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PEMBRIDGE RESOURCES PLC — Annual Report (ESEF) 2022
May 2, 2023
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Download source filePembridge Resources Plc ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS
Contents
- Strategic Report
- Chairman’s and Chief Executive’s Statement
- Principal Risks and Uncertainties and Key Performance Indicators
- Corporate and Social Responsibility Report
- Board of Directors and Senior Management
- Directors’ Report
- Governance Report
- Directors’ Remuneration Report
- Directors’ Responsibilities
- Independent Auditor’s Report to the Members of Pembridge Resources Plc
- Consolidated Financial Statements
- Statement of Comprehensive Income
- Consolidated Statement of Financial Position
- Company Statement of Financial Position
- Consolidated Statement of Changes in Equity
- Company Statement of Changes in Equity
- Consolidated Cash Flow Statement
- Company Cash Flow Statement
- Notes to the Financial Statements
- Company Information
2 | Pembridge Resources plc | Strategic Report
We are pleased to present the report and Consolidated Financial Statements of Pembridge Resources Plc (“Pembridge” or “the Group”) and the company Financial Statements of Pembridge Resources Plc (“the Company”) for the year ended 31 December 2022.
Strategy
On 17 January 2022, the Company announced its strategic plans for the future. The Company sees a number of opportunities in the de-carbonisation of the energy market. To that extent during 2022 a number of projects in the solar power generation field have been reviewed. In mining, the Strategy sets out preference for projects that are in production or close to production stage and have technical reports confirming resources and/or reserves. The key investment criteria approved in the Company’s strategy are for equity stakes acquired to be above 10% in projects with an IRR above 12% and preference for projects with NPV8% above $30 million. The objective is to complete one investment in a project that meets the criteria set out in the Company Strategy.
Minto Metals Corp.
Since the listing of Minto Metals Corp (“Minto”) on the Toronto Stock Exchange (TSXV) in 2021, Pembridge continues to be represented on the Board of Minto, with its Chairman and CEO, Gati Al-Jebouri, a director of Minto and chairman of its Audit Committee. Because Minto is a listed company whose shares are all voting shares, Pembridge’s 11.1% holding does not give the Company control or substantial influence over Minto Metals. As a result, Pembridge accounts for its investment in Minto as a financial asset, which is revalued on a mark-to-market basis.
The Company lent a total of CAD 4 million to Minto to fund Minto’s surety account during 2019 and 2020. The loan carries interest at 8% and was due to be repaid in full via quarterly instalments each of C$1 million during 2022, with the final interest payment in early 2023. The first two instalments were repaid in March and June 2022 and the third instalment, which was due originally at the end of September, has now been repaid fully with the last C$250,000 received in December 2022. The third instalment was partly deferred under an agreement between Minto and Pembridge, announced by Pembridge on 13 October 2022, to aid Minto in funding increased reclamation security payments, and Minto made payments in accordance with that agreement.
To continue its support to Minto in funding its reclamation security payments, Pembridge agreed with Minto in early January 2023 to spread the fourth instalment of C$1 million over the first half of 2023 with payments of C$500,000 due on 31 March and 30 June with the interest accumulated, which will be approximately C$1m in addition to the C$1m principal, due at the end of September 2023.
Negotiations are ongoing between Capstone Copper Corp (“Capstone”), Minto and Pembridge in respect of the timing of both the USD 5 million final payment due to Capstone and of Minto repaying the last surety funding due to Pembridge, being the remaining principal of CAD 1 million and accumulated interest including the amount that was due on 31 March 2023. Pembridge’s management expect these negotiations to reach a constructive conclusion in the near term.
Cost saving measures
Since 31 December 2022, Pembridge has introduced cost saving measures, the main ones being that its CEO and Chairman has agreed to defer his salary effective from March until September 2023 and the company’s CFO has agreed to move to a part-time basis with a corresponding cost saving effective from 1 April. In addition, because of Pembridge’s limited cash resources, it has agreed with Gati Al-Jebouri that the interest that became payable on its loan from him on 31 March 2023 will be added to the loan principal.
Renegotiation of loan from Chairman and CEO
Between 2019 and 2021, Gati Al-Jebouri lent a total of £3,575,000 to Pembridge under an agreement that was to mature at the end of 2022, under which drawdown fees and interest accrued on the loan were not paid to Mr Al-Jebouri but added to the loan principal. On 18 November 2022 the Company announced that it had made a repayment of £280,261 and extended the term of the loan’s remaining balance of £4,673,773 under a new loan agreement. The key terms of the new loan are:
- Repayment of loan by 31 December 2025
- 14% interest rate per annum
- Company’s right to dispose of any of its assets is subject to lender’s prior approval
Chairman and Chief Executive’s Statement
“The Company sees a number of opportunities in the de-carbonisation of the energy market”
Convertible Loan Notes
In June 2021 Pembridge raised debt of USD$3 million using 14% Convertible Loan Notes, which was used exclusively for the purchase of additional newly issued shares in Minto Metals Corp. (“Minto”) when it became listed on the Toronto Stock Exchange at the IPO price of CAD$2.60 per share, giving Pembridge an overall equity stake in Minto of 11.1%. The Convertible Loan Notes had a maturity date of 31 May 2023. Since 31 December 2022, Pembridge has reached agreement with the Convertible Loan Note holders to extend the repayment period to May 2025, with interest payments being made at the same 14% per annum each year on or around 31 May of each year, with Pembridge having the right to defer payment of interest until May 2025 if the cash position of Pembridge does not permit the payment of interest. In return, Pembridge has agreed that the accrued interest up to 31 January 2023 is to be settled at the time of the new terms being accepted by each Convertible Loan Note investor and for the conversion price to be reduced from £0.08 to £0.0375 per share, expressed as 4.65 USD cents at the exchange rate of GBP1:USD1.24 when the arrangement was proposed.
Pembridge Resources Bulgaria LLC
On 6 April 2022, a new subsidiary was formed in Bulgaria, called Pembridge Resources Bulgaria LLC. This company acts as a regional office to evaluate possible local projects. It is owned 80% by Pembridge Resources plc and its results since formation are included in these results. The new subsidiary had one employee at 31 December 2022.
Share capital
The share capital issued in 2022 comprised 3,200,000 shares issued in January 2022 at 5p per share in exchange for cash of £160,000 and the conversion of the convertible loan note for £80,000 issued to Gati Al-Jebouri in December 2021, for which the cash was received in 2021, into equity at 5p per share.
Financials
During the year the Group made a loss of $8,013,000 (2021 – profit of $20,580,000).
Consolidated Financial Statements
Statement of Comprehensive Income
| 2022 | 2021 | |
|---|---|---|
| Revenue | - | - |
| Other income | 1,999 | 79,586 |
| Loss on financial assets at fair value through profit or loss | (24,467) | (30,892) |
| Administrative expenses | (2,109,926) | (1,354,579) |
| Audit fees | (34,298) | (30,353) |
| Depreciation and amortisation | (50,563) | (50,463) |
| Fair value adjustments on financial instruments | (6,043,690) | 21,728,388 |
| Interest income | 251,311 | 17,513 |
| Interest expense | (1,342,528) | (525,401) |
| Other expenses | (3,579) | - |
| Loss for the year | (8,013,043) | 20,580,007 |
| Other comprehensive income | ||
| Items that will not be reclassified to profit or loss | ||
| Items that may be reclassified subsequently to profit or loss | ||
| Total comprehensive income for the year | (8,013,043) | 20,580,007 |
Consolidated Statement of Financial Position
As at 31 December 2022
| 2022 | 2021 | |
|---|---|---|
| ASSETS | ||
| Non-current assets | ||
| Property, plant and equipment | 1,351 | 51,914 |
| Current assets | ||
| Financial assets at fair value through profit or loss | 1,410,628 | 7,610,230 |
| Cash and cash equivalents | 59,128 | 617,375 |
| Total assets | 1,471,107 | 8,279,519 |
| EQUITY AND LIABILITIES | ||
| Equity | ||
| Issued capital | 163,375 | 159,475 |
| Share premium | 21,864,509 | 21,864,509 |
| Capital redemption reserve | 1,381 | 1,381 |
| Other reserves | 24,000 | 24,000 |
| Retained earnings | (23,805,541) | (15,792,497) |
| Equity attributable to owners of parent | (1,432,276) | 6,257,373 |
| Non-controlling interests | 2,903,383 | 2,022,146 |
| Total equity | 1,471,107 | 8,279,519 |
| Liabilities | ||
| Current liabilities | ||
| Trade and other payables | 215,625 | 160,800 |
| Total liabilities | 215,625 | 160,800 |
| Total equity and liabilities | 1,686,732 | 8,440,319 |
Company Statement of Financial Position
As at 31 December 2022
| 2022 | 2021 | |
|---|---|---|
| ASSETS | ||
| Non-current assets | ||
| Investments | 7,610,230 | 7,610,230 |
| Current assets | ||
| Cash and cash equivalents | 21,716 | 1,845,207 |
| Total assets | 7,631,946 | 9,455,437 |
| EQUITY AND LIABILITIES | ||
| Equity | ||
| Issued capital | 163,375 | 159,475 |
| Share premium | 21,864,509 | 21,864,509 |
| Capital redemption reserve | 1,381 | 1,381 |
| Other reserves | 24,000 | 24,000 |
| Retained earnings | (15,423,324) | (14,477,303) |
| Equity attributable to owners of parent | 6,629,941 | 7,672,067 |
| Liabilities | ||
| Current liabilities | ||
| Trade and other payables | 1,002,005 | 1,783,370 |
| Total liabilities | 1,002,005 | 1,783,370 |
| Total equity and liabilities | 7,631,946 | 9,455,437 |
Consolidated Statement of Changes in Equity
For the year ended 31 December 2022
| Issued Capital | Share Premium | Capital Redemption Reserve | Other Reserves | Retained Earnings | Equity Attributable to Owners of Parent | Non-controlling Interests | Total Equity | |
|---|---|---|---|---|---|---|---|---|
| Balance at 1 January 2021 | 159,475 | 21,864,509 | 1,381 | 24,000 | (36,372,504) | (14,323,139) | 2,022,146 | (12,200,993) |
| Profit for the year | 20,580,007 | 20,580,007 | 20,580,007 | |||||
| Balance at 31 December 2021 | 159,475 | 21,864,509 | 1,381 | 24,000 | (15,792,497) | 6,257,373 | 2,022,146 | 8,279,519 |
| Loss for the year | (8,013,043) | (8,013,043) | 881,237 | (7,131,806) | ||||
| Share issues | 3,900 | 3,900 | 3,900 | |||||
| Balance at 31 December 2022 | 163,375 | 21,864,509 | 1,381 | 24,000 | (23,805,541) | (1,432,276) | 2,903,383 | 1,471,107 |
Company Statement of Changes in Equity
For the year ended 31 December 2022
| Issued Capital | Share Premium | Capital Redemption Reserve | Other Reserves | Retained Earnings | Equity Attributable to Owners of Parent | Total Equity | |
|---|---|---|---|---|---|---|---|
| Balance at 1 January 2021 | 159,475 | 21,864,509 | 1,381 | 24,000 | (14,477,303) | 7,672,067 | 7,672,067 |
| Profit for the year | 20,580,007 | 20,580,007 | 20,580,007 | ||||
| Balance at 31 December 2021 | 159,475 | 21,864,509 | 1,381 | 24,000 | (14,477,303) | 7,672,067 | 7,672,067 |
| Loss for the year | (1,102,821) | (1,102,821) | (1,102,821) | ||||
| Share issues | 3,900 | 3,900 | 3,900 | ||||
| Balance at 31 December 2022 | 163,375 | 21,864,509 | 1,381 | 24,000 | (15,580,124) | 6,595,067 | 6,595,067 |
Consolidated Cash Flow Statement
For the year ended 31 December 2022
| 2022 | 2021 | |
|---|---|---|
| Operating activities | ||
| Loss for the year | (8,013,043) | 20,580,007 |
| Adjustments for: | ||
| Depreciation and amortisation | 50,563 | 50,463 |
| Fair value adjustments on financial instruments | 6,043,690 | (21,728,388) |
| Interest expense | 1,342,528 | 525,401 |
| Interest income | (251,311) | (17,513) |
| Changes in working capital: | ||
| Trade and other payables | 54,825 | 160,800 |
| Net cash generated from / (used in) operating activities | (572,558) | (759,220) |
| Investing activities | ||
| Purchase of property, plant and equipment | (12) | - |
| Net cash generated from / (used in) investing activities | (12) | - |
| Financing activities | ||
| Proceeds from issue of shares | 160,000 | - |
| Repayment of loans | (1,000,000) | - |
| Proceeds from borrowings | - | 2,800,000 |
| Net cash generated from / (used in) financing activities | (840,000) | 2,800,000 |
| Net increase / (decrease) in cash and cash equivalents | (1,412,570) | 2,040,780 |
| Cash and cash equivalents at beginning of year | 617,375 | (1,423,405) |
| Cash and cash equivalents at end of year | 59,128 | 617,375 |
Company Cash Flow Statement
For the year ended 31 December 2022
| 2022 | 2021 | |
|---|---|---|
| Operating activities | ||
| Loss for the year | (1,102,821) | 20,580,007 |
| Adjustments for: | ||
| Interest expense | 1,342,528 | 525,401 |
| Interest income | (251,311) | (17,513) |
| Changes in working capital: | ||
| Trade and other payables | (781,365) | 1,783,370 |
| Net cash generated from / (used in) operating activities | (793,070) | 22,871,265 |
| Investing activities | ||
| Purchase of investments | - | (7,610,230) |
| Net cash generated from / (used in) investing activities | - | (7,610,230) |
| Financing activities | ||
| Proceeds from issue of shares | 160,000 | - |
| Proceeds from borrowings | - | 2,800,000 |
| Repayment of loans | (1,000,000) | - |
| Net cash generated from / (used in) financing activities | (840,000) | 2,800,000 |
| Net increase / (decrease) in cash and cash equivalents | (1,633,070) | 18,061,035 |
| Cash and cash equivalents at beginning of year | 1,845,207 | (16,215,828) |
| Cash and cash equivalents at end of year | 212,137 | 1,845,207 |
Notes to the Financial Statements
1. Company Information
Pembridge Resources Plc is a public company incorporated and domiciled in the United Kingdom. The registered office is located at 20-22 Wenlock Road, London, N1 7GU. The company’s shares are listed on the OTCQB Market in the USA.
2. Basis of Preparation
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC). The financial statements have been prepared under the historical cost convention, except for certain financial instruments that have been measured at fair value.
The company financial statements have been prepared in accordance with IFRS.
