cost options or conditional awards which vest after three years subject to the meeting of objective performance conditions specified at award. Awards to Executive Directors have an additional two- year holding period post the three-year vesting period. LTIP awards are subject to malus and clawback provisions.

The Executive Chairman, CEO and Executive Director (Brian Rudd) will receive two performance share awards each year. The initial award will have a face value of up to 100% of salary for the Executive Chairman and CEO, and 60% of salary for the Executive Director (Brian Rudd), and have performance conditions pitched at conventional levels. The further awards will have a face value of up to a further 100% of salary for the Executive Chairman and CEO, and a further 60% of salary for the Executive Director (Brian Rudd), and have performance conditions set ahead of conventional levels.

Performance conditions are set by the Committee at the time of award and are currently based on absolute Total Shareholder Return (TSR) and adjusted Earning Per Share (EPS) growth, both measured once at the end of the three- year period. 25% of the award will vest at threshold and 100% of the award will vest at stretch performance. The Committee may vary the type, weighting and pitching of performance targets each year.

Element

Link to remuneration policy/strategy

Operation

Maximum opportunity

Performance metric

Shareholding requirement

Aligns Executive Directors’ interests with those of shareholders. Encourages Executive Directors to achieve the Company’s long- term strategy and create sustainable stakeholder value. Executive Directors are required to accumulate a personal shareholding in the Company. The Chairman and Executive Director’s (Brian Rudd) shareholding are currently many multiples of their salaries. The Remuneration Committee will review the appropriate personal shareholding target for the new CEO in 2023.

N/A

N/A

Non-executive Director remuneration

To attract and retain high calibre Non- Executives with the necessary experience. To provide fees appropriate to time commitments and responsibilities of each role. Non-Executive Directors are paid a basic fee. An additional fee is paid to the Senior Independent Non- Executive Director to reflect the additional time and responsibility, and to the Chair of each Committee for the same reason. Fee levels reflect market conditions and are reviewed annually on 1 January each year.

N/A

Service contracts

The Executive Directors’ employment service contracts have no specified term. No Director has a service contract containing more than six months’ notice period or with pre-determined compensation provisions upon termination exceeding six months’ salary. It is the Company’s policy that, except where prescribed by law, there should be no automatic entitlement to bonuses in the event of an early termination.

Non-Executive Directors have entered into letters of appointment with the Group, for an initial three-year period, thereafter renewable on the agreement of both the Company and the Non- Executive Director. The notice period under the letters of appointment is three months.

Policy on recruitment

When hiring a new Executive Director, the Committee will consider the overall remuneration package by reference to the remuneration policy set out in this report.

LTIP provisions – leavers, malus and clawback provisions

Awards are governed by the rules of the LTIP scheme at the time of award. Unless individuals are deemed good leavers, awards will lapse on cession of employment. In the case of good leavers, awards will vest on the date of cessation normally subject to the application of performance conditions and time pro-rating. LTIP awards are subject to malus and clawback provisions up to three years from the date of determination of awards in the event of a material misstatement of results of the Company or Group or error in assessing the achievement of the performance conditions, a serious breach of the Company’s code of ethics or a serious heal and safety issue.

External appointments

The Company recognises the proposition that Executive Directors could become fee earning non-executive directors of other companies and that such appointment can broaden their knowledge and experience to the benefit of the Company. In their contracts of employment, the Executive Directors have covenants not to compete during their employment (including directorships) unless the Board consents in writing.

Consideration of employment conditions elsewhere in the Company in developing policy

In setting the remuneration policy for Directors, the pay and conditions of other Group employees are taken into account. The Committee is provided with data on the remuneration structure for senior members of staff below the Executive Director level and uses this information to ensure consistency of approach throughout the Group. The Committee does not directly engage with the workforce on executive remuneration but, as mentioned on page 80 in the Corporate Governance Report, the workforce has the opportunity to raise any issues (including those on executive remuneration) in the employee engagement initiatives. As mentioned elsewhere in this report, the Company welcomes and encourages a transparent culture.

Consideration of shareholder views

Shareholders views are considered when evaluating and setting remuneration strategy. Opportunities to discuss the remuneration strategy are available during investor calls as well as by voting on the report at the AGM.

Annual report on remuneration

This section of the remuneration report contains details of how the Company’s remuneration policy for Directors was implemented during the financial year ended 31 December 2022.

From 1 January 2022, the salaries of the Executive Chairman and Executive Director (Brian Rudd) were $500,000 and $360,000, respectively. Our new CEO Peter Stokes was appointed on 1 October 2022 at a salary of $450,000.

The bonus maximums for stretch performance for the Executive Chairman and the Executive Director (Brian Rudd) are 150% and 90% of salary respectively with 100% and 60% of salary for on-target performance. Of this, for the Executive Chair, the entire bonus is based on corporate and financial performance objectives. For the Executive Director (Brian Rudd), 80% of the maximum bonus opportunity is subject to corporate and financial performance objectives with the remaining 20% based on individual performance targets relating to business development. For the CEO, the maximum for stretch performance for 2022 does not apply, but rather a maximum of 100% of salary for on-target level pro-rated for 3 months of his employment during the year.

For 2022, corporate and financial objectives were weighted 55% EBIT, 20% Return on Capital Employed (ROCE), 20% on safety (HSE TRIFR) and 5% Localisation.

The table below sets out the breakdown of the total award:

2022 ANNUAL BONUS	TARGET GROUP TARGET METRICS (100% OF TOTAL BONUS FOR EXECUTIVE CHAIR, 80% FOR EXECUTIVE DIRECTOR (BRIAN RUDD)
	Threshold $’m	Target $’m	On Target $’m	Stretch Target $’m	Target achieved
EBIT (55% of Group Target Metrics)	51.3	55.6	59.3	59.7	59.7
ROCE (20% of Group Target Metrics)	22.5%	25.0%	27.0%	25.7%	25.7%
HSE TRIFR (20% of Group Target Metrics)	1.87	1.50	1.12	1.23	1.23
Sustainability (nationalisation) (5% of Group Target Metrics)	89.0%	90.0%	91.0%	91.35%	91.35%
Weighted total – % of on-target

The Executive Director‘s (Brian Rudd) personal performance targets related to business development. The targets set were exceeded including new business awards expanding into new regions such as Gabon, Pakistan and Sudan.

In light of the strong performance of the Group during the year, bonuses were awarded to the Executive Chair at 141.3% of salary and to the Executive Director (Brian Rudd) at 84.8% (comprised of 68% relating to Group target metrics and 17% relating to his personal KPIs) of salary. Peter Stokes was paid a bonus at his On-Target level of 100% of salary pro-rated for 3 months of his employment during the year.

Of the $706,500 bonus awarded to Jamie Boyton, the $112,500 bonus awarded to Peter Stokes and the $305,208 awarded to Brian Rudd, 50% is payable in cash in March 2023 and 50% payable in shares in March 2024.

In April 2022, the Executive Chairman and Executive Director (Brian Rudd) were granted two separate awards each (LTIP1 and LTIP2) as detailed in the share options table below in April 2022 for the performance period of January 2022 to December 2024. All awards vest after three years subject to performance targets.

LTIP1 awards are subject to two performance targets each covering 50% of the award: an absolute Total Shareholder Return (TSR) condition and an EPS growth performance condition, both measured once at the end of a three-year period. For both conditions, the threshold vesting target, at which 25% of the relevant portion of an award vests, was 8% compound annual growth with full vesting at 15% CAGR.

LTIP2 awards are solely subject to an absolute TSR condition measured at the end of a three- year period.The threshold vesting target, at which 0% of the relevant portion of an award vests, was 15% compound annual growth with 100% vesting if 25% compound annual growth is achieved. All awards to Executive Directors are subject to a two-year holding period post vesting. The remuneration of the Executive and Non-Executive Directors showing the breakdown between elements and comparative figures is shown below.

Salary/ fees	Bonus in cash	Bonus in shares	LTIP	Total	Salary/ fees	Bonus in cash	Bonus in shares	LTIP	Total
2022	2022	2022	2022	2022	2021	2021	2021	2021	2021
Current Executive Directors
Jamie Boyton	500	353	353	862	2,068	450	337.5	337.5	–
Brian Rudd	360	153	153	427	1,093	330	148.5	148.5	–
Peter Stokes	112	56	56	224	n/a	n/a	n/a	n/a	n/a
Non-Executive Directors
David Abery	101	–	–	–	101	98	–	–	–
Catherine (Cassie) Boggs	88	–	–	–	88	28	–	–	–
Alex Davidson	88	–	–	–	88	85	–	–	–
Michael Rawlinson	108	–	–	–	108	85	–	–	–

Figures in US$’000

Peter Stokes was appointed to the Board on 1 October 2022 hence salary pro-rated. The value of the LTIP in 2022 relates to the vesting of the 2019 LTIP awards, and the value has been calculated by multiplying the number of awards which vested by the (20-day VWAP) share price of 80.4 p on the vesting date of 31 December 2021.

Non-Executive Remuneration is set out below:

Basic Fees	Committee Chair	Snr NED	Total	Basic Fees	Committee Chair	Snr NED	Total
2022	2022	2022	2022	2021	2021	2021	2021
David Abery	68	20	13	101	65	20	13
Catherine (Cassie) Boggs	68	20		88	21	7
Alex Davidson	68	20		88	65	20
Michael Rawlinson	68	40		108	65	20

Figures in US$’000

Remuneration Committee Report

96 Capital Limited Annual Report 2022

97 Capital Limited Annual Report 2022

Directors’ Share Interests

Directors’ share interests at 31 December 2022 are set out below:

Number of beneficially owned shares at 31 December 2022	Unvested options without performance measures	Total interest held at 31 December 2022	Total interest held at 31 December 2021
Executive
Jamie Boyton	24,056,802	24,056,802	23,026,895
Brian Rudd	12,583,079	12,583,079	12,105,538
Non-Executive:
David Abery	555,747	555,747	555,747
Catherine (Cassie) Boggs	43,478	43,478	–
Alex Davidson	50,000	50,000	50,000
Michael Rawlinson	169,540	169,540	169,540

1 Beneficially owned shares include shares held directly or indirectly by connected persons
2 Non-Executive shares were acquired through market purchases which complied with the Company’s share dealing code, and were not acquired through any option scheme

This table does not include the share portion of Jamie Boyton’s 2021 bonus which is expected to be issued in March 2023, totalling 280,239 shares based on the share price of last day of the Company’s close period in March 2022. This table does not include the share portion of Brian Rudd’s 2021 bonus which is expected to be issued in March 2023, totalling 123,305 shares based on the share price of last day of the Company’s close period in March 2021.

Shareholder Return Graph

The graph below shows the percentage change in total shareholder return for each of the last five financial years compared to the FTSE Actuaries All Share index. This index was selected as it represents a broad equity index which the Company can be compared against.

175%
150%
125%
100%
75%
50%
25%
0%
-25%
-50%
Jul ’18  Jan ’19  Jul ’19  Jan ’20  Jul ’20  Jan ’21  Jul ’21  Jan ’22  Jul ’22
Capital
FTSE Actuaries All Sh

Relative importance of spend on pay

The following table shows the Group’s actual spend on pay for all Group employees relative to dividends and pre-tax profit

	2022 US$’ m	2021 US$’ m	Change %
Total employee costs	82.3	67.5	22
Operating profit	59.7	51.9	15
Cash capital expenditure	48.5	49.9	(3)
Dividends	7.1	4.8	48

Share Options and Long-Term Incentive Awards

At 31 December 2022, the LTIP awards that had been awarded to each Director were as follows:

Name	Scheme	Date of award	Vesting date	At 1 Jan 2022	Granted in year	Exercised in year	Lapsed in year	At 31 Dec 2022	Expiry date
Boyton	LTIP Jan 2019	31/3/22		797,212			797,212	30/9/22
	LTIP Jan 2020	31/3/23		509,254			509,254	30/9/23
	LTIP Jan 2021	31/3/24		540,767			540,767	30/9/24
	LTIP1 Jan 2022	31/3/25		460,766			460,766	30/9/27
	LTIP2 Jan 2022	31/3/25		460,766			460,766	30/9/27
	Total			1,847,233	921,532		1,971,553
Rudd	LTIP Jan 2019	31/3/22		394,620			394,620	30/9/22
	LTIP Jan 2020	31/3/23		252,081			252,081	30/9/23
	LTIP Jan 2021	31/3/24		237,938			237,938	30/9/24
	LTIP1 Jan 2022	31/3/25		199,051			199,051	30/9/27
	LTIP2 Jan 2022	31/3/25		199,051			199,051	30/9/27
	Total			884,639	398,102		888,121

The above awards all vest after three years and are subject to performance conditions detailed above.

The Company granted the first awards under its new LTIP to its Executive Chairman and Executive Director (Brian Rudd) in 2019. The awards were subject to two performance targets each covering 50% of the award: an absolute Total Shareholder Return (TSR) condition and an EPS growth performance condition, both measured once at the end of a three-year period. For both conditions, the threshold vesting target, at which 25% of the relevant portion of an award vests, was 8% compound annual growth with maximum vesting at 18%. These performance conditions were met in full (EPS: 86.5% CAGR, TSR: 27.2%) and 797,212 awards vested for the Executive Chairman and 394,620 awards for the Executive Director (Brian Rudd).

Management of remuneration for 2023

As explained earlier this report, the Company implemented a number of changes to remuneration for 2022. There will be no changes to the basic structure of remuneration for 2023.

Salaries

Effective 1 April 2023, the salary of the Executive Chairman, Jamie Boyton will be reduced from $500,000 to $400,0000 to reflect his time commitment reducing from 5 to 4 days per week. At this time and as per the agreement when Peter Stokes joined the Company as CEO, effective 1 April 2023, the salary of the CEO, Peter Stokes will increase from $450,000 to $454,545 and he will receive superannuation at 10% of salary following his relocation to Australia, such changes agreed when he joined the Company. The salary of Executive Director (Brian Rudd) will remain unchanged at $360,000.

Annual bonus

The annual bonus scheme for the Executive Directors for 2023 is based on the overall performance of the Group and the meeting of financial and non-financial performance objectives including profitability measures, safety measures, specific execution of strategic targets, role based and, for Brian Rudd, personal targets. We will operate the 2023 annual bonus with a scorecard in line with our normal practice with weightings in line with 2022.

For 2023, the corporate and financial performance objectives will have the following weightings: 45% EBIT, 20% ROCE, 5% strategic targets set for the labs business, 5% strategic targets set for the mining business, 20% HSE and 5% localisation. For the Executive Chairman and CEO bonus will be based solely on Group targets. For the Executive Director (Brian Rudd), the 20% of the bonus will be based on individual performance targets. In line with our policy, 50% of bonus amounts paid for 2022 and any paid for 2023 will be paid in cash with 50% in shares deferred for one year.

Long-Term Incentives

Our approach with regard to the annual LTIP in 2023 will remain the same as 2022. For LTIP1, the Chairman and CEO will receive an award at 100% of salary and 60% for the Executive Director (Brian Rudd) with a three-year performance period. Awards will be subject to two performance targets each covering 50% of the award: an absolute Total Shareholder Return (TSR) condition and an EPS growth performance condition. For both conditions, the threshold vesting target will be 8% compound annual growth with a maximum of 15% CAGR. LTIP2 awards will solely be subject to an absolute TSR condition. The threshold vesting target, at which 0% of the awards will vest, will be 15% compound annual growth with full vesting at 25% CAGR. Awards to Executive Directors will be subject to a two year post vesting holding period.

Non-Executive remuneration

The Non-Executives are paid a basic fee with additional amounts paid to chair a sub-committee, as well as to the Senior Independent Director to reflect the additional time and responsibility associated with this role. The base fee has been increased by 5.2% from $68,250 to $72,000 with the additional Senior NED fee and Committee chair fee remaining at $13,000 and $20,000 respectively.

Annual General Meeting and Shareholder Feedback

The Committee welcomes feedback from shareholders on its remuneration.

Corporate Governance Code

The 2018 FRC Corporate Governance Code requires the description of the work of the Committee to cover a number of specified matters, most of which are covered above. The Committee believes that the remuneration levels and structure are appropriate in the light of the Company’s commercial and strategic objectives and the need to attract and retain experienced and skilled executives. The remuneration policy operated as intended in 2022 in terms of Company performance and quantum. The Committee has considered the principles of clarity, simplicity, risk management, predictability, proportionality and alignment to culture in developing and managing executive remuneration as reflected in the table below.

Clarity

The Committee is committed to transparency. Information in this report is intended to be disclosed directly, simply and clearly.

Simplicity

The structure of the Remuneration Policy is unchanged and is commonly used by UK-listed companies. It comprises three elements - salary, annual bonus and long-term incentive awards which operate simply and in line with market norms.

Risk Management

The Committee recognises the risk of target-based plans.It seeks to mitigate risk by imposing limits on variable pay amounts, by paying half of annual bonus amounts in shares, through applying malus and clawback provisions to its incentive plans and through the ability of the remuneration committee to exercise certain discretions.

Predictability
Variable pay is subject to normal threshold and maximum value or share amounts.

Proportionality
There is a clear link between individual reward and the delivery of strategy, particularly through the performance targets attached to annual bonus and long-term incentive schemes. The link of remuneration outcomes to long-term performance is primarily through the LTIP which has stretching targets based on eps and absolute share price performance as well has vesting values being directly linked to share price performance.

Alignment to culture
The Remuneration Policy is designed to ensure that successful long-term partnership with shareholders delivers good rewards to the Executive Directors, the senior leadership team and the workforce as a whole.

Approval
This report was approved by the Board of Directors on 24 March 2023 and signed on its behalf by:

Michael Rawlinson
Remuneration Committee Chair

Remuneration Committee Report

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The report has been prepared by the Audit and Risk Committee (the ‘Committee’) and approved by the Board. The Committee comprises David Abery (Chair), Alex Davidson and Michael Rawlinson. The profiles of the Committee members are included on pages 73 to 76. David Abery and Michael Rawlinson are deemed to be members with recent and relevant financial experience. The Board considers all three members to be Independent Non-Executive Directors.

Summary of the role of the Audit and Risk Committee

The Committee acknowledges and embraces its role of protecting the interests of shareholders in reporting the Group’s financial information and the effectiveness of the audit of that financial information. The Committee also plays a key role in ensuring that the annual report and accounts are fair, balanced and understandable and contain sufficient information on the Group’s performance, business model and strategy.

The Committee is governed by the Audit and Risk Committee Charter (‘Charter’), which is agreed and approved by the Board of Directors, and includes the following responsibilities:

• Consideration of the appointment, re- appointment or removal of the external auditor;
• The negotiation of the audit fee;
• Agreeing the nature and scope of the Group’s annual financial audit;
• Monitoring the integrity of the financial statements;
• Considering and reporting on any significant issues in relation to the financial statements;
• Reviewing the effectiveness of the audit and the independence and objectivity of the external auditor, including an assessment of any non- audit services;
• Reviewing the Company’s procedures for detecting fraud, reviewing the Company’s systems and controls for the prevention of fraud and assessment of the reporting fraud instances;
• Reviewing the half-year and annual financial statements, and any audited accounts, before submission to the Board, and confirming to the Board of Directors their opinion that the report and accounts are fair, balanced and understandable and contain sufficient information on the Group’s performance, business model and strategy;
• Discussing with the Group’s auditors any issues and reservations arising from the interim review and year-end audit;
• Reviewing, on behalf of the Board, the Group’s system of internal control and making recommendations to the Board;
• Business risk management and internal control systems, including business policies and practices;
• Assisting in the selection of a new CFO (most recently carried out in 2022);
• Reviewing the requirement for an internal audit; and
• Reviewing the Group’s whistle-blowing procedures.

Audit and Risk Committee Report

Audit and Risk Committee Report

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Meetings

During the year ending 31 December 2022, five meetings of the Committee were held, exceeding the minimum number of three required as per the Charter. The Executive Chairman and Chief Financial Officer were regular invitees in addition to the Chief Executive Officer (after his appointment on 1 October 2022), as they all provided important information and insight.

