TIDMCMET
RNS Number : 4720K
Capital Metals PLC
21 December 2022
21 December 2022
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS STIPULATED
UNDER THE UK VERSION OF THE MARKET ABUSE REGULATION NO 596/2014
WHICH IS PART OF ENGLISH LAW BY VIRTUE OF THE EUROPEAN (WITHDRAWAL)
ACT 2018, AS AMED. ON PUBLICATION OF THIS ANNOUNCEMENT VIA A
REGULATORY INFORMATION SERVICE, THIS INFORMATION IS CONSIDERED TO
BE IN THE PUBLIC DOMAIN.
Capital Metals plc
("Capital Metals" or the "Company")
Unaudited Interim Results for the Six Months Ended 30 September
2022
Capital Metals (AIM: CMET), a mineral sands company approaching
mine development stage at the high-grade Eastern Minerals Project
in Sri Lanka (the "Project"), announces its unaudited results for
the six months ended 30 September 2022 (the "Half Year").
Highlights
-- Cash balance of $812,246 as at 30 September 2022
-- Released results of auger drilling programme in April 2022
which delivered exceptional high grades:
o All results from surface to a maximum of only 3.5m depth (with
an average depth 1.5m) ended in mineralisation
o +30% Total Heavy Minerals ("THM") and average grade of 19.37%
THM from 560 drill holes, compared to existing JORC resource grade
of 17.6%
-- Completion of Development Study and Project Economics in May
2022 demonstrating robust economics with a base case NPV of $155
million and IRR of 56%
-- Grant of the first two Industrial Mining Licences ("IMLs") in
August 2022 - subsequently purportedly temporarily suspended in
December 2022 by the GSMB pending an investigation into the
Company's ownership structure, which the Company has been advised
is legally sound
-- Continued positive discussions with a prospective offtaker
and strategic partners with the objective that such parties will
form a significant part of the future capex funding package
-- Continued work with local communities including sponsorship
of educational, sporting and community cleaning initiatives
Chairman's Report
I am pleased to present the half year results for the six months
ended 30 September 2022.
The most significant event in the Half Year was the granting in
August 2022 of our Project's first two Industrial Mining Licences
("IMLs") by the Geological Survey and Mines Bureau of the
Government of Sri Lanka ("GSMB"). Significant work went into that
process, including the approval of the EIA in November 2021 and
these first IMLs importantly provide a basis for the granting of
further IMLs in due course.
The IMLs were a major step forward both towards the commencement
of mining activities, in accordance with the Development Plan
outlined in the Preliminary Economic Assessment completed in May
2022, and the advancement of ongoing discussions a prospective
offtaker and strategic partners. To that end, we are in advanced
discussions with some large organisations with our expectation that
any agreement would contribute capital to help fund the development
of the Project.
While our Board and local management team continues to monitor
the economic and political developments in Sri Lanka, we are
pleased to observe that Sri Lanka's economic situation appears to
be improving and a normal operating environment in respect of fuel
and other key supplies appears to have been restored. Undoubtedly,
there is widespread support both within the Sri Lankan government
and local communities for the progression of the Project and the
benefits it will bring to all stakeholders.
Significant workstreams in addition to the granting of the IMLs
during the Half Year included:
-- The publication of results from the auger drilling programme
which commenced in October 2021 and delivered exceptional higher
grades. All results were from surface to a maximum of only 3.5m
depth (with an average depth 1.5m) and ended in mineralisation.
Exceptional high-grade results of +30% Total Heavy Minerals ("THM")
and average grade of 19.37% THM from 560 drill holes were recorded,
compared to the existing JORC resource grade of 17.6%, indicating
the potential for both volume and grade increases.
-- The completion of the Development Study and Project Economics
in May 2022 demonstrating robust economics with a base case NPV of
$155 million and IRR of 56%.
-- Continued work with the local communities and Sri Lanka as a
whole where we are increasingly seeing a growing awareness of the
positive economic and social benefits that the Project can
bring.