3. Significant Accounting Policies
a) Basis of Consolidation
The consolidated financial statements comprise the financial statements of Pembridge Resources Plc and its subsidiary undertakings.
b) Revenue Recognition
Revenue is recognised at the fair value of the consideration received or receivable for goods and services provided in the ordinary course of business, net of discounts and value added taxes.
c) Financial Instruments
Financial assets and liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument.
i) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets that are held for trading or are designated as such upon initial recognition.
ii) Financial liabilities
Financial liabilities are classified according to the substance of the contractual arrangement.
d) Share Capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction from the proceeds.
e) Earnings per Share
Basic earnings per share is calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.
f) Investments
Investments in subsidiaries are stated at cost less impairment losses.
4. Critical Judgements and Estimates
In the application of the Group’s accounting policies, management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and underlying assumptions are reviewed on an ongoing basis.
5. Revenue
| 2022 | 2021 | |
|---|---|---|
| Other income | 1,999 | 79,586 |
| Total revenue | 1,999 | 79,586 |
6. Other Income
| 2022 | 2021 | |
|---|---|---|
| Interest income | 251,311 | 17,513 |
| Other income | 1,999 | 62,073 |
| Total other income | 253,310 | 79,586 |
7. Loss on financial assets at fair value through profit or loss
| 2022 | 2021 | |
|---|---|---|
| Loss on financial assets at fair value through profit or loss | (24,467) | (30,892) |
8. Administrative Expenses
| 2022 | 2021 | |
|---|---|---|
| Salaries and wages | 1,500,000 | 1,000,000 |
| Other administrative expenses | 609,926 | 354,579 |
| Total administrative expenses | 2,109,926 | 1,354,579 |
9. Audit Fees
| 2022 | 2021 | |
|---|---|---|
| Audit fees | 34,298 | 30,353 |
10. Depreciation and Amortisation
| 2022 | 2021 | |
|---|---|---|
| Depreciation of property, plant and equipment | 50,563 | 50,463 |
11. Fair Value Adjustments on Financial Instruments
| 2022 | 2021 | |
|---|---|---|
| Fair value adjustments on financial assets | 6,043,690 | (21,728,388) |
12. Interest Expense
| 2022 | 2021 | |
|---|---|---|
| Interest on loans | 1,342,528 | 525,401 |
13. Other Expenses
| 2022 | 2021 | |
|---|---|---|
| Other | 3,579 | - |
14. Loss for the Year
| 2022 | 2021 | |
|---|---|---|
| Group | (8,013,043) | 20,580,007 |
| Company | (1,102,821) | 20,580,007 |
15. Other Comprehensive Income
| 2022 | 2021 | |
|---|---|---|
| Items that will not be reclassified to profit or loss | - | - |
| Items that may be reclassified subsequently to profit or loss | - | - |
| Total other comprehensive income for the year | - | - |
16. Earnings per Share
| 2022 | 2021 | |
|---|---|---|
| Basic earnings per share (loss) attributable to owners of parent | (0.05) | 1.25 |
| Diluted earnings per share (loss) attributable to owners of parent | (0.05) | 1.25 |
The weighted average number of ordinary shares outstanding for the year ended 31 December 2022 was 163,375,000 (2021: 163,375,000).
17. Property, Plant and Equipment
| 2022 | 2021 | |
|---|---|---|
| Cost | 150,000 | 150,000 |
| Accumulated depreciation | (148,649) | (98,086) |
| Net book value | 1,351 | 51,914 |
18. Financial Assets at Fair Value Through Profit or Loss
| 2022 | 2021 | |
|---|---|---|
| Investment in Minto Metals Corp. | 1,410,628 | 7,610,230 |
| Total financial assets at fair value through profit or loss | 1,410,628 | 7,610,230 |
19. Cash and Cash Equivalents
| 2022 | 2021 | |
|---|---|---|
| Bank balances | 59,128 | 617,375 |
| Total cash and cash equivalents | 59,128 | 617,375 |
20. Issued Capital
| 2022 | 2021 | |
|---|---|---|
| Ordinary shares of £0.001 each | 163,375 | 159,475 |
On 24 January 2022, 3,200,000 ordinary shares were issued at a price of £0.05 per share, resulting in proceeds of £160,000.
21. Share Premium
| 2022 | 2021 | |
|---|---|---|
| Share premium | 21,864,509 | 21,864,509 |
22. Capital Redemption Reserve
| 2022 | 2021 | |
|---|---|---|
| Capital redemption reserve | 1,381 | 1,381 |
23. Other Reserves
| 2022 | 2021 | |
|---|---|---|
| Other reserves | 24,000 | 24,000 |
24. Retained Earnings
| 2022 | 2021 | |
|---|---|---|
| Retained earnings | (23,805,541) | (15,792,497) |
25. Non-controlling Interests
| 2022 | 2021 | |
|---|---|---|
| Non-controlling interests | 2,903,383 | 2,022,146 |
26. Trade and Other Payables
| 2022 | 2021 | |
|---|---|---|
| Trade payables | 180,000 | 120,000 |
| Accrued expenses | 35,625 | 40,800 |
| Total payables | 215,625 | 160,800 |
27. Related Party Transactions
The following transactions were carried out with related parties:
- Loan from Chairman and CEO:
- During the year ended 31 December 2022, the Company continued to have a loan from Gati Al-Jebouri, the Chairman and CEO. The principal amount of the loan at 31 December 2022 was £4,673,773. Interest accrued on this loan during the year amounted to £577,621.
- Loan to Minto Metals Corp.:
- The Company has a loan facility with Minto Metals Corp. At 31 December 2022, the outstanding principal loan amount was CAD 4,000,000. Interest income recognised on this loan during the year was £251,311.
Company Information
Registered Office:
20-22 Wenlock Road
London
N1 7GU
United Kingdom
Directors:
Gati Al-Jebouri (Chairman and Chief Executive Officer)
Alexander Black (Non-Executive Director)
Geoffrey Reed (Non-Executive Director)
Company Secretary:
Alexander Black
Auditors:
Crowe U.K. LLP
St. Faith’s Church Hall
15 St Faith’s Lane
Norwich
NR2 4DG
Bankers:
Barclays Bank Plc
1 Churchill Place
London
E14 5HP
Registrars:
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
| ifrs-full:IssuedCapitalMember | 2022-12-31 | 2021-12-31 | 2020-12-31 |
|---|---|---|---|
| 163,375 | 159,475 | 159,475 | |
| ifrs-full:SharePremiumMember | 2022-12-31 | 2021-12-31 | 2020-12-31 |
| 21,864,509 | 21,864,509 | 21,864,509 | |
| ifrs-full:CapitalRedemptionReserveMember | 2022-12-31 | 2021-12-31 | 2020-12-31 |
| 1,381 | 1,381 | 1,381 | |
| ifrs-full:OtherReservesMember | 2022-12-31 | 2021-12-31 | 2020-12-31 |
| 24,000 | 24,000 | 24,000 | |
| ifrs-full:RetainedEarningsMember | 2022-12-31 | 2021-12-31 | 2020-12-31 |
| (23,805,541) | (15,792,497) | (36,372,504) | |
| ifrs-full:EquityAttributableToOwnersOfParentMember | 2022-12-31 | 2021-12-31 | 2020-12-31 |
| (1,432,276) | 6,257,373 | (14,323,139) | |
| ifrs-full:NoncontrollingInterestsMember | 2022-12-31 | 2021-12-31 | 2020-12-31 |
| 2,903,383 | 2,022,146 | 2,022,146 | |
| iso4217:USD | |||
| iso4217:USD | |||
| xbrli:shares |
The operating loss for the year of $7,076,000 comprised a loss on mark-to-market revaluation of the Company’s investment in Minto of US$6,215,000, reflecting Minto’s share price on 31 December 2022 in accordance with IFRS requirements for valuation of financial assets, and administrative costs of $816,000. The operating profit for 2021 of $21,225,000 comprised exceptional gains of $18,571,000 resulting from the assumption of the Capstone liability by Minto Metals Corp. as part of the reverse takeover process, a gain on mark-to-market revaluation of the Company’s investment in Minto of US$3,800,000 and administrative costs of $1,146,000.
Principal Risks and Uncertainties
Directors have identified the following as the principal risks and uncertainties facing the Group and Company.
| Nature of Risk | How we manage it | Impact |
|---|---|---|
| Funding Risk | The Company may need to secure additional funding to cover working capital need or to make investments. | Shortage of cash for operational costs. The Company has liquid investments in the form of its shares in Minto Metals Corp, expects to receive cash from Minto in the form of debt repayments and future dividends and has the capability to raise funds through equity and loans from shareholders and other sources. |
| Investment Risk | The investments the Company makes may fail to generate value, or an inability to find investment opportunities at a suitable price may hold the Company back in achieving its aims. | The Company may not be able to fulfil its aims, or investments may have to be impaired. Pembridge has a comprehensive investment policy and strategy, as outlined in its Financial Prospects Policy (“FPP”) procedures, that will assist in prudent measures being made to identify and perform due diligence on the investments that the Company makes. |
| Copper Price Risk | Because the Company’s main asset is its investment in a copper mine, the value of the Company is dependent partly on the market value of copper. | A high copper price will make it easier for the Company to raise funds and a lower copper price will lead to a lower share price. Demand for copper is widely considered to be a growth area for the medium term. In addition, management are considering other areas of investment to enable diversification of risk. |
| Regulatory Risk | As a listed company, Pembridge has to comply with relevant laws and listing rules. | Failure to comply with regulations can result in penalties. The Company has appointed experienced management and has advisors whose knowledge of the regulatory environment enables them to ensure compliance. |
| Human Resources Risk | The achievement of the Company’s objectives will be dependent on the Company attracting and retaining qualified and motivated staff. | The efficiency of a particular aspect of the Company’s operations could be affected leading to reduced profitability. The Company has attracted and will retain a qualified team by providing a competitive remuneration policy, which includes financial performance incentives so as to align the team with its shareholders. |
Business Review & Development
A review of the business and its operations can be found in the Chairman’s and Chief Executive’s statement on page 2.
Section 172(1) statement
The Board of Pembridge Resources plc is aware that the decisions we make may affect the lives of many people. The Board makes a conscious effort to try and understand the interests of our stakeholders, and to reflect them in the choices we make in creating long-term sustainable success for the business. The Board views engagement with our shareholders and wider stakeholder groups as essential work. We are aware that we need to listen to each stakeholder group, so that we can understand specific interests, and foster effective and mutually beneficial relationships. By understanding our stakeholders, we can build their needs into the decisions we take. Throughout this Annual Report, we provide examples of how we:
- Consider the likely consequences of long-term decisions;
- Foster relationships with stakeholders;
- Understand our impact on our local community and the environment; and
- Demonstrate the importance of behaving responsibly.
This section serves as our section 172 statement and should be read in conjunction with the Strategic Report and the Company’s Corporate Governance Statement.
Section 172 of the Companies Act 2006 (CA) requires Directors to act in a way that they consider, in good faith, would most likely promote the success of the Company for the benefit of its members as a whole, taking into account the following factors (among others) listed in S172:
(a) the likely consequences of any decision in the long term,
(b) the interests of the company’s employees,
(c) the need to foster the company’s business relationships with suppliers, customers and others,
(d) the impact of the company’s operations on the community and the environment,
(e) the desirability of the company maintaining a reputation for high standards of business conduct, and
(f) the need to act fairly as between members of the company.
The Directors continue to have regard to the interests of the Company’s employees and other stakeholders, including the impact of its activities on the community, the environment and the Company’s reputation, when making decisions. Acting in good faith and fairly between members, the Directors consider what is most likely to promote the success of the Company for its members in the long term. The Board regularly reviews our principal stakeholders and how we engage each group. The relevance of each stakeholder group may increase or decrease depending on the matter or issue in question, so the Board seeks to consider the needs and priorities of each stakeholder group during its discussions and as part of its decision making
Minto
Since the listing of Minto Metals Corp (“Minto”) on the Toronto Stock Exchange (TSXV) in 2021, Pembridge continues to be represented on the Board of Minto, with its Chairman and CEO, Gati Al-Jebouri, a director of Minto and chairman of its Audit Committee.
Gati Al-Jebouri
Chairman and Chief Executive Officer
27 April 2023
Corporate and Social Responsibility Report
Pembridge is committed to complying with all Health and Safety, environmental and social legislation and protecting the health and general wellbeing of its employees. It is committed to preserving the environment.
Environment
As a company focused on mining and renewable energy, concern for the environment is of utmost importance to Pembridge. It is our policy to reduce to a minimum the potential environmental impact of our activities and have a positive impact on the areas in which we operate.
Health, Safety and Security
The health, safety and security of the personnel and communities in which we operate takes priority in the management of our operations. Our goal is to prevent injury and ill health to employees by providing a safe and healthy working environment and by minimising risks associated with occupational hazards. The Company requires the same standards in the businesses in which it invests.
Business Ethics
Pembridge is committed to carrying out all its operations with high moral and legal standards. Pembridge has an anti-corruption and anti-bribery policy which are in line with the requirements of the UK Bribery Act and equivalent legislation in other countries where it operates. Staff and contractors are made aware of their obligations both on recruitment and by periodical updates.
Gati Al-Jebouri
Chairman and Chief Executive Officer
27 April 2023
Board of Directors and Senior Management
David James, Chief Financial Officer and Company Secretary
Mr. James is a Chartered Accountant, having qualified with KPMG in 1995. David has had a varied career including time spent in Budapest, Hungary and in blue chip multinational groups, followed by 10 years running his own business as a consolidation and reporting specialist, providing financial reporting services mainly to multinational listed companies, before joining the Company full time in February 2020.
Gati Al-Jebouri, Chairman and Chief Executive Officer
Mr Al-Jebouri, who was born in Bulgaria in 1969, graduated from the University of Bristol with a Civil Engineering degree in 1990 and became a member of the Institute of Chartered Accountants in 1994. In 2001 he was appointed Deputy Minister of Energy of Bulgaria and in 2002 Bulgaria’s First Deputy Minister of Finance. His varied career has included working for the accountancy firm KPMG in London and Bulgaria until being recruited to LUKOIL, where he soon became Director of investment and Finance in the London office. In 2003 he became Chief Financial Officer of LITASCO (LUKOIL International Trading and Supply Company), where he rose to Chief Executive Officer two years later. In 2010 he became Executive Director for Finance and Marketing of LUKOIL Mid East Ltd and in 2016 was promoted to Vice President LUKOIL and Head of Middle East Upstream. He has been a Non-Executive Director since 2017 and became Chairman and Chief Executive Officer on 19 September 2019
Frank McAllister, Non-Executive Director
With over 50 years’ industry experience, Mr. McAllister has held various senior and Board positions in a number of metals and mining companies. He worked with ASARCO Incorporated for 33 years during which he became Chief Financial Officer in 1982 and then Executive Vice President of Copper Operations in 1993. Eventually he became ASARCO’s President and Chief Operating Officer before becoming Chairman and Chief Executive Officer in 1999.In 1996 he became an Independent Director of Cliffs Natural Resources Inc and its Lead Director from 2004 to 2013. During the same period, he was also Chairman, CEO and a Director at Stillwater Mining Co, and served as President of the National Mining Association during 2012 and 2013. Francis holds an MBA from New York University, Bachelor of Science in Finance from the University of Utah and attended the Advanced Management Program at Harvard Business School.