Significant matters related to the financial statements

The Audit Committee considered the significant matters set out below, and in all cases considered to what extent areas of judgement were appropriate. Papers were presented to the Audit Committee by management, setting out the relevant facts, material accounting estimates, and the judgements associated with each item. The external auditor provided a summary report setting out its views on each area of judgement. The Committee discussed the papers with management, challenged all significant areas of judgement, sought the views of the external auditor on each matter. The Committee concurred with the assumptions and treatment adopted by management in each area and the related disclosure presented in the Annual Report and Financial Statements. During the year there were no instances where there were any disagreements which could not be resolved between the Committee and the Board.

The significant matters that were considered by the Committee in 2022 in relation to the financial statements and how these were addressed were as follows:

Going concern and working capital:
The Group operates in an uncertain environment and maintaining sufficient cash headroom for the business is essential. The Group has a strict budgetary discipline and working capital and cash flow forecasting tools which enable management to closely monitor the Group’s working capital and cash forecasts. The working capital and cash forecasts are examined on an ongoing basis by the Committee and Board, and always when contemplating major capital expenditure, to enable the Board to report that the Group remains a going concern. During the year, the Group has secured and extended long-term mining contracts with high quality customers. In addition, the Group upsized its debt facility with Standard Bank by $10 million, refinanced the Macquarie facility, taking advantage of the excellent condition of the mining equipment at Sukari, which provided $10.6 million of new liquidity and extended its facilities with Epiroc. The Committee and Board are satisfied that this funding approach will provide sufficient capital to execute the business’ strategy without negatively impacting the going concern.

Taxation:
The Group operates in multiple jurisdictions with complex legal, tax and regulatory requirements. In certain of these jurisdictions, the Group has taken income tax positions that management believes are supportable and are intended to withstand challenge by tax authorities. Some of these positions are inherently uncertain and include those relating to transfer pricing matters and the interpretation of income tax laws. Management periodically reassesses its tax positions and presents these assessment updates to the Committee for consideration and approval. In particular, the Committee assessed the positions concerning the claims of the Zambian, Tanzanian, Mauritanian and Malian tax authorities as disclosed in Notes 9 and 38 to the Annual Financial Statements. During the year, the claims with the Zambian and Tanzanian tax authorities were dismissed and settled respectively. The Committee is satisfied with management’s estimates and assumptions. The Committee takes into account the views and experience of the external advisors but accepts that responsibility for such matters lies with management and, ultimately, the Board.

Asset impairment and inventory valuation:
The Group reviews the carrying amounts of its assets and inventory annually. Management performed a detailed analysis in terms of IAS 36, Impairment of Assets and IAS 2, Inventories to assess the carrying amounts of the Group’s assets and inventories. The Committee is satisfied with management’s estimates and assumptions.

Valuation of unlisted investments
The Group holds investments in listed and unlisted entities which are fair valued at each reporting date. The Group’s largest unlisted investment is in Allied Gold Corp, valued at $7.7 million (2021: $7.4 million). Significant judgement is involved in the valuation of unlisted investments due to the unobservable nature of some of the key inputs used in the valuation methodology. The Committee critically reviewed the methodology and key assumptions applied in the valuation of unlisted investments and challenged the accuracy and reliability of forecasts used in the valuation. The Committee is satisfied with management’s estimates and assumptions in the valuation of unlisted investments.

Recoverability of Trade Receivables
The Group carried trade receivables of $39.8 102 Capital Limited Annual Report 2022

Capital Limited Annual Report 2022 103 million (2021: $42.2 million) at year end, net of an expected loss provision of $3.0 million (2021: $nil). The provision for expected credit losses represents management’s best estimate at the Balance Sheet date. A number of judgements are made in the calculation of the provision, primarily the existence of any disputes, recent historical payment patterns and the debtors’ financial position. Further details can be found in Note 19 to the financial statements. The Group has considered the ongoing conflict in Ukraine on the Financial Statements – there is no evidence to suggest that the Group’s trade receivables may be at a higher risk of becoming credit impaired as a result of the conflict. No impairment allowances were made in respect of the conflict in Ukraine.The Committee reviewed management’s process for determining the provision and considered the likelihood of the conflict in Ukraine impacting the collection of trade receivables and were satisfied that the judgements are appropriate.

External audit

The Company’s policy is to tender the external audit every ten years. The last audit tender was undertaken in 2019 when BDO United Kingdom (BDO) were appointed as auditors to the Group. The effectiveness of the external audit process is largely dependent on appropriate audit risk identification at the commencement of the audit process. BDO prepared a detailed audit plan, identifying key risks which in 2022 included identifying and assessing the risks of material misstatement, revenue recognition, trade creditors, trade receivables, management override of controls, valuation of unlisted investments, asset impairment, inventory existence and valuation, property plant and equipment, lease liabilities, existence of provisions, going concern, taxation and climate risk. In forming its assessment of the effectiveness of the audit and prior to the audit, the Committee considered the FRC’s Audit Quality Review report on BDO LLP, received formal presentations regarding the proposed audit strategy, met separately with the Audit Partner without members of management present and the Chair met separately with the Audit Partner to discuss the audit strategy in detail, with the Chair reporting back to the Committee after doing so. These forums enabled the Committee to assess the extent to which the audit strategy was considered to be appropriate for the Group’s activities and addressed the risks the business faces, including factors such as: independence, materiality, the auditors’ risk assessment versus the Committee’s own risk assessment, the extent of the Group auditors’ participation in the subsidiary component audits and the planned audit procedures to mitigate risks. The Committee assesses the effectiveness of the audit process in addressing these matters semi-annually. In addition, the Committee seeks feedback from management on the effectiveness of the audit process. For the 2022 financial year, management was satisfied that there had been appropriate focus and challenge on the primary areas of audit risk and assessed the quality of the audit process to be good. The Committee concurred with the view of management and did not consider it necessary to request the auditors to look at any specific areas. The external auditor and Committee have the opportunity at the end of a Committee meeting to speak privately without management to ensure that no restriction in scope has been placed on the external auditor by management. Informal meetings are also held from time to time between the Chair of the Committee and the external audit partner and did not consider it necessary to request the auditors to look at any specific areas.

Non-audit services

The Committee requires that any non-audit services to be performed by the external auditors are formally approved in advance of the service being undertaken. Audit-related services do not require pre-approval and encompass actions necessary to perform an audit, including areas such as providing comfort letters to management and/or underwriters; and performing regulatory audits. The provision of any non-audit service requires pre-approval and is subject to careful consideration, focused on the extent to which provision of such non-audit service may impact the independence or perceived independence of the auditors. The auditors are required to provide details of their assessment of the independence considerations, as well as measures available to guard against independence threats and to safeguard the audit independence. No non-audit services were provided by auditors to any entities within the Group.

Risk management and internal controls

The Board is ultimately responsible for establishing and maintaining the system of internal controls which has been in place throughout 2022. The system of internal controls is vital in managing the risks that face the Group and safeguarding shareholders’ interests. The Group’s internal controls are designed to manage rather than eliminate risk as an element of risk is inherent in the activities of a drilling company. The Board’s obligation is to be aware of the risks facing the Group, mitigate them where possible, insure against them where appropriate and manage the residual risk in accordance with the stated objectives of the Group. In pursuing these objectives, internal controls can only provide reasonable and not absolute assurance against material misstatement or loss. The effectiveness of the Group’s system of internal controls is reviewed annually by the Committee. The Committee’s assessment includes a review of the major financial and non-financial risks to the business and the corresponding internal controls. Where weaknesses or opportunities for improvement are identified, clear action plans are put in place and implementation is monitored by senior management and the Executive Directors. The Committee reported to the Board that following such review, it considered the internal controls in respect of the key risks that face the Group to be appropriate.

The following describes the principal elements of the Group’s internal control system and processes employed to review the effectiveness of such system:

Strategic plan

The Board sets the strategic direction for the Group which is then implemented by the Executive Directors and senior management which make up the Executive Leadership Team. Goals are set at the commencement of each year by the Executive Leadership Team and monitored thereafter by the Board.

Management structure

A formal schedule of matters is reserved for consideration and approval by the Board including all major decisions of financial, technical or organisational importance. The Group’s internal control procedures require Board approval for each significant new project and all major expenditure requires the approval of the Chief Executive Officer (previously Executive Chairman). The Executive Leadership Team meets regularly to discuss day-to-day operational matters.

Risk management

The Board is responsible for identifying the major business risks that face the Group and for determining appropriate risk mitigation in accordance with the Group’s risk management policy which covers environmental, operational, financial and legal risks.

Financial Reporting risk

Board members are provided monthly with a Board Report detailing financial, operational, HSEQ, HR and business development activities, obtaining insight into all significant aspects of the Company and allowing for open engagement with Management.

Liquidity and budgetary risk

Each year the Board approves the Group’s business plan and budget and variance analysis is undertaken regularly throughout the year and reported to the Board which approves any material variation to the budget. Short-term and long-term cash flow forecasts are produced and reported to senior management and the Board on a regular basis. The capital structure and financing facilities are reported by senior management to the Board on a regular basis to allow the Board to analyse the availability of funding. In instances where the Group is setting up operations in a new country or a new region, appropriate personnel are deployed or recruited and training is conducted to facilitate the integration with Group operational and financial policies. This has been the case in 2022 for countries including the DRC, Gabon, Sudan and most recently Pakistan.

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104 Capital Limited Annual Report 2022
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In addition, there are clear lines of responsibilities for key risk areas such as acquisitions, capital expenditure, compliance, information technology and operations. These lines of responsibilities are continuously monitored by the Executive Directors and to ensure that the Group’s strategic risk management principles are met. The Committee and Board are closely involved in evaluating and reviewing the principle risks and uncertainties as detailed in the Chief Financial Officer’s Report. The process for identifying, evaluating and managing the principal risks faced by the Company has been in place for the year under review and up to the date of approval of the annual report and accounts.

Internal Audit

The Group undertook formal internal audits in the year under review. The internal audit scopes included a review of the Group’s Delegation of Authority, a review of capex processes and controls, and a contract performance review. The Committee reviewed all internal audit reports detailing significant findings, progress on the timely and effective resolution of outstanding findings, the status of ad hoc projects and any revisions to the current year audit plan. The internal audit plan for 2022 was reviewed by the Committee and revisions proposed to reflect the updated risk profile of the business. Overall, the Committee considers the current internal audit resource to be adequate for the internal control and risk management assurance requirements.

Approval

This report was approved by the Board of Directors on 24 March 2023 and signed on its behalf by:

David Abery
Chair of Audit and Risk Committee

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Capital Limited Annual Report 2022 107
106 Capital Limited Annual Report 2022

Directors’ Responsibilities

The Directors are responsible for preparing the Annual Report, Financial Report, and the Consolidated Financial Statements in accordance with applicable laws and regulations.# Directors’ Responsibilities Statement

The Directors are required to prepare Consolidated Financial Statements for each financial year presenting fairly in all material respects the Group’s state of affairs at the end of the year and profit or loss for the year, in accordance with International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board. The Directors must not approve the accounts unless they are satisfied that they are presenting fairly in all material respects the state of affairs of the Group and of the profit or loss of the Group for that period.

In preparing these Consolidated Financial Statements, the Directors are required to:
* select suitable accounting policies and then apply them consistently;
* make judgements and accounting estimates that are reasonable and prudent;
* state whether they have been prepared in accordance with IFRSs, subject to any material departures disclosed and explained in the financial statements; and
* prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.

The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Group’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and to ensure that the Financial Statements comply with provisions of the Companies Act 1981 of Bermuda (as amended). They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in Bermuda and the United Kingdom governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions. The Directors are responsible for preparing the Annual Report in accordance with applicable law and regulations. Having taken advice from the Audit Committee, the Directors consider that the Annual Report and the financial statements, taken as a whole, provides the information necessary to assess the Group and Company’s performance, business model and strategy and are fair, balanced and understandable.

Corporate Governance Statement

The Corporate Governance Statement on pages 77 to 85 forms part of this report.

Directors’ responsibilities pursuant to DTR 4

In accordance with Chapter 4 of the Disclosure and Transparency Rules issued by the Financial Conduct Authority in the United Kingdom, the Directors confirm to the best of their knowledge:
* the Annual Financial Statements have been prepared in accordance with IFRSs and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group; and
* the Annual Report includes a fair review of the development and performance of the business and the financial position of the Group, together with a description of the principal risks and uncertainties that it faces.

Going Concern

The activities of the Group, together with the factors likely to affect its future development, performance, the financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Executive Chairman’s Statement, CEO’s Statement and CFO’s Review on pages 18 to 37. In addition, we describe in Note 33 to the Consolidated Financial Statement on pages 161 to 166 the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and its exposures to credit and liquidity risk.

Although not assessed over the same period as the going concern, the viability of the Group has been assessed on pages 36 to 37. It has further reviewed scenarios such as a general reduction in turnover and the impact on the business and a reasonable worst-case scenario incorporating the aggregate impact of operational and financial disruption on the business. The reasonable worse-case scenario is considered to be remote. It has also considered the impact of the ongoing Russia-Ukraine conflict. Refer to Note 1.1 of the Annual Financial Statements for more detail.

The Group has considerable financial resources together with established business relationships with many customers and suppliers in countries throughout the world. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully. After making enquiries, the Directors consider it appropriate to adopt the going concern basis of accounting in preparing this Annual Report and the Consolidated Financial Statements.

The Group has considerable financial resources together with established business relationships with many customers and suppliers in countries throughout the world. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully. After making enquiries, the Directors consider it appropriate to adopt the going concern basis of accounting in preparing this Annual Report and the Consolidated Financial Statements.

Fair, balanced and understandable

The Directors as at the date of this report consider that the Annual Report and Annual Financial Statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s position, performance, business model and strategy, as well as the principal risks and uncertainties which could affect the Group’s performance.

Auditors

As far as each of the Directors are aware at the time this report was approved:
* there is no relevant audit information of which the auditors are unaware; and
* they have taken all steps that ought to have been taken to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information.

On behalf of the Board

Chairman
Jamie Boyton
24 March 2023

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Independent Auditors Report to the Members of Capital Limited

Financial Statements

Independent Auditors Report

Opinion on the financial statements

In our opinion:
* the financial statements give a true and fair view of the state of the Group’s affairs as at 31 December 2022 and of the Group’s profit for the year then ended;
* the financial statements have been properly prepared in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board; and
* the financial statements have been prepared in accordance with the requirements of the Bermuda Companies Act 1981.

We have audited the financial statements of Capital Limited (the ‘Parent Company’) and its subsidiaries (together the ‘Group’) for the year ended 31 December 2022 which comprise the Consolidated Statement of Profit or Loss and Other Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards issued by the International Accounting Standards Board.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We remain independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services prohibited by that standard were not provided to the Group.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Group’s ability to continue to adopt the going concern basis of accounting included:
* Discussion of the continued impact of the Russia-Ukraine conflict and global inflationary pressures with the Directors and the Audit Committee, including their assessment of risks and uncertainties associated with the Group’s customers, workforce and commodity market prices. We assessed this against our own views of the risks based on our understanding of the business, the mining sector in Africa and the business’ performance in the 2022 financial year.
* We obtained the Directors’ cash flow forecasts covering the period to 30 June 2024, which is a period of at least 12 months from the date of approval of the financial statements, and challenged the key assumptions in respect of revenue growth, gross profit margins and cash generation with reference to new contract wins, our knowledge of the business and its historical performance and results.# To the Members of Capital Limited

Capital Limited Annual Report 2022

Financial Statements

checked that the Directors had considered appropriate risks and uncertainties in the preparation of the cash flow forecasts based on our assessment of the risks and issues relating to the business.
* We tested the integrity of the forecast models and assessed their consistency with approved budgets.
* We obtained and critically reviewed the Directors’ reverse stress test analysis, performed to determine the point at which:
* a deterioration of EBITDA; or
* net debt deterioration due to working capital outflows would result in a covenant breach or liquidity shortfall and without further mitigation would potentially impact the going concern of the business.
Our consideration included an assessment of whether the reverse stress test analysis appropriately reflected the key risks and issues to which the models were sensitive, and we challenged the nature and feasibility of the mitigating actions available to the business identified by the Directors;
* We assessed covenants at year end, to check that the Group were compliant under the terms of the financing agreements;
* We evaluated forecast covenant compliance and headroom calculations with reference to the covenants stated in the relevant financing agreements;
* We reviewed the adequacy of disclosures in the financial statements in respect of going concern with reference to the Directors’ going concern assessment, the cash flow forecasts and reverse stress test analysis, and our understanding of the business.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

In relation to the Parent Company’s reporting on how it has applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the Directors’ statement in the financial statements about whether the Directors considered it appropriate to adopt the going concern basis of accounting.

Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.

Overview

• Coverage 94% (2021: 92%) of Group revenue
• Coverage 91% (2021: 85%) of Group total assets

Key audit matters

1. Appropriateness of revenue recognition – also a key audit matter in the prior year

The prior year KAMs also included Uncertain Tax Positions. Whilst the Group continues to be subject to tax claims in the jurisdictions it operates in, this is not considered a KAM in the current year due to a number of the historical claims being resolved in the current year, and the remaining claims not being material to the Group financial statements.

Materiality

• Group financial statements as a whole $2,600,000 (2021 - $2,150,000) based on 5% of Group adjusted profit before tax (2021 – 5% of Group adjusted profit before tax)

An overview of the scope of our audit

Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s system of internal control, and assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override of internal controls, including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement.

The Group’s services are primarily provided across Africa. We assessed there to be four significant components that were significant due to their size and risk profile, being three of the operational subsidiaries in Egypt, Tanzania and Mali, and the Parent Company in Bermuda.

Full scope audits for Group reporting purposes were performed on the significant components in Tanzania and Egypt by local BDO network member firms, and on the Malian component and Parent Company by the Group Engagement Team.

We also identified other components in Zambia, Cote d’Ivoire, Guinea and Mauritius where the Group Engagement Team performed specific audit procedures on discrete financial statement areas that we considered presented risks of material misstatement to the Group financial statements.

Financial information relating to the remaining non-significant components of the Group was principally subjected to analytical review procedures performed by the Group Engagement Team.

Our involvement with component auditors

For the work performed by component auditors in Egypt and Tanzania, we determined the level of involvement needed in order to be able to conclude whether sufficient appropriate audit evidence has been obtained as a basis for our opinion on the Group financial statements as a whole. Our involvement with these component auditors included the following:

• Detailed Group reporting instructions were sent, which included the significant areas to be covered by the audits (including areas that were considered to be key audit matters as detailed below), and set out the information required to be reported to the Group audit team
• The Group audit team performed procedures independently over certain key audit risk areas, as considered necessary, including the key audit matters below.
• Regular communication throughout the planning and execution phase of the audit. Members of the Group audit team virtually attended the planning and clearance meetings and had detailed discussions throughout the audit with the component auditors. The group audit team visited Egypt and met with the component auditors at the planning stage of the audit, and visited Tanzania at the completion stage of the audit to review the component audit files and to attend the clearance meeting.
• The Group audit team was actively involved in risk assessment and the direction of the audits performed by the component auditors for Group reporting purposes, review of their working papers, consideration of findings and determination of conclusions drawn.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

| Key audit matter Our application of materiality We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the financial statements. In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole. Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows:

Group financial statements	2022 $	2021 $
Materiality	2,600,000	2,150,000
Basis for determining materiality	5% of adjusted Group profit before tax	5% of adjusted Group profit before tax

Rationale for the benchmark applied We consider the use of 5% of adjusted Group profit before tax to be the most appropriate benchmark since this removes the impact of fair value gains and losses on investments on the underlying profit of the Group and is also a key measure for the users of the financial statements.