Subsequent to the period end, we were extremely surprised to
receive a notice from the GSMB to the Company's Sri Lankan
subsidiary Damsila Exports Pvt Limited ("Damsila") that they
consider it necessary for the current shareholding structure of
Damsila to have been approved by the Board of Investment of Sri
Lanka (BOI) and that as Damsila has not obtained such approval they
will be carrying out proper investigations regarding the ownership
structure of Damsila, and that in the meantime the two IMLs which
were issued to Damsila are temporarily suspended. Capital Metals
has been working with the GSMB to clarify any concerns around the
structure, which was set up in 2016 and has been made clear to the
GSMB throughout its mutual dealings, including the applications and
granting of the Company's exploration licences, environmental
permits (EIA) and the IMLs themselves. There appears to be some
uncertainty within the GSMB (and perhaps the BOI) around the
application of the Foreign Exchange Act of Sri Lanka that governs
investment in shares in companies incorporated in Sri Lanka by
non-residents. Damsila, is a subsidiary company of a Sri Lanka
resident company, Redgate Lanka (Pvt) Limited. The ultimate parent
of Redgate is Capital Metals. The Company has made several
submissions to the GSMB and relevant authorities based on the
advice of its well regarded in country legal counsel, Varners,
which has provided its opinion to the Company that the current
shareholding structure of Damsila is in conformity with the
Regulations published under the Foreign Exchange Act and that BOI
approval is not required by Damsila for the issuance of shares to
Redgate which is a company incorporated in Sri Lanka even though
its ultimate parent is Capital Metals. The Company will continue
discussions in a cooperative manner with the relevant Sri Lankan
Government authorities to resolve this issue as soon as
possible.
Our immediate focus remains on having the temporary suspension
of the IMLs lifted, finalising offtake discussions, concluding
local land agreements and the lease agreement for Oluvil Port, the
granting of additional IMLs and further refining the technical,
engineering, and economic aspects of the Project in preparation for
construction. Our exploration team continues to develop its
programmes to extend the high-grade resource. We have several
identified potential areas that could be drilled to increase the
total resource. The Project currently has a JORC Resource of 17.2
Mt with an average grade of 17.6% THM. Limited sonic drilling so
far undertaken offers a compelling indication of deeper
mineralisation, including assays of 26.3% and 26.6% THM at
respective depths of 14m and 8m. The Project's THM grades are some
of the highest in the global peer group. Less than 10% of the total
Project area has been drilled to date. Initial exploration also
suggests potential for significant mineralisation further inland.
Additional work is planned in due course for infill and step out
drilling. We are excited about the potential to expand our
resource.
The Company continues its close involvement in the community in
the Ampara District of the Eastern Province. During the Half Year,
community initiatives included the sponsorship of a children's art
programme, local cricket tournaments and the community cleaning of
a local temple. As part of our beach cleaning programme, we are
also in discussions with local authorities to supply and install
bins for proper waste management in the Project area.
In conclusion, considering the compelling market dynamics for
our minerals, the advanced stage of our Project, the attractive
economics and the potential for further expansion of our high-grade
resource, we believe Capital Metals represents an exceptional
investment prospect. Further, the Company also announces that
Tavira Financial has been appointed as the Company's sole broker
with WH Ireland Limited no longer acting as the Company's broker
with immediate effect.
We look forward to keeping shareholders updated with further
progress as we work with all stakeholders to bring the Project into
production in a timely manner.