Guy Le Bel, Non-Executive Director
Mr. Le Bel has more than 35 years of international experience in strategic and financial mine planning. Most recently, he was CEO of Aquila Resources Inc. Previously, he was CEO and CFO of Golden Queen Mining Ltd. and formally, Vice President Evaluations for Capstone Mining Corp., and Vice President, Business Development at Quadra/FNX Mining Ltd. He also held business advisory, strategy and planning, business valuation and financial planning management roles at BHP Billiton Base Metals Ltd., Rio Algom Ltd. and Cambior Inc., together with independent consultation mandates across the industry. Mr. Le Bel holds a Finance MBA from École des Hautes Études Commerciales, a Master’s in Applied Sciences, Mining Engineering from the University of British Columbia, and a B.Sc. in Mining Engineering from Laval University. Mr. Le Bel has held board positions in numerous junior exploration and mining companies since 2007 and currently serves on the Board of Pembridge Resources plc. and Kintavar Exploration Inc. He is a member of Ordre des Ingénieurs du Québec.
9 | Pembridge Resources plc | Directors’ Report
The Directors present their report and the audited Financial Statements for the year ended 31 December 2022. General information about the Company is provided in note 1 to the Financial Statements.
Principal activity
The principal activity of Pembridge is to operate as a base and precious metals focussed holding Company.
Business review and future development
A review of the business and future developments of the Company is included within the Chairman and Chief Executive’s statement on pages 2 to 3, which forms part of the Strategic Report.
Results and dividends
During the year the Group made a loss of $8,013,000 (2021: profit of $20,580,000). The operating loss for the year of $7,076,000 comprised a loss on mark-to-market revaluation of the Company’s investment in Minto of US$6,215,000, reflecting Minto’s share price on 31 December 2022 in accordance with IFRS requirements for valuation of financial assets, and administrative costs of $816,000. The operating profit for 2021 of $21,225,000 comprised exceptional gains of $18,571,000 resulting from the assumption of the Capstone liability by Minto Metals Corp. as part of the reverse takeover process, a gain on mark-to-market revaluation of the Company’s investment in Minto of US$3,800,000 and administrative costs of $1,146,000. The closing cash and cash equivalents balance is $617,000 (2021: $280,000). No dividends were paid during the year and the Directors do not recommend payment of a final dividend (2021: $nil).
Going concern
The Financial Statements have been prepared on a going concern basis, which assumes that the Company will continue operating in the foreseeable future and will be able to service its debt obligations, realise its assets and discharge its liabilities as they fall due. The Company and Group have a planning, budgeting and forecasting process to determine the funds required to support their operations and expansionary plans. The budget for 2023 assumes repayments from Minto during 2023 and cost saving measures that are mentioned in the Strategic Report. Negotiations are ongoing between Capstone Copper Corp (“Capstone”), Minto and Pembridge in respect of the timing of both the USD 5 million final payment due to Capstone and of Minto repaying the last surety funding due to Pembridge, being the remaining principal of CAD 1 million and accumulated interest interest including the amount that was due on 31 March 2023. The Group’s ability to continue as a going concern is dependent on the outcome of these negotiations. Pembridge’s management expect these negotiations to reach a constructive conclusion but, because there can be no assurance of their outcome, a material uncertainty exists which may cast doubt on the Group’s ability to continue as a going concern.
In June 2021 Pembridge raised debt of USD 3 million using 14% Convertible Loan Notes, which was used exclusively for the purchase of additional newly issued shares in Minto Metals Corp. (“Minto”) when it became listed on the Toronto Stock Exchange at the IPO price of CAD 2.60 per share, giving Pembridge an overall equity stake in Minto of 11.1%. The Convertible Loan Notes had a maturity date of 31 May 2023. Since 31 December 2022, Pembridge has reached agreement with the Convertible Loan Note holders to extend the repayment period to May 2025, with interest payments being made at the same 14% per annum each year on or around 31 May of each year, with Pembridge having the right to defer payment of interest until May 2025 if the cash position of Pembridge does not permit the payment of interest. In return, Pembridge has agreed that the accrued interest up to 31 January 2023 is to be settled at the time of the new terms being accepted by each Convertible Loan Note investor and for the conversion price to be reduced from £0.08 to £0.0375 per share, expressed as 4.65 USD cents at the exchange rate of GBP1:USD1.24 when the arrangement was proposed. Pembridge does not presently plan to sell its holding in Minto, but Minto is now a publicly listed company so this can be done if necessary to raise funds. A restriction on pre-existing owners selling shares means that, as at 31 December 2022, Pembridge could sell 60% of its shares, with the restriction on the remaining 40% lifting on 25 May 2023, so that it would be possible to sell these shares if the cash proceeds were needed.
Having prepared forecasts based on current resources, assessing methods of obtaining additional finance, the Directors believe the Company and Group has sufficient resources to meet its obligations for a period of 12 months from the date of approval of these Financial Statements. Taking these matters into consideration, the Directors continue to adopt the going concern basis of accounting in preparing these Financial Statements. The Financial Statements do not include the adjustments that would be required should the going concern basis of preparation no longer be appropriate.
Post reporting date events
These are set out in note 26 to the financial statements.
Directors’ Report
10 | Pembridge Resources plc | Directors’ Report
Directors
The Directors who served during the year ended 31 December 2022 and up to the date of signing the Financial Statements were as follows:
- Gati Al-Jebouri Chairman and Chief Executive Officer
- Francis McAllister Non-Executive Director
- Guy Le Bel Non-Executive Director
Substantial shareholders
As at 31 December 2022, the total number of issued ordinary shares with voting rights in the Company was 96,965,156. Details of the Company’s capital structure and voting rights are set out in Note 20 to the Financial Statements. The Company has been notified of the following interests of 3 per cent or more in its issued share capital on the date these Financial Statements were approved by the Board.
| Party Name | Number of Ordinary Shares | % of Share Capital |
|---|---|---|
| Gati Al-Jebouri | 21,250,117 | 21.9% |
| Jonathan Armstrong | 6,012,121 | 6.2% |
| Francis McAllister | 4,663,540 | 4.8% |
| Guy Le Bel | 3,073,545 | 3.2% |
| Richard Calleri | 6,756,837 | 7.0% |
| Ruggero Maman | 5,424,242 | 5.6% |
| UBS Group AG Investment Bank | 5,130,255 | 5.3% |
Capital structure
The Company’s capital consists of ordinary shares which rank pari passu in all respects and are traded on the Standard segment of the Main Market of the London Stock Exchange. There are no restrictions on the transfer of securities in the Company or restrictions on voting rights and none of the Company’s shares are owned or controlled by employee share schemes. There are no arrangements in place between shareholders that are known to the Company that may restrict voting rights, restrict the transfer of securities, result in the appointment or replacement of Directors, amend the Company’s articles of association or restrict the powers of the Company’s Directors, including in relation to the issuing or buying back by the Company of its shares or any significant agreements to which the Company is a party that take effect after, or terminate upon, a change of control of the Company following a takeover bid, or arrangements between the Company and its Directors or employees providing for compensation for loss of office or employment (whether through resignation, purported redundancy or otherwise) that may occur because of a takeover bid.
Directors’ indemnities
Pembridge maintained liability insurance for its Directors and officers during the period and also as at the date of approval of the Directors’ Report.
Financial instruments
The financial risk management policies and objectives are set out in detail in Notes 22 and 24 of the Financial Statements. Information on exposure to risks Principal risks and uncertainties are discussed in the Strategic Report on page 5, while liquidity risks are covered in Note 22.
Greenhouse gas emissions
The Company consumed less than 40,000 KWh of energy in the United Kingdom during the period for which the Directors’ Report is prepared.
Corporate Governance
The Governance Report is presented on pages 11 to 13.
Statement as to disclosure of information to auditor
The Directors who were in office on the date of approval of these Financial Statements have confirmed, as far as they are aware, that there is no relevant audit information of which the auditors are unaware.# Directors’ Report
Introduction
Pembridge Resources Plc recognises the importance of, and is committed to, high standards of Corporate Governance. At the date of this Report, and whilst the Company is not formally required to comply with the UK Corporate Governance Code, the Company will try to observe, where practical, the requirements of the UK Corporate Governance Code. The UK Corporate Governance Code can be found at frc.org.uk/our-work/publications/Corporate-Governance.
The Company will comply with QCA Code, as published by the Quoted Companies Alliance, to the extent they consider appropriate in light of the Company’s size, stage of development and resources. The Company is currently a small company with a modest resource base. The Company has a clear mandate to optimise the allocation of limited resources to support its development plans. As such, the Company strives to maintain a balance between conservation of limited resources and maintaining robust corporate governance practices.
As the Company evolves, the Board is committed to enhancing the Company’s corporate governance policies and practices deemed appropriate for the size and maturity of the organisation. Set out below are the Company’s corporate governance practices for the year ended 31 December 2022.
Leadership
The Company is headed by an effective Board which is collectively responsible for the long-term success of the Company.
The role of the Board
The Board sets the Company’s strategy, ensuring that the necessary resources are in place to achieve the agreed strategic priorities, and reviews management and financial performance. It is accountable to shareholders for the creation and delivery of strong, sustainable financial performance and long-term shareholder value. To achieve this, the Board directs and monitors the Company’s affairs within a framework of controls which enable risk to be assessed and managed effectively. The Board also has responsibility for setting the Company’s core values and standards of business conduct and for ensuring that these, together with the Company’s obligations to its stakeholders, are widely understood throughout the Company.
Board Meetings
The core activities of the Board are carried out in scheduled meetings of the Board. These meetings are timed to link to key events in the Company’s corporate calendar and regular reviews of the business are conducted. Additional meetings and conference calls are arranged to consider matters which require decisions outside the scheduled meetings. During the year, the Board met on 3 occasions. Outside the scheduled meetings of the Board, the Directors maintain frequent contact with each other to discuss any issues of concern they may have relating to the Company or their areas of responsibility, and to keep them fully briefed on the Company’s operations.
Matters reserved specifically for Board
The Board has a formal schedule of matters reserved that can only be decided by the Board. The key matters reserved are the consideration and approval of;
- The Company’s overall strategy;
- Financial Statements and dividend policy;
- Management structure including succession planning, appointments and remuneration; material acquisitions and disposal, material contracts, major capital expenditure projects and budgets;
- Capital structure, debt and equity financing and other matters;
- Risk management and internal controls;
- The Company’s corporate governance and compliance arrangements; and
- Corporate policies.
Summary of the Board’s work in the year
During the year, the Board considered all relevant matters within its remit, but focused in particular on the liquidity and financial stability of both the Company. Certain other matters are delegated to the Board Committees, namely the Audit and Remuneration Committees
Attendance at meetings:
| Member | Meetings attended |
|---|---|
| Francis McAllister | 3 |
| Guy Le Bel | 3 |
| Gati Al-Jebouri | 3 |
All Directors attended 100% of Board meetings they were entitled to attend during the period. The Board is pleased with the high level of attendance and participation of Directors at Board and committee meetings. The Chairman sets the Board Agenda and ensures adequate time for discussion.
Non-executive Directors
The non-executive Directors bring a broad range of business and commercial experience to the Company and have a particular responsibility to challenge independently and constructively the performance of the Executive management (where appointed) and to monitor the performance of the management team in the delivery of the agreed objectives and targets. Non-executive Directors are initially appointed for a term of three years which may, subject to satisfactory performance and re-election by shareholders, be extended by mutual agreement.
Other governance matters
All of the Directors are aware that independent professional advice is available to each Director in order to properly discharge their duties as a Director. In addition, each Director and Board Committee has access to the advice of the Company Secretary.
The Company Secretary
The Company Secretary role is carried out by the Chief Financial Officer.
Effectiveness
The Board comprises of a combined Chairman and Chief Executive Officer and two independent non-executive Directors. Biographical details of the Board members are set out on page 8 of this report. The Directors are of the view that the Board and its committees consist of Directors with an appropriate balance of skills, experience, independence and diverse backgrounds to enable them to discharge their duties and responsibilities effectively.
Independence
The extensive commercial experience of the non-executive Directors, particularly in the mining industry, makes them competent to evaluate projects and performance and a useful resource to the Board on high level and strategic decisions as well as in general matters of governance. They both have significant shareholdings and share options in the Company, which align their interests with those of other shareholders, and they are not reliant financially on the Company so are in a position to challenge constructively the performance of the Executive management. Because of these factors, the Board considers each of the non-executive Directors to be independent in character and judgement.
Appointments
The Board is responsible for reviewing and the structure, size and composition of the Board and making recommendations to the board with regards to any required changes.
Commitments
All Directors have disclosed any significant commitments to the Board and confirmed that they have sufficient time to discharge their duties.
Induction
All new Directors received an induction as soon as practical on joining the Board.
Conflicts of interest
A Director has a duty to avoid a situation in which he or she has, or can have, a direct or indirect interest that conflicts, or possibly may conflict with the interests of the Company. The Board had satisfied itself that there is no compromise to the independence of those Directors who have appointments on the Boards of, or relationships with, companies outside the Company. The Board requires Directors to declare all appointments and other situations which could result in a possible conflict of interest.
Board performance and evaluation
The company has a policy of appraising Board performance annually. Having reviewed various approaches to Board appraisal, the Company has concluded that for a Company of its current scale, an internal process of regular meetings is most appropriate, in which all Board members discuss any issues as and when they arise in relation to the Board or any individual member’s performance.
Although the Board consists of only male Directors, the Board supports diversity in the Boardroom and the Financial Reporting Council’s aims to encourage such diversity. The following table sets out a breakdown by gender at 31 December 2022:
| Male | Female | |
|---|---|---|
| Directors | 3 | - |
| Senior Managers | 1 | - |
Accountability
The Board is committed to providing shareholders with a clear assessment of the Company’s position and prospects. This is achieved through this report and as required other periodic financial and trading statements.