Group financial statements	2022 $	2021 $
Performance materiality	1,820,000	1,505,000
Basis for determining performance materiality	70% of Materiality	70% of Materiality

Rationale for the benchmark applied The level of performance materiality was set after considering a number of factors including the expected value of known and likely misstatements and Management’s attitude towards proposed misstatements.

Component materiality We set materiality for each component of the Group based on the size and our assessment of the risk of material misstatement of that component. Component materiality ranged from $900,000 to $1,680,000 (2021: $620,000 to $1,400,000). In the audit of each component, we further applied performance materiality levels of 70% of the component materiality to our testing to ensure that the risk of errors exceeding component materiality was appropriately mitigated.

Reporting threshold We agreed with the Audit Committee that we would report to them all individual audit differences in excess of $130,000 (2021: $105,000). We also agreed to report the amount in aggregate of differences below this threshold but in excess of $52,000 that in our view, warranted reporting on qualitative grounds.

Other information

The Directors are responsible for the other information. The other information comprises the information included in the Annual Report other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Corporate governance statement

The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to the Parent Company’s compliance with the provisions of the UK Corporate Governance Code specified for our review. Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit.

Going concern and longer-term viability

• The Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified set out on page 107; and
• The Directors’ explanation as to their assessment of the Group’s prospects, the period this assessment covers and why the period is appropriate set out on page 36.

Other Code provisions

• Directors’ statement on fair, balanced and understandable set out on page 107;
• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 36;
• The section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on page 103; and
• The section describing the work of the audit committee set out on page 100.

Responsibilities of Directors

As explained more fully in the Directors’ Responsibilities Statement, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Extent to which the audit was capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

• We gained an understanding of the legal and regulatory framework applicable to the Group and the industry in which it operates, through discussion with Management and the Audit Committee and our knowledge of the industry. We considered the significant laws and regulations to be those relating to the financial reporting framework, tax legislation and the listing rules.
• We considered compliance with these laws and regulations through discussions with Management, in-house legal counsel, and the Audit Committee and reviewing minutes from board meetings of those charged with governance to identify any instances of non-compliance with laws and regulations.
• We assessed the susceptibility of the Group’s financial statements to material misstatement, including how fraud might occur. We considered the main areas where the risk of fraud could arise included management override of controls, and improper revenue recognition.
• We tested the appropriateness of journal entries made throughout the year by applying specific criteria and corroborating these to supporting evidence and business rationale.
• We performed a detailed review of the Group’s adjusting entries and journals throughout the year, investigated any that appeared unusual as to nature or amount; assessed whether the judgements made in accounting estimates were indicative of a potential bias and tested the application of cut-off and revenue recognition (refer to Revenue Recognition KAM).
• We identified areas at risk of management bias and reviewed key estimates and judgements applied by Management in the financial statements to assess their appropriateness.
• We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members and component auditors, and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.

Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it.# Financial Statements

Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended 31 December 2022

Note(s)	2022 US$	2021 US$
Revenue	290,284,368	226,793,266
Cost of sales	(155,852,595)	(120,491,246)
Gross profit	134,431,773	106,302,020
Administration expenses	(44,330,562)	(33,027,346)
Depreciation, amortisation and impairments	(30,416,239)	(21,397,355)
Operating profit	59,684,972	51,877,319
Interest income	34,835	244,998
Finance costs	(7,355,710)	(3,833,766)
Fair value (loss)/gain on investments at fair value	(19,797,969)	33,716,756
Profit before taxation	32,566,128	82,005,307
Taxation	(9,835,969)	(11,716,529)
Profit for the year and other comprehensive income*	22,730,159	70,288,778
Profit attributable to:
Owners of the parent	20,990,137	70,174,784
Non-controlling interest	1,740,022	113,994
	22,730,159	70,288,778
Earnings per share
Basic earnings per share (c)	10	11.07
Diluted earnings per share (c)	10	10.71

* Other comprehensive income for the year was $nil (2021: $nil).

Consolidated Statement of Financial Position as at 31 December 2022

Note(s)	2022 US$	2021 US$
ASSETS
Non-Current Assets
Property, plant and equipment	12	172,658,108
Right-of-use assets	13	16,652,318
Goodwill	14	1,296,387
Intangible assets	15	1,916,190
Other receivables	20	6,460,000
Total non-current assets		198,983,003
Current Assets
Inventories	18	58,694,979
Trade receivables	19	41,541,867
Other receivables	20	20,073,008
Investments at fair value	21	38,727,041
Current tax receivable	30	399,683
Cash and cash equivalents	22	28,379,607
Total current assets		187,816,185
Total Assets		386,799,188
EQUITY AND LIABILITIES
Equity
Equity
Attributable to Equity Holders of Parent
Share capital	23	19,287
Share premium	23	62,390,217
Treasury shares	24	(2,474,964)
Equity-settled employee benefits reserve	25	4,469,402
Other reserve	26	190,056
Retained income		168,725,546
Equity attributable to owners of the parent		233,319,544
Non-controlling interest	16	5,572,540
Total equity		238,892,084
LIABILITIES
Non-Current Liabilities
Loans and borrowings	27	56,864,811
Lease liabilities	13	12,127,384
Deferred tax	17	34,196
Total non-current liabilities		69,026,391
Current Liabilities
Trade and other payables	28	44,937,680
Provisions	29	2,636,640
Current tax payable	30	9,130,118
Loans and borrowings	27	18,036,811
Lease liabilities	13	4,139,464
Total current liabilities		78,880,713
Total Liabilities		147,907,104
Total Equity and Liabilities		386,799,188

Consolidated Statement of Changes in Equity For the year ended 31 December 2022

	Share capital	Share premium	Treasury shares	Total share capital	Other reserve	Equity- settled employee benefits reserve	Total reserves	Retained income	Total attributable to the equity holders of the Group/ Company	Non- controlling interest	Total equity
Group	US$	US$	US$	US$	US$	US$	US$	US$	US$	US$	US$
Balance at January 1, 2022	19,006	60,900,119	-	60,919,125	190,056	3,185,450	3,375,506	154,879,201	219,173,832	3,767,589	222,941,421
Profit for the year	-	-	-	-	-	-	-	20,990,137	20,990,137	1,740,022	22,730,159
Total comprehensive income for the year	-	-	-	-	-	-	-	20,990,137	20,990,137	1,740,022	22,730,159
Issue of shares	281	1,490,098	-	1,490,379	-	-	-	-	1,490,379	-	1,490,379
Recognition of share- based payments	-	-	-	-	-	2,774,331	2,774,331	-	2,774,331	-	2,774,331
Repurchase of own shares	-	-	(2,474,964)	(2,474,964)	-	-	-	-	(2,474,964)	-	(2,474,964)
Adjustment arising from change in non- controlling interest	-	-	-	-	-	-	-	(54,608)	(54,608)	54,608	-
Impact of acquisition of subsidiary	-	-	-	-	-	-	-	-	-	10,321	10,321
Dividends	-	-	-	-	-	-	-	(7,089,184)	(7,089,184)	-	(7,089,184)
Total contributions by and distributions to owners of company recognised directly in equity	281	1,490,098	(2,474,964)	(984,585)	-	1,283,952	1,283,952	(7,143,792)	(6,844,425)	64,929	(6,779,496)
Balance at December 31, 2022	19,287	62,390,217	(2,474,964)	59,934,540	190,056	4,469,402	4,659,458	168,725,546	233,319,544	5,572,540	238,892,084

	Share capital	Share premium	Treasury shares	Total share capital	Other reserve	Equity- settled employee benefits reserve	Total reserves	Retained income	Total attributable to the equity holders of the Group/ Company	Non- controlling interest	Total equity
Group	US$	US$	US$	US$	US$	US$	US$	US$	US$	US$	US$
Balance at January 1, 2021	18,878	60,169,426	-	60,188,304	190,056	1,926,994	2,117,050	84,384,101	146,689,455	1,389,315	148,078,770
Profit for the year	-	-	-	-	-	-	-	70,174,784	70,174,784	113,994	70,288,778
Total comprehensive income for the year	-	-	-	-	-	-	-	70,174,784	70,174,784	113,994	70,288,778
Issue of shares	128	730,693	-	730,821	-	-	-	-	730,821	-	730,821
Recognition of share- based payments	-	-	-	-	-	1,989,277	1,989,277	-	1,989,277	-	1,989,277
Adjustment arising from change in non- controlling interest	-	-	-	-	-	-	-	5,071,688	5,071,688	2,264,280	7,335,968
Dividends	-	-	-	-	-	-	-	(4,751,372)	(4,751,372)	-	(4,751,372)
Total contributions by and distributions to owners of company recognised directly in equity	128	730,693	-	730,821	-	1,258,456	1,258,456	320,316	2,309,593	2,264,280	4,573,873
Balance at December 31, 2021	19,006	60,900,119	-	60,919,125	190,056	3,185,450	3,375,506	154,879,201	219,173,832	3,767,589	222,941,421

Consolidated statement of Cash Flow For the year ended 31 December 2022

Note(s)	2022 US$	2021 US$
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations	31	73,533,457
Interest income received		34,835
Finance costs paid		(6,406,712)
Tax paid	30	(10,585,423)
Net cash from operating activities		56,576,157
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment		(42,974,044)
Proceeds from sale of property, plant and equipment		18,902
Purchase of intangible asset		(633,921)
Purchase of investments at fair value		(9,010,521)
Proceeds from sale of investments at fair value		10,637,179
Cash paid in advance for property, plant and equipment		(5,542,523)
Proceeds from sale of other investments		-
Net cash from investing activities		(47,504,928)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from new loans		20,716,801
Repayment of loans		(16,665,708)
Repayment of leases		(3,733,798)
Advance payment on ROU assets		(666,776)
Dividends paid	11	(7,089,184)
Repurchase of own shares	24	(2,474,964)
Amount received from non-controlling interest on rights issue		-
Net cash from financing activities		(9,913,629)
Total cash movement for the year		(842,400)
Cash at the beginning of the year	22	30,577,249
Effect of exchange rate movement on cash balances		(1,355,242)
Total cash at end of the year	22	28,379,607

Notes to the Annual Financial Statements

Corporate Information

Capital Limited (the “Company”) is incorporated in Bermuda. The Company and its subsidiaries (the “Group”) provide drilling, mining (load and haul), mineral assaying and surveying services. The Group also has a portfolio of investments in listed and unlisted exploration and mining companies. During the year ended 31 December 2022, the Group provided drilling services in Côte d’Ivoire, Guinea, Egypt, Kenya, Mauritania, Mali, Saudi Arabia and Tanzania. Mining services are provided in Egypt and mineral analysis services are provided in Canada, Guyana, Mauritania, Nigeria, Côte d’Ivoire, Mali, Tanzania, Kenya and Democratic Republic of the Congo. The Group’s administrative office is located in Mauritius.

1. SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of the Group’s annual financial statements are set out below.

1.1 Basis of preparation and going concern

The Group Annual Financial Statements have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board and are presented in United States Dollars since that is the currency in which the majority of the Group’s transactions are denominated.# Notes to the Annual Financial Statements (continued)

1. SIGNIFICANT ACCOUNTING POLICIES (continued)

1.1 Basis of preparation and going concern (continued)

Where additional information has been presented in the current year Annual Financial Statements, the prior year amounts have been presented to be consistent with the presentation in the current year. The Group Annual Financial Statements have been prepared on the historical cost basis except for certain financial instruments which are measured at fair value. Historical cost is based on the fair value of the consideration given in exchange for the assets. 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 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. Fair value for measurement and/or disclosure purposes in these Financial Statements is determined on such a basis, except for share- based payment transactions that are in the scope of IFRS 2, leasing transactions which are within the scope of IFRS 16 and measurements that have some similarities to fair value but are not fair value, such as net realisable value in IAS 2 or value in use in IAS 36. 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.

Going Concern

As at 31 December 2022, the Group had a robust balance sheet with a low debt gearing with equity of US$239.9 million and loans and borrowings of US$75.6 million. Cash as at 31 December 2022 was US$28.4 million, with net debt of US$47.2 million. Investments in listed entities at the end of December 2022 amounted to US$30.4 million which provided additional flexibility as these investments could be converted into cash. This robustness is underpinned by stable revenues generated on long-term contracts. Revenues generated on mine sites and longer-term contracts make up over 85% of Group revenues. Revenues continued to perform strongly in 2022 with increased revenue of 28% compared to 2021. Commercially, the Group continues to secure and extend long-term mining contracts with high quality customers, including the significant contract win at B2Gold’s Fekola gold mine and major extensions at the AngloGold Ashanti’s Geita gold mine and Barrick’s Bulyanhulu gold mine. In addition, there are no major contracts due to expire in 2023 which provides strong support for earnings over the coming year.

122 Capital Limited Annual Report 2022

Capital Limited Annual Report 2022 123

In determining the going concern status of the business, the Board has reviewed the Group’s forecasts for the 18 months to June 2024, including both forecast liquidity and covenant measurements. In the assessment, management took into consideration the principal risks of the business that are most relevant to the going concern assessment and reverse stressed the forecast model to identify the magnitude of sensitivity required to cause a breach in covenants or risk the going concern of the business, alongside the Group’s capacity to mitigate. The most relevant sensitivity was considered to be decrease in EBITDA through loss of contracts, with no redeployment of equipment. EBITDA would need to fall over 70% for a 12-month period to breach the covenant test. Given the strong market demand from existing clients and across a large tendering pipeline, the Group’s increased service diversification and the limited contract expiries due during the year, management consider the risk of a deep demand correction to be low. Given the Group’s exposure to high quality mine site operations, we consider a decrease of such magnitude to be remote. Based on its assessment of the forecasts, principal risks and uncertainties and mitigating actions considered available to the Group in the event of downside scenarios, the Board confirms that it is satisfied the Group will be able to continue to operate and meet its liabilities as they fall due over the going concern period to June 2024. Accordingly, the Board has concluded that the going concern basis in the preparation of the Financial Statements is appropriate and that there are no material uncertainties that would cast doubt on that basis of preparation.

1.2 Consolidation

Basis of consolidation

The consolidated annual financial statements incorporate the annual financial statements of the Company and all subsidiaries. Subsidiaries are entities (including structured entities) which are controlled by the Group. The Company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control. The results of subsidiaries are included in the consolidated annual financial statements from the effective date of acquisition to the effective date of disposal. Adjustments are made when necessary to the annual financial statements of subsidiaries to bring their accounting policies in line with those of the Group. All inter-company transactions, balances, and unrealised gains on transactions between group companies are eliminated in full on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Non-controlling interests in the net assets of consolidated subsidiaries are identified and recognised separately from the group’s interest therein and are recognised within equity. Losses of subsidiaries attributable to non-controlling interests are allocated to the non-controlling interest even if this results in a debit balance being recognised for non-controlling interest. Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions and are recognised directly in the Statement of Changes in Equity. The difference between the fair value of consideration paid or received and the movement in non-controlling interest for such transactions is recognised in equity attributable to the owners of the company. Where a subsidiary is disposed of and a non- controlling shareholding is retained, the remaining investment is measured to fair value with the adjustment to fair value recognised in profit or loss as part of the gain or loss on disposal of the controlling interest. 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.

1.2 Consolidation (continued)

Business combinations

The Group accounts for business combinations using the acquisition method of accounting. The cost of the business combination is measured as the aggregate of the fair values of assets given, liabilities incurred or assumed, and equity instruments issued. Costs directly attributable to the business combination are expensed as incurred, except the costs to issue debt which are amortised as part of the effective interest and costs to issue equity which are included in equity. Any contingent consideration is included in the cost of the business combination at fair value as at the date of acquisition. Subsequent changes to the assets, liability or equity which arise as a result of the contingent consideration are not affected against goodwill, unless they are valid measurement period adjustments. Otherwise, all subsequent changes to the fair value of contingent consideration that is deemed to be an asset or liability is recognised in either profit or loss or in other comprehensive income, in accordance with relevant IFRSs. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity. The acquiree’s identifiable assets, liabilities and contingent liabilities which meet the recognition conditions of IFRS 3 Business combinations are recognised at their fair values at acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current assets Held for Sale and Discontinued Operations, which are recognised at fair value less costs to sell. On acquisition, the acquiree’s assets and liabilities are reassessed in terms of classification and are reclassified where the classification is inappropriate for group purposes.Non-controlling interests in the acquiree are measured on an acquisition-by-acquisition basis either at fair value or at the non-controlling interests’ proportionate share in the recognised amounts of the acquiree’s identifiable net assets. This treatment applies to non-controlling interests which are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation. All other components of non-controlling interests are measured at their acquisition date fair values unless another measurement basis is required by IFRSs. In cases where the Group held a non-controlling shareholding in the acquiree prior to obtaining control, that interest is measured to fair value as at acquisition date. The measurement to fair value is included in profit or loss for the year. Where the existing shareholding was classified as an available-for-sale financial asset, the cumulative fair value adjustments recognised previously to other comprehensive income and accumulated in equity are recognised in profit or loss as a reclassification adjustment. Goodwill is determined as the consideration paid, plus the fair value of any shareholding held prior to obtaining control, plus non-controlling interest and less the fair value of the identifiable assets and liabilities of the acquiree. If, in the case of a bargain purchase, the result of this formula is negative, then the difference is recognised directly in profit or loss. Goodwill is not amortised but is tested on an annual basis for impairment. If goodwill is assessed to be impaired, that impairment is not subsequently reversed.

Asset acquisition
In the event of an asset acquisition, the cost of the acquisition is assigned to the individual assets and liabilities based on their relative fair values. Contingent consideration is accrued for when these amounts are considered probable and are discounted to present value based on the expected timing of payment.

Notes to the Annual Financial Statements (continued)

1. SIGNIFICANT ACCOUNTING POLICIES (continued)

1.3 Significant judgements and sources of estimation uncertainty

The preparation of the Annual Financial Statements in conformity with IFRS requires management, from time to time, to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. These estimates and associated assumptions are based on experience and various other factors that are believed to be reasonable under the circumstances. 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 estimates are revised and in any future periods affected.

1.3.1 Critical judgements in applying accounting policies

The critical judgements made by management in applying accounting policies, apart from those involving estimations, that have the most significant effect on the amounts recognised in the annual financial statements, are outlined as follows:

Financial Statements
124 Capital Limited Annual Report 2022
Capital Limited Annual Report 2022
125

Notes to the Annual Financial Statements (continued)

1. SIGNIFICANT ACCOUNTING POLICIES (continued)

1.3 Significant judgements and sources of estimation uncertainty (continued)

1.3.1 Critical judgements in applying accounting policies (continued)

Impairment of Property, Plant & Equipment
At the end of every year, management uses judgement to review the indicators of impairment of Property, Plant & Equipment. Depending on those indicators, management will determine if an impairment review needs to be done. Refer to Note 12 for details on external indicators and management assessment on the impairment of Property, Plant & Equipment.

Going concern
There is an element of judgement involved in determining the financial forecasts and availability of cash and headroom over banking facilities and covenants in the context of a macro downturn, major political unrest and non-renewal of contracts. Refer to Note 1.1 for the detailed assessment on going concern.

Recoverability of trade receivables and accrued income
The Group has material amounts of billed and unbilled services outstanding at 31 December 2022. Receivables are recognised initially at cost (being the same as fair value) and subsequently at amortised cost less any allowance for impairment, to ensure that amounts recognised represent the recoverable amount. The Group recognises a loss allowance for expected credit losses (ECLs) on all receivable balances from customers using a lifetime credit loss approach and includes specific allowance for impairment where there is evidence that the Group will not be able to collect amounts due from customers, subsequent to initial recognition. Management applies judgement on specific allowances for impairment based on the information available at each reporting date which includes information about past events, current conditions and forecasts of the future economic condition of customers.

Contingent liabilities
Management applies its judgement to the fact patterns and advice it receives from its attorney, advocates and other advisors in assessing if an obligation, including taxation related claims, is probable, more likely than not, or remote. This judgement application is used to determine if the obligation is recognised as a liability or disclosed as a contingent liability (Note 38).