Greg Martyr
Non-Executive Chairman
21 December 2022
For further information, please visit www.capitalmetals.com or
contact:
Capital Metals plc Via Vigo Consulting
Michael Frayne (CEO)
James Mahony (CFO)
Vigo Consulting (Investor Relations) +44 (0)20 7390 0234
Ben Simons / Peter Jacob capitalmetals@vigoconsulting.com
SPARK Advisory Partners (Nominated
Adviser)
Neil Baldwin / James Keeshan +44 (0)20 3368 3554
Tavira Financial
Jonathan Evans / Oliver Stansfield +44 (0)20 7100 5100
Market Abuse Regulation (MAR) Disclosure
Certain information contained in this announcement would have
been deemed inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 until the release of this
announcement.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
6 months 6 months
to 30 September to 30 September
2022 Unaudited 2021 Unaudited
Notes $ $
------------------------------------------ ------ ----------------- -----------------
Continuing operations
Revenue - -
Administration expenses (382,400) (1,123,697)
Foreign exchange 1,681 (73,241)
Operating loss (380,719) (1,196,938)
------------------------------------------ ------ ----------------- -----------------
Finance income 2,531 110
------------------------------------------ ------ ----------------- -----------------
Loss before income tax (378,188) (1,196,828)
------------------------------------------ ------ ----------------- -----------------
Income tax - -
------------------------------------------ ------ ----------------- -----------------
Loss for the period (378,188) (1,196,828)
------------------------------------------ ------ ----------------- -----------------
Other comprehensive income
Items that may be reclassified to profit
or loss
Currency translation differences (1,064,932) 52,184
Total comprehensive loss for the period (1,443,120) (1,144,644)
------------------------------------------ ------ ----------------- -----------------
Basic and diluted 5 (0.069)p (0.216)p
------------------------------------------ ------ ----------------- -----------------
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at As at As at
30 September 31 March 30 September
2022 Unaudited 2022 Audited 2021 Unaudited
Notes $ $ $
------------------------------------- -------- ---------------- -------------- ----------------
Non-Current Assets
Property, plant and equipment 23,396 28,541 42,961
Intangible assets 6 4,061,939 4,556,210 6,333,401
4,085,335 4,584,751 6,376,362
------------------------------------- -------- ---------------- -------------- ----------------
Current Assets
Trade and other receivables 61,475 36,160 148,832
Cash and cash equivalents 812,246 1,775,754 1,199,612
------------------------------------- -------- ---------------- -------------- ----------------
873,721 1,811,914 1,348,444
------------------------------------- -------- ---------------- -------------- ----------------
Total Assets 4,959,056 6,396,665 7,724,806
------------------------------------- -------- ---------------- -------------- ----------------
Non-Current Liabilities
Trade and other payables 600,000 602,274 600,000
------------------------------------- -------- ---------------- -------------- ----------------
600,000 602,274 600,000
------------------------------------- -------- ---------------- -------------- ----------------
Current Liabilities
Trade and other payables 731,711 723,926 847,180
731,711 723,926 847,180
------------------------------------- -------- ---------------- -------------- ----------------
Total Liabilities 1,331,711 1,326,200 1,447,180
------------------------------------- -------- ---------------- -------------- ----------------
Net Assets 3,627,345 5,070,465 6,277,626
------------------------------------- -------- ---------------- -------------- ----------------
Capital and Reserves Attributable
to
Equity Holders of the Company
Share capital 6,062,403 6,062,403 6,018,628
Share premium 48,946,676 48,946,676 47,469,912
Capital contribution and contingent
shares 3,218,750 3,218,750 3,218,750
Other reserves (39,790,729) (38,725,797) (36,715,612)
Retained losses (14,809,755) (14,431,567) (13,714,052)
------------------------------------- -------- ---------------- -------------- ----------------
Total Equity 3,627,345 5,070,465 6,277,626
------------------------------------- -------- ---------------- -------------- ----------------
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS'
EQUITY
Attributable to owners of
the Parent
------ ---------- ---------------- ------------------------------------------------------------
Capital
contribution
Share Share and contingent Other Retained Total
capital premium shares reserves losses equity
Note $ $ $ $ $ $
---------- ------------
Balance as at 1 April
2021 6,018,628 47,469,912 3,218,750 (37,359,486) (12,517,224) 6,830,580
------------------------------ ---------- ----------- --------------- ------------- ------------- ------------
Loss for the period - - - - (1,196,828) (1,196,828)
Other comprehensive income
for the period - - - 52,184 - 52,184
------------------------------ ---------- ----------- --------------- ------------- ------------- ------------
Total comprehensive
income/(loss)
for the period - - - 52,184 (1,196,828) (1,144,644)
Share option expense - - - 591,690 - 591,690
Total transactions with
owners, recognised in
equity - - - 591,690 - 591,690
------------------------------ ---------- ----------- --------------- ------------- ------------- ------------
Balance as at 30 September
2021 6,018,628 47,469,912 3,218,750 (36,715,612) (13,714,052) 6,277,626
------------------------------ ---------- ----------- --------------- ------------- ------------- ------------
Balance as at 1 April
2022 6,062,403 48,946,676 3,218,750 (38,725,797) (14,431,567) 5,070,465
------------------------------ ---------- ----------- --------------- ------------- ------------- ------------
Loss for the period - - - - (378,188) (378,188)
Other comprehensive loss