Going concern
The Company’s business activities, together with factors likely to affect its future operations, financial position, and liquidity position are set out in the Directors’ Report and the Principal risks and Uncertainties sections of the Strategic Report. In addition, the notes to Financial Statements discloses the Company’s financial risk management practices with respect to its capital structure, liquidity risk, foreign exchange risk, and other related matters.
The Directors, having made due and careful enquiry, are of the opinion that the Company has adequate working capital to execute its operations and has the ability to access additional financing, if required, over the next 12 months. The Directors, therefore, have made an informed judgement, at the time of approving Financial Statements, that there is a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future.
Each of the Directors have confirmed that they have taken all the steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that it has been communicated to the auditor.
Auditor
The auditors, PKF Littlejohn LLP, have expressed their willingness to continue in office and a resolution that they be re-appointed will be proposed at the general meeting.
By order of the Board
Gati Al-Jebouri
Chairman and Chief Executive Officer
27 April 2023# Governance Report
Internal controls
The Board of Directors reviews the effectiveness of the Company’s system of internal controls in line with the requirement of the Code. The internal control system is designed to manage the risk of failure to achieve its business objectives. This covers internal financial and operational controls, compliance and risk management. The Company has necessary procedures in place for the year under review and up to the date of approval of the Annual Report and Financial Statements. The Directors acknowledge their responsibility for the Company’s system of internal controls and for reviewing its effectiveness. The Board confirms the need for an ongoing process for identification, evaluation and management of significant risks faced by the Company. The Directors carry out a risk assessment before signing up to any commitments. The Audit Committee is made up of the two non- executive directors and regularly reviews and reports to the Board on the effectiveness of the system of internal control. Given the size of the Company and the relative simplicity of the systems, the Board considers that there is no current requirement for an internal audit function. The procedures that have been established to provide internal financial control are considered appropriate for a Company of its size and include controls over expenditure, regular reconciliations and management accounts. The Directors are responsible for taking such steps as are reasonably available to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.
Remuneration
A Remuneration Committee was established during 2019 and is made up of the two non-executive directors. Remuneration paid to Directors in the period under review is disclosed in the Directors’ Remuneration Report.
Nomination
Currently due to the size of the Company there is no Nomination Committee.
Shareholder relations
Communication and dialogue
Open and transparent communication with shareholders is given high priority and there is regular dialogue with institutional investors, as well as general presentations made at the time of the release of the annual and interim results. All Directors are kept aware of changes in major shareholders in the Company and are available to meet with shareholders who have specific interests or concerns. The Company issues its results promptly to individual shareholders and also publishes them on the Company’s website: www.pembridgeresources.com. Regular updates to record news in relation to the Company are included on the Company’s website. The Directors are available to meet with institutional shareholders to discuss any issues and gain an understanding of the Company’s business, its strategies and governance. Meetings are also held with the corporate governance representatives of institutional investors when requested.
Annual General Meeting
At an AGM, individual shareholders are normally given the opportunity to put questions to the Chairman and to other members of the Board that may be present. Notice of the AGM is sent to shareholders at least 21 working days before the meeting. Details of proxy votes for and against each resolution, together with the votes withheld, are announced to the London Stock Exchange and are published on the Company’s website as soon as practical after the meeting.
Gati Al-Jebouri
Chairman and Chief Executive Officer
27 April 2023
| Governance Report | 14 | Pembridge Resources plc | Directors’ Remuneration Report |
|---|---|---|---|
During 2019 the Company put in place a remuneration committee comprising its two non-executive directors. The items included in this report are unaudited unless otherwise stated.
Statement of Pembridge Resources Plc’s policy on Directors’ remuneration
The Company’s policy is to maintain levels of remuneration so as to attract, motivate, and retain Directors and Senior Executives of the highest calibre who can contribute their experience to deliver industry leading performance with the Company’s operations. Currently Director’s remuneration is not subject to specific performance targets. In 2020, the Company implemented a remuneration policy so that a meaningful proportion of Executive and Senior Management’s remuneration is structured so as to link rewards to corporate and individual performance, align their interests with those of shareholders and to incentivise them to perform at the highest levels. No Director takes part in any decision directly affecting their own remuneration. This has not changed in 2022.
Directors’ remuneration
The Directors who held office at 31 December 2022 and who had beneficial interests in the ordinary shares of the Company are summarised as follows:
| Name of Director | Position | No.of shares held |
|---|---|---|
| Gati Al-Jebouri | Chairman and Chief Executive Officer | 21,250,117 |
| Francis McAllister | Non-Executive Director | 4,663,540 |
| Guy Le Bel | Non-Executive Director | 3,073,545 |
The Directors entered into service agreements at the time of the Company’s admission to the main market in August 2018. Mr. Al-Jebouri entered into a new service agreement when he became Chairman and Chief Executive Officer on 19 September 2019. Details of Directors’ emoluments and of payments made for professional services rendered are set out below.
| Directors’ Remuneration Report | 15 | Pembridge Resources plc | Directors’ Remuneration Report |
|---|---|---|---|
Remuneration components
For the year ended 31 December 2022 salaries, fees and share based payments were the main components of remuneration, with health insurance also for the Chief Executive Officer. This is expected to continue in 2023.
Directors’ emoluments and compensation (audited)
Set out below are the emoluments of the Directors for the years ended 31 December 2022 and 2021:
| Fees US$’000 | Bonuses US$’000 | Share-based payment US$’000 | Health insurance US$’000 | Total US$’000 | |
|---|---|---|---|---|---|
| 2022 | |||||
| Francis McAllister | 31 | 13 | 4 | - | 48 |
| Gati Al-Jebouri | 236 | 118 | 17 | 11 | 382 |
| Guy Le Bel | 31 | 13 | 4 | - | 48 |
| Total | 298 | 144 | 25 | 11 | 478 |
| 2021 | |||||
| Francis McAllister | 17 | - | - | - | 17 |
| Gati Al-Jebouri | 236 | - | - | 16 | 252 |
| Guy Le Bel | 17 | - | - | - | 17 |
| Total | 270 | - | - | 16 | 286 |
In 2022, the Directors received share options exercisable at 5p per share, vesting immediately, as part of the bonuses for performance in 2021. These are reflected at their fair value in the table above. The number of shares over which options were awarded is shown below.
| Number of shares | |
|---|---|
| Francis McAllister | 250,000 |
| Gati Al-Jebouri | 1,000,000 |
| Guy Le Bel | 250,000 |
| Total | 1,500,000 |
Directors beneficial share interests (audited)
The interests of the Directors who served during the year in the share capital of the Company at 31 December 2022 and at the date of this report or their resignation (if earlier) were as follows:
| Name of Director | Number of ordinary shares held at 31 December 2022 | Number of ordinary shares held as at the date of this report | Number of options / warrants | Number of share options / warrants vested but unexercised |
|---|---|---|---|---|
| Francis McAllister | 4,663,540 | 4,663,540 | 1,645,833 | 1,645,833 |
| Guy Le Bel | 3,073,545 | 3,073,545 | 1,645,833 | 1,645,833 |
| Gati Al-Jebouri | 21,250,117 | 21,250,117 | 7,659,779 | 7,659,779 |
| Directors’ Remuneration Report | 16 | Pembridge Resources plc | Directors’ Remuneration Report |
|---|---|---|---|
Total pension entitlements (audited)
The Company currently has a statutory workplace pension scheme in place but did not pay pension amounts in relation to any Directors. The Company has not paid out any excess retirement benefits to any Directors or past Directors.
Payments to past Directors (audited)
The Company has not paid any compensation to past Directors.
Payments for loss of office (audited)
No payments were made to Directors for loss of office during the year.
Consideration of shareholder views
The Board considers shareholder feedback received and guidance from shareholder bodies. This feedback, plus any additional feedback received from time to time, is considered as part of the Company’s annual policy on remuneration.
Policy for new appointments
Base salary levels will take into account market data for the relevant role, internal relativities, the individual’s experience and their current base salary. Where an individual is recruited at below market norms, they may be re-aligned over time (e.g. two to three years), subject to performance in the role. Benefits will generally be in accordance with the approved policy. For external and internal appointments, the Board may agree that the Company will meet certain relocation and/or incidental expenses as appropriate.
Policy on payment for loss of office
Payment for loss of office would be determined by the remuneration committee once appointed, taking into account contractual obligations.
Other matters
The Company does not currently have any annual or long-term incentive schemes in place for any of the Directors and as such there are no disclosures in this respect.
Approved on behalf of the Board
Gati Al-Jebouri
Chairman and Chief Executive Officer
27 April 2023
| Directors’ Remuneration Report | 17 | Pembridge Resources plc | Directors’ Responsibilities |
|---|---|---|---|
Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and regulations. Company law requires the Directors to prepare Financial Statements for each financial year. Under that law the Directors have elected to prepare the Financial Statements in accordance with UK-adopted international accounting standards. Under Company law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.# Directors' Responsibilities
In preparing these 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 applicable international accounting standards in conformity with the Companies Act 2006 have been followed, 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 Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Financial Statements and the Directors’ Remuneration Report comply with the requirements of the Companies Act 2006 and, as regards the Financial Statements, UK-adopted IFRS (UK-adopted international accounting standards). They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Website publication
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of the Financial Statements may differ from legislation in other jurisdictions.
Directors’ Responsibility Statement Pursuant to Disclosure and Transparency Rules
Each of the Directors, whose names and functions are listed on page 8, confirm that, to the best of their knowledge and belief:
* the Financial Statements have been prepared in accordance with UK-adopted IFRS (UK-adopted international accounting standards), and give a true and fair view of the assets, liabilities, financial position and loss of the Company; and
* the annual report and Financial Statements, including the Business review, includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that they face.
18 | Pembridge Resources plc | Independent Auditor’s Report to the members of Pembridge Resources Plc
Independent Auditor’s Report to the members of Pembridge Resources Plc
Opinion
We have audited the financial statements of Pembridge Resources plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the year ended 31 December 2022 which comprise the Consolidated Statement of comprehensive income, the Consolidated and Parent Company Statements of financial position, the Consolidated and Parent Company Statements of changes in equity, the Consolidated and Parent Company Cash flow statements and notes to the financial statements, including significant accounting policies.
The financial reporting framework that has been applied in their preparation is applicable law and UK-adopted international accounting standards and as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
In our opinion, the financial statements:
* the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 December 2022 and of the group’s loss for the year then ended;
* the group financial statements have been properly prepared in accordance with UK-adopted international accounting standards;
* the parent company financial statements have been properly prepared in accordance with UK-adopted international accounting standards and as applied in accordance with the provisions of the Companies Act 2006; and
* the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
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 are independent of the group and parent company 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 public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Material uncertainty related to going concern
We draw attention to note 2 in the financial statements, which indicates that further funding will be required within the 12 months following the date of approval of the financial statements in order to meet working capital needs. As stated in note 2, these events or conditions, along with the other matters as set forth in note 2, indicate that a material uncertainty exists that may cast significant doubt on the group and parent company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. In auditing the financial statements, we have concluded that the director’s 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 and parent company’s ability to continue to adopt the going concern basis of accounting included:
* Challenging the directors’ forecasts prepared to assess the group and parent company’s ability to meet its financial obligations as they fall due for a period of at least twelve months from the date of approval of the financial statements. We have reviewed the committed cash flows against contractual arrangements and historic information and compared general budgeted overheads to current run rates;
* Identifying and evaluating subsequent events which impact upon going concern and evaluating the likelihood of occurrence of forecast future cash inflows; and
* Stress testing the forecasted cash flows by eliminating sources of cash inflows that are not currently guaranteed, as well as critically reviewing committed versus non committed expenditure, in order to evaluate reasonably possible downside scenarios impacting the headroom.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Independent Auditor’s Report to the Members of Pembridge Resources Plc
19 | Pembridge Resources plc | Independent Auditor’s Report to the members of Pembridge Resources Plc
Our application of materiality
| Entity | Basis for materiality | Materiality |
|---|---|---|
| Pembridge Resources Plc – Group | 2% net assets (2021: N/A – first year as a group) | $161,000 (2021: N/A – first year as a group) |
| Pembridge Resources Plc – Parent company | 2% net assets (2021: 2% net assets) | $160,000 (2021: $210,000) |
The calculated level of materiality is broadly similar to the prior year as net assets have remained broadly unchanged year on year. We consider net assets to be the most significant determinant of the group’s and parent company’s financial position and performance used by shareholders, with the key financial statement balances being investments in financial assets and cash.
Performance materiality for the group and parent company was set at 70% (2021: 70% company only – group N/A) to ensure sufficient coverage of key balances. We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. At the planning stage materiality is used to determine the financial statement areas that are included within the scope of our audit and the extent of sample sizes during the audit. We agreed with the audit committee that we would report to the committee all individual audit differ-ences identified during the course of our audit of the group in excess of $8k (2021: $10.5k). There were no misstatements identified during the course of our audit that were individually, or in aggre-gate, considered to be material.
Our approach to the audit
In designing our audit, we determined materiality and assessed the risk of material misstatement in the financial statements. In particular, we looked at areas involving significant accounting estimates and judgement by the directors and considered future events that are inherently uncertain, including classification and valuation of certain financial instruments and valuation of share-based payments. We also addressed the risk of management override of controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.
Work on all significant components have been performed by us as the group auditor.
Independent Auditor’s Report to the Members of Pembridge Resources Plc
20 | Pembridge Resources plc | Independent Auditor’s Report to the members of Pembridge Resources Plc
Key audit matters
Key audit matters are those matters that, in our professional judgment, 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) 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
How our scope addressed this matter
Classification and valuation of Minto investment [Note 4, 5 and 15]
During the prior year, the parent company’s former subsidiary, Minto Explorations Limited (‘Minto’) became publicly listed under the name Minto Metals Corp. (‘MNTO’) on the TSXV exchange in Canada, through a reverse takeover process. At the time of the listing of Minto on the Canadian stock exchange, the Shareholders’ Agreement between the group and the other owners of Minto was terminated. Pembridge participated in the capital raise and retained its shareholding of 11.2% in Minto Metals. However, the share structure changed and Minto Metals now has only one class of shares, meaning the parent company no longer held 100% of the voting rights with its shareholding, but only 11.2%. Management has concluded that this investment should be treated as a financial asset at fair value through profit or loss. There is a risk that this treatment is not appropriate in accordance with the requirements of IFRS 10 Consolidated Financial Statements, IAS 28 Investments in Associates and Joint Ventures and IFRS 9 Financial Instruments. There is a further risk that the investment has not been recorded at the correct value and is therefore materially misstated at the year end.