Uncertain taxation provisions
The Group operates internationally in territories with different and complex tax codes. Management exercises judgement in relation to the level of provision required for uncertain tax outcomes. There are a number of tax positions not yet agreed with the tax authorities where different interpretation of legislation and commercial arrangements could lead to a range of outcomes. The tax positions under review covers Corporate Income Tax, VAT, Minimum Income Tax, WHT and Payroll. Judgements are made for each position having regard to the particular circumstances and advice obtained. Refer to Notes 9 and 38 uncertain tax positions. Management also exercises judgement in assessing the availability of suitable future taxable profits to support deferred tax asset recognition. Further details of the Group’s tax position are provided in Note 9.

Classification of spare parts and servicing equipment
Management exercises judgement in assessing spare parts and servicing equipment classification. Spare parts and servicing equipment are carried as inventory and recognised as an expense when consumed. However major spares stand-by equipment qualifies as property, plant and equipment when an entity expects to use them during more than one period and if spare parts and servicing equipment can be used only in connection with an item of property, plant and equipment, they are accounted for as property, plant and equipment.

Investments at fair value
The Group holds investments classed as Level 3. The Group has assessed the fair value of these investments based on a market-based approach using multiples of a set of peer companies. This requires Directors’ estimates to be used and judgements to be made with any gain or loss in fair value recognised in the statement of profit or loss. Further details are provided in Note 21

Value added tax (“VAT”)
Included in trade and other receivables are recoverable VAT balances owing mainly by the fiscal authorities in a number of jurisdictions. The Group is following the relevant process in each country to recoup the VAT balances owing and continues to engage with authorities to estimate if all amounts are recoverable and to accelerate the refund of the outstanding VAT balances. Refer to Note 20

1.3 Significant judgements and sources of estimation uncertainty (continued)

1.3.2 Key sources of estimation uncertainty

Useful lives of property, plant and equipment
Management assesses the appropriateness of the useful lives of property, plant and equipment at the end of each reporting period. The useful economic lives of drilling rigs were reviewed during the year assessed as appropriate. When the estimated useful life of an asset differs from previous estimates, the change is applied prospectively in the determination of the depreciation charge. Heavy mining equipment (“HME”) is depreciated using the unit of production method based on the estimated production hours. The estimated production hours for each type of equipment is based on the original equipment manufacturers (OEM) standards, together with an assessment by the Group’s technical team. The useful lives of property, plant and equipment could be reduced by climate-related matters, for example as a result of physical risks, obsolescence or legal restrictions. The change in useful lives would have a direct impact on the amount of depreciation or amortisation recognised each year from the date of reassessment. The Directors’ review of useful lives has taken into consideration the impacts of the Group’s decarbonisation commitments and has not had a material impact on the results for the year.

Share-based payments
In calculating the share-based payment charge for the year under IFRS 2 Share-based payments, certain assumptions have been made surrounding the future performance of the Capital Limited share price and the number of employees likely to remain employed during the duration of the option life period. In addition, in order to arrive at a fair value for each of the grants, certain parameters have been assumed for the grants and these have been disclosed in Note 25.

Transportation costs – Freight and customs
The Group has significant inventory which is purchased across the world and is moved across multiple borders.In order to allocate freight and customs incurred to inventories management makes use of the inventory consumption during the year to determine the percentage of freight and customs costs which are attributable to inventory and cost of sales. Refer to Note 18 on details of inventories.

Inventory provisions

Inventories are valued at the lower of cost and net realisable value. At year end, management estimates the net realisable value of inventories in order to decide whether to make provision for obsolescence. Factors which are considered include the ageing profile of inventories, storage conditions as well as the shelf life of specific inventories. Refer to Note 6 and Note 18 for details on the amount of inventory provision for obsolescence.

Incremental borrowing rate

The Group used estimates of its incremental borrowing rate to calculate the present value of future lease payments at the date of adoption/ commencement of the leases. The Group calculated its incremental borrowing rate based on existing loan facility arrangements. The weighted average incremental borrowing rate applied to lease arrangements entered into during the year was 7.0% (2021: 7.0%). (Note 13)

Notes to the Annual Financial Statements (continued)

SIGNIFICANT ACCOUNTING POLICIES (continued)

Property, plant and equipment

Property, plant and equipment are tangible assets which the Group holds for its own use or for rental to others and which are expected to be used for more than one year. Impairment tests are performed on property, plant and equipment when there is an indicator that they may be impaired. When the carrying amount of an item of property, plant and equipment is assessed to be higher than the estimated recoverable amount, an impairment loss is recognised immediately in profit or loss to bring the carrying amount in line with the recoverable amount. An item of property, plant and equipment is recognised as an asset when it is probable that future economic benefits associated with the item will flow to the Group, and the cost of the item can be measured reliably. Property, plant and equipment is initially measured at cost. Cost includes all of the expenditure which is directly attributable to the acquisition or construction of the asset, including the capitalisation of borrowing costs on qualifying assets. Depreciation of an asset commences when the asset is available for use as intended by management. Depreciation is charged to write off the asset’s carrying amount over its estimated useful life to its estimated residual value, using a method that best reflects the pattern in which the asset’s economic benefits are consumed by the group. Leased assets are depreciated in a consistent manner over the shorter of their expected useful lives and the lease term.

Financial StatementsFinancial Statements
126 Capital Limited Annual Report 2022
Capital Limited Annual Report 2022
127

Notes to the Annual Financial Statements (continued)

1. SIGNIFICANT ACCOUNTING POLICIES (continued)

Property, plant and equipment (continued)

Depreciation is not charged to an asset if its estimated residual value exceeds or is equal to its carrying amount. Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale or derecognised. Depreciation is recognised in profit or loss so as to write-off the cost of assets, less their residual values, over their expected useful lives using the straight-line method. For Heavy Mining Equipment (HME), equipment hours are most closely linked with the economic benefits of the asset. On this basis, the unit of production method using equipment hours is the preferred method of depreciation for HME.

The useful lives of items of property, plant and equipment have been assessed as follows:

Item	Depreciation method	Average useful life
Drilling Rigs	Straight line	5–20 years
Associated drilling equipment	Straight line	2–7 years
Heavy Mining equipment	Production Hours	6,000–80,000 hours
Motor vehicles	Straight line	4–7 years
Camp and Associated Equipment	Straight line	3–5 years
Leasehold improvements	Straight line	10 years

The residual value, useful life and depreciation method of each asset are reviewed at the end of each reporting year. There have been no changes in the residual values of assets during the year. If the expectations differ from previous estimates, the change is accounted for prospectively as a change in accounting estimate.

Impairment tests are performed on property, plant and equipment when there is an indicator that they may be impaired. When the carrying amount of an item of property, plant and equipment is assessed to be higher than the estimated recoverable amount, an impairment loss is recognised immediately in profit or loss to bring the carrying amount in line with the recoverable amount. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its continued use or disposal. Any gain or loss arising from the derecognition of an item of property, plant and equipment, determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item, is included in profit or loss when the item is derecognised.

Capital spares

Capital spares are spare parts that are regularly replaced, usually as part of a general replacement programme. The parts removed are often repaired or overhauled and used in the next replacement cycle. The Group carries these spare parts and servicing equipment as inventories and recognises them as an expense when consumed. However spare parts and servicing equipment that can only be used in connection with a specific item of property, plant and equipment and they are expected to be used more than 1 year are recognised as property, plant and equipment. Depreciation of spares that are capitalised commences when the asset has been installed and is capable of being used. The depreciation charge is based on the expected useful life of the spare while it is being used, which may be shorter than the useful life of the asset to which it relates. When the spare is itself replaced, the asset is derecognised.

Intangible assets

An intangible asset is recognised when:
* It is probable that the expected future economic benefits that are attributable to the asset will flow to the entity; and
* The cost of the asset can be measured reliably.

Intangible assets are initially recognised at cost. Intangible assets are carried at cost less any accumulated amortisation and any impairment losses. For intangible assets, amortisation is provided on a straight-line basis over their useful life once the development of the software has been completed. The amortisation period and the amortisation method for intangible assets are reviewed every period-end. Reassessing the useful life of an intangible asset with a finite useful life after it was classified as indefinite is an indicator that the asset may be impaired. As a result, the asset is tested for impairment and the remaining carrying amount is amortised over its useful life. Amortisation is provided to write down the intangible assets, on a straight-line basis, to their residual value as follows:

Item	Depreciation method	Average useful life
Computer software	Straight line	10 Years

Notes to the Annual Financial Statements (continued)

1. SIGNIFICANT ACCOUNTING POLICIES (continued)

Financial instruments

Financial instruments held by the Group are classified in accordance with the provisions of IFRS 9 Financial Instruments. Broadly, the classification possibilities, which are adopted by the Group, as applicable, are as follows:

Financial assets which are equity instruments:

• Mandatorily at fair value through profit or loss.

Financial assets which are debt instruments:

• Amortised cost. (This category applies only when the contractual terms of the instrument give rise, on specified dates, to cash flows that are solely payments of principal and interest on principal, and where the instrument is held under a business model whose objective is met by holding the instrument to collect contractual cash flows); or
• Fair value through other comprehensive income. (This category applies only when the contractual terms of the instrument give rise, on specified dates, to cash flows that are solely payments of principal and interest on principal, and where the instrument is held under a business model whose objective is achieved by both collecting contractual cash flows and selling the instruments); or
• Mandatorily at fair value through profit or loss. (This classification automatically applies to all debt instruments which do not qualify as at amortised cost or at fair value through other comprehensive income); or
• Designated at fair value through profit or loss. (This classification option can only be applied when it eliminates or significantly reduces an accounting mismatch).

Derivatives which are not part of a hedging relationship:

• Mandatorily at fair value through profit or loss.

Financial liabilities:

• Amortised cost; or
• Mandatorily at fair value through profit or loss. (This applies to contingent consideration in a business combination or to liabilities which are held for trading); or
• Designated at fair value through profit or loss. (This classification option can be applied when it eliminates or significantly reduces an accounting mismatch; the liability forms part of a group of financial instruments managed on a fair value basis; or it forms part of a contract containing an embedded derivative and the entire contract is designated as at fair value through profit or loss).

Note 33 presents the financial instruments held by the Group based on their specific classifications.# 1. SIGNIFICANT ACCOUNTING POLICIES (continued)

1.6 Financial instruments (continued)

1.6.1 Trade and other receivables

The specific accounting policies for the classification, recognition and measurement of each type of financial instrument held by the Group are presented below:

Classification

Trade and other receivables are classified as financial assets (Note 19). They have been classified in this manner because their contractual terms give rise, on specified dates to cash flows that are solely payments of principal and interest on the principal outstanding, and the Group’s business model is to collect the contractual cash flows on trade and other receivables.

Recognition and measurement

Trade and other receivables are recognised when the Group becomes a party to the contractual provisions of the receivables. They are measured, at initial recognition, at fair value plus transaction costs, if any. They are subsequently measured at amortised cost. The amortised cost is the amount recognised on the receivable initially, minus principal repayments, plus cumulative amortisation (interest) using the effective interest method of any difference between the initial amount and the maturity amount, adjusted for any loss allowance.

Impairment

The group recognises a loss allowance for Expected Credit Losses (ECL) on trade and other receivables. When considering ECL, the Group reviews historical and forward-looking information. The amount of expected credit losses is updated at each reporting date. The Group measures the allowance for credit losses for trade and other receivables at an amount equal to lifetime expected credit losses, which represents the expected credit losses that will result from all possible default events over the expected life of the receivable. A default event means when the Group deems that funds are irrecoverable and written off.

1.6.2 VAT recoverability

The Group’s subsidiaries are subject to value added tax (VAT) in the jurisdictions in which they operate. The amount of VAT liability is determined by applying the applicable tax rate to the amount invoiced less VAT paid on purchases. When VAT paid on purchases exceed VAT charged on sales of goods and services, the excess is regarded as recoverable upon the submission of VAT returns and the acceptance of these VAT returns by the relevant tax authorities. VAT recoverable is reviewed for impairment at the end of each reporting date. (Note 20)

1.6.3 Investments in equity instruments

Classification

Investments in equity instruments are presented in Note 21. They are classified mandatorily at fair value through profit or loss.

Recognition and measurement

Investments in equity instruments are recognised when the Group becomes a party to the contractual provisions of the instrument. The investments are measured, at initial recognition, at fair value. Transaction costs are added to the initial carrying amount for those investments which have been designated as at fair value through other comprehensive income. All other transaction costs are recognised in profit or loss. Investments in equity instruments are subsequently measured at fair value with changes in fair value recognised either in profit or loss. Details of the valuation policies and processes are presented in Note 34.

1.6.4 Cash and cash equivalents

Cash and cash equivalents are stated at carrying amount which is deemed to be fair value. For the purpose of the Statement of Cash Flows, cash and cash equivalents comprise cash on hand and deposits held on call with banks.

1.6.5 Financial Liabilities

All financial liabilities are measured subsequently at amortised cost using the effective interest method or at FVTPL.

Financial liabilities measured subsequently at amortised cost

Financial liabilities that are not (i) contingent consideration of an acquirer in a business combination, (ii) held-for-trading, or (iii) designated as at FVTPL, are measured subsequently at amortised cost using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the amortised cost of financial liability.

1.7 Tax

Current tax assets and liabilities

Current tax for current and prior periods is, to the extent unpaid, recognised as a liability. If the amount already paid in respect of current and prior periods exceeds the amount due for those periods, the excess is recognised as an asset. Current tax liabilities (assets) for the current and prior periods are measured at the amount expected to be paid to (recovered from) the tax authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted in countries where the Company and its subsidiaries operate at the end of the reporting period.

Deferred tax assets and liabilities

A deferred tax liability is recognised for all taxable temporary differences, except to the extent that the deferred tax liability arises from the initial recognition of an asset or liability in a transaction which at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss).

A deferred tax asset is recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised. A deferred tax asset is not recognised when it arises from the initial recognition of an asset or liability in a transaction at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss).

A deferred tax asset is recognised for the carry forward of unused tax losses to the extent that it is probable that future taxable profit will be available against which the unused tax losses can be utilised. This is not applicable for the Group as there are no deferred tax assets at the end of the reporting date.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

1.7 Tax (continued)

Tax expenses

Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. When current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

Uncertainty over Income Tax Treatments

When considering the appropriate accounting for current and deferred tax liabilities and assets in circumstances in which there is uncertainty over income tax treatments, the Group considers whether it is probable that the relevant tax authority will accept the position adopted, assuming that the tax authority has full knowledge of all related information. If the assessed probability is that the tax authority will not accept the income tax treatment adopted, in accounting for the current and deferred tax asset or liability, the Group makes an assessment of the probable outcome of the uncertain tax position.

1.8 Leases

The Group assesses whether a contract is, or contains a lease, at the inception of the contract. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. In order to assess whether a contract is, or contains a lease, management determine whether the asset under consideration is “identified”, which means that the asset is either explicitly or implicitly specified in the contract and that the supplier does not have a substantial right of substitution throughout the period of use. Once management has concluded that the contract deals with an identified asset, the right to control the use thereof is considered. To this end, control over the use of an identified asset only exists when the Group has the right to substantially all of the economic benefits from the use of the asset as well as the right to direct the use of the asset. In circumstances where the determination of whether the contract is or contains a lease requires significant judgement, the relevant disclosures are provided in the significant judgments and sources of estimation uncertainty section of these accounting policies.

Group as lessee

A lease liability and corresponding right-of-use asset are recognised at the lease commencement date, for all lease agreements for which the Group is a lessee, except for short-term leases of 12 months or less, or leases of low value assets. For these leases, the Group recognises the lease payments as an operating expense (Note 6) on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Details of leasing arrangements where the Group is a lessee are presented in Note 13 Leases (Group as lessee).# Notes to the Annual Financial Statements (continued)

1. SIGNIFICANT ACCOUNTING POLICIES (continued)

1.8 Leases (continued)

Lease liability

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowing rate. The definition of the lessee’s incremental borrowing rate states that the rate should represent what the lessee ‘would have to pay to borrow over a similar term and with similar security, the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment. In practice, judgement may be needed to estimate an incremental borrowing rate.

Lease payments included in the measurement of the lease liability comprise the following:

• Fixed lease payments, including in-substance fixed payments, less any lease incentives;
• Variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;
• The amount expected to be payable by the Group under residual value guarantees;
• The exercise price of purchase options, if the Group is reasonably certain to exercise the option;
• Lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option; and
• Penalties for early termination of a lease, if the lease term reflects the exercise of an option to terminate the lease.

Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability (or right-of-use asset). The related payments are recognised as an expense in the period incurred and are included in operating expenses (Note 13).

The lease liability is presented as a separate line item on the Statement of Financial Position. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect lease payments made. Interest charged on the lease liability is included in finance costs (Note 7).

The Group has applied judgement to determine the lease term for some lease contracts in which it is a lessee that include renewal options. The assessment of whether the Group is reasonably certain to exercise such options impact the lease terms, which significantly affects the amount of lease liabilities and rights of use of assets recognised.

The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) when:

• There has been a change to the lease term, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate;
• There has been a change in the assessment of whether the Group will exercise a purchase, termination or extension option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate;
• There has been a change to the lease payments due to a change in an index or a rate, in which case the lease liability is remeasured by discounting the revised lease payments using the initial discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used);
• There has been a change in expected payment under a residual value guarantee, in which case the lease liability is remeasured by discounting the revised lease payments using the initial discount rate; and
• A lease contract has been modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured by discounting the revised payments using a revised discount rate.

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recognised in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

Lease payments included in the measurement of the lease liability comprise the following:

• The initial amount of the corresponding lease liability;
• Any lease payments made at or before the commencement date;
• Any initial direct costs incurred;
• Any estimated costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, when the Group incurs an obligation to do so, unless these costs are incurred to produce inventories; and
• Less any lease incentives received.

The Group presents the part of the lease payment that represents interest portion of the lease liability as a financing cash flow in Consolidated Statement of Cash Flows in accordance with IAS 7 “Statement of Cash Flows”.

Right-of-use assets

Right-of-use assets are presented as a separate line item on the Statement of Financial Position. Right-of-use assets are subsequently measured at cost less accumulated depreciation and impairment losses. Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. However, if a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. Depreciation starts at the commencement date of a lease. For right-of-use assets which are depreciated over their useful lives, the useful lives are determined consistently with items of the same class of property, plant and equipment. Refer to the accounting policy for property, plant and equipment for details of useful lives. The residual value, useful life and depreciation method of each asset are reviewed at the end of each reporting year. If the expectations differ from previous estimates, the change is accounted for prospectively as a change in accounting estimate. Each part of a right-of-use asset with a cost that is significant in relation to the total cost of the asset is depreciated separately. The depreciation charge for each year is recognised in profit or loss unless it is included in the carrying amount of another asset.

1.9 Inventories

Inventories relates to spare parts, servicing equipment and consumables. They are measured at the lower of cost and net realisable value. Cost is determined on the weighted average cost basis. Redundant and slow-moving inventory are identified and written down to their net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. The cost of inventories comprises of all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. When inventories are sold, the carrying amount of those inventories are recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories, arising from an increase in net realisable value, are recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.

1.10 Impairment of assets

The Group assesses at the end of each reporting period whether there is any indication that an asset may be impaired. If any such indication exists, the Group estimates the recoverable amount of the asset. When it is not possible to estimate the recoverable amount for an individual asset, the recoverable amount is determined for the cash-generating unit to which the asset belongs. The recoverable amount of an asset or a cash- generating unit is the higher of its fair value less costs to sell and its 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 is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is an impairment loss. An impairment loss of assets carried at cost less any accumulated depreciation or amortisation is recognised immediately in profit or loss. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so 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 (cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income in profit or loss immediately.