for the period - - - (1,064,932) - (1,064,932)
------------------------------ ---------- ----------- --------------- ------------- ------------- ------------
Total comprehensive loss
for the period - - - (1,064,932) (378,188) (1,443,120)
------------------------------ ---------- ----------- --------------- ------------- ------------- ------------
Total transactions - - - - - -
with
owners, recognised in
equity
---------------------- ------ ---------- ----------- --------------- ------------- ------------- ------------
Balance as at 30 September
2022 6,062,403 48,946,676 3,218,750 (39,790,729) (14,809,755) 3,627,345
------------------------------ ---------- ----------- --------------- ------------- ------------- ------------
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
6 months 6 months
to 30 September to 30 September
2022 2021 Unaudited
Notes Unaudited $
$
------------------------------------------- -------- ----------------- -----------------
Cash flows from operating activities
Loss before taxation (378,188) (1,196,828)
Adjustments for:
Share based payments - 591,689
Depreciation 3,196 15,053
Interest income (2,518) (110)
(Increase)/Decrease in trade and other
receivables (25,823) 1,306
Increase in trade and other payables 6,017 104,236
Foreign exchange 46,117 49,499
Net cash used in operations (351,199) (435,155)
-------------------------------------------- -------- ----------------- -----------------
Cash flows from investing activities
Purchase of property, plant and equipment (3,376) (10,314)
Exploration and evaluation activities 6 (368,585) (152,348)
Interest received 2,518 110
-------------------------------------------- -------- ----------------- -----------------
Net cash used in investing activities (369,443) (162,552)
-------------------------------------------- -------- ----------------- -----------------
Cash flows from financing activities - -
Net cash generated from financing
activities - -
------------------------------------------- -------- ----------------- -----------------
Net decrease in cash and cash equivalents (720,642) (597,707)
Exchange differences on cash (242,866) -
Cash and cash equivalents at beginning
of period 1,775,754 1,797,319
Cash and cash equivalents at end
of period 812,246 1,199,612
-------------------------------------------- -------- ----------------- -----------------
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1. General Information
Capital Metals plc is a mineral exploration company with its
shares admitted to trading on the AIM Market of the London Stock
Exchange.
The Company is domiciled in the United Kingdom and incorporated
and registered in England and Wales, with registration number
05555087. The Company's registered office is Suite 1, 15 Ingestre
Place, London, W1F 0DU.
2. Basis of Preparation
The condensed consolidated interim financial statements have
been prepared in accordance with the requirements of the AIM Rules
for Companies. As permitted, the Company has chosen not to adopt
IAS 34 "Interim Financial Statements" in preparing this interim
financial information. The condensed interim financial statements
should be read in conjunction with the annual financial statements
for the year ended 31 March 2022, which have been prepared in
accordance with UK adopted international accounting standards.
The interim financial information set out above does not
constitute statutory accounts within the meaning of the Companies
Act 2006. It has been prepared on a going concern basis in
accordance with the recognition and measurement criteria of UK
adopted international accounting standards.
Statutory financial statements for the year ended 31 March 2022
were approved by the Board of Directors on 23 September 2022 and
delivered to the Registrar of Companies. The report of the auditors
on those financial statements was unqualified with a material
uncertainty in relation to the Company's ability to continue as a
going concern. The condensed interim financial statements are
unaudited and have not been reviewed by the Company's auditor.
Going concern
These financial statements have been prepared on the going
concern basis. Given the Group's current cash position and its
demonstrated ability to raise capital, the Directors have a
reasonable expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future. Thus,
they continue to adopt the going concern basis of accounting
preparing the condensed interim financial statements for the period
ended 30 September 2022.
Notwithstanding the above, a material uncertainty exists that
may cast significant doubt on the Group and Parent Company's
ability to continue as a going concern and, therefore, that the
Group and Parent Company may be unable to realise their assets or
settle their liabilities in the ordinary course of business. As a
result of their review, and despite the aforementioned material
uncertainty, the Directors have confidence in the Group and Parent
Company's forecasts and have a reasonable expectation that the
Group and Parent Company will continue in operational existence for
the going concern assessment period and have therefore used the
going concern basis in preparing these consolidated and Parent
Company financial statements.
The factors that were extant at 31 March 2022 are still relevant
to this report and as such reference should be made to the going
concern note and disclosures in the 2022 Annual Report and
Financial Statements ("2022 Annual Report").
Risks and uncertainties
The Board continuously assesses and monitors the key risks of
the business. The key risks that could affect the Company's medium
term performance and the factors that mitigate those risks have not
substantially changed from those set out in the 2022 Annual Report,
a copy of which is available on the Company's website:
www.capitalmetals.com . The key financial risks are liquidity risk,
credit risk, market risk and fair value estimation.