Our work in this area included:
* Reviewing and challenging management’s paper on the classification of the investment balance in accordance with IAS 28 and IFRS 9, vouching key assumptions to supporting documentation where applicable;
* Ensuring that the asset is correctly classified and recorded in accordance with IFRS 9; and
* Recalculating the market value using the year-end share price and the number of shares held
Based on work performed, we are satisfied that the investment in Minto has been classified and valued appropriately and in accordance with IAS 28.
Independent Auditor’s Report to the Members of Pembridge Resources Plc
Other information
The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the group and parent company 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.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
* the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
* the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
* adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
* the parent company financial statements and the part of the directors’ remuneration report to be audited are not in agreement with the accounting records and returns; or
* certain disclosures of directors’ remuneration specified by law are not made; or
* we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the group and parent company 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 group and parent company financial statements, the directors are responsible for assessing the group’s and the parent company’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 the parent company 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. 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 obtained an understanding of the group and parent company and the sector in which they operate to identify laws and regulations that could reasonably be expected to have a direct effect on the financial statements. We obtained our understanding in this regard through discussions with management and relevant industry experience. We also selected a specific audit team based on experience with auditing entities within this industry facing similar audit and business risks.
* We determined the principal laws and regulations relevant to the group and parent company in this regard to be those arising from:
* Disclosure & Transparency Rules;
* Listing Rules;
* Companies Act 2006; and
* UK employment law.
* We designed our audit procedures to ensure the audit team considered whether there were any indications of non-compliance by the group and parent company with those laws and regulations. These procedures included, but were not limited to:
* Making enquiries of management;
* A review of Board minutes;
* A review of legal ledger accounts; and
* A review of RNS announcements.
* We also identified the risks of material misstatement of the financial statements due to fraud. We considered, in addition to the non-rebuttable presumption of a risk of fraud arising from management override of controls, that there were no other significant fraud risks.
* As in all of our audits, we addressed the risk of fraud arising from management override of controls by performing audit procedures which included, but were not limited to: the testing of journals; reviewing accounting estimates for evidence of bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Other matters which we are required to address
We were appointed by the Board of Directors on 10 February 2017 to audit the financial statements for the year ending 31 December 2016 and subsequent financial periods.Our total uninterrupted period of engagement is 7 years, covering the periods ending 31 December 2016 to 31 December 2022. The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the group or the parent company and we remain independent of the group and the parent company in conducting our audit. Our audit opinion is consistent with the additional report to the audit committee.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone, other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Eric Hindson (Senior Statutory Auditor)
For and on behalf of PKF Littlejohn LLP
Statutory Auditor
27 April 2023
15 Westferry Circus
Canary Wharf
London E14 4HD
24 | Pembridge Resources plc | Consolidated Financial Statements
| Note | Year ended 31 December 2022 US$’000 | Year ended 31 December 2021 US$’000 |
|---|---|---|
| Administrative, legal and professional expenses | (1,309) | (1,186) |
| Exceptional items – revaluation of Capstone liability | 7 | – |
| – payment of Capstone liability by Minto in March 2021 | 7 | – |
| – assumption of the Capstone liability by Minto Metals Corp | 7 | – |
| – mark-to-market valuation of investment in Minto Metals Corp | 7 | (6,215) |
| Foreign exchange gain | 448 | 40 |
| Operating (loss) / profit | 7 | (7,076) |
| Finance income | 200 | 274 |
| Finance cost | 11 | (1,137) |
| (Loss) / profit before income tax | (8,013) | |
| Income tax | 12 | – |
| (Loss) / profit for the year | (8,013) | |
| Other comprehensive income | (2) | |
| Total comprehensive (loss) / income for the year | (8,015) |
(Loss) / profit is attributable to:
| 7 | (10) | – | |
|---|---|---|---|
| Non-controlling interest | |||
| Shareholders of the Company | 7 | (8,003) | 20,580 |
| (Loss) / profit for the year | (8,013) | 20,580 |
Total comprehensive (loss) / income is attributable to:
| Non-controlling interest | (10) | – | |
| Shareholders of the Company | (8,005) | 20,580 | |
| Total comprehensive (loss) / income for the year | (8,015) | 20,580 |
Earnings per share expressed in US cents
| Year ended 31 December 2022 | Year ended 31 December 2021 | |
|---|---|---|
| (Loss) / profit per share attributable to the equity holders of the Company | ||
| Basic | (8.3c) | 24.4c |
| Diluted | (8.3c) | 19.1c |
All amounts relate to continuing activities.
As permitted by section 408 the Companies Act 2006, the statement of comprehensive income of the parent company is not presented as part of these financial statements.
The notes form an integral part of these financial statements.
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2022
25 | Pembridge Resources plc | Consolidated Financial Statements
| Note | 31 December 2022 US$’000 | 31 December 2021 US$’000 |
|---|---|---|
| Assets | ||
| Non-current assets | ||
| Investments in financial assets | 15 | 9,854 |
| Promissory note from Minto | 16 | – |
| Total non-current assets | 9,854 | |
| Current assets | ||
| Promissory note from Minto | 16 | 5,000 |
| Trade and other receivables | 16 | 1,894 |
| Cash and cash equivalents | 17 | 617 |
| Total current assets | 7,511 | |
| Total assets | 17,365 | |
| Non-Current liabilities | ||
| Borrowings | 19 | (5,753) |
| Deferred consideration due to Capstone | 25 | – |
| Total non-current liabilities | (5,753) | |
| Current liabilities | ||
| Trade and other payables | 18 | (380) |
| Borrowings | 19 | (3,000) |
| Deferred consideration due to Capstone | 25 | (5,000) |
| Total current liabilities | (8,380) | |
| Total liabilities | (14,133) | |
| Net assets | 3,232 | |
| Equity | ||
| Share capital | 20 | 1,276 |
| Share premium | 20 | 10,246 |
| Capital redemption reserve | 1,011 | |
| Translation reserve | (2) | |
| Other reserve | 325 | |
| Retained deficit | (9,625) | |
| Equity attributable to shareholders of the Company | 3,231 | |
| Non-controlling interests | 1 | |
| Total equity | 3,232 |
The Financial Statements were approved and authorised for issue by the Board on 27 April 2023 and signed on behalf of the Board by:
Consolidated Statement of Financial Position
As at 31 December 2022
Registered number: 07352056
Gati Al-Jebouri
Chairman and Chief Executive Officer
The notes form an integral part of these financial statements.
26 | Pembridge Resources plc | Consolidated Financial Statements
| Note | 31 December 2022 US$’000 | 31 December 2021 US$’000 |
|---|---|---|
| Assets | ||
| Non-current assets | ||
| Investment in subsidiary | 14 | 46 |
| Investments in financial assets | 15 | 9,854 |
| Receivable from Minto | 16 | – |
| Total non-current assets | 9,900 | |
| Current assets | ||
| Promissory note from Minto | 16 | 5,000 |
| Trade and other receivables | 16 | 1,893 |
| Cash and cash equivalents | 17 | 609 |
| Total current assets | 7,502 | |
| Total assets | 17,402 | |
| Non-Current liabilities | ||
| Borrowings | 19 | (5,753) |
| Deferred consideration due to Capstone | 25 | – |
| Total non-current liabilities | (5,753) | |
| Current liabilities | ||
| Trade and other payables | 18 | (377) |
| Borrowings | 19 | (3,000) |
| Deferred consideration due to Capstone | 25 | (5,000) |
| Total current liabilities | (8,377) | |
| Total liabilities | (14,130) | |
| Net assets | 3,272 | |
| Equity | ||
| Share capital | 20 | 1,276 |
| Share premium | 20 | 10,246 |
| Capital redemption reserve | 1,011 | |
| Other reserve | 325 | |
| Retained deficit | (9,586) | |
| Equity attributable to shareholders of the Company | 3,272 |
The Financial Statements were approved and authorised for issue by the Board on 27 April 2023 and signed on behalf of the Board by:
Company Statement of Financial Position
As at 31 December 2022
Registered number: 07352056
Gati Al-Jebouri
Chairman and Chief Executive Officer
The notes form an integral part of these financial statements.
27 | Pembridge Resources plc | Consolidated Financial Statements
Consolidated Statement of Changes in Equity
For the year ended 31 December 2022
| Share capital US$’000 | Share premium US$’000 | Capital redemption reserve US$’000 | Other reserve US$’000 | Retained deficit US$’000 | Total US$’000 | Non- controlling interest US$’000 | Total Equity US$’000 | |
|---|---|---|---|---|---|---|---|---|
| Balance at 1 January 2021 | 965 | 9,222 | 1,011 | 46 | (22,202) | (10,958) | – | (10,958) |
| Profit for the year | – | – | – | – | 20,580 | 20,580 | – | 20,580 |
| Other comprehensive income for the year | – | – | – | – | – | – | – | – |
| Total comprehensive income for the year | – | – | – | – | 20,580 | 20,580 | – | 20,580 |
| Proceeds from shares issued | 247 | 789 | – | – | – | 1,036 | – | 1,036 |
| Direct cost of shares issued | – | (11) | – | – | – | (11) | – | (11) |
| Share based payments | – | – | – | 247 | – | 247 | – | 247 |
| Total transactions with owners recognised directly in equity | 247 | 778 | – | 247 | – | 1,272 | – | 1,272 |
| Balance at 31 January 2022 | 1,212 | 10,000 | 1,011 | 293 | (1,622) | 10,894 | – | 10,894 |
| Loss for the year | – | – | – | – | (8,003) | (8,003) | (10) | (8,013) |
| Other comprehensive income for the year | – | – | – | (2) | – | (2) | – | (2) |
| Total comprehensive income for the year | – | – | – | (2) | (8,003) | (8,005) | (10) | (8,015) |
| Proceeds from shares issued | 64 | 246 | – | – | – | 310 | 11 | 321 |
| Share based payments | – | – | – | 32 | – | 32 | – | 32 |
| Total transactions with owners recognised directly in equity | 64 | 246 | – | 32 | – | 342 | 11 | 353 |
| Balance at 31 December 2022 | 1,276 | 10,246 | 1,011 | 323 | (9,625) | 3,231 | 1 | 3,232 |
The notes form an integral part of these financial statements.
28 | Pembridge Resources plc | Consolidated Financial Statements
Company Statement of Changes in Equity
For the year ended 31 December 2022
| Share capital US$’000 | Share premium US$’000 | Capital redemption reserve US$’000 | Other reserve US$’000 | Retained deficit US$’000 | Total US$’000 | |
|---|---|---|---|---|---|---|
| Balance at 1 January 2021 | 965 | 9,222 | 1,011 | 46 | (22,202) | (10,958) |
| Profit for the year | – | – | – | – | 20,580 | 20,580 |
| Other comprehensive income for the year | – | – | – | – | – | – |
| Total comprehensive income for the year | – | – | – | – | 20,580 | 20,580 |
| Proceeds from shares issued | 247 | 789 | – | – | – | 1,036 |
| Direct cost of shares issued | – | (11) | – | – | – | (11) |
| Share based payments | – | – | – | 247 | – | 247 |
| Total transactions with owners recognised directly in equity | 247 | 778 | – | 247 | – | 1,272 |
| Balance at 31 December 2022 | 1,212 | 10,000 | 1,011 | 293 | (1,622) | 10,894 |
| Loss for the year | – | – | – | – | (7,964) | (7,964) |
| Other comprehensive income for the year | – | – | – | – | – | – |
| Total comprehensive income for the year | – | – | – | – | (7,964) | (7,964) |
| Proceeds from shares issued | 64 | 246 | – | – | – | 310 |
| Share based payments | – | – | – | 32 | – | 32 |
| Total transactions with owners recognised directly in equity | 64 | 246 | – | 32 | – | 342 |
| Balance at 31 December 2022 | 1,276 | 10,246 | 1,011 | 325 | (9,586) | 3,272 |
The notes form an integral part of these financial statements.
Reserve Description and purpose
- Share capital: Nominal value of shares issued.
- Share premium: Amount subscribed for share capital in excess of nominal value, less share issue costs.
- Capital redemption reserve: Reserve created on cancellation of deferred shares.
- Other reserve: This comprises the Share-Based Payment Reserve, which is the cumulative fair value of warrants and share options granted, together with the equity element of the convertible loan, and the Translation Reserve, which is the cumulative translation adjustment from retranslation of group undertakings with functional currencies other than USD.
- Retained deficit: Cumulative net gains and losses recognised in the statement of comprehensive income.
- Non-controlling interest: Non-controlling interests represent the portion of the equity of a subsidiary not attributable either directly or indirectly to the parent company and are presented separately in the Consolidated Statement of comprehensive income and within equity in the Consolidated statement of financial position, distinguished from parent company shareholders’ equity.# Pembridge Resources plc | Consolidated Financial Statements
Consolidated Cash Flow Statement
For the year ended 31 December 2022
| Year Ended 31 December 2022 | US$’000 | Year Ended 31 December 2021 | US$’000 |
|---|---|---|---|
| Cash flows from operating activities | |||
| (Loss) / profit for the year | (8,013) | 20,580 | |
| Adjusted for: | |||
| Net finance costs | 937 | 645 | |
| Unrealised FX on debt included in administrative expenses | (668) | (31) | |
| Share based payments | 32 | 247 | |
| Revaluation of Capstone liability | - | (3,571) | |
| Assumption of the Capstone liability by Minto Metals Corp | - | (15,000) | |
| Mark-to-market valuation of investment in Minto Metals Corp | 6,215 | (3,800) | |
| Movement in fair value of derivatives | 56 | (26) | |
| (1,441) | (956) | ||
| Movements in working capital | |||
| Decrease in trade and other receivables | 2,451 | - | |
| Decrease in trade and other payables | (101) | (55) | |
| Cash generated / (used) by operations | 909 | (1,011) | |
| Income taxes recovered / (paid) | - | - | |
| Net cash generated from / (used in) operating activities | 909 | (1,011) | |
| Cash flows from investing activities | |||
| Purchase of investments | (33) | (3,034) | |
| Net cash used in investing activities | (33) | (3,034) | |
| Cash flows from financing activities | |||
| Interest payments | (420) | - | |
| Repayment of borrowings | (333) | (20) | |
| Proceeds from borrowings | - | 3,304 | |
| Proceeds from issuance of shares | 214 | 1,025 | |
| Net cash (used in) / generated from financing activities | (539) | 4,309 | |
| Net increase in cash and cash equivalents | 337 | 264 | |
| Cash and cash equivalents at beginning of year | 280 | 16 | |
| Cash and cash equivalents at end of year | 617 | 280 |
The notes form an integral part of these financial statements.