1.11 Share capital and equity

Ordinary shares are classified as equity. Ordinary shares are recognised at par value and classified as ‘share capital’ in equity. Any amounts received from the issue of shares in excess of par value is classified as ‘share premium’ in equity. Dividends are recognised as a liability when they are declared.# Notes to the Annual Financial Statements

1. SIGNIFICANT ACCOUNTING POLICIES (continued)

Cost of raising equity

There are two elements to consider in determining the accounting treatment of transaction costs.
* Transactions costs related to an equity transaction.
* Transaction costs that are directly attributable to an equity transaction.

Transactions costs that meet the criteria above are accounted for as a deduction from equity.

Treasury shares

Treasury shares represent the shares of the parent company, Capital Limited, that are held in treasury. Treasury shares are recorded at cost and deducted from equity.

1.12 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 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. At each reporting date, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss over the remaining vesting period, with a corresponding adjustment to the equity-settled employee benefits reserve. Market conditions and non-vesting conditions are taken into account when estimating the fair value of the equity-settled share-based payment. As an exception, when the Group is obligated, in terms of tax legislation, to withhold an amount of employees’ tax associated with an equity-settled share-based payment transaction (thus creating a net settlement feature), the full transaction is still accounted for as an equity-settled share-based payment transaction.

1.13 Employee benefits

Short-term employee benefits

A liability is recognised for benefits accruing to employees in respect of salaries, wages and leave entitlements in the period the related services is rendered. Liabilities recognised in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.

Retirement Benefits

The Group does not have a legal obligation to provide for retirement benefits, however each subsidiary makes defined contributions for retirement benefits as per the country’s statutory obligations and charged to Profit and Loss as payment falls due.

1.14 Revenue recognition

The core principle of IFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, the Standard introduces a 5-step approach to revenue recognition:
* Step 1: Identify the contract(s) with a customer;
* Step 2: Identify the performance obligations in the contract;
* Step 3: Determine the transaction price;
* Step 4: Allocate the transaction price to the performance obligations in the contract; and
* Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation.

Under IFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when ‘control’ of the goods or services underlying the particular performance obligation is transferred to the customer. Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances.

Rendering of services

Revenue from a contract to provide services is recognised by reference to either the stage of completion (over time) or at a point in time. The Group recognises revenue from the following streams:

• Revenue from drilling and mining contracts is recognised at the contractual rates as the drilling and mining services are delivered. Revenue for mobilisation of mining equipment and associated resources is recognised over the term of the contract;
• Revenue from surveying is recognised at the contractual rates as the survey services are delivered; and
• Laboratory analysis of drilling samples relates to sample analysis by MSA Laboratories provided to customers. Transfer of benefits occurs when testing is completed for each sample received and results communicated to customers. Samples are received in batches from customers and processed continuously. Revenue is recognised when testing of a batch is completed and when results are communicated.

Dividend and interest income

Dividend income from investments is recognised when the shareholder’s right to receive payment has been established (provided that it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably). Dividend income was only recognised when all the above criteria was met. Interest income from a financial asset is recognised when it is probable that the 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 at 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.

1.15 Translation of foreign currencies

Functional and presentation currency

The individual Financial Statements of each Group Company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the Group Financial Statements, the results and financial statements of each Group Company are translated to United States Dollars, which is the functional currency of the Group, and the presentation currency for the Group Financial Statements.

Foreign currency transactions

In preparing the Financial Statements of the individual Group companies, transactions in currencies other than the entity’s functional currency (foreign currencies) are recognised at the rates of exchange prevailing on the dates of the transactions. At each reporting date, monetary items that are denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency shall be translated using the exchange rate at the date of the transaction. Exchange differences are recognised in profit or loss in the period in which they arise except for:
* Exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings;
* Exchange differences on transactions entered into to hedge certain foreign currency risks; and
* Exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and reclassified from equity to profit or loss on repayment of the monetary items.

For the purpose of presenting Group Financial Statements, the assets and liabilities of the Group’s foreign operations are translated into United States Dollars at exchange rates prevailing on the reporting date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the date of transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity (attributed to non-controlling interests as appropriate). On disposal of a foreign operation, all of the exchange differences accumulated in equity in respect of that operation attributable to the owners of the Company are reclassified to Profit or Loss.

1.16 Contingent Liabilities

A Contingent Liability is a possible obligation from past events that will be confirmed by some future event or a present obligation from a past event, but either:
* The outflow of economic benefits to satisfy this obligation is not probable, or
* The amount of obligation cannot be reliably measured.

In events where firm indications of a possible obligation exist the Group will use judgements based on estimates from expert advice to provide for the portion of the possible expense.

1.17 Provisions

Provisions are recognised when the Group has a present (legal or constructive) obligation as a result of a past event, if it is probable the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value of money is material, provisions are discounted using a current pre-tax discount rate specific to the liability.

1.18 Consideration of climate change

In preparing the financial statements, the Directors have considered the impact of climate change, particularly in the context of the risks identified in the TCFD disclosure on pages 52 to 54 this year. There has been no material impact identified on the financial reporting judgements and estimates.# Notes to the Annual Financial Statements (continued)

2. NEW STANDARDS AND INTERPRETATIONS

2.1 New standards, interpretations and amendments effective from 1 January 2022

In the current year, the Group has applied a number of amendments to IFRS accounting standards issued by the International Accounting Standards Board (IASB) that are mandatorily effective for an accounting period that begins on or after 1 January 2022. Their adoption has not had any material impact on the disclosures or on the amounts reported in these financial statements.

Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16)

The amendment to IAS 16 prohibits an entity from deducting from the cost of an item of PP&E any proceeds received from selling items produced while the entity is preparing the asset for its intended use (for example, the proceeds from selling samples produced during the testing phase of a manufacturing facility after it is being constructed but before start of commercial production). The proceeds from selling such samples, together with the costs of producing them, are now recognised in profit or loss.

These amendments had no impact on the year-end consolidated financial statements of the Group as there were no sales of such items produced by property, plant and equipment made available for use on or after the beginning of the earliest period presented.

Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37)

IAS 37 defines an onerous contract as a contract in which the unavoidable costs (costs that the Group has committed to pursuant to the contract) of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The amendments to IAS 37.68A clarify, that the costs relating directly to the contract consist of both:

• The incremental costs of fulfilling that contract- e.g., direct labour and material; and
• An allocation of other costs that relate directly to fulfilling contracts: e.g., Allocation of depreciation charge on property, plant and equipment used in fulfilling the contract.

The Group, prior to the application of the amendments, did not have any onerous contracts. These amendments had no impact on the Group’s consolidated financial statements.

Amendments to IFRS 3 Reference to the Conceptual Framework

In May 2020, the IASB issued amendments to IFRS 3, which update a reference to the Conceptual Framework for Financial Reporting without changing the accounting requirements for business combinations.

Annual Improvements to IFRS Accounting Standards 2018 – 2020 Cycle

The Group has adopted the amendments included in the Annual Improvements to IFRS Accounting Standards 2018 – 2020 Cycle for the first time in the current year. The Annual Improvements include amendments to four standards.

• IFRS 1: Subsidiary as a First-time Adopter (FTA)
• IFRS 9: Fees in the ‘10 per cent’ Test for Derecognition of Financial liabilities
• IFRS 16: Reimbursement of leasehold improvements

136 Capital Limited Annual Report 2022

Capital Limited Annual Report 2022 137

Notes to the Annual Financial Statements (continued)

2. NEW STANDARDS AND INTERPRETATIONS (continued)

2.2 Standards and interpretations not yet effective

There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are effective in future accounting periods that the Group has decided not to adopt early.

Standard/Interpretation	Effective Date	Expected Impact
Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)	January 1, 2023	Unlikely there will be a material impact
Definition of Accounting Estimates (Amendments to IAS 8)	January 1, 2023	Unlikely there will be a material impact
Deferred Tax Related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12).	January 1, 2023	Unlikely there will be a material impact
IFRS 16 Leases (Amendment – Liability in a Sale and Leaseback)	January 1, 2024	Unlikely there will be a material impact
IAS 1 Presentation of Financial Statements (Amendment – Classification of Liabilities as Current or Non-current)	January 1, 2024	Unlikely there will be a material impact
IAS 1 Presentation of Financial Statements (Amendment – Non-current Liabilities with Covenants)	January 1, 2024	Unlikely there will be a material impact

3. REVENUE

Revenue from the rendering of services comprises:

	2022	2021
	US$	US$
Drilling and associated revenue	208,562,447	172,537,359
Mining and associated revenue	49,763,175	33,300,731
Laboratory services revenue	27,304,685	15,651,317
Revenue from surveying	4,654,061	5,303,859
Total revenue	290,284,368	226,793,266

The Group has four revenue streams:

• Drilling revenue relates to drilling services revenue where the terms of the contract with customers requires the Group to drill a specified number of meters at a specified drilling rate. Under IFRS 15 it has been concluded that the Group has an enforceable right to payment for performance completed. The transaction price for drilling is price per meter drilled times number of meters drilled. The e-plod system is a day-by-day tracker of the meters drilled per rig. This takes into account the meters, relevant rate per meter and leads to the revenue number. Revenue recognition occurs when the relevant geologist/mine manager signs and accepts the e-plod report which is converted monthly/bi-monthly into invoices.

• Mining revenue relates to earth moving and equipment rental services provided at customers’ mine sites. Revenue for the earth moving services is generated based on the bank cubic metres (BCM) moved multiplied by the rates per bank cubic metre as per the contract. Recognition is at a point in time as the load and haul service is provided, which in turn fulfils the performance obligations. Invoices are raised monthly after customer sign off and acceptance of the progress claim that details tonnage of earth moved at the contracted rates. The equipment rental contract consists of both the variable and fixed fee rates. Revenue is generated based on the fixed fee per equipment plus the variable rate multiplied by the number of hours the equipment worked for the month. Invoices are raised monthly with customer sign off on equipment engine hours. Customers are given 30 days credit periods for services rendered.

Notes to the Annual Financial Statements (continued)

1. REVENUE (continued)

   Revenue for mobilisation of mining equipment and associated resources is recognised over the term of the contract.

2. Laboratory analysis of drilling samples relates to sample analysis by MSA Laboratories provided to customers. Samples are analysed and invoiced as and when the results are obtained and communicated to customers. The turnaround time for a sample from collection is between 14 and 20 days from receipt to invoice. Under IFRS 15 it has been concluded that the Group has an enforceable right to payment for performance completed.

3. Revenue from surveying relates to short term hire of down hole surveying equipment. Under IFRS 15 it has been concluded that the Group has an enforceable right to payment for performance completed. Meeting of performance obligations and transfer of benefits is continuous.

4. COST OF SALES

	2022	2021
	US$	US$
Employee cost (Note 6)	63,236,358	50,592,673
Consumables	18,299,835	13,399,813
Repairs and maintenance	24,249,689	16,859,411
Fuel	7,483,682	3,707,324
Camp operational cost	5,397,497	4,042,900
Other cost of sales	11,696,754	8,349,937
Freight and customs	9,487,234	10,557,625
Equipment hire	1,785,865	1,497,625
Travel and accommodation	4,382,909	3,877,335
Safety gear and equipment	2,614,371	2,109,610
Establishment cost	944,805	1,099,407
Others	6,273,596	4,397,586
Total cost of sales	155,852,595	120,491,246

5. ADMINISTRATION EXPENSES

	2022	2021
	US$	US$
Employee cost (Note 6)	16,324,024	14,962,199
Professional fees	3,848,105	3,747,479
Insurance	1,886,037	1,412,108
Rental cost	1,549,375	1,268,795
Share based payment expenses	2,774,331	1,989,277
Bad debts written off	1,457,548	–
Expected credit loss provision	2,980,656	–
Travel and accommodation	2,499,292	825,399
Bank charges	1,277,475	730,294
Foreign exchange loss	1,711,081	1,586,329
Software costs	1,104,203	535,765
Other expenses	6,918,435	5,969,701
Total administration expenses	44,330,562	33,027,346

Financial StatementsFinancial Statements
138 Capital Limited Annual Report 2022

Capital Limited Annual Report 2022 139

Notes to the Annual Financial Statements (continued)

6.## PROFIT FROM OPERATIONS

The following items have been recognised as expenses in determining profit from operations:

	2022	2021
Depreciation, amortisation and impairments
Rights of use assets	3,457,633	880,871
Computer software	4,178	4,179
Drilling rigs	10,373,050	7,959,524
Associated drilling equipment	3,134,579	2,022,454
Vehicles and trucks	3,180,506	1,870,873
Camp and associated equipment	1,389,635	1,207,651
Mining equipment	8,876,658	7,451,803
Total depreciation, amortisation and impairments	30,416,239	21,397,355
Operating lease expense
Short term equipment rental	6,457,446	7,601,916
Employee costs
Salaries, wages, bonuses and other benefits	79,560,382	65,554,872
Share based compensation expense	2,774,331	1,989,277
Total employee costs	82,334,713	67,544,149
Other
Loss on disposal of property, plant and equipment	668,817	453,869
Legal and professional fees	3,848,105	3,747,479
Stock write off and provision	945,103	313,250
Allowance for credit losses	2,980,656	–
Bad debts written off	1,457,548	–
Other taxes	333,257	278,487
(Decrease)/ increase in provisions for other taxes	(287,678)	856,692

7. FINANCE COSTS

	2022	2021
Lease liabilities	818,249	177,962
Interest on bank loans	4,219,977	2,517,390
Interest on supplier credit facilities	1,005,158	699,865
Amortised debt arrangement costs	438,663	–
Other finance costs	873,663	438,549
Total finance costs	7,355,710	3,833,766

Notes to the Annual Financial Statements (continued)

8. FAIR VALUE (LOSS)/ GAIN ON INVESTMENTS AT FAIR VALUE

Fair value (loss)/gain on investments recognised during the year consists of:

	2022	2021
Valuation of equity investments at fair value through profit or loss	(19,534,702)	33,054,048
Valuation of derivative financial assets through profit or loss	(554,903)	554,903
Realised gain on disposal of equity investments	291,636	107,805
Fair value (loss)/gain on investments at fair value	(19,797,969)	33,716,756

9. TAXATION

Major components of the tax expense

	2022	2021
Current
Income tax – current period	6,281,949	8,074,306
Income tax – recognised in current tax for prior periods	204,943	224,385
Withholding tax – current period	3,349,077	3,397,396
Total current taxation	9,835,969	11,696,087
Deferred
Current year	–	20,442
Total deferred taxation	–	20,442
Total taxation	9,835,969	11,716,529

Capital Limited is incorporated in Bermuda. No taxation is payable on the results of the Bermuda business. Taxation for other jurisdictions is calculated in terms of the legislation and rates prevailing in the respective jurisdictions.

Reconciliation of the tax expense

The taxation charge for the year can be reconciled to the theoretical amount that would arise using the basic tax rate on the profit or loss per the statement of comprehensive income as follows:

	2022	2021
Accounting profit before tax	32,566,128	82,005,307
Tax at domestic rates applicable to profits and losses in the jurisdictions in which the Group operates	4,189,998	8,100,344
Tax effect of adjustments on taxable income
Foreign withholding taxes paid	3,349,077	3,397,396
Permanent differences	623,182	(542,467)
Prior year under / (over) provision	204,943	224,385
Losses not recognised	1,468,769	536,872
Total taxation	9,835,969	11,716,529

The Group’s consolidated income tax expense is affected by the varying tax laws and income tax rates in effect in the various countries in which it operates, which are mainly in Africa, Middle East and Americas.

Financial StatementsFinancial Statements 140 Capital Limited Annual Report 2022 Capital Limited Annual Report 2022 141

Notes to the Annual Financial Statements (continued)

9. TAXATION (continued)

Uncertain income tax positions

The Group operates in multiple jurisdictions with complex legal and tax regulatory environments. In certain of these jurisdictions, the Group has taken income tax positions that management believes are supportable and are intended to withstand challenge by tax authorities. Some of these positions are inherently uncertain and relate to the interpretation of income tax laws. The Group periodically reassesses its tax positions. Changes to the financial statement recognition, measurement, and disclosure of tax positions is based on management’s best judgment given any changes in the facts, circumstances, information available and applicable tax laws. Considering all available information and the history of resolving income tax uncertainties, the Group believes that the ultimate resolution of such matters will not likely have a material effect on the Group’s financial position, statements of income or cash flows.

10. EARNINGS PER SHARE

Basic earnings per share

The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows:

	2022	2021
Earnings for the year, used in the calculation of basic earnings per share ($)	20,990,137	70,174,784
Adjusted for:
Fair value loss/ (gain) on investments	19,797,969	(33,716,756)
Earnings for the year, used in the calculation of basic earnings per share (adjusted) ($)	40,788,106	36,458,028
Weighted average number of ordinary shares for the purposes of basic earnings per share (No.)	189,653,369	189,765,149
Basic earnings per share ($c)	11.07	36.98
Basic earnings per share (adjusted) ($c)	21.51	19.21

Diluted earnings per share

The earnings used in the calculation of diluted earnings per share measures are the same as those used in the equivalent basic earnings per share measures, as outlined above.

Notes to the Annual Financial Statements (continued)

10. EARNINGS PER SHARE (continued)

Diluted earnings per share (continued)

	2022	2021
Weighted average number of ordinary shares used for basic earnings per share	189,653,369	189,765,149
Adjusted for:
Effect of STIP and LTIP shares	6,263,799	3,021,654
Weighted average number of ordinary shares used in the calculation of diluted earnings per share	195,917,168	192,786,803
Diluted earnings per share ($c)	10.71	36.40
Diluted earnings per share (adjusted) ($c)	20.82	18.91

11. DIVIDENDS PAID

	2022	2021
Dividends	7,089,184	4,751,372

During the 12 months ended 31 December 2022, a dividend of 2.4 cents (2021: 1.3 cents) per ordinary share, totalling to US$4,607,599 (2021: US$2,470,713) was declared as the final dividend for 2021 and paid to the shareholders on 10 May 2022 (2021: 04 May 2021) followed by a further dividend of 1.3 cents (2021: 1.2 cents) per share which was declared as interim dividend for 2022 totalling US$2,481,586 (2021: US$2,280,658) and paid on 3 October 2022 (2021: 24 September 2021). The total dividend paid is US$7,089,184 (2021: US$4,751,372).

In respect of the year ended 31 December 2022, the Directors propose that a final dividend of 2.6 cents (2021: 2.4 cents) per share be paid to shareholders on 9 May 2023 (2021: 10 May 2022). This final dividend has not been included as a liability in these Consolidated Financial Statements. The proposed final dividend is payable to all shareholders on the Register of Members on 14 April 2023 (2021: 8 April 2022). The total estimated final dividend to be paid is US$5.0 million (2021: US$4.59 million). The payment of this final dividend will not have any tax consequences for the Group.