Critical accounting estimates
The preparation of condensed interim financial statements
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the end of the
reporting period. Significant items subject to such estimates are
set out in Note 2 the 2022 Annual Report. The nature and amounts of
such estimates have not changed significantly during the interim
period.
3. Accounting Policies
Except as described below, the same accounting policies,
presentation and methods of computation have been followed in these
condensed interim financial statements as were applied in the
preparation of the Company's annual financial statements for the
year ended 31 March 2022.
3.1 Changes in accounting policy and disclosures
(a) New and amended standards adopted by the Group and
Company
A number of new and amended standards and interpretations issued
by the International Accounting Standards Board (IASB) have become
effective for the first time for financial periods beginning on (or
after) 1 April 2022 and have been applied by the Company and Group
in these interim financial statements. None of these new and
amended standards and interpretations had a significant effect on
the Company or Group because they are either not relevant to the
Company or Group's activities or require accounting which is
consistent with the Company or Group's current accounting policies
.
(b) New standards, amendments and Interpretations in issue but
not yet effective or not yet endorsed and not early adopted
There are a number of standards, amendments to standards, and
interpretations which have been issued by the IASB that are
effective in future accounting periods and which have not been
adopted early.
4. Dividends
No dividend has been declared or paid by the Company during the
six months ended 30 September 2022 (six months ended 30 September
2021: $nil).
5. Loss per Share
The calculation of loss per share is based on a retained loss of
$378,188 for the six months ended 30 September 2022 ( six months
ended 30 September 2021: $ 1,196,828 ) and the weighted average
number of shares in issue in the period ended 30 September 2022 of
545,380,934 ( six months ended 30 September 2021: 528,714,268
).
No diluted earnings per share is presented for the six months
ended 30 September 2022 or six months ended 30 September 2021 as
the effect on the exercise of share options would be to decrease
the loss per share.
6. Intangible fixed assets
The movement in capitalised exploration and evaluation costs
during the period was as follows:
Exploration & Evaluation at Cost and Net Book Value $
----------------------------------------------------- ----------
Balance as at 1 April 2022 4,556,210
Additions 368,585
Foreign exchange (862,856)
As at 30 September 2022 4,061,939
----------------------------------------------------- ----------
7. Events after the balance sheet date
Subsequent to the period end, we were extremely surprised to
receive a notice from the GSMB to the Company's Sri Lankan
subsidiary Damsila Exports Pvt Limited ("Damsila") that they
consider it necessary for the current shareholding structure of
Damsila to have been approved by the Board of Investment of Sri
Lanka (BOI) and as Damsila has not obtained such approval they will
be carrying out proper investigations regarding the ownership
structure of Damsila, and that in the meantime the two IMLs which
were issued to Damsila are temporarily suspended. Capital Metals
has been working with the GSMB to clarify any concerns around the
structure, which was set up in 2016 and has been made clear to the
GSMB throughout its mutual dealings, including the applications and
granting of the Company's exploration licences, environmental
permits (EIA) and the IMLs themselves. There appears to be some
uncertainty within the GSMB (and perhaps the BOI) around the
application of the Foreign Exchange Act of Sri Lanka that governs
investment in shares in companies incorporated in Sri Lanka by
non-residents. Damsila, is a subsidiary company of a Sri Lanka
resident company, Redgate Lanka (Pvt) Limited. The ultimate parent
of Redgate is Capital Metals. The Company has made several
submissions to the GSMB and relevant authorities based on the
advice of its well regarded in country legal counsel, Varners,
which has provided its opinion to the Company that the current
shareholding structure of Damsila is in conformity with the
Regulations published under the Foreign Exchange Act and that BOI
approval is not required by Damsila for the issuance of shares to
Redgate which is a company incorporated in Sri Lanka even though
its ultimate parent is Capital Metals. The Company will continue
discussions in a cooperative manner with the relevant Sri Lankan
Government authorities to resolve this issue as soon as
possible.
8. Approval of interim financial statements
The Condensed interim financial statements were approved by the
Board of Directors on 21 December 2022.
9. Availability of interim financial statements
Copies of these interim financial statements are available from
the Capital Metals website at www.capitalmetals.com.
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