Company Cash Flow Statement
For the year ended 31 December 2022
| Year Ended 31 December 2022 | US$’000 | Year Ended 31 December 2021 | US$’000 |
|---|---|---|---|
| Cash flows from operating activities | |||
| (Loss) / profit for the year | (7,964) | 20,580 | |
| Adjusted for: | |||
| Net finance costs | 937 | 645 | |
| Unrealised FX on debt included in administrative expenses | (668) | (31) | |
| Share based payments | 32 | 247 | |
| Revaluation of Capstone liability | - | (3,571) | |
| Assumption of the Capstone liability by Minto Metals Corp | - | (15,000) | |
| Mark-to-market valuation of investment in Minto Metals Corp | 6,215 | (3,800) | |
| Movement in fair value of derivatives | 56 | (26) | |
| (1,392) | (956) | ||
| Movements in working capital | |||
| Decrease in trade and other receivables | 2,452 | - | |
| Decrease in trade and other payables | (102) | (55) | |
| Cash generated from / (used in) operations | 958 | (1,011) | |
| Income taxes recovered / (paid) | - | - | |
| Net cash generated from / (used in) operating activities | 958 | (1,011) | |
| Cash flows from investing activities | |||
| Purchase of investments | (79) | (3,034) | |
| Net cash used in investing activities | (79) | (3,034) | |
| Cash flows from financing activities | |||
| Interest payments | (420) | - | |
| Repayment of borrowings | (333) | (20) | |
| Proceeds from borrowings | - | 3,304 | |
| Proceeds from issuance of shares | 203 | 1,025 | |
| Net cash (used in) / generated from financing activities | (550) | 4,309 | |
| Net increase in cash and cash equivalents | 329 | 264 | |
| Cash and cash equivalents at beginning of year | 280 | 16 | |
| Cash and cash equivalents at end of year | 609 | 280 |
The notes form an integral part of these financial statements.
Notes to the Financial Statements
For the year ended 31 December 2022
1. NATURE OF OPERATIONS AND GENERAL INFORMATION
The principal activity of the Company is to operate as a mining focused holding Company. The Company has an investment in a listed entity which owns the Minto copper-gold-silver mine in Yukon, Canada. Pembridge Resources Plc is incorporated and domiciled in England. The address of the Company’s registered office is 38-43 Lincoln’s Inn Fields, London, WC2A 3PE. Pembridge Resources Plc’s shares are listed on the Standard Segment of the Official List of the London Stock Exchange. The Company’s Financial Statements are presented in United States dollars (US$), which is also the functional currency of the Company, and rounded to the nearest thousand.
2. BASIS OF PREPARATION
The Financial Statements have been prepared in accordance with UK-adopted international accounting standards. The Financial Statements have been prepared under the historical cost convention, except as modified for assets and liabilities recognised at fair value on a business combination and contingent consideration measured at fair value. The preparation of Financial Statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company’s accounting policies. The areas involving a high degree of judgement or complexity, or areas where assumptions and estimates are significant to the Financial Statements, are disclosed in Note 4.
Going concern
The Financial Statements have been prepared on a going concern basis, which assumes that the Company will continue operating in the foreseeable future and will be able to service its debt obligations, realise its assets and discharge its liabilities as they fall due. The Company and Group have a planning, budgeting and forecasting process to determine the funds required to support their operations and expansionary plans. The budget for 2023 assumes repayments from Minto during 2023 and cost saving measures that are mentioned in the Strategic Report. Negotiations are ongoing between Capstone Copper Corp (“Capstone”), Minto and Pembridge in respect of the timing of both the USD 5 million final payment due to Capstone and of Minto repaying the last surety funding due to Pembridge, being the remaining principal of CAD 1 million and accumulated interest including the amount that was due on 31 March 2023. The Group’s ability to continue as a going concern is dependent on the outcome of these negotiations. Pembridge’s management expect these negotiations to reach a constructive conclusion but, because there can be no assurance of their outcome, a material uncertainty exists which may cast doubt on the Group’s ability to continue as a going concern.
In June 2021 Pembridge raised debt of USD 3 million using 14% Convertible Loan Notes, which was used exclusively for the purchase of additional newly issued shares in Minto Metals Corp. (“Minto”) when it became listed on the Toronto Stock Exchange at the IPO price of CAD 2.60 per share, giving Pembridge an overall equity stake in Minto of 11.1%. The Convertible Loan Notes had a maturity date of 31 May 2023. Since 31 December 2022, Pembridge has reached agreement with the Convertible Loan Note holders to extend the repayment period to May 2025, with interest payments being made at the same 14% per annum each year on or around 31 May of each year, with Pembridge having the right to defer payment of interest until May 2025 if the cash position of Pembridge does not permit the payment of interest. In return, Pembridge has agreed that the accrued interest up to 31 January 2023 is to be settled at the time of the new terms being accepted by each Convertible Loan Note investor and for the conversion price to be reduced from £0.08 to £0.0375 per share, expressed as 4.65 USD cents at the exchange rate of GBP1:USD1.24 when the arrangement was proposed. Pembridge does not presently plan to sell its holding in Minto, but Minto is now a publicly listed company so this can be done if necessary to raise funds. A restriction on pre-existing owners selling shares means that, as at 31 December 2022, Pembridge could sell 60% of its shares, with the restriction on the remaining 40% lifting on 25 May 2023, so that it would be possible to sell these shares if the cash proceeds were needed. Having prepared forecasts based on current resources, assessing methods of obtaining additional finance, the Directors believe the Company and Group has sufficient resources to meet its obligations for a period of 12 months from the date of approval of these Financial Statements. Taking these matters into consideration, the Directors continue to adopt the going concern basis of accounting in preparing these Financial Statements. The Financial Statements do not include the adjustments that would be required should the going concern basis of preparation no longer be appropriate.
3. STANDARDS AND INTERPRETATIONS NOT YET APPLIED BY THE COMPANY
Amendments to accounting standards issued by the IASB and adopted in the year ended 31 December 2022 did not have a material impact on the results or financial position of the Group. Certain new accounting standards, amendments to accounting standards and interpretations have been published that are not mandatory for 31 December 2022 reporting periods and have not been adopted early by the Group. These standards, amendments and interpretations are not expected to have a material impact on the results or financial position of the Group in future reporting periods.
4. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Company’s accounting policies, described in Note 5, the Directors are required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.# Critical judgments exercised in applying accounting policies, apart from those involving estimates, that have the most significant effect on the amounts recognised in the financial statements are as follows:
Financial instruments
Financial assets and liabilities are designated upon inception to various classifications. The designation determines the method by which the financial instruments are carried on the balance sheet subsequent to inception and how changes in value are recorded. The designation may require the Company to make certain judgments, taking into account management’s intention of the use of the financial instruments. Since its listing on the TSXV Exchange, Minto Metals is a listed company whose shares are all voting shares, which means that Pembridge’s 11.1% holding does not give the Company control or substantial influence over Minto Metals. As a result, Pembridge accounts for its investment in Minto Metals not as a subsidiary but as a financial asset, which is revalued on a mark-to-market basis.
Income taxes
Deferred tax assets and liabilities are determined based on differences between the financial statement carrying values of assets and liabilities and their respective income tax bases (“temporary differences”), and losses carried forward. Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. The determination of the ability of the Company to utilise tax loss carry-forwards to offset deferred tax liabilities requires management to exercise judgment and make certain assumptions about the future performance of the Company. Management is required to assess whether it is probable that the Company will benefit from these prior losses and other deferred tax assets, and what tax rates are expected to be in effect when temporary differences reverse. Changes in economic conditions, metal prices and other factors could result in revisions to the estimates of the benefits to be realised or the timing of utilizing the losses.
Share based payments
Estimating fair value for share based payment transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant of share options and warrants. This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life, volatility and dividend yield and making assumptions about them. The assumptions used for estimating fair value for share based payment transactions are disclosed in Note 21.
33 | Pembridge Resources plc | Consolidated Financial Statements Notes to the Financial Statements For the year ended 31 December 2022
5. SIGNIFICANT ACCOUNTING POLICIES
Basis of consolidation and Business combinations
Up until March 2022 the company was a single entity and therefore the consolidated results and position as at 31 December 2021 mirrors that of the individual company. The consolidated Financial Statements comprise the Financial Statements of the company and its subsidiaries as at 31 December 2022. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if the Group has:
(i) Power over the investee i.e. existing rights that give it the current ability to direct the relevant activities of the investee
(ii) Exposure, or rights to, variable returns from its involvement with the investee
(iii) The ability to use its power over the investee to affect its returns
Generally there is a presumption that a majority of voting rights results in control. When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:
(i) The contractual arrangements with the other vote holders of the investee
(ii) Rights arising from other contractual arrangements
(iii) The Group’s voting rights and potential rights
Consolidation of a subsidiary begins when a Group obtains control over a subsidiary and ceases when the Group loses control of the subsidiary. Profit or loss and each component of Other Comprehensive Income (‘OCI’) are attributed to the equity holders of the Company and to the non-controlling interest, even if this results in the non-controlling interest having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, which is measured at acquisition date fair value, and the amount of any non-controlling interests in the acquire. Acquisition related costs are expensed as incurred and included in administrative expenses. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition date. Contingent consideration classified as a liability and within the scope of IFRS 9 is measured at fair value with the changes in fair value recognised in profit or loss.
Reporting foreign currency transactions in functional currency
In preparing the Financial Statements, transactions in currencies other than the entity’s functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each reporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences arising, if any, are recognised in profit or loss.
Translation from functional currency to presentational currency
When the functional currency of a Group entity is different from the Group’s presentational currency (US dollars), its results and financial position are translated into the presentational currency as follows:
(i) Assets and liabilities are translated using exchange rates prevailing at the balance sheet date.
(ii) Income and expense items are translated at average exchange rates for the year, except where the use of such average rates does not approximate the exchange rate at the date of a specific transaction, in which case the transaction rate is used.
(iii) All resulting exchange differences are recognised in other comprehensive income and presented in the translation reserve in equity and are reclassified to profit or loss in the period in which the foreign operation is disposed of.
34 | Pembridge Resources plc | Consolidated Financial Statements Notes to the Financial Statements For the year ended 31 December 2022
5. SIGNIFICANT ACCOUNTING POLICIES (continued)
Taxes
Income tax represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable result for the period. Taxable profit or loss differs from reported profit or loss because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting date. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the Financial Statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in profit or loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Tax relating to items recognised in other comprehensive income is recognised in other comprehensive income. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.
Compound instruments and borrowings
The component parts of compound instruments are classified separately as financial liabilities and equity in accordance with the substance of the contractual agreement. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for similar debt instruments.# SIGNIFICANT ACCOUNTING POLICIES (continued)
This amount is recorded as a liability on an amortised cost basis until extinguished upon conversion or at the instrument’s maturity date. The equity component is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognised and included in equity, net of income tax effects, and is not subsequently remeasured. Where the nature of the instrument is such that an equity component could exist in principle, but the event that would cause this (such as conversion on a ‘fixed for fixed’ basis on a sale) is inherently uncertain, no value is attributed to it. Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period. Borrowing costs are expensed in the period in which they are incurred.
Financial instruments
On initial recognition, financial assets are recognised at fair value and are subsequently classified and measured at: (i) amortised cost; (ii) fair value through other comprehensive income (“FVOCI”); or (iii) fair value through profit or loss (“FVTPL”). The classification of financial assets is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. A financial asset is measured at fair value net of transaction costs that are directly attributable to its acquisition except for financial assets at FVTPL where transaction costs are expensed. All financial assets not classified and measured at amortised cost or FVOCI are measured at FVTPL.
On initial recognition of an equity instrument that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment’s fair value in OCI, but the Company has not so elected in respect of its investment in Minto Metals Corp. The classification determines the method by which the financial assets are carried on the statement of financial position subsequent to inception and how changes in value are recorded. Accounts receivable are measured at amortised cost with subsequent impairments recognised in the statement of income / (loss). Derivative assets are measured at FVTPL with subsequent changes recognised in profit or loss.
Financial liabilities are designated as either: (i) fair value through profit or loss; or (ii) amortised cost. All financial liabilities are classified and subsequently measured at amortised cost except for financial liabilities at FVTPL. The classification determines the method by which the financial liabilities are carried on the statement of financial position subsequent to inception and how changes in value are recorded. Accounts payable and accrued liabilities are classified as amortised cost and carried on the statement of financial position at amortised cost.
All interest and other borrowing costs incurred in connection with the above are expensed as incurred and reported as part of financing costs in the statement of comprehensive income. The Company derecognises financial liabilities when, and only when, the Company’s obligations are discharged, cancelled or they expire.
Fair value measurement
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. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability or, in the absence of a principal market, in the most advantageous market for the asset or liability.
35 | Pembridge Resources plc | Consolidated Financial Statements Notes to the Financial Statements For the year ended 31 December 2022
A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
All assets and liabilities for which fair value is measured or disclosed in the Financial Statements are categorised within the fair value hierarchy described as follows:
(i) Level 1 – quoted market prices in active markets for identical assets or liabilities
(ii) Level 2 – valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
(iii) Level 3 – valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
External valuers are involved for the valuation of assets and liabilities acquired in a business combination, and significant liabilities such as contingent consideration.
Trade receivables
Trade receivables are recognised initially at the amount of consideration that is unconditional, unless they contain significant financing components. They are subsequently measured at amortised cost using the effective interest method, less loss allowance.
Impairment and collectability of financial assets
An ‘expected credit loss’ impairment model applies which requires a loss allowance to be recognised based on expected credit losses. This applies to financial assets measured at amortised cost. The estimated present value of future cash flows associated with the asset is determined and an impairment loss is recognised for the difference between this amount and the carrying amount as follows: the carrying amount of the asset is reduced to estimated present value of the future cash flows associated with the asset, discounted at the financial asset’s original effective interest rate, either directly or through the use of an allowance account and the resulting loss is recognised in profit or loss for the period. In a subsequent period, if the amount of the impairment loss related to financial assets measured at amortised cost decreases, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.
Cash and cash equivalents
Cash and cash equivalents includes cash in hand and deposits held at call with banks. Any interest earned is accrued monthly and classified as finance income. For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above.
Trade and other payables
These amounts represent liabilities for goods and services provided to the Company prior to the end of the financial year which are unpaid. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.
Provisions
Provisions are recognised when the Company has a present obligation (legal or constructive), as a result of past events, and it is probable that an outflow of resources that can be reliably estimated will be required to settle the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. Where the effect is material, the provision is discounted to net present value using an appropriate current market-based pre-tax discount rate and the unwinding of the discount is included in profit or loss as interest expense from discounting obligations.
Employee benefits
Liabilities for wages and salaries, including non-monetary benefits and annual leave, that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled.