Financial StatementsFinancial Statements 142 Capital Limited Annual Report 2022 Capital Limited Annual Report 2022 143

Notes to the Annual Financial Statements (continued)

12. PROPERTY, PLANT AND EQUIPMENT

	Drilling Rigs	Heavy mining equipment	Associated drilling equipment	Vehicles and trucks	Camp and associated equipment	Computer software	Leasehold improvements	Total
Total Cost
At 1 January 2021	103,540,898	26,511,913	20,326,737	21,979,021	12,037,844	38,361	1,653,952	186,088,726
Additions	23,814,358	29,918,725	7,009,849	12,439,323	2,483,930	–	–	75,666,185
Disposal	(3,103,550)	(19,520)	(831,773)	(824,132)	(644,637)	–	–	(5,423,612)
Transfers from Associated drilling equipment	–	2,813,654	(2,813,654)	–	–	–	–	–
At 31 December 2021	124,251,706	59,224,772	23,691,159	33,594,212	13,877,137	38,361	1,653,952	256,331,299
Additions	21,873,207	12,309,225	12,133,884	5,617,520	4,772,198	–	–	56,706,034
Disposal	(6,755,226)	(89,983)	(4,426,158)	(1,425,910)	(479,718)	–	–	(13,176,995)
At 31 December 2022	139,369,687	71,444,014	31,398,885	37,785,822	18,169,617	38,361	1,653,952	299,860,338
Total Accumulated Depreciation
At 1 January 2021	70,806,074	–	7,159,802	12,641,891	6,407,935	5,042	97,299	97,118,043
Depreciation	7,959,524	7,451,803	2,022,454	1,870,873	1,207,651	4,179	–	20,516,484
Disposal	(2,940,714)	–	(700,176)	(751,640)	(509,097)	–	–	(4,901,627)
Transfers from Associated drilling equipment	–	528,416	(528,416)	–	–	–	–	–
At 31 December 2021	75,824,884	7,980,219	7,953,664	13,761,124	7,106,489	9,221	97,299	112,732,900
Depreciation	10,373,050	8,876,658	3,134,579	3,180,506	1,389,635	4,178	–	26,958,606
Disposal	(6,409,664)	(81,176)	(4,345,182)	(1,245,572)	(407,682)	–	–	(12,489,276)
At 31 December 2022	79,788,270	16,775,701	6,743,061	15,696,058	8,088,442	13,399	97,299	127,202,230
Carrying amount at 31 December 2021	48,426,822	51,244,553	15,737,495	19,833,088	6,770,648	29,140	1,556,653	143,598,399
Carrying amount at 31 December 2022	59,581,417	54,668,313	24,655,824	22,089,764	10,081,175	24,962	1,556,653	172,658,108

Bank borrowings are secured on the Group’s drilling and mining fleet – see Note 27. The Group’s property plant and equipment includes assets not yet commissioned totalling US$24.6 million (2021: US$19.9 million). The assets will be depreciated once commissioned and available for use.# Impairment and reversal of impairment

The Group reviews the carrying amounts of its tangible assets at the end of each reporting period to determine whether there is any indication that those assets may be impaired. Property, plant and equipment was tested for impairment at the reporting date. As at this date, Management did not identify any impairment indicators to warrant a detailed impairment review. A checklist is made against both the external and internal sources of impairment. These indicators include:

• Unexpected decline in market value of the asset;
• Adverse technological changes, market or legal environment;
• Impact of climate change transitions;
• Changes in customer demands which Capital Limited fails to respond to; and
• Visual inspections of the asset during scheduled maintenance.

No indication of the above has been noted with regards to the Group’s property, plant and equipment. Market Values are still stable and in line with the carrying values on the assets. Routine maintenance is carried out on the assets as required, including parts change out and service.

Notes to the Annual Financial Statements (continued)

13. LEASES (GROUP AS LESSEE)

Details pertaining to leasing arrangements, where the Group is lessee are presented below:

Right of use assets	Machinery US$	Land & Buildings US$	Total US$
At 1 January 2021	–	629,657	629,657
Additions	8,332,484	1,773,126	10,105,610
Depreciation	(340,101)	(543,823)	(883,924)
At 31 December 2021	7,992,383	1,858,960	9,851,343
Additions	7,735,707	2,522,297	10,258,004
Depreciation	(2,641,117)	(815,912)	(3,457,029)
At 31 December 2022	13,086,973	3,565,345	16,652,318

Lease liabilities	At 1 January 2021	Additions	Interest expense	Lease payments	At 31 December 2021	Additions	Interest expense	Lease payments	At 31 December 2022
US$	US$	US$	US$	US$	US$	US$	US$	US$	US$
Machinery	–	8,332,484	96,385	(380,882)	8,047,987	7,068,932	651,492	(2,897,410)	12,871,001
Land & Buildings	673,299	1,354,344	81,577	(566,038)	1,543,182	2,522,296	166,757	(836,388)	3,395,847
Total	673,299	9,686,828	177,962	(946,920)	9,591,169	9,591,228	818,249	(3,733,798)	16,266,848

The weighted average incremental borrowing rate applied to lease liabilities during the year was 7% (2021: 7%).

Lease liabilities

The maturity analysis of lease liabilities is as follows:

	2022	2021
US$
Within one year	4,139,464	2,236,424
Two to five years	12,127,384	7,354,745
Total	16,266,848	9,591,169

	2022	2021
US$
Current liabilities	4,139,464	2,236,424
Non-current liabilities	12,127,384	7,354,745
Total	16,266,848	9,591,169

The Group’s machinery leases mainly relate to the Chrysos PhotonAssay TM units for the laboratory business. The Group recognises lease liabilities and right of use assets once the units have been commissioned for use on site. As at 31 December 2022, 4 Chrysos units had been commissioned (2021: 1 unit).

Financial StatementsFinancial Statements

144 Capital Limited Annual Report 2022

Capital Limited Annual Report 2022

145

14. GOODWILL

Group	Cost	Accumulated impairment	Carrying value	Cost	Accumulated impairment	Carrying value
	2022	2022	2022	2021	2021	2021
US$	US$	US$	US$	US$	US$	US$
Goodwill	1,296,387	–	1,296,387	1,252,348	–	1,252,348

Goodwill arose from the business combination with the acquisition of control in MSA Mineral Services Analytical (Canada) Inc. (MSALABS) in 2019 and International Apprenticeship & Competency Academy Limited (“IACA”) during the year (see Note 16). At 31 December 2022 the group owns 76.65% of the share capital in MSA and 75% of the share capital in IACA. The consideration paid, assets acquired and goodwill arising on the IACA acquisition are not considered to be material to these financial statements.

Goodwill Impairment

The Group is required to test, on an annual basis whether goodwill has suffered any impairments. Discounted cash flows were used to assess the goodwill as at 31 December 2022 and no impairment was found. The discount rate used was 20% (2021: 16.7%) with growth rate of 5% (2021: 3%). Cash flow forecast was performed  for 5 years up to 31 December 2027 with terminal values estimated thereafter at a growth rate of 0% (2021: 1.5%).

Key assumptions

The Group regards MSALABS as a single Cash Generating Unit (CGU) for the purpose of testing for goodwill impairment. The recoverable amount for this CGU is based on value in use which is derived from discounted cashflow calculations.  The key assumptions applied in value in use calculations are those regarding Earnings Before Interest Tax & Depreciation (EBITDA), growth rates and discount rates.

Forecasting EBITDA

For MSALABS, the Group prepared cashflow projections for the 5 years to 31 December 2027 as noted above, based on the most recent forecasts for the year ending 31 December 2023 and the Group’s outlook on the health of the metals and mining sector over that period.

Growth rates

Revenue growth rates applied to the value in use calculations for MSALABS reflect management’s  strategy and outlook on the metals and mining sector and particularly over the gold mining sector where a growth rate of 5% per year has been used as a base case scenario with sensitivity analysis applied to growth rates ranging from 1 % to 10%.

Discount rates

The pre-tax discount rates used to assess the forecast cashflows for MSALABS was based on estimates of the risk-free rate and uplifted by management’s own assessment of business risks and specific risks of operating in the metals and  mining sector. This was estimated at 20% at 31 December 2022. Sensitivity analysis was applied to discount rates ranging from 12% to 25%.

Sensitivity analysis

A sensitivity analysis was performed, and management concluded that changes in the key assumptions did not result in an impairment of the goodwill in MSALABS. Discount rates of up to 25% and growth rates as low as 1% were used in the value in use workings. Even at such level management concluded that no impairment was required.

15. INTANGIBLE ASSETS

Reconciliation of intangible assets

COMPUTER SOFTWARE	2022	2021
US$
At 1 January	1,282,269	276,248
Additions	633,921	1,006,021
At 31 December	1,916,190	1,282,269

The intangible assets have not yet been amortised as they were still in the development stage at the reporting date. No impairment indicators have been identified in respect of the intangible assets. The additions to computer software during the year consist of expenditure on the Group’s Laboratory Information Management System (LIMS) and the new ERP system which, as at 31 December 2022, was still in the development stage. Management expects the ERP software to be commissioned during 2023.

16. NON-CONTROLLING INTEREST

MSALABS Ltd, a 76.65% (2021: 76.93%) owned subsidiary of the Company, has material non-controlling interests (NCI). MSALABS Ltd is incorporated in Mauritius and has operations globally. CMS (Tanzania) Ltd is a 89.8% (80% direct, 8.9% indirect) owned subsidiary of the company. 

Summarised financial information in relation to MSALABS Ltd, before intra-group eliminations, and CMS (Tanzania) Ltd is presented below together with amounts attributable to NCI.

Summarised statement of financial position

MSALABS LTD	2022	2021	CMS (TANZANIA) LTD	2022	2021
US$			US$
Assets
Non-current assets	24,138,781	7,481,076	32,569,310	18,438,320
Current assets	11,231,985	9,792,814	22,577,986	22,049,074
Total assets	35,370,766	17,273,890	55,147,296	40,487,394
Liabilities
Non-current liabilities	12,299,594	347,638	15,823,091	12,880,968
Current liabilities	11,559,300	4,777,698	11,009,312	16,908,847
Total liabilities	23,858,894	5,125,336	26,832,403	29,789,815
Total net assets	11,511,872	12,148,554	28,314,893	10,697,579
Carrying amount of non- controlling interest	2,688,022	2,673,353	2,891,202	1,094,236

Financial StatementsFinancial Statements

146 Capital Limited Annual Report 2022

Capital Limited Annual Report 2022

147

Summarised statement of profit or loss and other comprehensive income

MSALABS LTD	2022	2021	CMS (TANZANIA) LTD	2022	2021
US$			US$
Revenue	26,657,058	12,247,313	64,537,043	23,641,827
Other income and expenses	(25,672,018)	(12,491,928)	(44,859,082)	(14,665,399)
Profit/(Loss) before tax	985,040	(244,615)	19,677,961	8,976,428
Tax expense	(1,156,429)	(301,408)	(2,060,647)	(784,029)
(Loss)/ profit for the year	(171,389)	(546,023)	17,617,314	8,192,399
Total comprehensive (loss)/ income for the year	(171,389)	(546,023)	17,617,314	8,192,399
(Loss)/ profit allocated to non-controlling interest	(39,939)	(133,764)	1,796,966	479,546

Summary of movement in non-controlling interest during the year:

	MSALABS Ltd	CMS (Tanzania) Ltd	International Apprenticeship & Competency Academy Limited	Total
Balance at 1 January 2022	2,673,353	1,094,236	–	3,767,589
Acquisitions during the year	–	–	10,321	10,321
Profit or (loss)	(39,939)	1,796,966	(17,005)	1,740,022
Change in ownership	54,608	–	–	54,608
Balance at 31 December 2022	2,688,022	2,891,202	(6,684)	5,572,540

	MSALABS Ltd	CMS (Tanzania) Ltd	Total
Balance at 1 January 2021	1,389,315	–	1,389,315
Profit or loss	(133,764)	247,758	113,994
Adjustment arising from change in non-controlling interest:
Rights issue	875,968	–	875,968
Impact of change in ownership percentage	541,834	846,478	1,388,312
Balance at 31 December 2021	2,673,353	1,094,236	3,767,589

On 25 March 2022 the Group acquired 75% of the voting equity instruments of International Apprenticeship & Competency Academy Limited (“IACA”) for a consideration of $75,000. IACA’s principal activity is developing a network of technical training centres across the country, to support industrial development with apprenticeship programmes and skills assessment. IACA incurred a loss of US$0.07 million during the period since acquisition.

17.# NOTES TO THE ANNUAL FINANCIAL STATEMENTS

DEFERRED TAX

	2022	2021
US$	US$	US$
Deferred tax liability
Excess of capital allowances over depreciation	(34,196)	(34,196)
Total deferred tax liability	(34,196)	(34,196)
Deferred tax asset
Excess of capital allowances over depreciation	–	–

The summarised position is as per below:

	2022	2021
US$	US$	US$
Deferred tax liability	(34,196)	(34,196)
Deferred tax asset	–	–
Tax losses recognised	(34,196)	(34,196)

Reconciliation of deferred tax asset / (liability)

	2022	2021
US$	US$	US$
At beginning of year	(34,196)	(13,755)
Taxable / (deductible) temporary difference movement on tangible fixed assets	–	(20,441)
At end of year	(34,196)	(34,196)

During 2022 the Group undertook an assessment of the likelihood of utilising older tax losses. At the reporting date, the Group has estimated tax losses carried forward of US$6.6 million (2021: US$8.8 million) with a tax value of US$1.5 million (2021: US$1.7 million) available for offset against future profits. All losses will expire between 1–4 years. No deferred tax asset has been recognised in relation to these carried forward tax losses due to uncertainty as to the realisation of future taxable profits against which the losses can be offset.

18. INVENTORIES

	2022	2021
US$	US$	US$
Consumables	58,310,073	36,303,937
Goods in transit	1,035,386	2,197,983
Gross carrying value of inventory	59,345,459	38,501,920
Less impairment of inventory	(650,480)	(566,808)
	58,694,979	37,935,112

The cost of inventories recognised as an expense in the current year amounts to US$18.3 million (2021: US$13.4 million). During the year, the Group wrote off US$0.2 million (2021: US$1.3 million) of inventory. A provision of US$0.7 million (2021: US$1.0 million – reversal of provision) was made during the year, resulting in an increase in the carrying amount of the provision. Refer to Note 6 for details of the amount of write-down of inventories recognised as an expense in the period.

Financial StatementsFinancial Statements
148 Capital Limited Annual Report 2022
Capital Limited Annual Report 2022
149 Notes to the Annual Financial Statements (continued)

19. TRADE RECEIVABLES

	2022	2021
US$	US$	US$
Trade receivables	44,522,523	42,212,147
Less: Allowance for credit losses	(2,980,656)	–
Total trade and other receivables	41,541,867	42,212,147

Trade receivables have credit periods of between 30 to 45 days. The ageing of trade receivables is detailed below:

	2022	2021
US$	US$	US$
Current	29,298,139	31,548,218
Past due 1–30 days	6,504,565	7,011,229
Past due 31–60 days	1,299,056	1,329,602
Past due 61–90 days	740,146	886,293
Past due over 90 days	6,680,617	1,436,805
	44,522,523	42,212,147

Before accepting any new customer, the Group assesses the potential customer’s credit quality and defines credit limits for each customer. Customers' credit limits are reviewed annually. The Group’s credit risk is concentrated as the Group currently provides drilling services to a limited number of major and mid-tier mining companies as well as junior explorers. The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected loss provision for trade receivables and contract assets. To measure expected credit losses on a collective basis, trade receivables and contract assets are grouped based on similar credit risk. The contract assets have similar risk characteristics to the trade receivables for similar types of contracts. As the Group does not have historical credit losses, the expected loss rates have been based on current and forward-looking information on micro macroeconomic factors affecting the Group’s customers. The Group has identified the metals and mining sector’s credit loss probability rates as the key macroeconomic factor in countries where the Group operates.

The lifetime expected loss provision for trade receivables is as follows:

	31 December 2022
US$	Current	More than 30 days past due	More than 60 days past due	More than 120 days past due	Total
Expected loss rate	1%	6%	13%	38%	7%
Gross carrying amount	35,802,704	1,299,057	740,146	6,680,616	44,522,523
Loss provision	232,820	80,441	99,522	2,567,873	2,980,656

Movements in the impairment allowance for trade receivables are as follows:

	2022	2021
US$	US$	US$
Opening provision for impairment of trade receivables	–	–
Increase during the year	4,438,204	–
Receivables written off during the year as uncollectible	(1,457,548)	–
At 31 December	2,980,656	–

The Directors consider that the carrying amount of trade and other receivables approximate their fair values.

Notes to the Annual Financial Statements (continued)

20. OTHER RECEIVABLES

	2022	2021
US$	US$	US$
Prepayments	4,334,239	4,134,418
Capitalised contract costs	1,584,888	2,608,530
VAT recoverable	6,484,855	6,050,210
Accounts receivable - Sundry	8,584,473	7,778,654
Prepayment for fixed assets	5,542,523	3,548,794
Others	2,030	21,017
	26,533,008	24,141,623
Current	20,073,008	17,681,623
Non-current	6,460,000	6,460,000
	26,533,008	24,141,623

Non-current receivable of US$6.5 million (2021: US$6.5 million) relates to the consideration due from the non-controlling interest in CK Washirika Limited. The consideration will be settled against future dividends in CK Washirika Limited. In assessing the receivable for impairment, the Group has considered the future cash flows to be generated by CK Washirika Limited through its investments in CMS Tanzania Ltd and MSA Laboratories (T) Ltd, the provisions of the shareholder agreement and the credit worthiness of the non-controlling interest. The Directors have assessed the expected credit loss allowance in respect of the non-current receivable to be immaterial.

21. INVESTMENTS AT FAIR VALUE

	2022	2021
US$	US$	US$
Equity investments at fair value through profit or loss
Mandatorily at fair value through profit or loss:
Level 1 shares	30,434,599	51,958,649
Level 3 shares	8,292,442	8,193,018
	38,727,041	60,151,667

Financial StatementsFinancial Statements
150 Capital Limited Annual Report 2022
Capital Limited Annual Report 2022
151 Notes to the Annual Financial Statements (continued)

21. INVESTMENTS AT FAIR VALUE (continued)

The reconciliation of the investment valuations from 1 January 2022 to 31 December 2022 is as follows:

Details	At 1 January 2022	Additions	Disposal	Fair value gain/(loss)	At 31 December 2022
US$	US$	US$	US$	US$	US$
Level 1	51,958,649	8,713,205	(10,345,543)	(19,891,712)	30,434,599
Level 3	8,193,018	297,316	–	(197,892)	8,292,442
Total	60,151,667	9,010,521	(10,345,543)	(20,089,604)	38,727,041

Details	At 1 January 2021	Additions	Disposal	Fair value gain/(loss)	Transfer from level 3	At 31 December 2021
US$	US$	US$	US$	US$	US$	US$
Level 1	16,233,516	9,025,943	(6,377,163)	31,042,850	2,033,503	51,958,649
Level 3	10,933,579	124,141	–	(831,199)	(2,033,503)	8,193,018
Total	27,167,095	9,150,084	(6,377,163)	30,211,651	–	60,151,667

Fair value information

Level 1 shares

Market approach – Listed share price. The Company’s interests in various listed shares are valued at the 31 December 2022 closing prices. No secondary valuation methodologies have been considered as the Company’s Level 1 investments are listed on active markets.

Level 3 shares

Market Approach – Market comparables applying Directors’ estimate. The Directors have reviewed the valuation methodology at 31 December 2022 and considered the most appropriate valuation methodology is a multiples-based approach based on comparing the enterprise values of a peer group with their respective consensus forecast EBITDA (EV/EBITDA) for 2023 and 2024. The peer average multiple for 2023 was 3.9x and the multiple for 2024 was 3.8x. The peer group average multiples are then applied to the forecast EBITDA of the level 3 investment, supplied by the level 3 company. For the purposes of the disclosures required by IFRS 13, if the average EBITDA multiples increased by 25% across all the level 3 companies, with all other indicators unchanged, in aggregate the level 3 investment value included in the balance sheet would increase from USD7.6 million to US$10.0 million. The related fair value increase of US$2.4 million would be recognised in profit and loss statement. Alternatively, if the average multiples used decrease by 25%, with all other indicators unchanged, in aggregate the level 3 investment value included in the balance sheet would decrease from US$7.6 million to US$5.5 million. The related fair value decrease of US$2.1 million would be recognised in profit and loss statement. An adjustment to forecast gold prices would have an impact on the Enterprise Values of the peer companies. The Directors do not have the information available to accurately determine the impact such a change would have on the valuation of the level 3 companies. In line with 31 December 2021 the Directors have continued to use a multiples-based approach based on comparing the enterprise values of a peer group with their EBITDA however have rolled the valuation forward to be based on forward looking estimates for 2023 and 2024. The Directors also considered the suitability of the peers, with specific consideration to the mine lives of the peer group. A full comparison of the same peer group of West African producing peers was performed and noted that mine lives were comparable taking into account recent additions in mining portfolio.

Notes to the Annual Financial Statements (continued)

22. CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of:

	2022	2021
US$	US$	US$
Cash on hand	104,130	119,533
Bank balances	28,275,477	30,457,716
Total cash and cash equivalents	28,379,607	30,577,249

23. SHARE CAPITAL AND PREMIUM

		2022	2021
US$		US$	US$
Authorised	2,000,000,000 (2021: 2,000,000,000)
Ordinary shares of $0.0001 (2021: $0.0001) each		200,000	200,000
Number of ordinary shares
Balance at beginning of period		190,054,838	188,780,903
Number of shares issued		2,809,900	1,273,935
Balance at end of period		192,864,738	190,054,838
No of shares reserved for issue under options		1,973,551	–

In March and April 2022, the Company issued 2,809,900 new common shares (valued at US$1,490,379) pursuant to the Company’s employee short and long term.# 23. ISSUED SHARE CAPITAL AND SHARE PREMIUM

The shares rank pari passu with the existing ordinary shares. Fully paid ordinary shares which have a par value of 0.01 cents, carry one vote per share and carry rights to dividends.

	2022	2021
Issued share capital
Balance at beginning of period	19,006	18,878
Share issued	281	128
Balance at end of period	19,287	19,006

The holders of ordinary shares have the same rights. They are entitled to receive dividends as declared from time to time and to one vote per share at the shareholders’ meeting.

	2022	2021
Share premium
Balance at beginning of period	60,900,119	60,169,426
Share issue	1,490,098	730,693
Balance at end of period	62,390,217	60,900,119

24. TREASURY SHARES

	2022	2021
US$
Balance at 1 January	–	–
Acquired in the year	2,474,964	–
Balance at 31 December 2022	2,474,964	–

The treasury shares reserve represents the cost of shares in Capital Limited purchased in the market and held by the Company to satisfy options under the Group’s share options plans. The number of ordinary shares held by the Company at 31 December 2022 was 1,973,551 (2021: nil).

---

Notes to the Annual Financial Statements (continued)

25. EQUITY-SETTLED EMPLOYEE BENEFITS RESERVE

All employees of the Group are eligible to participate in the discretionary bonus incentive scheme approved by the Remuneration Committee. The scheme incentivises the achievement of a range of short-term and long-term performance targets that are key to the success of the Group. The Remuneration Committee grants at its discretion options or share awards at no costs to the employee based on individual performance. Employees to whom options or share awards are offered are required to accept the offer prior to issuance of the certificate. Grant terms are determined by the Remuneration Committee on the date of the grant. These include the number of options or share awards, vesting terms, exercise price and expiry date which are communicated to employees in the offer notice. Options or share awards are forfeited if the employee leaves the Group before the vesting date. If options are not exercised by the expiry date, they are cancelled.

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

2021 & 2022 Short Term Incentive Plan

Share awards were granted under the 2021 Short Term Incentive Plan (STIP). The total value of the grant in shares was US$1,336,921. The total number of shares granted was 967,441 and the share price used in the calculation was GBP 1.04 which was the quoted price of the shares as at 31 March 2022. Vesting date is 31 March 2023 and vesting is contingent on continued employment to that date. The Group has expensed US$668,461 in 2022 (2021: US$668,461).

Share awards were granted under the 2022 Short Term Incentive Plan (STIP). The total value of the grant in shares was US$1,548,599. The total number of shares to be awarded will be based upon the closing share price after the March 2023 closing period. Vesting date is 31 March 2024 and vesting is contingent on continued employment to that date. The Group has expensed US$774,299 in 2022 (2021: US$ nil).

2020, 2021 & 2022 Long-Term Incentive Plan

Vesting conditions for 2020, 2021 and 2022 LTIP shares are contingent upon:
i) the compound annual growth rate (CAGR) of the earnings per share (EPS) over the vesting period
ii) the Total Shareholder Return (TSR) over the vesting period

50% of the share awards are contingent on condition 1 (EPS CAGR), while the other 50% are contingent on condition 2 (TSR). The share awards are valued separately due to the independent vesting conditions. Condition 1 being a non-market related condition while condition 2 is a market-related condition. During 2022, a second LTIP (“LTIP 2”) was introduced with vesting conditions 100% contingent upon the TSR over the vesting period (3 years).

Condition 1: (EPS CAGR)

Condition 1 is a non-market condition with a variable number of equity instruments. Valuation of condition 1 is done using the modified grant method which utilises a value method and a number component.

i) Value component: The value component is the grant date fair value of the share award based on the share price observed in the market on grant date. This value remains constant during the life of the instrument.
ii) Number component: The number of equity instruments expected to vest is based on the EPS CAGR estimate at year end. Linear interpolation is performed between upper and lower bound targets to obtain an estimate of the number of shares vesting. The estimated number of shares vesting is revised at year end.

Condition 2: (TSR)

Condition 2 is a market condition with a variable number of equity instruments. The grant date fair value should therefore reflect the probability of satisfying the market condition. The binomial model is an appropriate valuation model as it considers the different possible outcomes while allowing the adjustment of intrinsic value for the vesting conditions. The share-based payment should not be adjusted for stock price changes related to the market condition on subsequent valuation dates.

---

25. EQUITY-SETTLED EMPLOYEE BENEFITS RESERVE (continued)

The second condition utilised a binomial model with the following inputs for the 2020, 2021 and 2022 LTIP:

	2020 LTIP	2021 LTIP	2022 LTIP 1	2022 LTIP 2
Volatility	37.06%	41.56%	39.80%	39.80%
Fair value at grant date	GBP 0.3950	GBP 0.3283	GBP 0.4404	GBP 0.2979
Share price at grant date	GBP 0.5988	GBP 0.6101	GBP 0.8036	GBP 0.8036
Risk Free Rate	1.88%	1.52%	1.52%	1.52%
Dividend yield	1.79%	3.28%	4.39%	4.39%
Exercise price	USD 0.0001	USD 0.0001	USD 0.0001	USD 0.0001
Volatility periods	1,301	1,264	1,261	1,261
Vesting date	31 Dec 2022	31 Dec 2023	31 Dec 2024	31 Dec 2024
* Volatility for the LTIPs was calculated using the daily share price movement from the 4 respective preceding years.

Long-Term Incentive Plans

Vesting Date	Remaining Options 31/12/2022	Remaining Options 31/12/2021	Expected total expense 31/12/2022 (US$)	Expected total expense 31/12/2021 (US$)
2020 LTIP
31/12/2022	1,645,908	1,645,908	1,019,616	1,016,405
2021 LTIP
31/12/2023	1,555,968	1,748,241	1,030,952	1,107,460
2022 LTIP 1
31/12/2024	1,948,692	–	1,466,841	–
2022 LTIP 2
31/12/2024	1,113,232	–	401,319	–

During the year 583,525 options were forfeited (2021: nil).

---

26. OTHER RESERVES

Other reserves consist of $190,056 (2021: $190,056) which arose upon the acquisition of shares in MSA in 2019.

27. LOANS AND BORROWINGS

	2022	2021
$
Bank loans	57,944,781	48,735,961
Supplier credit facilities	17,674,372	13,719,399
	75,619,153	62,455,360
Less: Unamortised debt arrangement costs	(717,531)	–
Total loans and borrowings	74,901,622	62,455,360
Current	18,036,811	16,887,692
Non-current	56,864,811	45,567,668
Total loans and borrowings	74,901,622	62,455,360

Long-term liabilities consist of:

(a) $25 million revolving credit facility (“RCF”) provided by Standard Bank (Mauritius) Limited

The RCF was renewed on 19 July 2022 for a further term of 3 years. The interest rate on the RCF is the prevailing three-month SOFR (payable in arrears) plus a margin of 5.75%, and an annual commitment fee of 2.275% is charged on any undrawn balances. The amount utilised on the RCF is US$25 million as at 31 December 2022 (2021: US$15 million).

Under the terms of the RCF, the Group is required to comply with certain financial covenants relating to:
* Interest Cover Ratio
* Debt EBITDA Ratio
* Debt Equity Ratio
* Total Tangible Net Worth

In addition, CAPD (Mauritius) Limited, as borrower, is also required to comply with the Total Tangible Net Worth covenant. Security for the Standard Bank (Mauritius) Limited facility comprises: The RCF is secured by various pledges over the shares and claims of the Group’s entities in Cote d’Ivoire and Tanzania together with the assignment of material contracts and their collection accounts in these jurisdictions and a debenture over the rigs in Tanzania. As at the reporting date and during the period under review, the Group has complied with all covenants attached to the loan facilities.

(b) $32.5 million term loan provided by Macquarie Bank Limited (London Branch)

On 15 September 2022, the Group refinanced the senior secured, asset backed term loan facility with Macquarie Bank Limited. The term of the loan is three years repayable in quarterly instalments with an interest rate on the facility of the prevailing three-month SOFR plus a margin of 6.5% per annum (payable quarterly in arrears). The loan is secured over certain assets owned by the Group and currently located in Egypt together with guarantees provided by Capital Limited, Capital Drilling Egypt LLC and Capital Mining Services. The Group drew an additional US$10.6 million in 2022. As at 31 December 2022, the term loan was fully drawn. During the year under review, the Group has complied with all covenants attached to the term loan.

(c) Epiroc Financial Solutions AB credit agreements

The Group has a number of credit agreements with Epiroc, drawn down against the purchase of rigs. The term of the agreements is four years repayable in 46 monthly instalments. The rate of interest on some of the agreements is three-month US LIBOR plus a margin of 4.8%, with a fixed rate of interest of the remaining agreements of 8.25%. As at 31 December 2022, the total drawn under these credit agreements was US$11.7m (2021: US$6.1 million). No covenants are attached to this facility.

(d) $8.5 million term loan facility with Sandvik Financial Services AB (PUBL)

The Group has term loan facility agreement with Sandvik Financial Services AB (PUBL).The facility is for the purchase of equipment from Sandvik AB, available in not more than four tranches. Interest is payable quarterly in arrears at 5.45% per annum on the drawn amount. The facility is no longer available to drawn on and as at 31 December 2022 the balance outstanding was US$5.9 million (2021: US$7.5 million). No covenants are attached to this facility.

Notes to the Annual Financial Statements (continued)

28. TRADE AND OTHER PAYABLES

	2022	2021
US$	US$	US$
Financial instruments:
Trade payables	25,510,128	22,137,469
Other payables – Accrued expenses	8,785,662	11,107,425
Other payables – Employee related liabilities	8,167,230	9,033,748
Non-financial instruments:
Deferred income	2,474,660	4,221,480
Total trade and other payables	44,937,680	46,500,122

Deferred income
Current 989,864 1,688,592
Non-current 1,484,796 2,532,888
Total deferred income 2,474,660 4,221,480

Trade payables comprise liabilities for the purchase of goods and services and have terms ranging from 60 to 90 days. The Group has financial risk management policies in place to ensure that all payables are paid within an appropriate credit time frame. The deferred income refers to amounts received in advance for the Sukari project.

29. PROVISIONS

	2022	2021
US$	US$	US$
Current
At 1 January	–	–
Charge to profit or loss	2,636,640	–
At 31 December	2,636,640	–

Provisions relate to project closure (redundancy costs) in respect of contracts concluded during the year and various operational claims and disputes that are expected to be settled during 2023. The provisions represent management’s best estimate of the Group’s liability as at 31 December 2022.

Financial StatementsFinancial Statements
156 Capital Limited Annual Report 2022
Capital Limited Annual Report 2022
157

Notes to the Annual Financial Statements (continued)

30. CURRENT TAX PAYABLE /RECEIVABLE

	2022	2021
US$	US$	US$
Current tax receivable
Normal tax	98,851	95,179
Withholding tax	300,832	404,182
Total current tax receivable	399,683	499,361
Current tax payable
Normal tax	7,180,351	7,814,794
Withholding tax payable	1,949,767	2,164,456
Total current tax payable	9,130,118	9,979,250

The taxation paid for the period under review can be reconciled as follows:

Net amount payable at the beginning of the year 9,479,889 6,814,779
Amounts charged to the statement of comprehensive income (excluding deferred tax) 9,835,969 11,696,087
Net amount payable at the end of the year (8,730,435) (9,479,889)
Total Taxation Paid 10,585,423 9,030,977

31. NOTES SUPPORTING STATEMENT OF CASH FLOWS

31.1 CASH GENERATED FROM OPERATIONS

	2022	2021
US$	US$	US$
Profit before taxation	32,566,128	82,005,307
Adjustments for:
Depreciation, amortisation and impairments	26,958,606	20,516,484
Loss on disposals	668,817	453,869
Depreciation of Right of use assets	3,457,029	883,923
Share-based payment	2,774,331	1,989,277
Fair value loss/ (gain) on investments	19,797,969	(33,716,756)
Interest income	(34,835)	(244,998)
Finance costs	7,355,710	3,833,766
Unrealised foreign exchange loss on foreign cash held	1,355,242	918,723
Increase in expected credit loss provision	2,980,656	–
Bad debt write offs	1,457,548	–
Changes in working capital:
Increase in inventories	(20,759,867)	(13,246,010)
Increase in trade and other receivables	(4,883,111)	(26,879,489)
(Decrease)/ increase in trade and other payables	(2,797,406)	6,093,468
Increase in provisions	2,636,640	–
Cash generated from operations	73,533,457	42,607,564

31.2 RECONCILIATION OF BORROWINGS AND LEASES

	Loans and borrowings	Leases liabilities	Total
US$	US$	US$	US$
At 1 January 2022	62,455,360	9,591,169	72,046,529
Cash flows	(1,143,924)	(3,733,798)	(4,877,722)
Non-cash flows:
Supplier credit facility received	9,082,582	–	9,082,582
Interest accruing in the period	5,225,135	818,249	6,043,384
Unamortised debt arrangement costs	(717,531)	–	(717,531)
Additions to leases	–	9,591,228	9,591,228
At 31 December 2022	74,901,622	16,266,848	91,168,470

	Loans and borrowings	Leases liabilities	Total
US$	US$	US$	US$
At 1 January 2021	30,693,713	673,299	31,367,012
Cash flows	17,727,781	(946,920)	16,780,861
Non-cash flows:
Supplier credit facility received	10,834,144	–	10,834,144
Interest accruing in the period	3,217,253	177,962	3,395,215
Commitment fees expensed	(17,531)	–	(17,531)
Additions to leases	–	9,686,828	9,686,828
At 31 December 2021	62,455,360	9,591,169	72,046,529

Notes to the Annual Financial Statements (continued)

32. SEGMENTAL INFORMATION

Operating segments are identified on the basis of internal management reports regarding components of  the Group. These are regularly reviewed by the Chair in order to allocate resources to the segments and to assess their performance. Operating segments are identified based on the regions of operations. For  the purposes of the segmental report, the information on the operating segments have been aggregated into the principal regions of operations of the Group. The Group’s reportable segments under IFRS 8 are therefore:

• Africa: Derives revenue from the provision of drilling and mining services, surveying, IT support services and mineral assaying.
• Rest of world: Derives revenue from the provision of drilling services, surveying, IT support services and mineral assaying. The segment relates to jurisdictions which contribute a relatively small amount of external revenue to the Group. These include Saudi Arabia and Canada.

Financial StatementsFinancial Statements
158 Capital Limited Annual Report 2022
Capital Limited Annual Report 2022
159

Notes to the Annual Financial Statements (continued)

32. SEGMENTAL INFORMATION (continued)

Segmental revenue and results

The following is an analysis of the Group’s revenue and results by reportable segment:

2022

	Africa	Rest of world	Consolidated
US$	US$	US$	US$
External revenue:
Drilling services	202,201,283	6,361,164	208,562,447
Mining services	49,763,175	–	49,763,175
Laboratory services	13,803,750	13,500,935	27,304,685
Surveying services	4,333,017	321,044	4,654,061
Total external revenue	270,101,225	20,183,143	290,284,368
Segment profit (loss)	91,428,320	(31,302,839)	60,125,481
Central administration costs and depreciation			(440,508)
Profit from operations			59,684,973
Interest income			34,835
Finance charges			(7,355,711)
Fair value loss on investments at fair value			(19,797,969)
Profit before tax			32,566,128

The following customers from the Africa segment contributed 10% or more to the Group’s revenue.

	2022	2021
%	%	%
Customer A	15	16
Customer B	39	37

2021

	Africa	Rest of world	Consolidated
US$	US$	US$	US$
External revenue:
Drilling services	167,104,052	5,433,307	172,537,359
Mining services	33,300,731	–	33,300,731
Laboratory services	7,384,006	8,267,311	15,651,317
Surveying services	4,941,973	361,886	5,303,859
Total external revenue	212,730,762	14,062,504	226,793,266
Segment profit (loss)	84,884,225	(31,732,012)	53,152,213
Central administration costs and depreciation			(1,274,894)
Profit from operations			51,877,319
Interest income			244,998
Finance charges			(3,833,766)
Fair value loss on investments at fair value			33,716,756
Profit before tax			82,005,307

Notes to the Annual Financial Statements (continued)

32. SEGMENTAL INFORMATION (continued)

The accounting policies of the reportable segments are the same as the Group’s accounting policies. Segment profit (loss) represents the profit (loss) earned by each segment without allocation of central  administration costs, depreciation, interest income, share of losses from associate, finance charges,  losses of investment recognised at FVTPL, and income tax. This is the measure reported to the Chair for the purpose of resource allocation and assessment of segment performance.

Segment assets and liabilities

The following is an analysis of the Group’s assets and liabilities by reportable segment:

	2022	2021
US$	US$	US$
Segmental assets:
Africa	506,043,094	421,186,192
Rest of world	59,642,347	75,429,655
Total segmental assets	565,685,441	496,615,847
Head Office companies	280,828,362	278,034,723
	846,513,803	774,650,570
Eliminations	(459,714,615)	(423,149,052)
Total Assets	386,799,188	351,501,518

	2022	2021
US$	US$	US$
Segmental liabilities:
Africa	239,012,484	226,314,805
Rest of world	31,752,437	28,407,677
Total segmental assets	270,764,921	254,722,482
Head Office companies	315,694,862	269,589,374
	586,459,783	524,311,856
Eliminations	(438,552,679)	(395,751,759)
Total Liabilities	147,907,104	128,560,097

Financial StatementsFinancial Statements
160 Capital Limited Annual Report 2022
Capital Limited Annual Report 2022
161

Notes to the Annual Financial Statements (continued)

32. SEGMENTAL INFORMATION (continued)

For the purposes of monitoring segmental performance and allocating resources between segments, the Chair monitors the tangible, intangible and financial assets attributable to each segment. All assets are allocated to reportable segments with the exception of property, plant and equipment used by the head office  companies and investment amounts totalling US$18.9 million (2021: US$15.2 million) included in other receivables, and US$5.7 million (2021: US$10.1 million) in cash and cash equivalents held by the Head  Office companies. As part of the segmental reporting, all the liabilities have been allocated to the respective segments with the exception of the long-term liabilities of US$57.0 million (2021: US$47.1 million) and part of the trade payables and intercompany balances held at the level of the head office which is eliminated at the Group  level.# Notes to the Annual Financial Statements (continued)

32. SEGMENTAL INFORMATION (continued)

Segmental reporting summary by region:

REVENUE	NON-CURRENT ASSETS
	2022	2021	2022
US$	US$	US$	US$
Middle East / North Africa	121,287,573	89,307,774	77,014,240
South and East Africa	70,266,325	52,055,578	36,970,552
West Africa	78,854,825	78,186,571	56,262,245
Others	19,875,645	7,243,343	28,735,966
Total	290,284,368	226,793,266	198,983,003

The business has considered this segmental distribution to be appropriate as it represents the discrete areas of operations that make up the Group’s revenue stream.

33. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

Capital risk management

The Group manage their capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The Group’s overall strategy remains unchanged from 2021. The capital structure of the Group consists of debt (refer to Note 27), cash and cash equivalents (refer to Note 22) and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings and the statement of changes in equity.