Earnings per share
Basic earnings / (loss) per share is computed by dividing net earnings available (attributable) to common shareholders by the weighted average number of common shares outstanding during the period. The computation of diluted earnings (loss) per share assumes the conversion, exercise or contingent issuance of securities only when such conversion, exercise or issuance would have a dilutive effect on earnings / (loss) per share. The dilutive effect of convertible securities is reflected in diluted earnings / (loss) per share by application of the “if converted” method.
Investment in subsidiary
The Company recognises its investments in subsidiaries at cost, less any provision for impairment.
36 | Pembridge Resources plc | Consolidated Financial Statements Notes to the Financial Statements For the year ended 31 December 2022
5. SIGNIFICANT ACCOUNTING POLICIES (continued)
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares are shown in equity as a deduction from proceeds.
Share based payments
The fair value of services received from employees and third parties in exchange for the grant of share options and warrants is recognised as an expense, except for those granted in connection with the issue of new ordinary shares which are shown as a deduction in equity. A corresponding increase is recognised in other reserves in equity. The fair value of the share options and warrants is calculated using an appropriate valuation model. At each reporting period end the Company revises its estimate of the number of options that are expected to become exercisable. The proceeds received net of any attributable transaction costs are credited to share capital (nominal value) and share premium when exercised.
6.# OPERATING SEGMENTS
Operating segments are reported in a manner consistent with the internal reporting provided to the Board, who are responsible for allocating resources and assessing performance of the operating segment. The Company has one operating segment, being investment activities, therefore all IFRS 8 disclosures are incorporated within other notes to the Financial Statements.
7. OPERATING (LOSS) / PROFIT
Audit fees and staff costs are shown in notes 8 and 9. Exceptional items are analysed below.
| Year Ended 31 December 2022 US$’000 | Year Ended 31 December 2021 US$’000 | |
|---|---|---|
| Revaluation of Capstone liability | - | (1,429) |
| Payment of Capstone liability by Minto in March 2021 | - | 5,000 |
| Assumption of the Capstone liability by Minto Metals Corp | - | 15,000 |
| Mark-to-market valuation of investment in Minto Metals Corp | (6,215) | 3,800 |
| (6,215) | 22,371 |
Pembridge accounts for its investment in Minto as a financial asset, which is revalued on a mark-to-market basis. The revaluation of the investment to its share price of C$1.64 per share at 31 December 2022 resulted in a loss of US$6,215,000 (2021: revaluation from its historic cost to its market value of C$2.50 per share at 31 December 2021 resulted in a gain of US$3,800,000).
2021
The payment of the Capstone liability for the acquisition of Minto Exploration Ltd is dependent on certain conditions related to production and copper prices being met. At the end of 2020, the payments were not certain in amount or timing, which meant that the value placed on the liability was less than the maximum possible US$ 20 million. During 2021, all conditions were met and the full balance because payable, which resulted in a further charge of US$1,429,000. Minto made a payment of US$5 million of the obligation to Capstone in March 2021 on behalf of Pembridge under the terms of the Shareholders’ Agreement then in force, which reduced the obligation to US$15 million. The assumption of the Capstone liability by Minto Metals Corp was part of the reverse take-over process under which Minto Exploration Ltd. amalgamated with 1246778 B.C. Ltd. to form Minto Metals Corp. As part of this process, the Shareholder’s Agreement between Pembridge and the other owners of Minto Explorations Ltd. was terminated and Pembridge and Minto Metals Corp (“Minto”) executed the Future Expenditures Agreement (“FEA”). As a result of the FEA, Minto assumed the obligations of Pembridge with respect to all outstanding Capstone payments arising under the Share Purchase Agreement for the acquisition of Minto Exploration Ltd. Minto had paid $5 million of the full US$20 million already, so the amount of the promissory note issued by Minto to Pembridge in respect of this was US$15 million. Of this amount, US$10 million was paid prior to 31 December 2021 and payment of the remaining US$5 million was deferred by agreement with Capstone until 15 January 2023. Negotiations are ongoing with Capstone and Minto in respect of its further deferral.
37 | Pembridge Resources plc | Consolidated Financial Statements
Notes to the Financial Statements
For the year ended 31 December 2022
8. AUDITOR’S REMUNERATION
| Year Ended 31 December 2022 US$’000 | Year Ended 31 December 2021 US$’000 | |
|---|---|---|
| Remuneration receivable by the Company’s auditors for the audit of the Financial Statements | 41 | 41 |
| Total remuneration | 41 | 41 |
9. EMPLOYEES AND KEY MANAGEMENT
The total Directors’ emoluments for the year, including share-based payments, were US$478,000 (2021 – US$286,000). Detailed disclosure of Directors’ remuneration is disclosed in the Directors’ remuneration report on page 14. The average number of employees in the Company was 2 (2021 – 2), and in the Group in 2022 the average number of employees was 3. Key management personnel as defined under IAS 24 have been identified as only the Board of Directors.
| Group Year ended 31 December 2022 US$’000 | Company Year ended 31 December 2021 US$’000 |
|---|---|
| Staff costs | |
| Wages and salaries | 694 |
| Social security costs | 33 |
| Injury protection and health insurance | 12 |
| Pensions | 5 |
| Share based payments | 32 |
| 776 |
10. RELATED PARTY TRANSACTIONS
The Company has borrowings from its Chairman and CEO, Gati Al-Jebouri, which which date from between 2019 and 2021. These borrowings and interest accrued thereon were restructured in November 2022 into a new loan of £4,673,773. This loan is repayable by 31 December 2025 and incurs interest of 14% per annum. Gati Al-Jebouri has invested US$500,000 in the convertible loan notes described in note 19. In December 2021, the Company agreed to a convertible loan of £80,000 with Gati Al-Jebouri. The loan carried no interest and was converted to new ordinary shares at an exercise price of 5p in May 2022.
11. FINANCE COSTS
| Year Ended 31 December 2022 US$’000 | Year Ended 31 December 2021 US$’000 | |
|---|---|---|
| Interest on loans – Loan from Director | 717 | 674 |
| Interest on loans – Convertible loan notes | 420 | 245 |
| 1,137 | 919 |
38 | Pembridge Resources plc | Consolidated Financial Statements
Notes to the Financial Statements
For the year ended 31 December 2022
12. INCOME TAX
| Year Ended 31 December 2022 US$’000 | Year Ended 31 December 2021 US$’000 | |
|---|---|---|
| Current tax: | ||
| UK corporation tax on the result for the year | - | - |
| Total current taxation | - | - |
| Deferred taxation | - | - |
| Income tax | - | - |
| Differences explained below: | ||
| (Loss) / profit before tax | (8,013) | 20,580 |
| (Loss) / profit before tax multiplied by the standard rate 19% (2021: 19%) | (1,522) | 3,910 |
| Effect of: | ||
| Non-qualifying depreciation | ||
| Expenses not deductible | 9 | 11 |
| Non-taxable portion of unrealised losses / (gains) | 1,181 | (4,250) |
| Tax losses for which no deferred income tax asset was recognised | 322 | 329 |
| Tax charge / (credit) for the year | - | - |
| Unrecognised deferred tax asset | ||
| Tax losses | ||
| UK – excess management expenses | 3,304 | 3,350 |
| 3,304 | 3,350 |
The deferred tax assets are currently unrecognised as the likelihood of sufficient future taxable profits does not yet meet the definition of “probable”. The unrecognised deferred tax asset has no expiry period.
13. EARNINGS PER SHARE
The calculation of basic and diluted loss per ordinary share is based on the following data:
| Year Ended 31 December 2022 | Year Ended 31 December 2021 | |
|---|---|---|
| Basic (loss) / profit per share (US cents) | (8.3c) | 24.4c |
| Diluted (loss) / profit per share (US cents) | (8.3c) | 19.1c |
| Weighted average number of shares for basic profit / (loss) per share | 96,058,119 | 84,449,176 |
| Weighted average number of shares for diluted profit / (loss) per share | 131,120,926 | 107,884,498 |
The basic and diluted result per share have been calculated using the loss attributable to shareholders of the Company of US$8,003,000 (2021: profit US$20,580,000 ) as the numerator, i.e. no adjustment to loss / profit was necessary. The basic and dilutive loss per share for 2022 are the same because the effect of the exercise of share options and warrants would be anti-dilutive. Details of share options and warrants that could potentially dilute earnings per share in future periods are set out in Note 21.
39 | Pembridge Resources plc | Consolidated Financial Statements
Notes to the Financial Statements
For the year ended 31 December 2022
14. INVESTMENT IN SUBSIDIARY - COMPANY
| Pembridge Resources Bulgaria LLC. US$’000 | Minto Exploration Ltd. US$’000 | |
|---|---|---|
| At 1 January 2022 | - | 9,202 |
| Capital injected on formation of new subsidiary | 46 | - |
| Reclassification (see note 15) | - | (9,202) |
| At 31 December 2022 | 46 | - |
| At 31 December 2021 | - |
15. INVESTMENTS IN FINANCIAL ASSETS - GROUP AND COMPANY
| Minto Metals Corp US$’000 | Shares in Vulcan Green Copper Ltd. US$’000 | Convertible loan note in Vulcan Green Copper Ltd. US$’000 | Total US$’000 | |
|---|---|---|---|---|
| At 1 January 2021 | - | - | - | - |
| Reclassification (see note 14) | 9,202 | - | - | 9,202 |
| Additions | 3,000 | 34 | - | 3,034 |
| Revaluation to fair market value | 3,800 | - | - | 3,800 |
| At 31 December 2021 | 16,002 | 34 | - | 16,036 |
| Additions | - | - | 33 | 33 |
| Revaluation to fair market value | (6,215) | - | - | (6,215) |
| At 31 December 2022 | 9,787 | 34 | 33 | 9,854 |
On the date of Minto’s listing, when the investment was reclassified from a subsidiary to a financial asset, the existing shares in Minto owned by the Company had a fair market value, at the subscription price for new shares of C$2.60, of US$13,588,000. As part of the Minto capital raise that completed with its listing as Minto Metals Corp in 2021, Pembridge invested US$3 million. This maintained Pembridge’s interest in Minto at 11.1%. The share structure of Minto Metals Corp, with all shares being voting shares, means that Pembridge does not control Minto Metals Corp. and It is now reported as a financial asset, valued at its fair market value based on its closing share price on TSXV on 31 December 2022 of C$1.64.
In July 2021, the Company made an investment of £25,000 in Vulcan Green Copper Ltd. (“Vulcan”) as part of Vulcan’s capital raise of £500,000. Vulcan is the holder of the Kitumba Copper project in Zambia and is valued at £3.5 million post capital raise. The Pembridge investment represents just under 1% of Vulcan’s share capital. In March 2022, the Company invested a further £25,000 in Vulcan, in the form of a convertible loan note. The loan carries interest at 12% and will convert automatically to shares on the earlier of the following events:
1. Vulcan does a single funding raising of more than £250,000;
2. Vulcan does an Initial Public Offering (“IPO”) on the London Stock Exchange or an equivalent admission to any other recognised investment exchange;
3. On a change of control of Vulcan; or
4. Three years after issuance of the note.
Under the first three scenarios, Pembridge will be able to convert its loan into shares at a discount of 50% to the price set in the triggering transaction. Under the fourth scenario, the conversion price would be 1p per share, which represents a 90% discount to the pricing of the 2021 £500,000 capital raise.
40 | Pembridge Resources plc | Consolidated Financial Statements
16.# Notes to the Financial Statements
For the year ended 31 December 2022
17. CASH AND CASH EQUIVALENTS
| Group 31 December 2022 US$’000 | Company 31 December 2022 US$’000 | Group & Company 31 December 2021 US$’000 | |
|---|---|---|---|
| Cash and short-term deposits | 617 | 609 | 280 |
18. TRADE AND OTHER PAYABLES
| Group 31 December 2022 US$’000 | Company 31 December 2022 US$’000 | Group & Company 31 December 2021 US$’000 | |
|---|---|---|---|
| Accrued interest | 245 | 245 | 245 |
| Other payables and accruals | 91 | 88 | 189 |
| Derivative liability | 44 | 44 | - |
| 380 | 377 | 434 |
Accrued interest is from the convertible loan notes and will be payable in June 2023. Other payables are non-interest bearing and normally settled in the month following date of invoice.
19. BORROWINGS - GROUP AND COMPANY
| 31 December 2022 US$’000 | 31 December 2021 US$’000 | |
|---|---|---|
| Convertible loan notes | - | 3,000 |
| Loans from directors | 5,753 | - |
| Borrowings – non-current | 5,753 | 3,000 |
| Loans from directors | - | 6,145 |
| Convertible loan notes | 3,000 | - |
| Total borrowings | 8,753 | 9,145 |
The Company has borrowings from its Chairman and CEO, Gati Al-Jebouri, which which date from between 2019 and 2021. These borrowings and interest accrued thereon were restructured in November 2022 into a new loan of £4,673,773. This loan is repayable by 31 December 2025 and incurs interest of 14% per annum. In June 2021, the Company issued convertible loan notes with a value of USD 3 million, with an interest rate of 14%, redeemable after two years, in order that it could participate in Minto’s capital raise. The loan notes may be converted into Ordinary Shares in the Company at any time from 1 June 2022 until 31 May 2023 at an exercise price of $0.113 (8p at an exchange rate of £1 - $1.415) at the option of the noteholder. Gati Al-Jebouri has invested US$500,000 in the convertible loan notes. Interest of US$245,000 has been accrued and is disclosed in note 18. Since 31 December 2022, Pembridge has reached agreement with the Convertible Loan Note holders to extend the repayment period to May 2025, with interest payments being made at the same 14% per annum each year on or around 31 May of each year, with Pembridge having the right to defer payment of interest until May 2025 if the cash position of Pembridge does not permit the payment of interest. In return, Pembridge has agreed that the accrued interest up to 31 January 2023 is to be settled at the time of the new terms being accepted by each Convertible Loan Note investor and for the conversion price to be reduced from £0.08 to £0.0375 per share, expressed as 4.65 USD cents at the exchange rate of GBP1:USD1.24 when the arrangement was proposed. In December 2021, the Company agreed to a convertible loan of £80,000 with Gati Al-Jebouri. The loan carried no interest and was converted to new ordinary shares at an exercise price of 5p in May 2022.
20. SHARE CAPITAL AND PREMIUM
| Number of ordinary shares | Share Capital – ordinary shares US$000 | Share premium US$000 | Total US$000 | |
|---|---|---|---|---|
| At 1 January 2022 | 92,165,516 | 1,212 | 10,000 | 11,212 |
| Shares issued | 4,800,000 | 64 | 246 | 310 |
| At 31 December 2022 | 96,965,516 | 1,276 | 10,246 | 11,522 |
Ordinary shares have attached to them full voting, dividend and capital distribution rights (including on a winding up). The shares issued in 2022 comprised 3,200,000 shares issued in January 2022 at 5p per share in exchange for cash of £160,000 and the conversion of the convertible loan note for £80,000 issued to Gati Al-Jebouri in December 2021, for which the cash was received in 2021, into equity at 5p per share.