The Group’s capital structure and going concern are dependent on the Company’s ability to obtain cash resources from its subsidiaries. There are currently no severe long-term restrictions in place which impairs the Company’s ability to repatriate funds from its subsidiaries.

Under the terms of the Revolving Credit Facility (“RCF”) from Standard Bank (Mauritius) Limited and term loan provided by Macquarie Bank Limited, the Group is required to comply with certain financial covenants relating to:

• Interest coverage
• Gross debt to EBITDA ratio
• Debt to Equity ratio
• Tangible net worth
• Loans to value ratio (applicable only to loan from Macquarie Bank Limited)

In order to meet Capital Risk Management objectives, the Group aims to ensure it meets these financial covenants attached to the loans. There have been no breaches of the financial covenants during the reporting period.

Risk Management is conducted within a framework of policies and guidelines that are continuously monitored by Management and the Board of Directors. The objective is to minimise exposure to market risks (interest rate risk, foreign currency risk and price risk), credit risk and liquidity risk.

Financial StatementsFinancial Statements 162
Capital Limited Annual Report 2022
Capital Limited Annual Report 2022 163

Notes to the Annual Financial Statements (continued)

33. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)

Gearing

The gearing ratio at the end of the reporting period was as follows:

	2022	2021
	Note(s)	US$
Lease liabilities	13	16,266,848
Total loans and borrowings	27	75,619,153
Total debt		91,886,001
Cash & cash equivalents	22	(28,379,607)
Net debt		63,506,394
Less: lease liabilities		(16,266,848)
Adjusted net debt		47,239,546
Equity		238,892,084
Adjusted debt to equity ratio		19.8%

Categories of financial instruments

The following table details the categories of financial instruments and their carrying values in the Statement of Financial Position for the Group.

Categories of financial assets

Group – 2022

	Note(s)	Fair value through profit or loss - Mandatory	Amortised cost	Total
Investments at fair value	21	38,727,041	–	38,727,041
Trade receivables	19	–	41,541,867	41,541,867
Non-current receivables	20	–	6,460,000	6,460,000
Cash and cash equivalents	22	–	28,379,607	28,379,607
Total		38,727,041	76,381,474	115,108,515

Group – 2021

	Note(s)	Fair value through profit or loss - Mandatory	Amortised cost	Total
Investments at fair value	21	60,151,667	–	60,151,667
Trade receivables	19	–	42,212,147	42,212,147
Non-current receivable	20	–	6,460,000	6,460,000
Cash and cash equivalents	22	–	30,577,249	30,577,249
Total		60,151,667	79,249,396	139,401,063

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.

For further categorisation, refer to note 21.

Notes to the Annual Financial Statements (continued)
33. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)

Categories of financial liabilities

Group – 2022

	Note(s)	Amortised cost	Total
Trade and other payables	28	42,463,020	42,463,020
Loans and borrowings		75,619,153	75,619,153
Total		118,082,173	118,082,173

Group – 2021

	Note(s)	Amortised cost	Total
Trade and other payables	28	42,278,642	42,278,642
Loans and borrowings		62,455,360	62,455,360
Total		104,734,002	104,734,002

At 31 December 2022, the Group did not have any financial liabilities measured at fair value through profit or loss or other comprehensive income (2021: US$nil).

The carrying values of financial assets and financial liabilities in the statement of financial position for the Group approximate their fair values.

Financial risk management

Foreign currency risk

The Group’s activities expose it to the financial risks of fluctuations in foreign currency exchange rates. In order to manage the Group’s risk to foreign currency fluctuations, the Group tries to match the currency of operating costs with the currency of revenue as well as the currency of financial assets with currency of financial liabilities. Financial assets and liabilities denominated in foreign currencies are reviewed regularly by Management to ensure that the Group is not unduly exposed to foreign currency risk. Further to this, the Group manages its exposure on foreign cash balances by converting excess local currency cash to United States Dollar to minimise local currency cash balances maintained.

The carrying amounts of the Group’s foreign currency denominated monetary assets, cash and cash equivalents, trade receivables, monetary liabilities, and trade payables at 31 December 2022 are as follows:

	2022	2021
	$	$
Financial assets
Mauritanian Ouguiya (2022: MRU 42,848,179; 2021: MRU 120,562,360)	1,160,883	3,303,983
West African CFA (2022: XOF 10,994,012,757; 2021: XOF 8,878,480,112)	17,286,183	15,176,889
Guinea Franc (2022: GNF 39,725,121,620; 2021: GNF 12,153,465,757)	4,644,431	1,372,974
All other currencies	3,550,844	8,604,246
Total	26,642,341	28,458,092
Financial liabilities
Euro (2022: EUR 1,579,467; 2021: EUR 3,978,532)	1,681,000	4,500,602
Canadian Dollar (2022: CAD 2,427,308; 2021: CAD 236,435)	1,791,504	185,789
All other currencies	4,383,417	5,243,214
Total	7,855,921	9,929,605

Financial StatementsFinancial Statements 164
Capital Limited Annual Report 2022
Capital Limited Annual Report 2022 165

Notes to the Annual Financial Statements (continued)

33. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)

Financial risk management (continued)

Foreign currency risk (continued)

The following table details the Group’s sensitivity to a 10% change in the United States Dollar against the relevant foreign currencies. The sensitivity analysis includes the outstanding foreign currency denominated monetary items at year end and adjusts their translation for a 10% change in foreign currency rates. A positive number below indicates an increase in profit before tax where the United States Dollar strengthens by 10% against the relevant currency. For a 10% weakening of the United States Dollar against the relevant currency, there would be an equal and opposite impact on the profit before tax.

	2022	2021
	US$	US$
Mauritanian Ouguiya	111,858	320,274
West African CFA	1,784,144	1,924,979
Guinea Franc	439,868	116,246
Euro	(139,049)	(424,271)
Canadian Dollar	(93,687)	73,885
All other currencies	(224,482)	(158,264)
Total	1,878,652	1,852,849

Interest rate risk management

As a result of changes in interest rates, the Group is exposed to interest rate risk as entities in the Group borrow funds at variable interest rates and therefore borrowing costs could increase with rate increases. The risk is managed by the Group by maintaining a conservative gearing ratio.

The Group’s exposure to interest rates on financial liabilities are detailed below.

Interest rate sensitivity analysis:

The sensitivity analysis below has been determined based on the exposure to interest rates at the date of the Statement of Financial Position. For floating rate liabilities, the analysis is prepared using the average balance outstanding for the year. A 200 basis point increase or decrease (2021: 50 basis points) is used when reporting interest rate risk internally to key Management personnel and represents Management’s assessment of the reasonably possible change in interest rates.## Notes to the Annual Financial Statements (continued)

33. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)

Credit risk management (continued)

The Group’s exposure to credit risk is minimized as customers are given 30 to 45 days credit periods for services rendered. As at 31 December 2022, 3 customers individually contributed 10% or more to the Group’s trade receivables (2021: 3 customers). There was a significant increase in the credit risk that has been identified in respect of the Group’s customers during the year and as at 31 December 2022, an expected credit loss allowance of US$2.8 million has been recognised (2021: US$nil). Further disclosures regarding trade and other receivables, which are neither past due nor impaired, are provided in Note 19.

Credit risk also arises from cash and cash equivalents with banks and financial institutions. For banks and financial institutions, only independently rated parties with minimum rating “A” are accepted.

Liquidity risk management

Ultimate responsibility for Liquidity Risk Management rests with the Board of Directors. The Group manages liquidity risk by maintaining adequate reserves, banking and reserve borrowing facilities, continuously monitoring forecast and actual cash flows and by matching the maturity profiles of financial assets and liabilities

Liquidity risk tables:

The following table details the Group’s remaining contractual maturity for its financial assets and liabilities with agreed repayment periods. The tables for assets have been drawn up based on the undiscounted contractual maturities of the financial assets including interest that will be earned on those assets. The tables for liabilities represent undiscounted cash flows of financial liabilities based on the earliest repayment date on which the Group can be required to pay at the reporting date:

2022

	1 month	1–3 months	3 months – 1 year	1–5 years
US$	US$	US$	US$	US$
Financial assets
Financial Assets under Amortised Cost	27,997,194	6,250,425	6,587,037	7,167,211
Financial liabilities
Non-interest bearing - Financial Liabilities at Amortised Cost	23,856,804	15,042,479	6,536,340	2,138,697
Variable interest rate instruments	1,007,050	4,037,240	13,430,835	56,426,497
Lease liability	332,096	670,009	3,137,360	12,127,383
	25,195,950	19,749,728	23,104,535	70,692,577

2021

	1 month	1–3 months	3 months – 1 year	1–5 years
US$	US$	US$	US$	US$
Financial assets
Financial Assets under Amortised Cost	35,087,344	4,835,352	2,159,412	6,590,039
Financial liabilities
Non-interest bearing - Financial Liabilities at Amortised Cost	21,187,328	16,550,484	6,123,628	2,638,682
Variable interest rate instruments	1,247,470	2,350,262	13,300,009	45,557,619
Lease liabilities	182,089	356,695	1,697,640	7,354,745
	22,616,887	19,257,441	21,121,277	55,551,046

Financial StatementsFinancial Statements 166 Capital Limited Annual Report 2022 Capital Limited Annual Report 2022 167

Notes to the Annual Financial Statements (continued)

33. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)

Financing facilities

The following table details the Group’s secured loan facilities (undiscounted) at the reporting date.

	2022	2021
US$	US$	US$
Available amount	86,800,000	70,100,000
Unutilised amount	–	(3,000,000)
Utilised amount	86,800,000	67,100,000

34. FAIR VALUE MEASUREMENTS

Fair value adjustment on financial assets through profit and loss (investments)

The Group’s fair value adjustment on financial assets through profit and loss are listed and unlisted equity securities in the mining industry and are measured at fair value at the end of each reporting period. The listed equity securities are designated as Level 1 financial assets in the fair value hierarchy. Their fair value is determined using quote bid prices in an active market. The fair value of these financial assets FVPTL amounted to US$30,434,599 (2021: US$51,958,649).

The fair values of financial instruments that are not traded in an active market are determined using standard valuation techniques. These valuation techniques maximise the use of observable market data where available and rely as little as possible on Group specific estimates. The Directors consider that the carrying value amounts of financial assets and financial liabilities recorded at amortised cost in the Consolidated Financial Statements are approximately equal to their fair values. The fair values disclosed for the financial assets and financial liabilities are classified in level 3 of the fair value hierarchy have been assessed to approximate their carrying amounts based on a peer group analysis.

35. AUDITOR’S REMUNERATION

The Group auditors are BDO LLP (“BDO”). The Group has engaged BDO and other audit firms to provide both audit and non-audit services to its various subsidiaries.

	2022	2021
US$	US$	US$
Fees paid to the Group’s auditor
The audit of the Group’s annual Financial Statements	507,761	429,324
Non-audit services – Group	91,626	85,460
Fees paid to associates of the Group’s auditor
The audit of the Group’s subsidiaries	86,860	78,000
Non-audit services – subsidiaries	–	12,151
	686,247	604,935

Notes to the Annual Financial Statements (continued)

36. RELATED PARTIES

During the year, the Company and its subsidiaries, in the ordinary course of business, entered into various sale and purchase transactions. All transactions are entered into at amounts negotiated between the parties.

	2022	2021
US$	US$	US$
Directors’ emoluments
Short Term Benefits	1,920,608	1,266,000
Share Based Payments	562,000	486,000
	2,482,608	1,752,000

The Group considers the Key Management Personnel to be limited to the Board of Directors as they are responsible for planning and directing the Group’s activities.

37. COMMITMENTS

The Group has the following commitments:

	2022	2021
US$	US$	US$
Committed capital expenditure	18,685,619	13,424,141

The Group had outstanding purchase orders amounting to $29.7 million (2021: $30.3 million) at the end of the reporting period of which $18.7 million (2021: $13.4 million) were for capital expenditure.

38. CONTINGENCIES

As a result of the multiple jurisdictions in which the Group operates, there are a number of ongoing tax audits. In the opinion of Management, with the exception of the matters identified below, none of these ongoing audits represent a reasonable possibility of a material settlement and as such, no contingent liability disclosure is required.

38.1. Zambia tax

Capital Drilling (Zambia) Limited (“CDZ”), a subsidiary of Capital Limited, is a party to various tax claims made by the Zambian Revenue Authority (ZRA) for the tax years 2007 to 2013, totalling Zambian Kwacha 150 million (US$ $8.2 million). No subsequent communication has been received from the ZRA regarding this matter since June 2016. As CDZ is in the final stages of a court approved liquidation, the provision of US$1.6 million previously recognised has been released during the year.

38.2. Tanzania tax

2009–15 tax audit

Capital Drilling (T) Ltd (“CDT”), was party to a payroll tax claim (US$9.8 million including interest) made by the Tanzanian Revenue Authority (“TRA”) for the tax years 2009-2015. During the year, CDT reached a final agreement with the TRA and the deed of settlement was lodged with the Tax Revenue Appeals Tribunal on 29 June 2022. The final payment of US$0.7 million was made in August 2022, bringing the total paid to $1.8m. As part of the settlement, the TRA waived penalties and interest in full.

2016–18 tax audit

The TRA issued an initial assessment to CDT of US$4.5 million for 2016–18 in December 2019. Through negotiation, the tax claim was reduced to US$2.4 million in May 2020 and a payment of US$0.7 million was made in order to proceed with lodging formal objections. During the year, the audit was formally closed with a further US$0.1 million payment as final settlement, bring the total tax paid to US$0.8 million.# Financial Statements

Notes to the Annual Financial Statements (continued)

38. CONTINGENCIES (continued)

38.3 Cote D’Ivoire tax 2018–19 tax audit

A tax audit of Capital Drilling Cote D’Ivoire (CDCI) for the two years ended 31 December 2019 is currently underway. Through negotiations, the total tax claimed has been reduced from US$1.5 million to US$0.4 million. The underlying facts would not trigger any additional tax liability and the tax authorities verbally confirmed they would undertake a full review. However, a demand for payment was issued in February 2023 and accordingly the exposure of US$0.4 million has been provided in full as at 31 December 2022.

39. EVENTS AFTER THE REPORTING DATE

There have been no significant events affecting the Group since the year end.

40. APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTS

The Annual Financial statements set out on pages 116 to 168 were approved by the Board of Directors on 24 March 2023 in London.

GLOSSARY AND ALTERNATIVE PERFORMANCE MEASURES

Glossary

The following terms and alternative performance measures were used for the year ended 31 December 2022.

• ARPOR: Average revenue per operating rig
• EBITDA: Earnings before interest, taxes, depreciation, amortisation and fair value gain/ loss on investments
• EBIT: Earnings before interest, taxes and fair value gain/loss on investments
• OPERATIONAL EARNINGS: Profit for the year attributable to the owners of the parent before fair value gain or loss on investments
• NET CASH/(DEBT): Cash and cash equivalents less short term and long-term debt (excluding lease liabilities)
• NET ASSET VALUE PER SHARE (CENTS): Total equity/ weighted average number of ordinary shares
• RETURN ON CAPITAL EMPLOYED: EBIT/ Total assets-current liabilities

Reconciliation of alternative performance measures to the financial statements:

ARPOR can be reconciled from the financial statements as per the below:

	2022	2021
Revenue per financial statements ($)	290,284,368	226,793,266
Non-drilling revenue ($)	(89,793,368)	(57,130,266)
Revenue used in the calculation of ARPOR ($)	200,491,000	169,663,000
Monthly Average active operating Rigs	93	78
Monthly Average operating Rigs	118	104
ARPOR (rounded to nearest $’000)	180,000	181,000

EBITDA can be reconciled from the financial statements as per the below:

	2022	2021
Profit for the year	22,730,159	70,288,778
Depreciation	30,416,239	21,397,355
Taxation	9,835,969	11,716,529
Interest income	(34,835)	(244,998)
Finance charges	7,355,710	3,833,766
Fair value adjustments	19,797,969	(33,716,756)
EBITDA	90,101,211	73,274,674
Operating profit (EBIT)	59,684,972	51,877,319
Depreciation, amortisation and impairments	30,416,239	21,397,355
EBITDA	90,101,211	73,274,674
Gross profit	134,431,773	106,302,020
Administration expenses	(44,330,562)	(33,027,346)
EBITDA	90,101,211	73,274,674
EBITDA Margin	31.0%	32.3%

Net cash (debt) can be reconciled from the financial statements as per the below:

	2022	2021
Cash and cash equivalents	28,379,607	30,577,249
Long-term borrowings	(57,153,863)	(45,567,668)
Current portion of long-term borrowings	(18,465,290)	(16,887,692)
Net (debt)/cash	(47,239,546)	(31,878,111)

EBITDA

EBITDA represents profit or loss for the year before interest, income taxes, depreciation and amortisation and fair value adjustments on financial assets at fair value through profit and loss and realised gain (loss) on FVTOCI shares. EBITDA is non-IFRS financial measures that is used as supplemental financial measures by management and external users of financial statements, such as investors, to assess our financial and operating performance. These non-IFRS financial measures will assist our management and investors by increasing the comparability of our performance from period to period.

i) Understanding and analysing the results of our operating and business performance, and
ii) Monitoring our ongoing financial and operational strength in assessing whether to continue to hold our shares.

This is achieved by excluding the potentially disparate effects between periods of depreciation and amortisation, income (loss) from associate, interest income, finance charges, fair value adjustment on financial assets at fair value through profit and loss and realised gain (loss) on FVTOCI shares, which may significantly affect comparability of results of operations between periods. EBITDA has limitations as analytical tools and should not be considered as alternatives to, or as substitutes for, or superior to, profit or loss for the period or any other measure of financial performance presented in accordance with IFRS. Further other companies in our industry may calculate these measures differently from how we do, limiting their usefulness as a comparative measure.

NET CASH (DEBT)

Net cash (debt) is a non-GAAP measure that is defined as cash and cash equivalents less short term and long-term debt. Management believes that net cash (debt) is a useful indicator of the Group’s indebtedness, financial flexibility and capital structure because it indicates the level of borrowings after taking account of cash and cash equivalents within the Group’s business that could be utilised to pay down the outstanding borrowings. Management believes that net debt can assist securities analysts, investors and other parties to evaluate the Group. Net cash (debt) and similar measures are used by different companies for differing purposes and are often calculated in ways that reflect the circumstances of those companies. Accordingly, caution is required in comparing net debt as reported by the Group to net cash (debt) of other companies.

AVERAGE REVENUE PER OPERATING RIG

ARPOR is a non-financial measure defined as the monthly average drilling specific revenue for the period divided by the monthly average active operating rigs. Drilling specific revenue excludes revenue generated from shot crew, a blast hole service that does not require a rig to perform but forms part of drilling. Management uses this indicator to assess the operational performance across the board on a period by period basis even if there is an increase or decrease in rig utilisation.

Corporate Information

• Capital Limited Bermuda registered number: 34477
• Registrar: Computershare Investor Services (Jersey) Limited
  Queensway House
  Hilgrove Street
  St Helier
  Jersey JE1 1ES
  Channel Islands
• Auditor: BDO LLP
  55 Baker St
  Marylebone
  London W1U 7EU
• Investor Relations: Buchanan
  107 Cheapside
  London EC2V 6DN
• Registered Office: Victoria Place, 5th Floor
  31 Victoria Street
  Hamilton HM 10
  Bermuda
• Website: www.capdrill.com
• Bank: Standard Bank (Mauritius) Limited
  9th Floor, Tower A
  1 CyberCity, Ébène
  Mauritius
• Brokers: Tamesis Partners LLP
  125 Old Broad Street
  London EC2N 1 AR
  Stifel Nicolaus Europe Limited
  150 Cheapside
  London, EC2V 6ET
• Corporate Office: Ground Floor
  10/11 Park Place
  London SW1A 1LP
  United Kingdom
• Company Secretary: Catherine Apthorpe