21. SHARE BASED PAYMENTS - GROUP AND COMPANY
Movements in the number of share options and warrants and their related weighted average exercise prices are as follows:
| 2022 | 2021 | |
|---|---|---|
| Options and warrants Number | Average exercise price (pence) | |
| Outstanding at 1 January | 35,456,139 | 7.66 |
| Granted | 1,750,000 | 5.00 |
| Forfeited | (600,800) | 9.99 |
| Exercised | (1,600,000) | 5.00 |
| Outstanding at 31 December | 35,005,339 | 7.28 |
| Exercisable at 31 December | 35,005,339 | 7.28 |
The weighted average remaining contractual life for the share options and warrants outstanding as at 31 December 2022 was 1.5 years (2021: 2.2 years). The fair value of share-based payment transactions is calculated using the Black-Scholes Option Pricing Model. Key inputs to the model were: volatility 56.34% (2021: 77.75%), risk free rate 3.67% (2020: 1.75%) and dividend yield 0% (2021: 0%).
Share options and warrants outstanding at the end of year have the following expiry dates and exercise prices:
| Grant-Vest | Expiry date | Exercise price (pence) | 2022 Number | 2021 Number |
|---|---|---|---|---|
| 2017 | 2021 | 43.4 | - | - |
| 2018 | 2022 | 43.4 | - | 300,000 |
| 2019 | 2022 | 15.625 | - | 300,800 |
| 2020-2021 | 2023 | 5.00 | 2,791,666 | 2,791,666 |
| 2020-2021 | 2030 | 5.00 | 3,915,000 | 3,915,000 |
| 2021-2022 | 2023 | 8.00 | 26,548,673 | 26,548,673 |
| 2021-2022 | 2022 | 5.00 | - | 1,600,000 |
| 2022-2022 | 2027 | 5.00 | 1,500,000 | - |
| 2022-2022 | 2032 | 5.00 | 250,000 | - |
22. FINANCIAL INSTRUMENTS
Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument, are disclosed in note 5. The Company held investments in two companies as financial assets at 31 December 2022. The investment in Minto Metals Corp is classified as level 1 under the fair value hierarchy. Vulcan Green Copper Ltd is a private company and the investments in it are classified as level 3 under the fair value hierarchy. The only other financial assets currently held by the Company are classified as receivables and cash and cash equivalents
Categories of financial instruments
The carrying amounts presented in the statement of financial position relate to the following categories of assets and liabilities.
| Group 31 December 2022 US$’000 | Company 31 December 2022 US$’000 | Company 31 December 2021 US$’000 | |
|---|---|---|---|
| Financial assets | |||
| At fair value through profit and loss | |||
| - Investment in Minto Metals Corp | 9,787 | 9,787 | 16,002 |
| - Investment in Vulcan Green Copper Ltd | 67 | 67 | 34 |
| - Trade receivables | - | - | - |
| At amortised cost | |||
| - Minto receivables | 6,814 | 6,814 | 9,106 |
| - Other receivables | 27 | 26 | - |
| - Cash and cash equivalents | 617 | 617 | 280 |
| 17,312 | 17,311 | 25,442 | |
| Financial liabilities | |||
| At amortised cost | |||
| - Trade payables | - | - | - |
| - Other payables | (336) | (333) | (434) |
| - Borrowings | (8,753) | (8,753) | (9,145) |
| At fair value through profit and loss | |||
| - Deferred consideration due to Capstone | (5,000) | (5,000) | (5,000) |
| (14,089) | (14,086) | (14,579) |
As at 31 December 2022, trade and other receivables are all considered to be recoverable. The fair value is equivalent to book value for current assets and liabilities at amortised cost.
22. FINANCIAL INSTRUMENTS (continued)
The main risks arising from the Company’s financial instruments are liquidity risk and foreign currency risk. Interest rate risk is minimised by fixed rate borrowings as described in note 19. The Directors review and agree policies for managing these risks and these are summarised below.
Liquidity risk
Liquidity risk arises from the Company’s management of working capital. It is the risk that the Company will encounter difficulty in meeting its financial obligations as they fall due. The Directors monitor cash flow on a regular basis and at quarterly Board meetings in the context of their expectations for the business, in order to ensure sufficient liquidity is available to meet foreseeable needs. The Company’s cash at bank is held with institutions with A credit ratings (Fitch).
As of December 31, 2022, the Company’s liabilities that have contractual maturities were as follows:
| Contractual cash flows Carrying amount US$’000 | Total US$’000 | 2023 US$’000 | 2024 US$’000 | 2025 US$’000 | 2026 US$’000 | After 2026 US$’000 | |
|---|---|---|---|---|---|---|---|
| Trade and other payables | 336 | 336 | 336 | - | - | - | - |
| Loan from Director | 5,753 | 5,753 | - | - | 5,753 | - | - |
| Convertible loan notes | 3,000 | 3,000 | 3,000 | - | - | - | - |
| Payable to Capstone | 5,000 | 5,000 | 5,000 | - | - | - | - |
| 14,089 | 14,089 | 8,336 | - | 5,753 | - | - |
As of December 31, 2021, the Company’s liabilities that have contractual maturities were as follows:
| Contractual cash flows Carrying amount US$’000 | Total US$’000 | 2022 US$’000 | 2023 US$’000 | 2024 US$’000 | 2025 US$’000 | After 2025 US$’000 | |
|---|---|---|---|---|---|---|---|
| Trade and other payables | 434 | 434 | 434 | - | - | - | - |
| Loan from Director | 6,145 | 6,145 | 6,145 | - | - | - | - |
| Convertible loan notes | 3,000 | 3,000 | - | 3,000 | - | - | - |
| Payable to Capstone | 5,000 | 5,000 | - | 5,000 | - | - | - |
| 14,579 | 14,579 | 6,579 | 8,000 | - | - | - |
Foreign currency risk management
The carrying amounts of monetary assets and monetary liabilities denominated in a currency other than the relevant company’s functional currency at the reporting date are as follows:
| CAD items in a USD functional company 31 December 2022 US$'000 | GBP items in a USD functional company 31 December 2022 US$'000 | CAD items in a USD functional company 31 December 2021 US$'000 | GBP items in a USD functional company 31 December 2021 US$'000 | |
|---|---|---|---|---|
| Financial assets | ||||
| Other receivables | 1,814 | - | 4,106 | - |
| Cash and cash equivalents | - | 617 | - | 280 |
| Total financial assets | 1,814 | 617 | 4,106 | 280 |
| Financial liabilities | ||||
| Trade and other payables | - | (88) | - | (189) |
| Borrowings | - | (5,753) | - | (6,145) |
| Total financial liabilities | - | (5,841) | - | (6,334) |
| Net | 1,814 | (5,224) | 4,106 | (6,054) |
Of the receivable from Minto (including interest), at 31 December 2022 C$1.9 million (US$1,402,000) (2021: C$4 million (US$3,166,000)) was hedged against GBP using forwards, which provides a partial hedge against the Company’s GBP borrowings.
The following table details the Company’s sensitivity to a 10% increase and decrease in the US dollar against the relevant foreign currencies. 10% is the sensitivity rate used when reporting foreign currency risk internally and represents Management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the year-end for a 10% change in foreign currency rates. A positive number below indicates an increase in profit and equity where the US dollar strengthens 10% against the relevant currency. For a 10% weakening of the US dollar against the relevant currency, there would be an equal and opposite impact on the profit and equity, and the balances below would be negative.
| 31 December 2022 US$'000 | 31 December 2021 US$'000 | |
|---|---|---|
| Effect on profit / (loss) | ||
| +10% | 341 | 194 |
| -10% | (341) | (194) |
| Effect on equity | ||
| +10% | 341 | 194 |
| -10% | (341) | (194) |
46 | Pembridge Resources plc | Consolidated Financial Statements Notes to the Financial Statements For the year ended 31 December 2022
23. RECONCILIATION OF MOVEMENT IN NET DEBT - GROUP
2022
| At 1 January US$'000 | New borrowing US$'000 | Interest added to debt US$'000 | Debt repaid US$'000 | Other cash flows US$'000 | Foreign exchange US$'000 | At 31 December US$'000 | |
|---|---|---|---|---|---|---|---|
| Cash at bank and in hand | 280 | - | - | (333) | 670 | - | 617 |
| Borrowings | (9,145) | - | (717) | 333 | 107 | 669 | (8,753) |
| Net debt | (8,865) | - | (717) | - | 777 | 669 | (8,136) |
2021
| At 1 January US$'000 | New borrowing US$'000 | Interest added to debt US$'000 | Debt repaid US$'000 | Other cash flows US$'000 | Foreign exchange US$'000 | At 31 December US$'000 | |
|---|---|---|---|---|---|---|---|
| Cash at bank and in hand | 16 | 3,304 | - | (20) | (3,020) | - | 280 |
| Borrowings | (5,218) | (3,304) | (674) | 20 | - | 31 | (9,145) |
| Net debt | (5,202) | - | (674) | - | (3,020) | 31 | (8,865) |
US$107,000 of borrowing was repaid in 2022 not as a cash payment but by the issuance of shares on conversion of a convertible note loan.
24. CAPITAL MANAGEMENT POLICIES AND PROCEDURES
The Company considers its capital to be equal to the sum of its total equity, disclosed on the Balance Sheet, and net debt. The Company’s objectives when managing its capital are:
- To ensure that the Company and all of its businesses are able to operate as going concerns and ensure that the Company operates within the financial covenants contained within its debt facilities
- To have available the necessary financial resources to allow the Company to invest in areas that may deliver acceptable future returns to investors
- To maintain sufficient financial resources to mitigate against risks and unforeseen events
- To maximise shareholder value through maintaining an appropriate balance between equity and net debt
47 | Pembridge Resources plc | Consolidated Financial Statements Notes to the Financial Statements For the year ended 31 December 2022
25. COMMITMENTS AND CONTINGENCIES
Contingent consideration
On 3 June 2019, the Company acquired all of the outstanding common shares of Minto Explorations Ltd (“Minto”) from Capstone Mining Corp (Capstone) (“Minto Acquisition”). The consideration for the Minto acquisition comprises up to US$20 million in total payments due to Capstone payable out of future cash flows and realisations from Minto and based on certain hurdles linked to production levels at Minto as well as future copper prices as detailed below. Of the three payments detailed below, the first was contingent only in respect of its timing, whereas payments 2 and 3 were contingent on copper prices reaching certain levels within a specified timeframe.
- First payment to Capstone of US$5 million will be due at the earlier of when production at Minto has reached a steady state 60% of mill capacity and 31 January 2021 (the ‘Restart Date’).
- Second payment to Capstone of US$5 million will be due once production at Minto has reached 60% of mill capacity and the copper price has averaged over US$3.00/lb (US$6,615/t) for two consecutive quarters, within three years of the Restart Date.
- Final payment to Capstone of US$10 million will be due upon the copper price achieving an average of US$3.50/lb (US$7,717/t) for two consecutive quarters, within three years of the Restart Date.
Because the payments were dependent on the above conditions being met, they were not certain in amount or timing and the Company calculated a fair value as at 31 December 2020 for the total consideration due for the Minto Acquisition as US$18.6 million. During 2021, all conditions were satisfied and the payable to Capstone was recognised in full. Of the US$20 million, US$15 million was paid in 2021 and payment of the remaining US$5 million was deferred by agreement with Capstone until 15 January 2023. Negotiations are ongoing with Capstone and Minto in respect of its further deferral.
| 2022 $’000 | 2021 $’000 | |
|---|---|---|
| Current | 5,000 | - |
| Non-current | - | 5,000 |
| Total | 5,000 | 5,000 |
26. EVENTS SUBSEQUENT TO THE REPORTING DATE
Convertible Loan Notes
In June 2021 Pembridge raised debt of USD$3 million using 14% Convertible Loan Notes, which was used exclusively for the purchase of additional newly issued shares in Minto Metals Corp. (“Minto”) when it became listed on the Toronto Stock Exchange at the IPO price of CAD$2.60 per share, giving Pembridge an overall equity stake in Minto of 11.1%. The Convertible Loan Notes had a maturity date of 31 May 2023. Since 31 December 2022, Pembridge has reached agreement with the Convertible Loan Note holders to extend the repayment period to May 2025, with interest payments being made at the same 14% per annum each year on or around 31 May of each year, with Pembridge having the right to defer payment of interest until May 2025 if the cash position of Pembridge does not permit the payment of interest. In return, Pembridge has agreed that the accrued interest up to 31 January 2023 is to be settled at the time of the new terms being accepted by each Convertible Loan Note investor and for the conversion price to be reduced from £0.08 to £0.0375 per share, expressed as 4.65 USD cents at the exchange rate of GBP1:USD1.24 when the arrangement was proposed.
Cost saving measures
Since 31 December 2022, Pembridge has introduced cost saving measures, the main ones being that its CEO and Chairman has agreed to defer his salary effective from March until September 2023 and the company’s CFO has agreed to move to a part-time basis with a corresponding cost saving effective from 1 April. In addition, because of Pembridge’s limited cash resources, it has agreed with Gati Al-Jebouri that the interest that became payable on its loan from him on 31 March 2023 will be added to the loan principal.
48 | Pembridge Resources plc | Consolidated Financial Statements
Directors
- Gati Al-Jebouri (Chairman and Chief Executive Officer)
- Francis Ralph McAllister (Non-Executive Director)
- Guy Le Bel (Non-Executive Director)
Secretary
- David James
Registered office
- 38-43 Lincoln’s Inn Field
- London WC2A 3PE
Registered number
- 07352056 (England and Wales)
Auditor
- PKF Littlejohn LLP
- Statutory Auditor
- 15 Westferry Circus
- Canary Wharf
- London E14 4HD
Bankers
- Bank of Scotland
- St James’s Gate
- 14-16 Cockspur Street
- London SW1Y 5BL
Solicitors
- Armstrong Teasdale (UK) Limited
- 38-43 Lincoln’s Inn Field
- London WC2A 3PE
Brokers
- Tavira Securities
- 88 Wood Street
- London EC2V 7DA
Registrars
- Link Group
- 10th Floor Central Square
- 29 Wellington Street
- Leeds LS1 4DL
Website
- www.pembridgeresources.com
TDIM PERE
COMPANY INFORMATION
YEAR ENDED 31 DECEMBER 2022
ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS