TIDMKRPZ
RNS Number : 6978Q
Kropz PLC
30 June 2022
The information contained within this announcement is deemed to
constitute inside information as stipulated under the Market Abuse
Regulations (EU) No. 596/2014 (the "UK MAR") which is part of UK
law by virtue of the European Union (Withdrawal) Act 2018. The
information is disclosed in accordance with the Company's
obligations under Article 17 of the UK MAR. Upon the publication of
this announcement, this inside information is now considered to be
in the public domain.
30 June 2022
Kropz Plc
("Kropz" or the "Company")
Final Results for the Year ended 31 December 2021,
Posting of Annual Report and Accounts
and
Notice of General Meeting
Kropz Plc (AIM: KRPZ), an emerging African producer and
developer of plant nutrient feed minerals, announces Final Results
for the Year ended 31 December 2021 and the publication of the
Company's Annual Report and Accounts.
The full financial report and Notice of General Meeting will be
available online shortly on the Company's website at www.kropz.com
and are being posted to shareholders today.
The Company will hold a General Meeting for the purposes of
approving the Annual Report which will be held at the offices of
Memery Crystal at 165 Fleet Street, London EC4A 2DY on 25 July 2022
at 1 p.m.
HIGHLIGHTS 2021
Key developments during the 2021 financial year
Corporate
-- Activities during the year were focused on completion of
construction activities at Elandsfontein and finalisation of the
Hinda updated feasibility study (" Hinda Updated FS ");
-- Kropz Plc (" Kropz " or the " Company ") secured a further
convertible loan facility of up to US$ 5 million (not exceeding a
maximum of ZAR 85 million) from the ARC Fund ("ARC"), Kropz's major
shareholder in February 2021 ("Further Equity Facility"), used
exclusively for the Hinda Updated FS and general corporate purposes
;
-- The fourth drawdown on the convertible loan facility, secured
from ARC in June 2020, of up to US$ 40 million (not exceeding a
maximum of ZAR 680 million) ("Original Equity Facility") occurred
on 10 March 2021 for US$ 7 million;
-- The first drawdown on the Further Equity Facility occurred on
10 March 2021 for US$ 2 million;
-- The fifth drawdown on the Original Equity Facility occurred
on 23 June 2021 for US$ 11 million;
-- The second drawdown on the Further Equity Facility occurred
on 23 June 2021 for US$ 2 million;
-- The sixth and final drawdown on the Original Equity Facility
occurred on 10 September 2021 for US$ 3 million;
-- The third drawdown on the Further Equity Facility occurred on
10 September 2021 for US$ 400,000;
-- On 15 October 2021, Kropz secured a new conditional
convertible equity facility of up to ZAR 200 million (approximately
US$ 13 million) ("New ZAR Equity Facility"), with ARC in order to
deliver the Company's Elandsfontein phosphate project to first
revenue;
-- The first drawdown on the New ZAR Equity Facility occurred on
26 October 2021 for ZAR 90 million (approximately US$ 6
million);
-- The fourth drawdown on the Further Equity Facility occurred
on 10 December 2021 for US$ 400,000;
-- The second drawdown on the New ZAR Equity Facility occurred
on 10 December 2021 for ZAR 37 million (approximately US$ 2
million);
-- US$200,000 remained undrawn on the Further Equity Facility at 31 December 2021; and
-- ZAR 73 million (approximately US$ 5 million) remained undrawn
at 31 December 2021 on the New ZAR Equity Facility.
Elandsfontein
-- Activities focussed on completion of construction and
commissioning activities at Elandsfontein;
-- As announced on 9 September 2021, the appeal against the
award of the integrated Water Use Licence ("WUL") for the
Elandsfontein project was dismissed by the South African Water
Tribunal. The appeal was lodged by a small group calling themselves
the West Coast Environmental Protection Association ("WCEPA"), on
26 June 2017. The appeal was heard, over four sittings, from
October 2019 to February 2021;
-- Mining activities commenced in October 2021, and significant
volumes of ore were made available to support commissioning
ramp-up;
-- In November 2021, earthworks, civil construction, fabrication
and erection of structural steel, platework and piping was
completed and all mechanical equipment installed;
-- Pre-commissioning (C2) and cold commissioning (C3) activities commenced in November 2021;
-- Construction activities at Elandsfontein were completed in
December 2021, under budget and on time;
-- "First-fill" reagents, sourced in South Africa and imported
from the USA, were received on site in December 2021;
-- On 23 December 2021, a major milestone was achieved when
first ore was introduced into the Elandsfontein plant; and
-- As announced on 23 November 2021, Transnet provided
Elandsfontein with a draft port access agreement to support the
long-term export of Elandsfontein's phosphate rock through the port
of Saldanha. Signature of the contract is now being finalised
between the parties. Exports through Cape Town will only be
required for a maximum of 350,000 tonnes of Elandsfontein's export
production of approximately 1 million tonnes per annum, and only if
capacity through Saldanha is unavailable for a limited period of
time.
Hinda
-- As announced on 4 February 2021, Kropz appointed Hatch Africa
(Pty) Ltd ("Hatch"), a global engineering and construction firm, to
complete the Hinda Updated FS;
-- The updated Environmental and Social Impact Assessment
("ESIA") was completed in December 2021 by WSP Global Inc ("WSP")
out of Montreal, Canada;
-- The updated ESIA was lodged with the Republic of Congo
("RoC") Ministry of Environment in late December 2021; and
-- Hatch completed the Hinda Updated FS and the outcomes, as
detailed below, were announced on 22 December 2021.
Aflao
-- Kropz divested its 50% + 1 share interest in Aflao, as announced on 16 February 2021.
Key developments post the financial year end
Corporate
-- Issued 6,700,000 ordinary shares, at an exercise price of
GBP0.001 an ordinary share, in the Company to key members of the
executive management team, including certain Persons Discharging
Managerial Responsibilities ("PDMRs") . The issue of ordinary
shares was due to awards vesting that had been issued under its
Long-Term Incentive Plan ("LTIP Awards") on 31 July 2020 and as
announced on 4 August 2020;
-- The fifth and final drawdown on the Further Equity Facility
occurred on 10 March 2022 for US$ 200,000;
-- The third drawdown on the New ZAR Equity Facility occurred on
25 March 2022 for ZAR 40 million;
-- The fourth drawdown on the New ZAR Equity Facility occurred
on 26 April 2022 for ZAR 33 million;
-- On 27 April 2022, Kropz announced that it had entered into an
agreement with ARC for a ZAR 25 million (approximately US$ 1.60
million) bridge loan facility (the "Loan") to meet cash
requirements in April 2022 and draw down of the Loan took place on
28 April 2022;
-- As announced on 11 May 2022, Kropz entered into a new
conditional convertible equity facility of up to ZAR 177 million
(approximately US$ 11 million) ("ZAR 177 Million Equity Facility")
with ARC to fund Elandsfontein to first revenues from bulk
concentrate sales;
-- The ZAR 177 Million Equity Facility was approved by Kropz
shareholders and became unconditional on 1 June 2022; and
-- The first drawdown on the ZAR 177 Million Equity Facility
occurred on 2 June 2022 for ZAR 103.5 million (approximately US$ 7
million). After set-off of the Loan, Kropz received an amount of
ZAR 78.5 million (approximately US$ 5 million).
Elandsfontein
-- The focus at Elandsfontein continues to be production ramp-up
of the mine and beneficiation plant, to reach nameplate
capacity;
-- To date, 5,000 tonnes of saleable concentrate have been
produced and are being stored in the Saldanha Bay storage
facility;
-- BNP Paribas ("BNP") released the ZAR 77 million restricted
cash in the bank account of Kropz Elandsfontein (Pty) Ltd ("Kropz
Elandsfontein") on 10 January 2022, upon satisfaction of the
requirement by BNP for Kropz to bridge the funding shortfall in
respect of Elandsfontein as announced on 1 September 2021. The
funding shortfall was satisfied when the New ZAR Equity Facility
was secured from ARC;
-- As announced on 27 April 2022, a further funding shortfall of
ZAR 177 million was expected due to slower than expected progress
in the ramp up of operations at Elandsfontein;
-- First bulk sales are now expected to move into Q3 2022 as a
result of early geological challenges in the mining area - higher
than expected volumes of indurated material is limiting the mining
rate that can be achieved with the current equipment on site;
-- The delay was also driven by the need to re-engineer parts of
the fine flotation circuit as proposed by the vendor, but has also
been affected lack of operator expertise and experience; and
-- Measures taken by management to address these issues are set
out later in the annual report.
Hinda
-- Since 31 December 2021, management has been interrogating the
Hinda Updated FS and financial model as prepared by Hatch;
-- Various capital cost optimisation initiatives have been
identified for investigation ahead of detailed design; and
-- Development alternatives are being considered and potential funding options investigated.
General
-- The current and further potential effects of COVID-19, and
the possibility of further waves in South Africa and the RoC remain
a risk to Kropz's projects. Kropz has mitigated this risk as far as
reasonably practicable by compliance with the Kropz COVID-19
policies and procedures.
Kropz Plc
+27 (0) 79 744
Mark Summers (CEO) 8708
Grant Thornton UK LLP Nominated Adviser
Samantha Harrison
Harrison Clarke
George Grainger +44 (0) 20 7383
Ciara Donnelly 5100
Hannam & Partners Broker
Andrew Chubb +44 (0) 20 7907
Ernest Bell 8500
Tavistock Financial PR &
IR (UK)
Nick Elwes +44 (0) 207 920
Jos Simson 3150
kropz@tavistock.co.uk
R&A Strategic Communications PR (South Africa)
James Duncan +27 (0) 11 880
3924
james@rasc.co.za
About Kropz Plc
Kropz is an emerging African phosphate producer and developer
with projects in South Africa and the Republic of Congo. The vision
of the Group is to become a leading independent phosphate rock
producer and to develop into an integrated, mine-to-market plant
nutrient company focusing on sub-Saharan Africa.
Chairman's Statement
Dear shareholder,
The 31 December 2021 financial year was another challenging
year, particularly given the continued global COVID pandemic and
associated impact on the global economy.
Thankfully, the COVID pandemic had no significant impact on the
conclusion of construction activities at Elandsfontein. First ore
was introduced into the Elandsfontein plant in December 2021, on
time and under budget, a significant milestone given the challenges
faced.
Hatch completed the Hinda Updated FS in late December 2021 and
we are encouraged by the outcome and conclusions. Management are
interrogating the findings and the next step would be to select the
way forward for the progression of the project and sourcing the
required funding for its development.
Thanks to the ARC Fund, Kropz's major shareholder, funding was
secured to complete the Elandsfontein project and ramp-up
operations and complete the Hinda Updated FS.
Progress continues to be made at Elandsfontein, but slower than
expected progress in the ramp-up of operations, as announced on 27
April 2022, resulted in an additional funding requirement. Again
ARC responded by agreeing to provide the required ZAR 177 million
required to see Elandsfontein through to positive cash flow by way
of a convertible equity facility.
The Board thanks all the members of the executive, management,
the teams on the ground, contractors, auditors and advisers for all
their efforts and assistance during the year. We once again want to
thank our major shareholder, ARC, for their further commitment and
continued support.
Lord Robin William Renwick of Clifton
Non-Executive Chairman
28 June 2022
Strategic Report for the year ended 31 December 2021
Market overview
Since February 2022, phosphate prices have reached new highs,
largely due to the sanctions imposed on Russia, following their
invasion of the Ukraine. Russia is a significant supplier of
fertiliser feed products and associated sanctions increased the
prices of phosphate products significantly as producers that relied
on Russian sources sought to secure alternative sources of amongst
others, low cadmium phosphate rock. The cessation of exports of
phosphate products from China until mid-2022, has also inflated
prices of phosphate related fertilizers.
The phosphate rock market remains strong and has shown good
interest in Elandsfontein's low cadmium concentrate.
Significant changes in the state of affairs
Share issues
The issued share capital at 31 December 2020 was 558,627,558
ordinary shares (2019: 283,406,307).
On 3 March 2021, Kropz announced the fourth drawdown of US$ 7
million of the Original Equity Facility and the first drawdown of
US$ 2 million under the Further Equity Facility. These drawdowns
resulted in the issue of 89,185,185 ordinary shares to ARC at an
issue price of 6.75 pence per ordinary share and 34,745,359
ordinary shares to ARC at an issue price of 4.20 pence per ordinary
share. The 123,930,544 ARC drawdown shares were admitted to trading
on AIM on 10 March 2021.
On 16 June 2021, Kropz announced the fifth drawdown of US$ 11
million of the Original Equity Facility and the second drawdown of
US$2 million under the Further Equity Facility. These drawdowns
resulted in the issue of 140,148,148 ordinary shares to ARC at an
issue price of 6.75 pence per ordinary share and 34,745,359
ordinary shares to ARC at an issue price of 4.20 pence per ordinary
share. The 174,893,507 ARC drawdown shares were admitted to trading
on AIM on 23 June 2021.
On 7 September 2021, Kropz announced the sixth drawdown of US$ 3
million of the Original Equity Facility and the third drawdown of
US$ 400,000 under the Further Equity Facility. These drawdowns
resulted in the issue of 38,222,222 ordinary shares to ARC at an
issue price of 6.75 pence per ordinary share and 6,949,072 ordinary
shares to ARC at an issue price of 4.20 pence per ordinary share.
The 45,171,294 ARC drawdown shares were admitted to trading on AIM
on 10 September 2021.
On 8 December 2021, Kropz announced the fourth drawdown of US$
400,000 under the Further Equity Facility. This drawdown resulted
in the issue of 6,949,072 ordinary shares to ARC at an issue price
of 4.20 pence per ordinary share. The 6,949,072 ARC drawdown shares
were admitted to trading on AIM on 13 December 2021.
The issued share capital at 31 December 2021 was 909,571,975
ordinary shares (2020: 558,627,558).
Projects
Elandsfontein
Elandsfontein hosts the second largest phosphate deposit in
South Africa, after Foskor's operation at Phalaborwa. Elandsfontein
has been developed with the capacity to produce circa one million
tonnes per annum ("Mtpa") of phosphate rock concentrate from a
shallow mineral resource which is expected to be sold on both local
and international markets. The Company owns 74% of the issued share
capital of Kropz Elandsfontein, the company which owns the
Elandsfontein project.
Prior to 2021, in excess of US$ 135 million was spent at
Elandsfontein on project capital expenditure to construct the
processing plant and infrastructure, initial mining and capitalised
working capital. Following a suspended commissioning process in
2017, Kropz Elandsfontein conducted further geological drilling and
metallurgical test programme to define a robust process circuit, to
cater for all ore types present within the Elandsfontein
resource.
Elandsfontein's logistics are advantageous and allow for easy
access to both local and international markets.
Activity for the year ended 31 December 2021
The focus for the 2021 financial year was completion of the
construction activities on site. All major contracts were finalised
to enable site establishment by the mining and plant operators.
Mining activities recommenced in October 2021.
Mining and geology
The Elandsfontein resource is defined below, on a total (gross)
and net attributable basis. No further geological drilling was
conducted in 2021.
Mineral Resource Statement, as declared by Snowden and SRK on 31
October 2018
Class Quantity Grade Grade Grade Grade Grade Grade Contained
(Mt) (%P(2) (%Al(2) (%MgO) (%Fe(2) (%CaO) (%SiO(2) P(2) O(5)
O(5) O(3) ) O(3) ) ) (Mt)
)
Gross
===================================================================================================
Measured 47.5 10.3 1.2 0.2 1.0 14.9 69.8 4.9
Indicated 30.3 5.1 1.2 0.1 0.9 7.1 82.9 1.6
Inferred 23.3 5.5 1.2 0.1 1.0 7.5 82.5 1.3
=========== ========= ======== ========= ======== ========= ======== ========== ===========
Total 101.1 7.7 1.2 0.2 0.9 10.9 75.9 7.8
=========== ========= ======== ========= ======== ========= ======== ========== ===========
Net Attributable (74% attributable to the Company)
===================================================================================================
Measured 35.2 10.3 1.2 0.2 1.0 14.9 69.8 3.6
Indicated 22.4 5.1 1.2 0.1 0.9 7.1 82.9 1.2
Inferred 17.2 5.5 1.2 0.1 1.0 7.5 82.5 0.9
=========== ========= ======== ========= ======== ========= ======== ========== ===========
Total 74.8 7.7 1.2 0.2 0.9 10.9 75.9 5.7
=========== ========= ======== ========= ======== ========= ======== ========== ===========
Plant and processing
Pre-commissioning (C2) and cold commissioning (C3) activities
commenced in November 2021 and construction activities at
Elandsfontein were completed in December 2021, under budget and on
time. On 23 December 2021, a major milestone was achieved when
first ore was introduced into the Elandsfontein plant.
Dewatering of the aquifer continues in accordance with the
updated ground water management plan.
The Department of Mineral Resources and Energy ("DMRE") issued a
directive to Kropz Elandsfontein during 2020 to upgrade its
Environmental Management Programme ("EMPr") in line with latest
South African legislation. The updated EMPr was submitted to the
DMRE in September 2020. On 26 March 2021, management received the
updated EMPr for the Elandsfontein project from the DMRE. The
updated EMPr strongly emphasizes the adherence to the required
rehabilitation measures.
Offsets
In July 2020, Kropz Elandsfontein submitted a revised Offset
Study to the DMRE. Management informed the DMRE that the 2015
Offset Study for the Elandsfontein project did not adequately
consider Kropz Elandsfontein's effective rehabilitation measures
which have demonstrated successful implementation over the past
three growing seasons. Kropz Elandsfontein's rehabilitation
measures have been shown to guarantee future rehabilitation
success, if conducted in accordance with the approved mine
rehabilitation plan drafted by Kropz Elandsfontein's appointed
rehabilitation specialist.
Following due consideration of all the comments and responses
received during the thirty-day public participation period,
management received notification from the DMRE on 4 March 2021 that
the conditions required to cater for the offsets of land will be
removed from the Elandsfontein EMPr.
Several appeals against the DMRE's decision have been lodged and
are being dealt with by the Department of Forestry, Fisheries and
the Environment.
Water use licence ("WUL")
The outstanding appeal against the Elandsfontein WUL was heard
from 1 to 4 February 2021. During this fourth sitting of the
matter, final evidence was presented to the Water Tribunal.
The Water Tribunal issued a directive to all parties, setting
out the dates to be met for heads of arguments, to allow a ruling
in March 2021. The appellant was subsequently granted numerous
postponements for the submission of their heads of arguments, which
delayed the date of the ruling to September 2021.
As announced on 9 September 2021, the appeal was dismissed by
the Water Tribunal.
Safety, health and environment
As at 31 December 2021, the lost time injury frequency rate, per
200,000 man hours, was 0.698 (2020 - zero). For the reporting
period, three Lost Time injuries were regrettably suffered during
the construction phase. No reportable and major environmental or
safety incidents were reported during the year.
Corporate social responsibility ("CSR") and sustainability
The execution of the five-year Social and Labour Plan ("SLP"),
aligned with the 2018 South African Mining Charter, and approved by
the DMRE, remains on track. During the reporting period, the
five-year closure plan was submitted and subsequently accepted by
the DMRE. Kropz Elandsfontein has commenced with the development of
the next iteration of the SLP for submission to the DMRE in Q3
2022. The plan includes progressive improvements to obtain
compliance on the employment equity and procurement objectives of
the South African Mining Charter scorecard. The following strategic
focus areas have been identified:
-- Education;
-- Social wellness;
-- Local economic development; and
-- Urban reconstruction and infrastructure upgrades.
Through collaboration with the local community forum, various
community development projects continued during 2021 and the
selection of new projects will form part of the 2022 SLP.
Education support
During 2021 Kropz Elandsfontein continued to support the
Hopefield Primary School teacher's programme.
Metallurgical skills development
As a result of the strong drive to employ from within the local
municipal area, the commissioning of the plant necessitated skills
development training in metallurgy to ensure successful
commissioning and operation of the processing facility. This
training was provided for the local employees who were recruited as
part of the plant operating team.
Small, medium, micro enterprise ("SMME") development
During 2021, the second phase of the SMME development programme
was completed. The focus during this phase was to assist the SMME's
identified in the initial phase through a digital enablement
programme, boosting the digital competencies of young start-ups in
the community.
Adult matric certification
The previous two-year programme enabling individuals to complete
their secondary school qualification resumed in 2021. Nine adults
obtained a pass rate to qualify for their senior certificate at the
end of 2021.
Thusong community centre upgrade
The construction of an additional classroom and meeting venues
at the local community centre was completed towards the end of
2021, with final handover in early 2022. Opportunities are being
investigated with other business partners to review further
projects at the Thusong community centre.
Kropz Elandsfontein continues to engage with the local community
on a regular basis.
Post reporting period events
Transport and logistics
As announced on 23 November 2021, Transnet provided Kropz
Elandsfontein with a draft port access agreement to support the
long-term export of Elandsfontein's phosphate rock through the port
of Saldanha. Contract negotiations have been finalised and final
signature is expected prior to the shipment of first product.
Exports through Cape Town will potentially be required for no more
than 350,000 tonnes of Elandsfontein's production of approximately
1 million tonnes per annum, if capacity through the port of
Saldanha is unavailable for a limited period of time.
Hinda
The Hinda project, currently 100% owned by Cominco S.A., is
believed to be one of the world's largest undeveloped phosphate
reserves. Ownership is expected to be diluted to 90% through the
participation of the RoC government. Hinda consists of a
sedimentary hosted phosphate deposit located approximately 40 km
northwest of the city of Pointe-Noire. The project is fully
permitted.
Prior to acquisition by Kropz, more than US$ 40 million was
spent on project development, including drilling, metallurgical
test work and feasibility studies.
Activity for the year ended 31 December 2021
In early 2020, Kropz completed a competitive tender for an
updated feasibility study for the Hinda project. Hatch was
appointed in February 2021 to complete the Hinda Updated FS,
targeting a phased approach in line with the terms of the mining
investment agreement.
Hatch completed the Hinda Updated FS and the outcomes were
announced on 22 December 2021.
Highlights
-- The phased approach studied will initially deliver 1 Mtpa
phosphate rock concentrate through the existing Port of
Pointe-Noire ("Phase 1"), expanding to 2 Mtpa phosphate rock
concentrate through a new port facility at Pointe Indienne ("Phase
2");
-- The Hinda Updated FS demonstrates low technical and mining
risk and attractive project economics;
-- The mineral resource is unchanged from the 2018 Competent
Persons Report, with 201 million tonnes of measured mineral
resource at 11.6% P(2) O(5) and 381 million tonnes of indicated
mineral resource at 9.8% P(2) O(5) ;
-- The Hinda Updated FS delivers a 28-year life of mine ("LOM"),
extracting 31 million tonnes of ore in Phase 1 and 214 million
tonnes of ore in Phase 2;
-- Estimated Phase 1 capital cost is US$ 355 million, Phase 2
capital cost is US$ 310 million (in real 2021 terms), with a
nominal, peak funding requirement of US$ 392 million, as the first
phase supports the subsequent Phase 2 expansion capital
expenditure;
-- Phase 1 operating cost on a free-on-board ( "FOB") basis is
US$ 63 per tonne phosphate rock concentrate, and Phase 2 operating
cost is US$ 70 per tonne phosphate rock concentrate, inclusive of
mining royalties;
-- Using a December 2021 price forecast received from CRU on a
FOB Pointe-Noire basis, the real LOM earnings before interest and
taxation margin is US$ 65 per tonne of phosphate rock
concentrate;
-- Estimated three-year execution schedule allows first revenue
in 2025, assuming that the required funding is in place by the end
of 2022; and
-- Base case, nominal internal rate of return ( "IRR") of 19.2%
and base case, ungeared, nominal net present value ("NPV") (at
11.1% discount rate) of US$ 397 million.
The phased approach was intended to reduce up-front execution
capital requirements by making use of existing port facilities,
thus limiting the first phase to 1 Mtpa phosphate rock
concentrate.
The Hinda Updated FS included detailed engineering of the open
pit mine, associated mine dewatering and surface water management,
the beneficiation plant and all associated infrastructure, tailings
storage facilities and water storage dam, a gas fired power plant
and gas supply pipeline, a 30 kV overhead line ("OHL") to support
construction and early works, mine access roads, an accommodation
camp and port infrastructure. Costs and schedules associated with
procurement, construction management and commissioning are also
included.
Hatch delivered a robust execution strategy, which provides high
confidence in achieving execution success. The beneficiation plant
employs standard and proven technologies, and the design is based
on extensive laboratory and pilot-scale test work completed between
2013 and 2016.
Further Opportunities
A mine plan was run, scheduling the immediate commencement of
Phase 2 production, i.e. 2 Mtpa of phosphate rock concentrate to be
exported through a new port facility. This opportunity led to a
conservative increase in ungeared NPV (at 11.1% discount rate) to
US$ 543 million with an IRR of 21%. The estimated capital cost for
the immediate commencement of Phase 2 is US$ 618 million, based on
the study work completed. If this option is studied further, it
will be possible to optimise both capital and operating costs
further.
Opportunities also exist to enter into a long-term power
purchase agreement with one of several companies already
established in-country. The capital cost of the gas fired power
plant would therefore be removed from the estimate, although this
would be offset by an increase in power costs.
A number of other capital cost optimisation initiatives have
been identified for investigation ahead of detailed design.
Updated ESIA
The project has an approved environmental compliance certificate
issued in April 2020, valid for 25 years. As a result of the
modifications to the project in the Hinda Updated FS, the ESIA has
been updated to comply with local regulations. The updated ESIA has
been conducted in parallel with the execution of the Updated FS and
was submitted to the RoC Ministry of Environment in December
2021.
Mining Investment Agreement ("MIA")
At the end of 2018, Kropz received the supervisory authority to
initiate the process of ratification of the Hinda exploitation
convention or MIA, which sets out the legal and fiscal framework
under which Cominco S.A. would invest and operate within the RoC.
The MIA was signed by all parties on 10 July 2018 and ratified by
the RoC Government on 8 November 2021.
Declaration d'Utilite Publique ("DUP")
The Ministry of Land Tenure and Public Domain is responsible for
managing land tenure and legal land rights in RoC. The land
commission evaluates the land usage requirements of the Hinda
Project and liaises with legal property owners and traditional land
users to determine, based on the legislation, a baseline for land
use to be used for compensation and relocation. This process is
undertaken in line with IFC and other relevant standards.
The main declaration of public utility (DUP) process covering an
area of 33 km(2) was launched in September 2020. Public
consultations were organized by Cominco and CM2E. The initial land
survey was carried out from end of November 2020 until mid-January
2021. Following optimisation through the Updated FS, the land
footprint was reduced to 30 km(2) .
The MIA states that expropriation costs and compensations are to
be borne by the government of the RoC.
General
In country, given the COVID pandemic, focus was on progressing
the port occupancy agreement and sustaining solid relations with
the local communities. Kropz maintains communications with a number
of key stakeholders, including government, and local service
providers.
Mineral resources
The Hinda resource is defined below, on a total (gross) and net
attributable basis . No additional drilling was conducted in
2021.
Mineral Resource Statement, as declared by SRK on 31 August
2018
Class Quantity Grade Grade Grade Grade Grade Grade Contained
(Mt) (%P(2) (%Al(2) (%MgO) (%Fe(2) (%CaO) (%SiO(2) P(2) O(5)
O(5) O(3) O(3) ) (Mt)
) ) )
=========== ========= ======== ========= ======== ========= ======== ========== ===========
Gross
===================================================================================================
Measured 200.5 11.6 3.7 3.8 1.4 21.8 42.7 23.3
Indicated 380.9 9.8 5.0 3.3 1.8 17.6 48.5 37.3
Inferred 94.4 7.5 4.8 3.6 1.7 15.8 52.2 7.1
=========== ========= ======== ========= ======== ========= ======== ========== ===========
Total 675.8 10.0 4.6 3.5 1.7 18.6 47.3 67.7
=========== ========= ======== ========= ======== ========= ======== ========== ===========
Net Attributable (90% attributable to the Company)
Measured 180.5 11.6 3.7 3.8 1.4 21.8 42.7 20.9
Indicated 342.8 9.8 5.0 3.3 1.8 17.6 48.5 33.6
Inferred 85.0 7.5 4.8 3.6 1.7 15.8 52.2 6.4
=========== ========= ======== ========= ======== ========= ======== ========== ===========
Total 608.3 10.0 4.6 3.5 1.7 18.6 47.3 60.9
=========== ========= ======== ========= ======== ========= ======== ========== ===========
Safety, health and environment
No environmental or safety incidents were reported during the
year.
Sustainability
Cominco S.A. continued its interactions with the local
communities associated with the Hinda project. On-going projects
include the funding of teachers at local schools, educational
support for vulnerable children, and food security projects through
the establishment of nurseries.
Post reporting period events
The first phase of construction of a small office at the future
construction site near PK Mbili has been complete. Additional works
are ongoing. The routing for the 30 kV OHL has been finalised and
surveyed, and the tie-in point with the existing Mboundi power
station has been confirmed.
A memorandum of understanding has been signed with Italian gas
major, ENI, in a move to secure the gas supply for the gas fired
power plant and the concentrate dryer, both located at the mine
site. Discussions with the port authority are ongoing to secure a
port access agreement.
Strategy
The Company's long-term strategy is to build a portfolio of
high-quality phosphate mines and to be a major player within the
sub-Saharan African plant nutrient sector. Its priority is to bring
Elandsfontein to steady-state production and then to develop
Hinda.
Business model
The Company's business model is to source high-quality resources
and to bring them into production to contribute to the Company's
strategic competitiveness and profitability.
Once production has commenced at Elandsfontein and Hinda, the
Company may consider acquiring additional assets and/or adding
downstream beneficiation opportunities, where the Board believes
shareholder value could be increased.
Objectives and outlook for the year ahead
Objectives
Kropz
Kropz's overriding objective is to deliver strong shareholder
and stakeholder returns over the long term.
Elandsfontein
The primary focus of the year ahead will be to increasing
ramp-up of operations to achieve nameplate capacity and enable the
first commercial bulk shipment of phosphate rock concentrate while
optimising process recoveries. Full production capacity is expected
in Q4 2022 .
Hinda
Further to the completion of the Hinda Updated FS in December
2021, management is working to secure funding to commence with
project development in accordance with the MIA.
Outlook
Kropz's Elandsfontein project delivered first production in
early 2022. The Company is confident in the inherent value
contained within each of its core assets. Global phosphate rock
demand and pricing is robust, and the work being carried out will
provide Kropz with direction for the next phase of its development,
subject to short-term challenges being managed. The year ahead
should provide the Company with a solid foundation for its future
development.
Financial review for the year ended 31 December 2021
Summary financial highlights for the year:
-- Cash and cash equivalents of US$ 2 million (2020: US$ 12 million)
-- Restricted cash in terms of the amended facility agreement
between Kropz Elandsfontein and BNP of US$ 5 million (2020: US$ 7
million). The restricted cash was released by BNP on 10 January
2022;
-- Various equity and debt raises as set out in "Highlights" on page 1;
-- Trade and other payables of US$ 4 million (2020: US$ 5 million); and
-- Property, plant, equipment and development and exploration
assets of US$ 180 million (2020: US$ 159 million).
Key performance indicators
The Company is a mining and development entity whose assets
comprise a mine and plant in the ramp-up phase in South Africa and
an exploration asset in the RoC. Currently, minor revenues have
been generated from local sales in South Africa. The key
performance indicators for the Company will be first bulk
production of phosphate rock from Elandsfontein, achieving steady
state production and the successful advancement of the Hinda
project.
Principal risks and uncertainties
The Company and its subsidiaries ("the Group") are subject to
various risks relating to political, economic, legal, social,
industry, business and financial conditions. The following risk
factors, which are not presented in any order of priority, do not
purport to be a complete list or explanation of all the risks
involved in the Company or the Group's activities.
Ramp-up of Elandsfontein
The Elandsfontein project may require further funding to achieve
steady state operations in Q4 2022. Any delays in securing of
additional funding will have an adverse impact on the business and
financial performance of the operation. There can be no guarantee
that implementation of the recently completed modifications
identified by the Company and its technical consultants will result
in a successful long-term operation of the mine. Failure to achieve
ramp-up of the Elandsfontein project, or a significant delay in the
completion of ramp-up, could result in a material adverse impact on
the business, and the financial performance and position of the
Group. Further, see risk factor: COVID outbreak.
Access to infrastructure
Mining, processing, development and exploration activities
depend, to a significant degree, on adequate infrastructure. In the
course of developing Hinda, the Group may need to construct and
support the construction of infrastructure, which includes
permanent water supplies, tailings storage facilities, power,
logistics services and access roads.
Reliable roads, power sources and water supply are important
determinants, which affect capital and operating costs. Unusual or
infrequent weather phenomena, sabotage, government or other
interference in the maintenance or provision of such infrastructure
could materially adversely affect the Group's operations, financial
condition and results of operations. Any such issues arising in
respect of the supporting infrastructure or on the Group's sites
could materially adversely affect the Group's results of operations
or financial condition.
Furthermore, any failure or unavailability of the Group's
operational infrastructure (for example, through equipment failure,
disruption to its transportation arrangements or reduced port
capacity) could materially adversely affect the production output
from its mines or development of a mine or project.
Limited or reduced port capacity at the Port of Saldanha, as
well as the associated cost increase for procuring alternative
logistics could have an adverse impact on the business and
financial performance of the Group.
Operational targets
The Group's principal asset, the Elandsfontein project, is an
early stage mining and production project that has no operating
track record upon which to base estimates of future production
rates, operating costs, capital expenditures or financial
performance. The operational targets of the Group will be subject
to the completion of planned operational goals on time and
according to budget, and are dependent on the effective support of
personnel, systems, procedures and controls. Any failure of these
may result in delays in the achievement of operational targets with
a consequent material adverse impact on the business, operations
and financial performance of the Group. It is, therefore, possible
that mining and production rates might fluctuate.
The financial performance of the Group is subject to its ability
to achieve a target concentrate specification and production
efficiency at its Elandsfontein project, according to its
pre-determined budget. Failure to do this may result in failure to
achieve operational targets with a consequent material adverse
impact on the business, operations and financial performance of the
Group. Further, mining and production rates might fluctuate.
Excessive overburden stripping, non-economical mining of ore and
the dilution of feed grade to the processing facility could all
have an adverse impact on the processing operations. Furthermore, a
high variability in the daily feed grades could also have an
adverse impact on operations and financial performance of the
Group.
Any further unscheduled interruptions in the Group's operations
due to mechanical or other failures or industrial relations related
issues or problems or issues with the supply of goods or services
could have a serious impact on the financial performance of those
operations.
New entrant risk
Kropz Elandsfontein will, once production has been achieved of a
commercial saleable grade product, be a new entrant in the global
phosphate rock market, selling its products into a globally
competitive and established market.
There can be no guarantee that the sales estimates set by Kropz
Elandsfontein will be achieved until a successful track record has
been achieved. Not achieving appropriate selling prices for its
commercial grade products, would have a material adverse effect on
the business, operations and financial performance of the
Group.
Mining risks
The business of mining and mineral processing involves a number
of risks and hazards, including industrial accidents, labour
disputes, community conflicts, activist campaigns, unusual or
unexpected geological conditions, geotechnical risks, ore
variability, equipment failure, changes in the regulatory
environment, environmental hazards, ground water and weather and
other natural phenomena such as earthquakes and floods. The Group
may experience material mine or plant shutdowns or periods of
reduced production as a result of any of the above factors. Such
occurrences could result in material damage to, or the destruction
of, mineral properties or production facilities, human exposure to
pollution, personal injury or death, environmental and natural
resource damage, delays in mining, monetary losses and possible
legal liability, and may result in actual production differing,
potentially materially, from estimates of production, whether
expressly or by implication. There can be no assurance that the
realisation of operating risks and the costs associated with them
will not materially adversely affect the results of operations or
financial conditions of the Group.
Geotechnical, ore variability, geological and hydrogeological
risks could have a material adverse impact on the safety, business
and financial performance of the Group's operation.
Failure to successfully dewater the mining area and maintain
water levels in the mining area at the Elandsfontein project could
have a material adverse impact on the operational performance,
financial performance and financial condition of the Group.
Enforcement of contractual rights in the RoC
The legal system in the RoC is based on the French civil law
system (the Civil Code of the former French Equatorial Africa),
which has enacted the Uniform Act to harmonise business law in
Africa in order to guarantee legal and judicial security for
investors and companies in its member states, as well as a Uniform
Act on Arbitration Law, allowing recourse to a standard arbitration
mechanism for the settlement of contractual disputes arising from
civil or commercial contracts concluded in the RoC as an
alternative to RoC courts for legal proceedings relating to
contracts.
Under Congolese law, parties may enter into private contracts in
the language of their choice, however, a French translation is
always required for them to be used before any constituted
authority in the RoC. In addition, enforcement of contracts
concluded outside of Congo before an RoC court, administrations and
other constituted authorities, requires their prior registration
with the Office for Registration and Stamp Duties and, in the
absence of a specific exemption, payment of the applicable
registration fees and stamp duties.
Certain contracts concluded in the RoC (such as leases) must
also be presented for registration with the Office for Registration
and Stamp Duties, due to their nature and listing in the General
Tax Code, Volume 2. Moreover, certain contracts (such as commercial
leases) must also be notarised or authenticated by a notary if
concluded as private deeds, prior being registered as described
above.
If any of these processes are not strictly followed, the RoC
courts and administrations may disregard the concerned contract
and, as regards the requirement to register certain contracts with
the Office for Registration and Stamp Duties, the tax
administration may apply fines of 100% of the amount of
registration fees due. Further, the tax administration tends to
disregard any payment convention exemption for the purpose of
applying these fines.
If any of the Group's contracts are deemed unenforceable, this
could have a material adverse effect on the operations and
financial results of the Group.
COVID outbreak
The outbreak of COVID has had an impact on the Group's
businesses and operations and will continue to do so. The timescale
attached to this risk is not currently known. There is a risk that
the outbreak, and subsequent waves of infections in different
countries, has a material adverse impact on the Group's operations
and financial results.
Directives are issued and measures implemented, from time to
time, by the South African and RoC Governments to contain the
spread of COVID involving lockdowns, curfews, quarantine
requirements and travel restrictions ("Directives"). Kropz
continuously monitors the situation closely, both in South Africa
and the RoC, and codes of practice are in place to deal with
outbreaks on site.
Kropz is currently unable to quantify the impact of the
Directives going forward, but the Group will continue to progress
all its workstreams as previously outlined.
Commodity pricing
The future profitability and viability of the Group's operations
will be dependent upon the market price of phosphate rock to be
sold by the Group. Mineral prices fluctuate widely and are affected
by numerous factors beyond the control of the Company. The level of
interest rates, the rate of inflation, the world supply of mineral
commodities, the global level of demand from consumers and the
stability of exchange rates can all cause significant fluctuations
in prices. Such external economic factors are in turn influenced by
changes in international investment patterns, monetary systems and
political developments. Commodity prices have fluctuated widely in
recent years, and future price declines could cause commercial
production to be impracticable, thereby having a material adverse
effect on the Company's business, financial condition and results
of operations. A significant or sustained downturn in commodity
prices would adversely affect the Group's available cash and
liquidity and could have a material adverse effect on the business,
results of operations and financial condition of the Group in the
longer term.
In addition to adversely affecting the Group's reserve estimates
and its financial condition, declining commodity prices can impact
operations by requiring a reassessment of the feasibility of a
particular project. Such a reassessment may be the result of a
management decision or may be required under financing arrangements
related to a particular project. Even if the Elandsfontein project
and the Hinda project are ultimately determined to be economically
viable, the need to conduct such a reassessment may cause
substantial delays or may interrupt operations until the
reassessment can be completed.
Environmental regulation and environmental compliance
Mining operations have inherent risks and liabilities associated
with damage to the environment and the disposal of waste products
occurring as a result of mineral exploration and production.
Environmental and safety legislation and regulation (e.g. in
relation to reclamation, disposal of waste products, pollution and
protection of the environment, protection of wildlife and otherwise
relating to environmental protection) is frequently changing and is
generally becoming more restrictive with a heightened degree of
responsibility for companies and their Directors and employees and
more stringent enforcement of existing laws and regulations. Future
changes could impose significant costs and burdens on the Group
(the extent of which cannot be predicted) both in terms of
compliance and potential penalties, liabilities and
remediation.
Breach of any environmental obligations could result in
penalties and civil liabilities and/or suspension of operations,
any of which could adversely affect the Group. Further, approval
may be required for any material plant modifications or additional
land clearing and for ground disturbing activities. Delays in
obtaining such approvals could result in the delay to anticipated
exploration programmes or mining activities.
There may also be unforeseen environmental liabilities resulting
from mining activities, which may be costly to remedy. If the Group
is unable to fully remedy an environmental problem, it may be
required to stop or suspend operations or enter into interim
compliance measures pending completion of the required remedy. The
potential exposure may be significant and could have a material
adverse effect on the Group. The Group has not purchased insurance
for environmental risks (including potential liability for
pollution or other hazards as a result of the disposal of waste
products occurring from exploration and production) as it is not
generally available at a price which the Group regards as
reasonable.
In South Africa, the Regulations Pertaining to the Financial
Provision for Prospecting, Exploration, Mining or Production
Operations 2015 (R1147 of 20 Nov 2015) provides that the holder of
a mining right must provide for rehabilitation and remediation
costs, with particular reference to when the mine is decommissioned
at the end of mining, or production operations. It is expected that
mining operations at Elandsfontein will cease in year 2032. The
under-provision of such a rehabilitation liability could result in
future liabilities being payable, which could have a material
adverse impact on the financial condition of the Group.
Government regulation and political risk
The Group's operating activities are subject to laws and
regulations governing expropriation of property, health and worker
safety, employment standards, waste disposal, protection of the
environment, mine development, land and water use, prospecting,
mineral production, exports, taxes, labour standards, occupational
health standards, toxic wastes, the protection of endangered and
protected species and other matters. While the Directors believe
that the Group is in compliance with all material current laws and
regulations affecting its activities, future changes in applicable
laws, regulations, agreements or changes in their enforcement or
regulatory interpretation could result in changes in legal
requirements or in the terms of existing permits and agreements
applicable to the Group or its properties, which could have a
material adverse impact on the Group's current operations or
planned development projects. Where required, obtaining necessary
permits and licences can be a complex, time consuming process and
the Group cannot assure whether any necessary permits will be
obtainable on acceptable terms, in a timely manner or at all.
The costs and delays associated with obtaining necessary permits
and complying with these permits and applicable laws and
regulations could stop or materially delay or restrict the Group
from proceeding with any future exploration or development of its
properties. Any failure to comply with applicable laws and
regulations or permits, even if inadvertent, could result in
interruption or closure of exploration, development or mining
operations or material fines, penalties or other liabilities.
The Group has operations located in South Africa and the RoC and
the Group's activities may be affected in varying degrees by
political stability and governmental regulations. Any changes in
regulations or shifts in political attitudes in South Africa and
the RoC are beyond the control of the Group and may adversely
affect its operations.
Adverse sovereign action
The Group is exposed to the risk of adverse sovereign action by
the governments of South Africa, RoC and other governments. The
mining industry is important to the economies of these countries
and thus can be expected to be the focus of continuing attention
and debate. In similar circumstances in other developing countries,
mining companies have faced the risks of expropriation and/or
renationalisation, breach or abrogation of project agreements,
application to such companies of laws and regulations from which
they were intended to be exempt, denials of required permits and
approvals, increases in royalty rates and taxes that were intended
to be stable, application of exchange or capital controls, and
other risks.
Environmental, social and governance ("ESG") and climate
change
As the focus on ESG increases, there are increasing
environmental, social and governance risks that may affect the
Group's ability to raise capital; obtain permits; work with
communities, regulators and NGOs; and/or protect its assets from
impairments.
At Kropz, we acknowledge that our business activities affect the
society and environment around us, and that we have an opportunity
and an implicit duty to ensure this impact is positive. We also
believe that efficient and sustainable operations are a necessities
for long-term value creation.
We are committed to taking responsibility when conducting our
business by integrating ESG factors into our investment decisions
and operational processes. Given the stage of development of Kropz,
social initiatives have been limited to those outlined above at
Elandsfontein.
Climate change could potentially affect the demand for
fertilisers by impacting global agricultural activity. This in turn
could affect the demand for fertiliser feed materials, and could
cause events such as prolonged droughts that could reduce the
availability of water at the different project sites.
As the Kropz operations develop, more initiatives will be
undertaken on the ESG front and progress on these will be reported
on in the next annual report.
Governance
The Board considers sound governance as a critical component of
the Group's success and the highest priority. The Company has an
effective and engaged Board, with a strong non-executive presence
from diverse backgrounds, and well-functioning governance
committees. Through the Group's compensation policies and variable
components of employee remuneration, the Remuneration and
Nomination Committee ("Remuneration Committee") of the Board seeks
to ensure that the Company's values are reinforced in employee
behaviour and that effective risk management is promoted.
More information on our corporate governance can be found in the
Corporate Governance Report on pages 43 to 55.
Directors' section 172 statement
The following disclosure describes how the Directors have had
regard to the matters set out in section 172 and forms the
Directors' statement required under section 414CZA of The Companies
Act 2006. This reporting requirement is made in accordance with the
corporate governance requirements identified in The Companies
(Miscellaneous Reporting) Regulations 2018, which apply to company
reporting on financial years starting on or after 1 January
2019.
The matters set out in section 172(1) (a) to (f) are that a
Director must act in the way they consider, in good faith, would be
most likely to promote the success of the Company for the benefit
of its members as a whole, and in doing so have regard (amongst
other matters) to:
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 between members of the Company.
The analysis is divided into two sections, the first to address
stakeholder engagement, which provides information on stakeholders,
issues and methods of engagement. The second section addresses
principal decisions made by the Board and focuses on how the regard
for stakeholders influenced decision-making.
Section 1: Stakeholder mapping and engagement activities within
the reporting period
The Company continuously interacts with a variety of
stakeholders important to its success, such as equity investors,
joint venture partners, debt providers, employees, government
bodies, local community and vendor partners. The Company works
within the limitations of what can be disclosed to the various
stakeholders with regards to maintaining confidentiality of market
and/or commercially sensitive information.
Who are the Why is it How did Kropz What resulted
key important engage with the from the
stakeholder to engage this stakeholder group engagement
groups group of
stakeholders
Equity Access to The key mechanisms The Company
investors capital of engagement engaged
and equity is of vital included: with investors
partners importance on topics of
to the Substantial strategy,
All long-term shareholders governance,
substantial success of the * Both ARC and Kropz International have appointed project
shareholders business to Directors to the Board of Kropz; and updates and
that own more enable performance.
than 3% of the the
Company's development * The other existing substantial shareholders have Please see
shares of Hinda. regular meetings and interactions with the Chairman "Dialogue
are listed on Equity and/or CEO. with
page 39 of the partner shareholders"
Directors' involvement section of the
Report. is vital to Directors'
the Investment and report
The Company success of the equity partners on page 39.
owns development of * ARC have representatives on the Kropz Elandsfontein
74% of Kropz these and ELH Boards of Directors in terms of the The CEO
Elandsfontein, projects, respective shareholder's agreements; and presented
the owner of without which at a number of
the the Company investor
Elandsfontein cannot * Regular Board meetings are held. roadshows,
project in create value conferences and
South for its one on one
Africa. 26% is shareholders meetings.
owned by ARC. by producing Prospective
phosphate rock and existing During 2021, the
The Company concentrate investors Company
owns and * The AGM and Annual and Interim Reports; completed
70% of therefore a the Further
Elandsfontein return Equity
Land Holdings on the * Investor roadshows and presentations; Facility for US$
(Pty) Ltd investment. 5 million and
("ELH"), the New ZAR
the owner of Through * One on one investor meetings with the Chairman and/or Equity
the selected CEO; Facility for ZAR
Elandsfontein engagement 200 million,
mining activities, both
property the Company * Access to the Company's broker and advisers; with ARC.
in South strives
Africa. to obtain In terms of the
30% is owned investor * Regular news and project updates; and additional
by ARC. buy-in into facilities
its and capital
Kropz strategic * Social media accounts e.g. Twitter @Kropzplc; injection
Elandsfontein objectives prior to 31
may require detailed on December
further page * Site visits for potential cornerstone investors. 2021, ARC will
funding to 11 and the potentially
complete execution acquire
the ramp up at thereof. a total further
Elandsfontein 3.2% interest
and Cominco The Company in the Company,
Resources seeks eventually
requires to promote an taking
further investor base its 83.7%
funding to that is interest
develop interested at December
Hinda. in a long-term 2021,
holding in the to 86.9%.
As such, Company and
existing will At the Company's
equity support the AGM held on 30
investors Company June 2021 all
and potential in achieving resolutions were
investment its strategic duly passed with
partners objectives. at least 96%
are important votes
stakeholders. During the in favour
course demonstrating
of 2021, the broad
percentage of shareholder
shares held in support.
public hands
decreased and At the Company's
the overall general meeting
daily held on 23 July
volume of 2021 all
shares resolutions
traded were duly passed
increased. with 100% of the
votes cast in
favour of
resolutions
proposed.
At the Company's
general meeting
held on 15
October
2021 all
resolutions
were duly passed
with at least
98% votes in
favour
of resolutions
proposed.
--------------- ------------------------------------------------------------------ -----------------
Funding Access to * One on one meetings with the CEO and/or COO; In May 2020,
providers funding the
Kropz is of vital amended
Elandsfontein importance * Regular reporting on project progress; facility
has a US$30 to the agreement was
million, long-term signed between
fully success of * Ad hoc discussions with management, as required; and Kropz
utilised, the Elandsfontein
debt facility business to and BNP,
with BNP that be * Tripartite discussions between Kropz Elandsfontein, thereby
commenced in able to ARC and management to ensure there are no compliance moving the
September complete matters outstanding in relation to the facility. first
2016. the principal debt
Elandsfontein repayment to 31
project. The December 2022.
debt facility
was utilised
in the
construction
of
Elandsfontein
.
Various
contractual
conditions of
the debt
finance
require
regular
updates on
ongoing
progress.
Ongoing
support
from
potential
new debt
providers
is required
to
achieve the
construction
of Hinda.
--------------- ------------------------------------------------------------------ -----------------
Employees The majority General employees Employees
The Company of its * The Company maintains an open line of communication The Board met
has employees between its employees, senior management and the with management
14 South going forward Board. to discuss the
African, will be based long-term
2 UK and 5 in South remuneration
RoC Africa * The CEO reports regularly to the Board; strategy.
employees, and the
including Directors Advisors were
its consider * Key members of the executive team are invited to some appointed to do
Directors. workforce of the audit and risk committee meetings; the independent
issues party review to
Two of the holistically examine
Directors for the Group * There is a formalised employee induction into the non-executive
are UK as a whole. Company's corporate governance policies and Director and
residents, procedures; and executive
1 Monegasque, The Company's team
1 American long-term remuneration
and success * There is an HR function in the UK. in 2018 at the
2 are South is predicated time of the AIM
African on the IPO.
resident commitment
Directors. of its South African Board reporting
workforce employees has been
The CEO to its vision * There is an HR function in South Africa; optimised
during and the to include
the year demonstration sections
under of its values * Senior management regularly visit the operations in on engagement
review was on a daily South Africa and engage with its employees through with employees.
South basis. one on one and staff meetings, employee events,
Africa-based. project updates, etc; and South African
The CEO The Board and Congo
allocates have employees
35% of his identified * Staff safety committees continue to operate. The team were
time that trained in
to matters reliance on aspects
relating key of corporate
to the personnel is Congo employees policies
Company a known risk. * Senior management regularly visit the operations in and procedures
in the UK. RoC and engage with its employees through one on one to engender
and staff meetings, employee events, project updates, positive
etc. corporate
culture
aligned with
the
Company code of
conduct.
Meetings were
held with staff
to provide
project
updates and
ongoing
business
objectives.
--------------- ------------------------------------------------------------------ -----------------
Governmental Regular The Company provides Meetings have
bodies engagement general corporate been held with
The Company with organs presentations various
is of regarding the representatives
impacted by state at Elandsfontein of the
national, national, project development national,
regional and regional and as part of ongoing regional and
local local levels stakeholder engagement local
governmental is required with the South government
organisations to African government, bodies,
in South keep Western Cape to discuss
Africa stakeholders provincial government ongoing
and the RoC. informed and and local municipal compliance and
supportive of government. The other
project Company maintained regulatory
developments. its good relations matters
with the respective relating
government bodies to mining.
and frequently
communicated The Company has
progress. received its
South
The Company engages African
with the relevant requisite
departments of environmental
the RoC government and land use
in order to progress permits.
the development
of Hinda. In addition,
the
Company has
received
the required
permits
to develop
Hinda,
subject to
securing
of funding for
these
activities.
--------------- ------------------------------------------------------------------ -----------------
Community The Company * The Company has community liaison officers in South The Company has
The local engages Africa and RoC; ongoing
communities with the engagements
adjacent to local with the local
Elandsfontein community to * The Company has identified all key stakeholders community as
in South obtain within the local community in the reporting period; part
Africa acceptance its
and Hinda in for future sustainability
the RoC. development * Elandsfontein management has open dialogue with the initiatives.
plans. local government and community leaders regarding the
project development; Stakeholder
Community identification
engagement has enabled the
will inform * Similarly, Hinda management are actively engaging Company to
better with local government and communities directly ensure
understanding impacted by the Hinda project; and that
and decision representatives
making. of all
* The Company has existing Corporate Social stakeholder
The local Responsibility policies and management structure at groups may
community corporate level. The Company will expand on these participate
in Hopefield policies and structures at a local project level as in the
and the the Company moves into production. community
greater engagement
Saldanha Bay programme.
municipal
area
provides
employees
for
Elandsfontein
and its
contractors
for
operations.
Similarly,
the
communities
surrounding
Hinda will
provide
employees to
the project
and
contractors
during
construction
and
operation.
The Company
will
have a social
and economic
impact on the
local
communities.
The Company
is
committed to
ensuring
sustainable
growth,
minimising
adverse
impacts.
The Company
will
engage these
stakeholders
as is
appropriate.
--------------- ------------------------------------------------------------------ -----------------
Suppliers Kropz's * Management continue to work closely with appointed See page 8 of
During the contractors contractors, consultants and suppliers to manage and the strategic
Elandsfontein and suppliers optimise deliverables; and report for an
operations are update on the
phase, fundamental potential
the Company to ensuring * One on one meetings between management and suppliers; transport
will that and logistics
be using key the Company uncertainties
suppliers can * Vendor site visits and facility audits to ensure facing the
under meet the supplier is able to meet requirements; Group.
commercial ramp-up
contracts and steady Smaller local
for the state * Contact with procurement department and accounts vendors were
operations operating payable; and engaged
of mine, objectives. at a broader
plant, level
road and port Using quality * Assist local suppliers to address liquidity to better align
logistic suppliers challenges. with company
operators ensures objectives.
and that as a
laboratory business, the
service high
providers, performance
all of whom targets
are can be met.
reputable and
established
service
providers.
The Company
also
relies on a
number
of supply and
maintenance
contracts
to ensure
ongoing
operations.
At a
community
level, the
Company
has also
partnered
with a number
of SMME
companies.
--------------- ------------------------------------------------------------------ -----------------
Section 2: Principal decisions by the Board
Principal decisions are defined as both those that have
long-term strategic impact and are material to the Group, but also
those that are significant to key stakeholder groups. In making the
following principal decisions, the Board considered the outcome
from its stakeholder engagement, the need to maintain a reputation
for high standards of business conduct and the need to act fairly
between the members of the Company.
During the financial year ending 31 December 2021
Divestment by the Company of its equity interest in Aflao,
Ghana, entered into on 16 February 2021
During 2020, the Board agreed to divest from its 50% plus 1
share interest in First Gear Exploration Limited ("FGE"), the owner
of the Aflao prospecting right. During February 2021, Kropz
disposed of its interest in FGE to Consortium Minerals Ltd
("Consortium"), for a consideration of US$ 327,529, made up as
follows:
-- US$ 5,000 in cash ("Share Consideration"); and
-- US$ 322,529 ("Loan Consideration") deferred cash
consideration in respect of the shareholder loan from Kropz to FGE,
which is being novated to Consortium.
The Share Consideration was payable by Consortium within seven
days of completion. The Loan Consideration will be payable by
Consortium to Kropz upon, the earlier of,
(i) the sign-off by a competent person of a definitive
feasibility study on the Aflao deposit, as defined in the JORC Code
2012 edition; or
(ii) Consortium disposing or transferring the Shares prior to
the event described in (i) being achieved; or
(iii) Consortium disposing or transferring the prospecting right
prior to the event described in (i) being achieved .
Consortium is a subsidiary of Russell Brooks Ltd, who is a
minority shareholder in FGE, with a 15% shareholding prior to the
acquisition from Kropz.
The decision is aligned with the business model set out in the
Company strategy, which was to invest in high quality assets in the
phosphate rock market.
In making the above principal decisions, the Directors believe
that they have considered all relevant stakeholders, potential
impact and conflicts, the Company's business model and its
long-term strategic objectives, and have acted accordingly to
promote the success of the Company for the benefit of its members
as a whole.
Convertible loan facility for US$ 5 million from ARC, entered
into on 15 February 2021
Kropz secured the Further Equity Facility of up to US$ 5 million
(not exceeding a maximum of ZAR 85 million) from ARC in February
2021, to be used exclusively for the Hinda Updated FS and general
corporate purposes for Kropz . Quarterly drawdowns under the Equity
Facility are at the sole discretion of Kropz. The first draw down
of US$ 2 million on the Further Equity Facility occurred on 10
March 2021, the second draw down of US$ 2 million occurred on 23
June 2021, the third drawdown of US$ 400,000 occurred on 10
September 2021 and the fourth drawdown of US$ 400,000 occurred on
10 December 2021. The fifth and final drawdown of the Further
Equity Facility occurred on 10 March 2022.
No specific shareholder approval was required for the Further
Equity Facility as the Company received the necessary authority at
the AGM in August 2020 to allot shares for cash, without first
offering them to existing shareholders in proportion to their
existing shareholdings, of approximately 20% of the Company's
issued share capital at that time, representing 88,792,180 new
ordinary shares. Ordinary shares to be issued to ARC in terms of
the Further Equity Facility will be a maximum of 86,863,398
ordinary shares.
Repayment of the Further Equity Facility and any interest
thereon will be in the form of immediate conversion into ordinary
shares in Kropz and issued to ARC, at a conversion price of 4.202
pence per ordinary share each quarter, and any US$ amount will be
converted to GBP at an agreed rate of US$ 1 = 0.73 GBP.
The key stakeholder groups that could be materially impacted are
existing shareholders and potential investors.
Existing shareholders may have conflicting interests with the
Further Equity Facility due to potential dilution of their
shareholding. The Directors considered the impact of this and
concluded that obtaining the convertible facility from ARC was the
only funding opportunity available to the Company in order to
secure funding for the Hinda Update FS and for general working
capital for the Group. Various funding alternatives had been
investigated by the Directors, in conjunction with its brokers and
advisers, over the last year, both from an equity raise perspective
and through possible project finance facilities. Equity markets
were subdued and no new or existing equity investors were prepared
to provide the funding required for the Hinda Updated FS and
Kropz's working capital requirements.
Due to the fact that Machiel Reyneke, the ARC representative on
the Board, and Mike Nunn, representing Kropz International are
considered to be concert parties, they were not permitted to
consider or vote on the approval of the proposed US$ 5 million
Further Equity Facility by the Board. The independent,
non-executive Directors, being Lord Robin Renwick, Linda Beal and
Mike Daigle, and the CEO, Mark Summers, considered the transaction
to be fair and reasonable.
As a result of the Further Equity Facility, ARC could increase
its interest in the Company by a further approximate 2%, taking its
eventual interest in the Company to approximately 84%.
The conclusion was that the Further Equity Facility was fair and
reasonable, and the transaction was approved by the independent
Directors, in consultation with the nominated adviser, and
announced on RNS on 26 February 2021.
Convertible loan facility for ZAR 200 million from ARC, entered
into on 29 September 2021
Kropz secured the New ZAR Equity Facility of up to ZAR 200
million from ARC in September 2021, to be used exclusively for the
delivery of the Company's Elandsfontein project to first revenue
.
The New ZAR Equity Facility comprised a total commitment of up
to ZAR 200 million provided by ARC, which can be drawn down at the
discretion of Kropz, as follows:
-- ZAR 127 million from 15 October 2021 and up to 30 April 2022; and
-- ZAR 73 million from the date as determined by ARC, and at its
discretion, but no earlier than 15 October 2021 and until a further
date as determined by ARC.
At any time during the term of the New ZAR Equity Facility,
repayment of the New ZAR Equity Facility capital amount will, at
the election of ARC, either be:
-- In the form of the conversion into ordinary shares of 0.1
pence each in the Company and issued to ARC, at a conversion price
of 4.5058 pence per Ordinary Share each, representing the 30-day
Volume Weighted Average Price ("VWAP") on 21 September 2021, and at
fixed exchange rate of GBP 1 = ZAR 20.24 ("Conversion"); or
-- Payable in cash by the Company at the end of the term of the New ZAR Equity Facility.
The New ZAR Equity Facility would bear interest at 14% per annum
and would be compounded monthly ("Interest"). Interest would be
payable in cash to ARC by the Company. The term of the New ZAR
Equity Facility would be from 15 October 2021, to the earlier of 5
years from 15 October 2021, or one year after the term loan
facility provided by BNP Paribas to Kropz Elandsfontein (Pty) Ltd
(in the amount not exceeding US$ 30 million), had been repaid.
The New ZAR Equity Facility was secured by the shares which
Kropz holds in Cominco Resources Ltd ("Share Charge").
The first draw down of ZAR 90 million on the New Equity Facility
occurred on 26 October 2021 and the second draw down of ZAR 37
million occurred on 10 December 2021.
Post 31 December 2021, the third drawdown of ZAR 40 million
occurred on 16 March 2022 and the fourth drawdown of ZAR 33 million
occurred on 26 April 2022. The New ZAR Equity Facility is fully
drawn at the date of this annual report.
Specific shareholder approval was required for the New ZAR
Equity Facility, which shareholder approval was obtained on 15
October 2021. Ordinary shares to be issued to ARC in terms of the
New ZAR Equity Facility, if so elected by ARC, would be a maximum
of 219,304,517 ordinary shares.
The key stakeholder groups that could be materially impacted are
existing shareholders and potential investors.
Existing shareholders may have conflicting interests with the
New ZAR Equity Facility due to potential dilution of their
shareholding. The Directors considered the impact of this and
concluded that obtaining the convertible facility from ARC was the
only funding opportunity available to the Company in order to
secure funding for the delivery of the Elandsfontein project to
first revenue. Various funding alternatives had been investigated
by the Directors, in conjunction with its brokers and advisers,
over the last year, both from an equity raise perspective and
through possible project finance facilities. Equity markets were
subdued and no new or existing equity investors were prepared to
provide the required funding.
Due to the fact that Machiel Reyneke, the ARC representative on
the Board, and Mike Nunn, representing Kropz International are
considered to be concert parties, they were not permitted to
consider or vote on the approval of the proposed New ZAR Equity
Facility by the Board. The independent, non-executive Directors,
being Lord Robin Renwick, Linda Beal and Mike Daigle, and the CEO,
Mark Summers, considered the transaction to be fair and
reasonable.
As a result of the New Equity Facility, ARC could increase its
interest in the Company by a further approximate 3%, taking its
eventual interest in the Company to approximately 87%.
The conclusion was that the New ZAR Equity Facility was fair and
reasonable and the transaction was approved by the independent
Directors, in consultation with the nominated adviser, and
announced on RNS on 29 September 2021.
Post 31 December 2021
As announced on 18 January 2022, Kropz issued 6,700,000 ordinary
shares, at an exercise price of GBP0.001 an ordinary share, in the
Company to key members of the executive management team, including
certain PDMRs. The issue of ordinary shares are due to awards
vesting and issued under its LTIP Awards, issued on 31 July 2020 as
announced on 4 August 2020. Of the total above, 2,350,000 ordinary
shares were issued to Mark Summers, 2,350,000 ordinary shares to
Michelle Lawrence and 1,000,000 to Patrick Stevenaert.
BNP Paribas released the ZAR 77 million restricted cash in the
bank account of Kropz Elandsfontein (Pty) Ltd on 10 January 2022,
upon satisfaction of the requirement by BNP Paribas for the Group
to bridge the funding shortfall in respect of Elandsfontein as
announced on 1 September 2021. The funding shortfall was satisfied
when the New ZAR Equity Facility was secured from ARC.
Convertible loan facility for ZAR 177 million from ARC, entered
into on 11 May 2022
As announced on 27 April 2022, a funding shortfall of
approximately US$ 11 million (approximately ZAR 177 million) was
expected due to slower than expected progress in the ramp up of
operations at Kropz Elandsfontein, production of sufficient
phosphate rock concentrate for the first bulk sale would move to
later than originally expected.
The ZAR 177 Million Equity Facility was in addition to the New
ZAR Equity Facility, which ARC and the Company entered into in
February 2021.
As announced on 27 April 2022, Kropz and ARC entered into a
further ZAR 25 million (approximately US$ 1.60 million) bridge loan
facility (the "Loan") to meet immediate cash requirements at
Elandsfontein at the end of April 2022, expected to be ZAR 58
million. When the ZAR 177 Million Equity Facility becomes
unconditional, the Loan will be offset against it leaving ZAR 152
million available for future drawdown.
The ZAR 177 Million Equity Facility comprises a total commitment
of up to ZAR 177 million provided by ARC, which can be drawn down
at the discretion of ARC.
At any time during the term of the ZAR 177 Million Equity
Facility, repayment of the ZAR 177 Million Equity Facility capital
amount would, at the election of ARC, either be:
-- In the form of the conversion into ordinary shares of 0.1
pence each in the Company and issued to ARC, at a conversion price
of 9.256 pence per ordinary share each, representing the 30-day
VWAP on 4 May 2022, and at a fixed exchange rate of ZAR 1 = GBP
0.0504 ("Further Conversion"); or
-- Payable in cash by the Company at the end of the term of the
ZAR 177 Million Equity Facility.
The first drawdown of ZAR 103.5 million was made on 2 June 2022.
Following a Further Conversion, the Company would apply for the
newly issued Ordinary Shares in the capital of the Company to be
admitted to trading on AIM.
The ZAR 177 Million Equity Facility will bear interest at 14%
per annum and will be compounded monthly and will be payable in
cash to ARC by the Company.
The term of the ZAR 177 Million Equity Facility is from 2 June
2022 to the earlier of:
-- Five years from 2 June 2022; or
-- One year after the term loan facility provided by BNP Paribas
to Kropz Elandsfontein (in the amount not exceeding US$ 30
million), has been repaid;
The ZAR 177 Million Equity Facility is secured by the shares
that Kropz holds in Cominco Resources Ltd.
The ZAR 177 Million Equity Facility was conditional on:
-- approval from the SARB. The SARB application was lodged on 17
May 2022 and the approval received on 1 June 2022; and
-- shareholder approval of the Company which was received on 30 May 2022.
The ZAR 177 million Equity Facility was above the authorisation
limits given at the last Annual General Meeting in June 2021.
Specific shareholder approval was required for the ZAR 177 Million
Equity Facility, which shareholder approval was obtained on 30 May
2022. Ordinary shares to be issued to ARC in terms of the New ZAR
177 Million Equity Facility, if so elected by ARC, would be a
maximum of 96,378,566 ordinary shares.
The key stakeholder groups that could be materially impacted are
existing shareholders and potential investors.
Existing shareholders may have conflicting interests with the
ZAR 177 Million Equity Facility due to potential dilution of their
shareholding. The Directors considered the impact of this and
concluded that obtaining the convertible facility from ARC was the
only funding opportunity available to the Company in order to
secure funding for the delivery of the Elandsfontein project to
first revenue. Various funding alternatives had been investigated
by the Directors, in conjunction with its brokers and advisers,
over the last year, both from an equity raise perspective and
through possible project finance facilities. Equity markets were
subdued and no new or existing equity investors were prepared to
provide the required funding.
Due to the fact that Machiel Reyneke, the ARC representative on
the Board, and Mike Nunn, representing Kropz International are
considered to be concert parties, they were not permitted to
consider or vote on the approval of the proposed US$ 5 million
Further Equity Facility by the Board. The independent,
non-executive Directors, being Lord Robin Renwick, Linda Beal and
Mike Daigle, and the CEO, Mark Summers, considered the transaction
to be fair and reasonable.
As a result of the New ZAR Equity Facility and the ZAR 177
Million Equity Facility, ARC could increase its interest in the
Company by a further approximate 4.3%, taking its eventual interest
in the Company to approximately 87.5%.
The conclusion was that the ZAR 177 Million Equity Facility was
fair and reasonable and the transaction was approved by the
independent Directors, in consultation with the nominated adviser,
and announced on RNS on 11 May 2022.
This Strategic Report was approved by the Board of
Directors.
Mark Summers
Chief Executive Officer
28 June 2022
Consolidated Statement of Financial Position
As at 31 December 2021
31 December 31 December 31 December
2021 2020 2019
Notes US$'000 US$'000 US$'000
(Restated (Restated
- Note 2) - Note 2)
Non-current assets
Property, plant, equipment and
mine development 4 135,099 114,473 105,224
Exploration assets 5 44,631 44,348 40,192
Right-of-use asset 6 7 45 37
Other financial assets 7 1,357 1,477 1,534
------------- ------------- -------------
181,094 160,343 146,987
------------- ------------- -------------
Current assets
Inventories 8 1,025 821 875
Trade and other receivables 9 1,511 1,611 329
Derivative asset 10 - 8,586 -
Restricted cash 11 4,858 7,355 -
Cash and cash equivalents 12 2,461 11,572 15,530
------------- ------------- -------------
9,855 29,945 16,734
------------- ------------- -------------
TOTAL ASSETS 190,949 190,288 163,721
------------- ------------- -------------
Current liabilities
Trade and other payables 19 3,543 4,780 1,536
Lease liabilities 16 7 42 19
Other financial liabilities 17 4,295 2,500 29,982
Current taxation 27 - - 174
Other tax liabilities - - 451
7,845 7,322 32,162
------------- ------------- -------------
Non-current liabilities
Shareholder loans and derivative 15 25,043 15,703 14,701
Lease liabilities 16 - 6 21
Other financial liabilities 17 26,291 28,113 -
Provisions 18 4,033 4,311 3,702
------------- ------------- -------------
55,367 48,133 18,424
------------- ------------- -------------
TOTAL LIABILITIES 63,212 55,455 50,586
------------- ------------- -------------
NET ASSETS 127,737 134,833 113,135
------------- ------------- -------------
Consolidated Statement of Financial Position
As at 31 December 2021 (continued)
31 December 31 December 31 December
2021 2020 2019
Notes US$'000 US$'000 US$'000
(Restated (Restated
- Note 2) - Note 2)
Shareholders' equity
Share capital 13 1,194 706 363
13 /
Share premium 14 193,524 168,212 147,339
13 /
Merger reserve 14 (20,523) (20,523) (20,523)
Foreign exchange translation
reserve 14 (7,807) 2,334 53
Share-based payment reserve 14 1,197 385 167
Accumulated losses (45,626) (22,010) (18,655)
Total equity attributable to
the owners of the Company 121,959 129,104 108,744
Non-controlling interests 34 5,778 5,729 4,391
------------- ------------- -------------
127,737 134,833 113,135
------------- ------------- -------------
The notes form an integral part of these Consolidated Financial
Statements. The Financial Statements were approved and authorised
for issue by the Board of Directors and signed on its behalf
by:
Mark Summers
Chief Executive Officer
28 June 2022
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2021
Year ended Year ended
31 December 31 December
2021 2020
Notes US$'000 US$'000
Revenue - -
Other income 172 29
Operating expenses 23 (6,503) (5,912)
------------- -------------
Operating loss (6,331) (5,883)
Finance income 22 480 1,244
Finance expense 25 (7,391) (5,914)
Fair value (loss) / gains from derivative
asset / liability 31 (4,792) 8,586
Loss on disposal of subsidiary 26 (224) -
Loss before taxation (18,258) (1,967)
Taxation 27 - 36
Loss after taxation (18,258) (1,931)
------------- -------------
(Loss) / profit attributable to:
Owners of the Company (13,787) 1,531
Non-controlling interests (4,471) (3,462)
------------- -------------
(18,258) (1,931)
------------- -------------
Loss for the year (18,258) (1,931)
Other comprehensive income:
Items that may be subsequently reclassified
to profit or loss
* Exchange differences on translation of parent company
financial statements from functional to presentation
currency (643) 1,922
* Exchange differences on translating foreign
operations (10,541) 273
------------- -------------
Total comprehensive (loss) / income (29,442) 264
------------- -------------
Attributable to:
Owners of the Company (23,928) 3,812
Non-controlling interests (5,514) (3,548)
------------- -------------
(29,442) 264
------------- -------------
(Loss) / profit per share attributable
to owners of the Company :
Basic (US cents) 28 (1.80) 0.40
Diluted (US cents) 28 (1.80) 0.39
------------- -------------
Consolidated Statement of Changes in Equity
For the year ended 31 December 2021
Foreign
currency Share-based
Share Share Merger translation payment Retained Non-controlling Total
capital premium reserve reserve reserve earnings Total interest equity
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Balance at 1
January 2020,
as previously
reported 363 147,339 (20,523) 53 167 (12,536) 114,863 (1,728) 113,135
Prior year
adjustment - - - - - (6,119) (6,119) 6,119 -
-------- -------- --------- ------------ ------------ --------- ---------- ---------------- ---------
As restated 363 147,339 (20,523) 53 167 (18,655) 108,744 4,391 113,135
Total
comprehensive
profit
/
(loss) for the
year - - - 2,281 - 1,531 3,812 (3,548) 264
Issue of shares 343 21,173 - - - - 21,516 - 21,516
Cost of issuing
shares - (320) - - - - (320) - (320)
Issue of
warrants - (10) - - 10 - - - -
Lapsed warrants - 30 - - (30) - - - -
Investment in
non-redeemable
preference
shares of
Kropz
Elandsfontein - - - - - (4,886) (4,886) 4,886 -
Share based
payment
charges - - - - 238 - 238 - 238
-------- -------- --------- ------------ ------------ --------- ---------- ---------------- ---------
Transactions
with owners 343 20,873 - - 218 (4,886) 16,548 4,886 21,434
-------- -------- --------- ------------ ------------ --------- ---------- ---------------- ---------
Balance at 31
December
2020 as
restated 706 168,212 (20,523) 2,334 385 (22,010) 129,104 5,729 134,833
Total
comprehensive
loss
for the year - - - (10,141) - (13,787) (23,928) (5,514) (29,442)
Issue of shares 488 25,312 - - - - 25,800 - 25,800
Disposal of
subsidiary - - - - - - - 181 181
Extinguishment
of derivative
asset upon
equity draw
down - - - - - (4,447) (4,447) - (4,447)
Investment in
non-redeemable
preference
shares of
Kropz
Elandsfontein - - - - - (5,382) (5,382) 5,382 -
Share based
payment
charges - - - - 812 - 812 - 812
-------- -------- --------- ------------ ------------ --------- ---------- ---------------- ---------
Transactions
with owners 488 25,312 - - 812 (9,829) 16,783 5,563 22,346
-------- -------- --------- ------------ ------------ --------- ---------- ---------------- ---------
Balance at 31
December
2021 1,194 193,524 (20,523) (7,807) 1,197 (45,626) 121,959 5,778 127,737
-------- -------- --------- ------------ ------------ --------- ---------- ---------------- ---------
Consolidated Statement of Cash Flows
For the year ended 31 December 2021
Year ended Year ended
31 December 31 December
Notes 2021 2020
US$'000 US$'000
(Restated
- Note 2)
Cash flows from operating activities
Loss before taxation (18,258) (1,967)
Adjustments for:
Depreciation of property, plant and
equipment 4 904 780
Amortisation of right-of-use assets 6 39 51
Share-based payment charge 13 812 238
Finance income 22 (480) (1,244)
Finance costs 25 3,267 2,948
Fair value (loss) / gain on derivative
asset / liability 31 4,792 (8,586)
Debt modification loss 17 - 1,109
Debt modification present value adjustment 25 (258) (119)
Foreign currency exchange differences 4,382 1,858
Fair value loss on game animals 4 (51) 18
Operating cash flows before working
capital changes (4,851) (4,914)
Decrease / (increase) in trade and
other receivables 29 256 (1,278)
(Increase) / decrease in inventories 29 (291) 17
Increase in trade and other payables 29 3,178 28
Decrease in other tax liabilities - (388)
(1,708) (6,535)
Income taxes paid - (128)
------------- -------------
Net cash flows used in operating
activities (1,708) (6,663)
------------- -------------
Cash flows used in investing activities
Purchase of property, plant and equipment 4 (38,553) (10,927)
Exploration and evaluation expenditure 5 (3,931) (257)
Disposal of subsidiary 26 5 -
Finance income received 22 480 1,244
Transfer from / (to) restricted cash 11 2,497 (7,355)
Net cash flows used in investing
activities (39,502) (17,295)
------------- -------------
Cash flows from financing activities
Finance costs paid 25 (2,028) (2,079)
Shareholder loan received 15 8,037 411
Repayment of lease liabilities 16 (39) (53)
Other financial liabilities 29 54 (464)
Issue of ordinary share capital 13 25,800 21,516
Costs of share issues 13 - (320)
Net cash flows from financing activities 31,824 19,011
------------- -------------
Net decrease in cash and cash equivalents (9,386) (4,947)
Cash and cash equivalents at beginning
of the year 11,572 15,530
Foreign currency exchange gains /
(losses) on cash 275 989
Cash and cash equivalents at end
of the year 2,461 11,572
------------- -------------
Notes to the Consolidated Financial Statements for the year
ended 31 December 2021
(1) General information
Kropz is an emerging plant nutrient producer with an advanced
stage phosphate mining project in South Africa and a phosphate
project in the Republic of Congo (" RoC"). The principal activity
of the Company is that of a holding company for the Group, as well
as performing all administrative, corporate finance, strategic and
governance functions of the Group.
The Company was incorporated on 10 January 2018 and is a public
limited company, with its ordinary shares admitted to the AIM
Market of the London Stock Exchange on 30 November 2018 trading
under the symbol, "KRPZ". The Company is domiciled in England and
incorporated and registered in England and Wales. The address of
its registered office is 35 Verulam Road, Hitchin, SG5 1QE. The
registered number of the Company is 11143400.
The Group holds interests in two projects - in South Africa and
the RoC.
(2) Summary of significant accounting policies
The principal accounting policies applied in the preparation of
these Consolidated Financial Statements are set out below. These
policies have been consistently applied unless otherwise
stated.
(a) Basis of preparation
The Consolidated Financial Statements of the Company have been
prepared in prepared in accordance with UK adopted international
accounting standards and the Companies Act 2006 applicable to
companies reporting under IFRS. The Consolidated Financial
Statements have been prepared under the historical cost convention,
as modified for any financial assets, financial liabilities and
game animals which are stated at fair value through profit or loss.
The Consolidated Financial Statements are presented in United
States Dollars, the presentation currency of the Company and
figures have been rounded to the nearest thousand.
Going concern
During the year ended 31 December 2021, the Group incurred a
loss of US$ 18.3 million (2020: US$ 1.9 million) and experienced
net cash outflows from operating activities. Cash and cash
equivalents totalled US$ 2.5 million as at 31 December 2021 (2020:
US$ 11.6 million) and US$ 4.9 million (2020: US$ 7.4 million) was
restricted in terms of the amended facility agreement between Kropz
Elandsfontein and BNP. ZAR 77 million (approximately US$ 4.9
million) was locked up by BNP in the accounts of Kropz
Elandsfontein in terms of the BNP amended facility agreement at 31
December 2021. On 10 January 2022, BNP released the restricted
funding of ZAR 77 million.
Apart from forecast first revenue from Elandsfontein, the Group
has no current source of operating revenue and is therefore
dependent on both existing cash resources and facilities and future
fund raisings to meet overheads and future exploration requirements
as they fall due.
In September 2021, Kropz secured the New ZAR Equity Facility of
up to ZAR 200 million from ARC, to be used exclusively for the
purposes of bringing the Elandsfontein project to first revenues.
On 26 October 2021, Kropz received a draw down on the New ZAR
Equity Facility of ZAR 90 million and a further ZAR 37 million on
10 December 2021. Two further draw downs were made in 2022, one on
25 March 2022 for ZAR 40 million and ZAR 33 million on 26 April
2022. The New ZAR Equity Facility is fully drawn at the date of
this report.
In April 2022, ARC agreed to provide a ZAR 25 million
(approximately US$ 1.6 million) bridge loan facility (the "Loan")
to Kropz Elandsfontein (Pty) Ltd to meet its immediate cash
requirements. The Loan was unsecured, repayable on demand, and
there were no fixed repayment terms. It is repayable by Kropz on no
less than two business days' notice. Interest is payable on the
Loan at 14% nominal, compounded monthly. The Loan was drawn down on
28 April 2022.
In May 2022, Kropz secured a Further ZAR Equity Facility of up
to ZAR 177 million from ARC. The ZAR 177 Million Equity Facility
can be drawn down following a written request from Kropz plc and at
the discretion of ARC. The principal drawn amount may, at the
discretion of ARC, at any time be converted to ordinary shares, or
alternatively be repaid in cash at the end of the term of the ZAR
177 Million Equity Facility which is 27 October 2026. The ZAR 177
Million Equity Facility is to be used exclusively for the purposes
of bringing the Elandsfontein project to first revenues, given a
slower ramp-up in operations than originally envisaged. The delay
in ramp-up was largely driven by the need to re-engineer parts of
the fine flotation circuit proposed by the vendor, but has also
been affected by early unpredicted ore variability and lack of
operator experience. Since the announcement, the vendor has
provided design changes which were implemented at the plant,
additional operator training was conducted and is ongoing and a
mobile crusher ordered in the interim to facilitate the crushing of
the affected ore to an appropriate size fraction until further test
work has been conducted for a permanent solution. Several
alternatives to deal with the indurated material in the pit are
being investigated, and new equipment has arrived on site to
improve the mining efficiency and facilitate adequate feed to the
plant.
First drawdown of the ZAR 177 Million Equity Facility of ZAR
103.5 million was made on 2 June 2022. The Loan of ZAR 25 million
was set off against the first draw down and the net amount of ZAR
78.5 million received by the Company.
During 2021, due to second/third waves of the COVID-19 pandemic
and cases diagnosed with new variants of the virus, some
jurisdictions reimposed lockdowns and movement restrictions.
Further waves are expected in 2022. The Company has developed a
policy and is evolving procedures to address the health and
wellbeing of its employees, consultants and contractors, and their
families, in the face of the COVID outbreak. The timing and extent
of the impact and recovery from COVID is unknown but it may affect
planned activities.
On 24 February 2022, Russian troops started invading Ukraine.
The war in Ukraine and related events take place at a time of
significant global economic uncertainty and volatility, and the
effects are likely to interact with and exacerbate the effects of
current market conditions. Phosphate markets are currently in
turmoil, largely due to the sanctions imposed on Russia. Russia is
a significant supplier of fertiliser feed products and associated
sanctions increased the prices of phosphate products significantly
as producers that relied on Russian sources scrambled to secure
alternative sources of amongst others, low cadmium phosphate rock.
Kropz does not have Russian entities in its supply chain nor
customers and will benefit from higher phosphate prices.
Current budgeted estimates are based on first bulk concentrate
sales from Kropz Elandsfontein of approximately ZAR 50 million in
July 2022, at an average of ZAR 159 million per month for the
18-month period ended 31 December 2023. Should first bulk
concentrate sales not occur in July 2022, a funding shortfall would
arise in Kropz Elandsfontein at the end of July 2022 of
approximately ZAR 50 million.
Failure to produce adequate quantities of phosphate rock
concentrate to fulfil these first bulk sales in the projected time
frame, could negatively impact production ramp-up and cash
generation and create an additional funding requirement. The
average operating costs over the 18-month forecast period for Kropz
Elandsfontein is estimated at approximately ZAR 130 million per
month. This will have a further knock-on effect on Kropz Plc as its
cashflows are dependent on concentrate revenues being achieved by
Kropz Elandsfontein.
Additionally, at the date of these financial statements, the
potential future impact of COVID is uncertain, and any delays or
interruptions could cause delays that would require additional
funding through the raising of debt or equity.
The Directors have reviewed the Group's overall cash position,
debt repayments and outlook, for a period of eighteen months
following the date of signature of this Annual Report and have
considered sensitivities around pricing, volume and timing of
production and stress tested various scenarios, in respect of the
matters identified above and are of the opinion that it is
appropriate to adopt the going concern basis of accounting in
preparing these financial statements. Key contracts associated with
operational readiness and commencement of production activities at
Elandsfontein are finalised, except for Transnet. Negotiations with
Transnet were finalised in December 2021 and final signature of the
Transnet contract is expected prior to the shipment of first
concentrate sales.
Management has successfully raised money in the past from its
supportive shareholder base, but there is no guarantee that
adequate funds will be available if needed in the future. These
circumstances indicate the existence of a material uncertainty
which may cast significant doubt about the Group's ability to
continue as a going concern and therefore it may be unable to
realise its assets and discharge its liabilities in the normal
course of business.
The financial report does not include adjustments relating to
the recoverability and classification of recorded asset amounts or
to the amounts and classification of liabilities that might be
necessary should the Group not continue as a going concern.
Functional and presentational currencies
The Consolidated Financial Statements are presented in US
Dollars.
The functional currency of Kropz plc is Pounds Sterling and its
presentation currency is US Dollars, due to the fact that US
Dollars is the recognised reporting currency for most listed mining
resource companies on AIM.
The functional currency of Kropz SA and its subsidiaries (as
shown below) is South African Rand, being the currency in which the
majority of the companies' transactions are denominated.
The functional currencies of Cominco Resources and its
subsidiaries are Euros, Pounds Sterling and Central African Francs
being the currency in which the majority of the companies'
transactions are denominated. Its presentation currency is US
Dollars.
The functional and presentation currency of First Gear was US
Dollars.
In preparing the financial statements of the individual
entities, transactions in currencies other than the entity's
functional currency are recorded at the rate of exchange prevailing
on the date of the transaction.
At the end of each financial year, monetary items denominated in
foreign currencies are retranslated at the rates prevailing as of
the end of the financial year. Non-monetary items carried at fair
value that are denominated in foreign currencies are retranslated
at the rates prevailing on 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 on the settlement of monetary
items, and on retranslation of monetary items are included in
profit or loss for the period. Exchange differences arising on the
retranslation of non-monetary items carried at fair value are
included in profit or loss for the period except for differences
arising on the retranslation of non-monetary items in respect of
which gains and losses are recognised directly in equity. For such
non-monetary items, any exchange component of that gain or loss is
also recognised directly in equity.
In order to satisfy the requirements of IAS 21 with respect to
presentation currency, the consolidated nancial statements have
been translated into US Dollars using the procedures outlined
below:
-- Assets and liabilities where the functional currency is other
than US Dollars were translated into US Dollars at the relevant
closing rates of exchange;
-- Non-US Dollar trading results were translated into US Dollars
at the relevant average rates of exchange;
-- Differences arising from the retranslation of the opening net
assets and the results for the period have been taken to the
foreign currency translation reserve; and
-- Share capital has been translated at the historical rates
prevailing at the dates of transactions; and
-- Exchange differences arising on the net investment in
subsidiaries are recognised in other comprehensive income.
Changes in accounting policies
(i) New standards, interpretations and amendments adopted from 1 January 2021
Two new standards impacting the Group that have been adopted in
the annual financial statements for the year ended 31 December
2021:
-- COVID-19-Related Rent Concessions beyond 30 June 2021 (Amendments to IFRS 16); and
-- Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS
9, IAS 39, IFRS 7, IFRS4 and IFRS 16).
The Group has considered the above new standards and amendments
and has concluded that,
they are either not relevant to the Group or they do not have a
significant impact on the Group's
consolidated financial statements.
(ii) New standards, interpretations and amendments not yet effective
At the date of authorisation of these consolidated Group
financial statements, the following standards and interpretations,
which have not been applied in these financial statements, were in
issue but not yet effective. Management are currently assessing the
impact of these new standards on the Group. The Group does not
believe that the amendments will have a significant impact, with
the exception of IAS 16 which will be relevant once the Group
generates sales in 2022, which impact is currently being analysed
by management.
The following amendments are effective for the period beginning
1 January 2022:
-- Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37);
-- Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16);
-- Annual Improvements to IFRS Standards 2018-2020 (Amendments
to IFRS 1, IFRS 9, IFRS 16 and IAS 41); and
-- References to Conceptual Framework (Amendments to IFRS 3).
The following amendments are effective for the period beginning
1 January 2023:
-- Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2);
-- Definition of Accounting Estimates (Amendments to IAS 8); and
-- Deferred Tax Related to Assets and Liabilities arising from a
Single Transaction (Amendments to IAS 12).
Prior year adjustments
(i) Restatement of prior year statement of cash flows
The Group has restated certain prior year comparatives to
correctly present amounts in the Group financial statements for the
year ended 31 December 2021.
The prior year cash flow incorrectly included non-cash movements
related to interest accrued, non-cash movements in provisions and
the non-cash debt modification loss, together with
misclassification of trade payables directly associated with
capitalised cost to property, plant and equipment in calculating
the actual cash flow for certain line items.
Accordingly the prior year statement of cash flows and note 29
have been restated to correct these errors. The restatement had no
impact on the statement of comprehensive income, the statement of
financial position or the statement of changes in equity.
Impact on adjustment on the consolidated statement of cash
flows
Year ended Year ended
31 December Prior year 31 December
2020 adjustment 2020
US$'000 US$'000 US$'000
(As previously (As re-
stated) stated)
Cash flows from operating
activities
Foreign currency exchange
differences 261 1,597 1,858
Increase / (decrease) in
provisions 765 (765) -
Increase in trade and other
payables 3,356 (3,328) 28
Cash flows used in investing
activities
Purchase of property, plant
and equipment (14,589) 3,662 (10,927)
Cash flows from financing
activities
Finance costs paid (2,948) 869 (2,079)
Shareholder loan received 1,624 (1,213) 411
Other financial liabilities 1,935 (2,399) (464)
Foreign currency exchange
(losses) / gains on cash (588) 1,577 989
(ii) Restatement of prior year non-controlling interest
Previously the preference share investment by Kropz plc in Kropz
Elandsfontein was incorrectly recorded as inter-company liability
measured at the total amount paid for the investment and eliminated
on consolidation with no resulting impact on non-controlling
interest. The group has identified that the instrument should have
been measured at fair value with a residual equity element in Kropz
Elandsfontein for the amounts paid in excess of their value.
Accordingly the restatement reflects the benefit accruing to the
non-controlling interests arising from their proportionate share of
the portion of the preference share investment treated as equity.
This increases the net assets of Kropz Elandsfontein and therefore
gives rise to a consequential impact on non-controlling
interest.
Impact on adjustment on the consolidated statement of changes in
equity
Year ended Year ended Year ended
31 December 31 December 31 December
2020 2019 2018
US$'000 US$'000 US$'000
Increase in non-controlling
interest 4,886 1,370 4,749
Decrease in retained earnings (4,886) (1,370) (4,749)
Effect on total equity - - -
(b) Basis of consolidation
The Consolidated Financial Statements comprise the financial
statements of the subsidiaries listed in Note 3.
A subsidiary is defined as an entity over which the Group has
control. The Group controls an entity when the Group is exposed to,
or has rights to, variable returns from its involvement with the
entity and has the ability to affect those returns through its
power over the entity. Specifically, the Group controls an investee
if, and only if, the Group has all of the following:
a) Power over the investee (i.e. existing rights that give it
the current ability to direct the relevant activities of the
investee);
b) Exposure, or rights, to variable returns from its involvement with the investee; and
c) 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, it considers all
relevant facts and circumstances in assessing whether it has power
over an investee, including:
-- The contractual arrangements with the other vote holders of the investee;
-- Rights arising from other contractual arrangements; and
-- The Group's voting rights and potential voting rights.
Subsidiaries are fully consolidated from the date on which
control is transferred to the Group. They are deconsolidated from
the date that control ceases.
Intra-group transactions, balances and unrealised gains on
transactions are eliminated; unrealised losses are also eliminated
unless cost cannot be recovered. Where necessary, adjustments are
made to the financial statements of subsidiaries to ensure
consistency of accounting policies with those of the Group.
The total comprehensive income of non-wholly owned subsidiaries
is attributed to owners of the parent and to the non-controlling
interests in proportion to their relative ownership interests.
Accounting for asset acquisition within a corporate
structure
Acquisitions of mineral assets through acquisition of
non-operational corporate structures that do not represent a
business, and therefore do not meet the de nition of a business
combination, are accounted for as the acquisition of an asset and
recognised at the fair value of the consideration.
Non-controlling interests
The Group initially recognised any non-controlling interest in
the acquiree at the non-controlling interest's proportionate share
of the acquiree's net assets. The total comprehensive income of
non-wholly owned subsidiaries is attributed to owners of the parent
and to the non-controlling interests in proportion to their
relative ownership interests. The benefit accruing to the
non-controlling interests arising from their proportionate share of
the portion of the non-redeemable and non-participating preference
share investment by Kropz plc into Kropz Elandsfontein is
attributed to the non-controlling interests in proportion to their
relative ownership interests.
Merger relief
The issue of shares by the Company is accounted for at the fair
value of the consideration received. Any excess over the nominal
value of the shares issued is credited to the share premium account
other than in a business combination where the consideration for
shares in another company includes the issue of shares, and on
completion of the transaction, the Company has secured at least a
90%. equity holding in the other company. In such circumstances the
credit is applied to the merger relief reserve. In the case of the
Company's acquisition of Cominco Resources, where shares were
acquired on a share for share basis, then merger relief has been
applied to those shares issued in exchange for shares in Cominco
Resources.
(c) Property, plant, equipment and mine development
Property, plant, equipment and mine development includes
buildings and infrastructure, machinery, plant and equipment, site
preparation and development and essential spare parts that are held
to minimise delays arising from plant breakdowns, that are expected
to be used during more than one period.
Assets that are in the process of being constructed are measured
at cost less accumulated impairment and are not depreciated. All
other classes of property, plant and equipment are stated at
historical cost less accumulated depreciation and accumulated
impairment. Land is depreciated over the life of the mine.
Historical cost includes expenditure that is directly
attributable to the acquisition of the items, including:
-- The estimated costs of decommissioning the assets and site
rehabilitation costs to the extent that they related to the
asset;
-- Capitalised borrowing costs;
-- Capitalised pre-production expenditure; and
-- Topsoil and overburden stripping costs.
The cost of items of property, plant and equipment are
capitalised into its various components where the useful life of
the components differs from the main item of property, plant and
equipment to which the component can be logically assigned.
Expenditure incurred to replace a signi cant component of property,
plant and equipment is capitalised and any remaining carrying value
of the component replaced is written off as an expense in the
income statement.
Direct costs incurred on major projects during the period of
development or construction are capitalised. Subsequent expenditure
on property, plant and equipment is capitalised only when the
expenditure enhances the value or output of the asset beyond
original expectations, it is probable that future economic bene ts
associated with the item will ow to the entity and the cost of the
item can be measured reliably. Costs incurred on repairing and
maintaining assets are recognised in the income statement in the
period in which they are incurred.
Gains and losses on disposals are determined by comparing
proceeds with carrying amount. These are included in pro t or
loss.
Depreciation
All items of property, plant and equipment are depreciated on
either a straight-line method or unit of production method at cost
less estimated residual values over their useful lives as
follows:
Item Depreciation Average useful
Buildings and infrastructure method life
Buildings Units of production Life of mine*
Roads Straight-line 15 years
Electrical sub-station Straight-line 15 years
Machinery, Plant and
Equipment
Fixed plant and equipment Units of production Life of mine*
Water treatment plant Units of production Life of mine*
Critical spare parts Straight-line 2-15 years
Furniture and fittings Straight-line 6 years
Motor vehicles Straight-line 5 years
Computer equipment Straight-line 3 years
Mineral exploration Units of production Life of mine*
site preparation
Stripping activity Units of production Life of identified
ore*
* Depreciation of mining assets is computed principally by the
units-of-production method over life-of-identified ore based on
estimated quantities of economically recoverable proved and
probable reserves, which can be recovered in future from known
mineral deposits.
Useful lives and residual values
The asset's useful lives and residual values are reviewed and
adjusted if appropriate, at each reporting date.
Stripping activity asset
The costs of stripping activity which provides a bene t in the
form of improved access to ore is capitalised as a non-current
asset until ore is exposed where the following criteria are
met:
-- it is probable that future economic bene t in the form of
improved access to the ore body will ow to the entity;
-- the component of the ore body for which access has been improved can be identi ed; and
-- the cost of the stripping activity can be reliably measured.
The stripping activity is initially measured at cost and
subsequently carried at cost less depreciation and impairment
losses.
(d) Mineral exploration and evaluation costs
All costs incurred prior to obtaining the legal right to
undertake exploration and evaluation activities on a project are
written off as incurred. Following the granting of a prospecting
right, general administration and overhead costs directly
attributable to exploration and evaluation activities are expensed
and all other costs are capitalised and recorded at cost on initial
recognition.
The following expenditures are included in the initial and
subsequent measurement of the exploration and evaluation
assets:
-- Acquisition of rights to explore;
-- Topographical, geological, geochemical or geographical studies;
-- Exploratory drilling;
-- Trenching;
-- Sampling;
-- Activities in relation to the evaluation of both the
technical feasibility and the commercial viability of extracting
minerals;
-- Exploration staff related costs; and
-- Equipment and infrastructure.
Exploration and evaluation costs that have been capitalised are
classi ed as either tangible or intangible according to the nature
of the assets acquired and this classi cation is consistently
applied.
If commercial reserves are developed, the related deferred
exploration and evaluation costs are then reclassified as
development and production assets within property, plant and
equipment.
All capitalised exploration and evaluation expenditure is
monitored for indications of impairment in accordance with IFRS
6.
(e) Leases
All leases are accounted for by recognising a right-of-use asset
and a lease liability except for:
-- Leases of low value assets; and
-- Leases with a duration of 12 months or less.
Identifying Leases
The Group accounts for a contract, or a portion of a contract,
as a lease when it conveys the right to use an asset for a period
of time in exchange for consideration. Leases are those contracts
that satisfy the following criteria:
(a) There is an identified asset;
(b) The Group obtains substantially all the economic benefits
from use of the asset; and
(c) The Group has the right to direct use of the asset.
The Group considers whether the supplier has substantive
substitution rights. If the supplier does have those rights, the
contract is not identified as giving rise to a lease.
In determining whether the Group obtains substantially all the
economic benefits from use of the asset, the Group considers only
the economic benefits that arise from use of the asset, not those
incidental to legal ownership or other potential benefits.
In determining whether the Group has the right to direct use of
the asset, the Group considers whether it directs how and for what
purpose the asset is used throughout the period of use. If there
are no significant decisions to be made because they are
pre-determined due to the nature of the asset, the Group considers
whether it was involved in the design of the asset in a way that
predetermines how and for what purpose the asset will be used
throughout the period of use. If the contract or portion of a
contract does not satisfy these criteria, the Group applies other
applicable IFRSs rather than IFRS 16.
Lease liabilities are measured at the present value of the
contractual payments due to the lessor over the lease term, with
the discount rate determined by reference to the rate inherent in
the lease unless (as is typically the case) this is not readily
determinable, in which case the Group's incremental borrowing rate
on commencement of the lease is used.
The discount rate is the rate implicit in the lease, if readily
determinable. If not, the Company's incremental borrowing rate is
used which the Company has assessed to be 5.22%, being an average
LIBOR plus 3%, being an appropriate level of risk to the risk-free
rate of borrowing.
Variable lease payments are only included in the measurement of
the lease liability if they depend on an index or rate. In such
cases, the initial measurement of the lease liability assumes the
variable element will remain unchanged throughout the lease term.
Other variable lease payments are expensed in the period to which
they relate.
On initial recognition, the carrying value of the lease
liability also includes:
-- amounts expected to be payable under any residual value guarantee;
-- the exercise price of any purchase option granted in favour
of the Group if it is reasonably certain to assess that option;
and
-- any penalties payable for terminating the lease, if the term
of the lease has been estimated on the basis of termination option
being exercised.
Right of use assets are initially measured at the amount of the
lease liability, reduced for any lease incentives received, and
increased for:
-- lease payments made at or before commencement of the lease;
-- initial direct costs incurred; and
-- the amount of any provision recognised where the Group is
contractually required to dismantle, remove or restore the leased
asset (typically leasehold dilapidations).
Subsequent to initial measurement lease liabilities increase as
a result of interest charged at a constant rate on the balance
outstanding and are reduced for lease payments made. Right-of-use
assets are amortised on a straight-line basis over the remaining
term of the lease or over the remaining economic life of the asset
if, rarely, this is judged to be shorter than the lease term.
When the Group revises its estimate of the term of any lease
(because, for example, it re-assesses the probability of a lessee
extension or termination option being exercised), it adjusts the
carrying amount of the lease liability to reflect the payments to
make over the revised term, which are discounted at the same
discount rate that applied on lease commencement. The carrying
value of lease liabilities is similarly revised when the variable
element of future lease payments dependent on a rate or index is
revised. In both cases an equivalent adjustment is made to the
carrying value of the right-of-use asset, with the revised carrying
amount being amortised over the remaining (revised) lease term.
(f) Game animals
Game animals are wild animals that occur on the farm properties
owned by the Group. The animals are owned by Elandsfontein Land
Holdings and held within the approximately 5,000 hectares of
farmland owned by Elandsfontein Land Holdings. The property is
appropriately fenced with game specific fencing. These animals are
managed in terms of a game management plan and excess animals are
either sold as live animals or harvested as and when required based
on estimated stocking levels and vegetation conditions. Law in
South Africa specifies that wild animals are the property of the
owner of the land that they occupy.
Game animals are measured at their fair value less estimated
point-of-sale costs, fair value being determined upon the age and
size of the animals and relevant market prices. Market price is
determined on the basis that the animal is either to be sold to be
slaughtered or realised through sale to customers at fair market
value.
Fair market value of game animals is determined by using average
live game animal selling prices achieved at live game animal
auctions during the relevant year and published from time to time
on game animal auctioneering websites.
(g) Financial instruments
Classi cation and measurement
The Group classi es its nancial instruments into the following
categories:
-- Financial assets measured at amortised cost;
-- Financial assets measured at fair value through profit and loss;
-- Financial liabilities measured at amortised cost; and
-- Derivative financial instruments are accounted for at fair value through profit and loss.
Classi cation of nancial assets depends on the business model
for managing the nancial assets and the contractual terms of the
cash ows. Management determines the classi cation of nancial assets
at initial recognition. Generally, the Group does not acquire
nancial assets for the purpose of selling in the short term. The
Group's business model is primarily that of "hold to collect"
(where assets are held in order to collect contractual cash
ows).
Financial assets held at amortised cost
This classi cation applies to debt instruments which are held
under a hold to collect business model and which have cash ows that
meet the "solely payments of principal and interest" ("SPPI")
criteria.
At initial recognition, trade and other receivables that do not
have a signi cant nancing component are recognised at their
transaction price. Other nancial assets are initially recognised at
fair value plus related transaction costs. They are subsequently
measured at amortised cost using the effective interest method. Any
gain or loss on de-recognition or modi cation of a nancial asset
held at amortised cost is recognised in the income statement.
Financial assets and liabilities held at fair value through
profit or loss
Financial assets and liabilities at fair value through profit or
loss are carried in the statement of financial position at fair
value with net changes in fair value recognised in the statement of
profit or loss. Assets and liabilities in this category are
classified as current if they are expected to be settled within
twelve months, otherwise they are classified as non-current.
Call options in the Company's own equity are recorded at fair
value and change in fair value recorded through income
statement.
Undrawn facilities with a conversion option, for which the terms
give rise to a derivative, are revalued for changes in the share
price prior to draw down with a resulting loss for revaluation
booked to Profit and Loss and the remaining receivable extinguished
through equity based on the relative draw down percentage of
undrawn facilities at each reporting period.
Impairment of nancial assets
A forward-looking expected credit loss ("ECL") review is
required for debt instruments measured at amortised cost or held at
fair value through other comprehensive income, nancial guarantees
not measured at fair value through pro t or loss and other
receivables that give rise to an unconditional right to
consideration.
As permitted by IFRS 9, the Group applies the "simpli ed
approach" to trade receivables, contract assets and lease
receivables and the "general approach" to all other nancial assets.
The general approach incorporates a review for any signi cant
increase in counterparty credit risk since inception. The ECL
reviews include assumptions about the risk of default and expected
loss rates.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand
deposits, and other short-term highly liquid investments that are
readily convertible to a known amount of cash and are subject to an
insigni cant risk of changes in value. These are classi ed as
nancial assets at amortised cost.
Trade and other payables
Trade and other payables are classi ed as nancial liabilities at
amortised cost.
Interest bearing borrowings
Borrowings are recognised initially at fair value, net of
transaction costs incurred. Borrowings are subsequently carried at
amortised cost; any difference between the proceeds (net of
transaction costs) and the redemption value is recognised in the
income statement over the period of the borrowings using the
effective interest method.
Fees paid on the establishment of loan facilities are recognised
as transaction costs of the loan to the extent that it is probable
that some or all of the facility will be drawn down. In this case,
the fee is deferred until the draw down occurs. To the extent there
is no evidence that it is probable that some or all of the facility
will be drawn down, the fee is capitalised as a pre-payment for
liquidity services and amortised over the period of the facility to
which it relates.
Modification of debt instruments
When the contractual terms of a financial liability are
substantially modified, it is accounted for as an extinguishment of
the original debt instrument and the recognition of a new financial
liability. The new debt instrument is recorded at fair value and
any difference from the carrying amount of the extinguished
liability, including any non-cash consideration transferred, is
recorded in profit or loss. Any costs or fees incurred are
generally included in profit or loss, too.
If a modification to the terms of a financial liability is not
substantial, then the amortised cost of the liability is
recalculated as the present value of the estimated future
contractual cash flows, discounted at the original effective
interest rate. The resulting gains or losses are recognised in
profit or loss. Any costs or fees incurred adjust the carrying
amount of the modified financial liability and are amortised over
its term. The periodic re-estimation of cash flows to reflect
movements in market rates of interest will change the effective
interest rate of a floating-rate financial liability.
To determine whether a modification of terms is substantial, the
Company performs a quantitative assessment. If the difference in
the present values of the cash flows is less than 10 percent, then
the Company performs a qualitative assessment to identify
substantial differences in terms that by their nature are not
captured by the quantitative assessment. Performing a qualitative
assessment may require a high degree of judgement based on the
facts and circumstances.
(h) Taxation
Current tax assets and liabilities
Current tax for current and prior periods is, to the extent
unpaid, recognised as a liability. If the amount already paid in
respect of current and prior periods exceeds the amount due for
those periods, the excess is recognised as an asset.
Deferred tax assets and liabilities
Deferred tax is provided using the liability method on temporary
differences between the tax bases of assets and liabilities and
their carrying amounts for nancial reporting purposes at the
reporting date.
A deferred tax liability is recognised for all taxable temporary
differences, except to the extent that the deferred tax liability
arises from the initial recognition of an asset or liability in a
transaction which at the time of the transaction, affects neither
accounting pro t nor taxable pro t and differences relating to
investments in subsidiaries to the extent they are controlled and
probably will not reverse in the foreseeable future.
A deferred tax asset is recognised for all deductible temporary
differences to the extent that it is probable that taxable pro t
will be available against which the deductible temporary difference
can be utilised. A deferred tax asset is not recognised when it
arises from the initial recognition of an asset or liability in a
transaction at the time of the transaction, affects neither
accounting pro t nor taxable pro t.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply to the period when the asset is
realised or the liability is settled, based on tax rates (and tax
laws) that have been enacted or substantively enacted by the end of
the reporting period.
Deferred tax assets and deferred tax liabilities are offset if a
legally enforceable right exists to set off current tax assets
against current income tax liabilities and the deferred taxes
relate to the same taxable entity and the same taxation
authority.
Tax expense
Tax expense is recognised in the same component of total
comprehensive income (i.e. continuing operations, discontinued
operations, or other comprehensive income) or equity as the
transaction or other event that resulted in the tax expense.
(i) Impairment of non-financial assets
The Group assesses at each reporting date whether there is any
indication that an asset may be impaired. If any such indication
exists, the Group estimates the recoverable amount of the
asset.
If there is any indication that an asset may be impaired, the
recoverable amount is estimated for the individual asset. If it is
not possible to estimate the recoverable amount of the individual
asset, the recoverable amount of the cash-generating unit to which
the asset belongs is determined.
The recoverable amount of an asset or a cash-generating unit is
the higher of its fair value less costs to sell and its value in
use.
If the recoverable amount of an asset is less than its carrying
amount, the carrying amount of the asset is reduced to its
recoverable amount. That reduction is an impairment loss.
An impairment loss, of assets carried at cost less any
accumulated depreciation or amortisation, is recognised immediately
in pro t or loss.
The increased carrying amount of an asset other than goodwill
attributable to a reversal of an impairment loss does not exceed
the carrying amount that would have been determined had no
impairment loss been recognised for the asset in prior periods.
A reversal of an impairment loss of assets carried at cost less
accumulated depreciation or amortisation other than goodwill is
recognised immediately in pro t or loss. Any reversal of an
impairment loss of a revalued asset is treated as a revaluation
increase.
(j) Inventories
Inventories are measured at the lower of cost and net realisable
value.
Plant spares and consumables stores are capitalised to the
balance sheet and expensed to the income statement as they are
utilised.
Spares and consumables are valued at the lower of cost and net
realisable value. Cost is determined using the weighted average
method.
Obsolete, redundant and slow-moving items of spares and
consumables are identi ed on a regular basis and written down to
their net realisable value.
Inventories are included in current assets, unless the inventory
will not be used within 12 months after the end of the reporting
period.
(k) Provisions and contingencies
Environmental rehabilitation
The provision for environmental rehabilitation is recognised as
and when an obligation to incur rehabilitation and mine closure
costs arises from environmental disturbance caused by the
development or ongoing production of a mining property. Estimated
long-term environmental rehabilitation provisions are measured
based on the Group's environmental policy taking into account
current technological, environmental and regulatory requirements.
Any subsequent changes to the carrying amount of the provision
resulting from changes to the assumptions as to the timing of the
rehabilitation applied in estimating the obligation are recognised
in property, plant and equipment.
The provisions are based on the net present value of the
estimated cost of restoring the environmental disturbance that has
occurred up to the reporting date, using the risk-free rate and the
risk adjusted cash ows that re ect current market assessments and
the risks speci c to the provisions. Increases due to the
additional environmental disturbances are capitalised and amortised
over the remaining life of the mine.
Decommissioning provision
The estimated present value of costs relating to the future
decommissioning of plant or other site preparation work, taking
into account current environmental and regulatory requirements, is
capitalised as part of property, plant and equipment, to the extent
that it relates to the construction of an asset, and the related
provisions are raised in the statement of nancial position, as soon
as the obligation to incur such costs arises.
These estimates are reviewed at least annually and changes in
the measurement of the provision that result from the subsequent
changes in the timing of costs and the risk-free rate, are added
to, or deducted from, the cost of the related asset in the current
period. Other changes are charged to profit or loss. If a decrease
in the liability exceeds the carrying amount of the asset, the
excess is recognised immediately in the income statement. If the
asset value is increased and there is an indication that the
revised carrying value is not recoverable, an impairment test is
performed in accordance with the accounting policy on impairment of
non- nancial assets above.
(l) Share capital and equity
Ordinary shares are classi ed as equity and are recorded at the
proceeds received net of issue costs.
(m) Convertible debt
The proceeds received on issue of the Group's convertible debt
which fail the fixed-for-fixed criterion under IFRS are allocated
into their liability and derivative liability components. The
derivative liability is measured at fair value with subsequent
changes recognised in profit or loss The debt component is
accounted for as a financial liability measured at amortised cost
until extinguished on conversion or maturity of the debt.
(n) Borrowing costs
Interest on borrowings directly related to the nancing of
qualifying capital projects under development is added to the
capitalised cost of those projects during the development phase,
until such time as the assets are substantially ready for their
intended use or sale which, in the case of mining properties, is
when they are capable of commercial production. Where funds have
been borrowed speci cally to nance the project, the amount
capitalised represents the actual borrowing costs incurred. Where
the funds used to nance a project forming part of general
borrowings, the amount capitalised is calculated using a weighted
average of rates applicable to relevant general borrowings of the
Group during the period.
Qualifying assets are assets that necessarily take a substantial
period of time (more than 12 months) to get ready for their
intended use or sale. Borrowing costs are added to the cost of
these assets, until the assets are substantially ready for their
intended use or sale.
Capitalisation is suspended during extended periods in which
active development is interrupted.
Capitalisation ceases when substantially all the activities
necessary to prepare the qualifying asset for its intended use or
sale are complete.
All other borrowing costs are recognised in the income statement
in the period in which they are incurred.
(o) Employee benefits
The cost of short-term employee bene ts, such as leave pay and
sick leave, bonuses, and non-monetary bene ts such as medical care,
are recognised in the period in which the service is rendered and
are not discounted.
(p) Intangible assets
All intangible assets are stated at cost less accumulated
amortisation and any accumulated impairment losses.
(q) Finance income
Interest income is recognised as other income on an accruals
basis based on the effective yield on the investment.
(r) Share-based payment arrangements
Equity-settled share-based payments to employees are measured at
the fair value of the equity instruments at the grant date.
Equity-settled share based payments to non-employees are measured
at the fair value of services received, or if this cannot be
measured, at the fair value of the equity instruments granted at
the date that the Group obtains the goods or counterparty renders
the service.
The fair value determined at the grant date of the
equity-settled share-based payments is expensed on a straight-line
basis over the vesting period, based on the Group's estimate of
equity instruments that will eventually vest, with a corresponding
increase in equity.
Where there are no vesting conditions, the expense and equity
reserve arising from share-based payment transactions is recognised
in full immediately on grant.
At the end of each reporting period, the Group revises its
estimate of the number of equity instruments expected to vest. The
impact of the revision of the original estimates, if any, is
recognised in profit or loss such that the cumulative expense
reflects the revised estimate, with a corresponding adjustment to
other reserves.
Details regarding the determination of the fair value of
equity-settled share-based transactions are set out in the
Directors' Report and Note 13 to the Consolidated Financial
Statements.
(s) Critical accounting estimates and judgements
The preparation of nancial statements in conformity with IFRS
requires management, from time to time, to make judgements,
estimates and assumptions that affect the application of policies
and reported amounts of assets, liabilities, income and expenses.
These estimates and associated assumptions are based on experience
and various other factors that are believed to be reasonable under
the circumstances. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the
period in which the estimates are revised and in any future periods
affected.
The critical judgements made by management in applying
accounting policies, apart from those involving estimations, that
have the most signi cant effect on the amounts recognised in the
nancial statements, are outlined as follows:
(i) Control over the activities of First Gear
The acquisition of First Gear by the Company was accounted for
on the basis of the Company having control with effect from
acquisition and holding 50% plus one share. Management considered
that it controlled First Gear as this holding gave the Company
control over its strategic, operational and financing
decisions.
(ii) Exploration and evaluation assets (Note 5)
The application of the Group's accounting policy for exploration
and evaluation assets requires judgement in determining whether it
is likely that costs incurred will be recovered through successful
development or sale of the asset under review when assessing
impairment. Estimates and assumptions made may change if new
information becomes available. If, after expenditures are
capitalised, information becomes available suggesting that the
recovery of expenditures is unlikely, the amount capitalised is
written off in the net profit or loss in the period when the new
information becomes available. In situations where indicators of
impairment are present for the Group's exploration and evaluation,
estimates of recoverable amount must be determined as the higher of
the estimated value in use or the estimated fair value less costs
to sell.
(iii) Functional currency
The Group transacts in multiple currencies. The assessment of
the functional currency of each entity within the consolidated
Group involves the use of judgement in determining the primary
economic environment each entity operates in. The Group first
considers the currency that mainly influences sales prices for
goods and services, and the currency that mainly influences labour,
material and other costs of providing goods or services. In
determining functional currency, the Group also considers the
currency from which funds from financing activities are generated,
and the currency in which receipts from operating activities are
usually retained. See Note 32 for sensitivity analysis of foreign
exchange risk.
(iv) Decommissioning and rehabilitation provisions (Note 18)
Quantifying the future costs of these obligations is complex and
requires various estimates and judgements to be made, as well as
interpretations of and decisions regarding regulatory requirements,
particularly with respect to the degree of rehabilitation required,
with reference to the sensitivity of the environmental area
surrounding the sites. Consequently, the guidelines issued for
quantifying the future rehabilitation cost of a site, as issued by
the Department of Mineral Resources, have been used to estimate
future rehabilitation costs.
(v) Other financial assets
The Group has given guarantees to a number of third parties as
described in Note 7 and lodged funds as security.
The amounts are recoverable subject to satisfactory performance
of certain conditions which requires judgement as to the likelihood
of the return of such guarantees. At the balance sheet date the
Directors make judgements on the amounts expected to be returned
and consider that all amounts are recoverable.
(vi) Taxation
Judgement is required in determining the provision for income
taxes due to the complexity of legislation. There are many
transactions and calculations for which the ultimate tax
determination is uncertain during the ordinary course of
business.
The Group recognises the net future tax bene t related to
deferred income tax assets to the extent that it is probable that
the deductible temporary differences will reverse in the
foreseeable future. Assessing the recoverability of deferred income
tax assets requires the Group to make signi cant estimates related
to expectations of future taxable income. Estimates of future
taxable income are based on forecast cash ows from operations and
the application of existing tax laws in each jurisdiction. To the
extent that future cash ows and taxable income differ signi cantly
from estimates, the ability of the Group to realise the net
deferred tax assets recorded at the end of the reporting period
could be impacted.
Management's judgement is that due to the mine not being at
steady state production it is premature to recognise a deferred tax
asset for the accumulated tax losses.
(vii) Fair value of financial instruments
The judgements and estimates made by the Group in determining
the fair values of the financial instruments are described in Note
10, 15 and 31 to the Consolidated Financial Statements.
Impairment indicator assessment
The Group reviews and tests the carrying value of assets when
events or changes in circumstances ("impairment indicators")
suggest that the carrying amount may not be recoverable. At 31
December 2021 an impairment indicator assessment was performed and
no impairment indicators were considered to exist. As part of the
impairment indicator assessment, management evaluate the life of
mine plan discounted cash flow model. These calculations require
the use of estimates and assumptions. The key estimates made
include discount rates, being the Group's weighted average cost of
capital, future prices of phosphate rock, mine production levels
and foreign currency exchange rates.
(t) Key sources of estimation uncertainty
Property, plant and equipment
The depreciable amount of property, plant and equipment is
allocated on a systematic basis over its useful life. In
determining the depreciable amount management makes certain
assumptions with regard to the residual value of assets based on
the expected estimated amount that the Group would currently obtain
from disposal of the asset, after deducting the estimated cost of
disposal, if the asset were already of the age and in the condition
expected at the end of its useful life. If an asset is expected to
be abandoned the residual value is estimated at zero.
In determining the useful lives of property, plant and equipment
that is depreciated, management considers the expected usage of
assets, expected physical wear and tear, legal or similar limits of
assets such as mineral rights as well as obsolescence.
This estimate is further impacted by management's best
estimation of proved and probable phosphate ore reserves and the
expected future life of each of the mines within the Group. The
forecast production could be different from the actual phosphate
mined. This would generally result from signi cant changes in the
factors or assumptions used in estimating phosphate reserves. These
factors include:
-- changes in proved and probable ore reserves;
-- differences between achieved ore prices and assumptions;
-- adverse movements in foreign exchange;
-- unforeseen operational issues at mine sites; and
-- changes in capital, operating, mining, processing,
reclamation and logistics costs, discount rates and foreign
exchange rates.
Any change in management's estimate of the useful lives and
residual values of assets would impact the depreciation charge. Any
change in management's estimate of the total expected future life
of each of the mines would impact the depreciation charge as well
as the estimated rehabilitation and decommissioning provisions.
Life of mine
Life of mine is de ned as the remaining years of production,
based on proposed production rates and ore reserves and will be
assessed as soon as additional exploration drilling has been
performed and further reserves proven based on additional test
results.
Fair value of derivative instruments
Information about the specific techniques, assumptions and
inputs is disclosed in Note 10, 15 and 31 to the Consolidated
Financial Statements. The key estimates associated with the fair
value of the derivative liability include volatility and the
assumptions regarding conversion timing.
Subsidiaries of the Group
The subsidiaries of the Group, all of which are private
companies limited by shares, as at 31 December 2021, are as
follows:
Company Country Registered Office Principal Percentage
of Registration Activity of ordinary
or Incorporation shares held
by Company
Unit 213, The
Hills
Buchanan Square
160 Sir Lowry
Road
Woodstock
Kropz SA (Pty) Cape Town 8001 Intermediate
Limited South Africa South Africa holding company 100%
Elandsfontein South Africa Property 70% *
Land Holdings owner
(Pty) Ltd
Kropz Elandsfontein South Africa Phosphate 74% **
(Pty) Ltd exploration
and mining
West Coast
Fertilisers Phosphoric
(Pty) Ltd South Africa acid production 70%
Xsando (Pty)
Ltd South Africa Sand sales 70%
Woodbourne Hall,
PO Box 3162,
Road Town,
Cominco Resources Tortola, British Intermediate
Limited BVI Virgin Islands holding company 100%
Cominco S.A. RoC Development 100% ***
Cominco Resources England and Service company
(UK) Ltd Wales 100% ***
* 46.67% held indirectly
** 38.18% held indirectly
*** held indirectly
The accounting reference date of each of the subsidiaries is
coterminous with that of the Company.
(4) Tangible assets - Property, plant, equipment and mine development
31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec
2021 2021 2021 2020 2020 2020
Accumulated Carrying Accumulated Carrying
Cost Depreciation value Cost Depreciation value
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Buildings and
infrastructure
Land 1,515 - 1,515 2,067 - 2,067
Buildings 10,514 (56) 10,458 11,003 (12) 10,991
Capitalised road
costs 8,121 (2,978) 5,143 8,824 (2,647) 6,177
Capitalised electrical
sub-station costs 3,523 (1,213) 2,310 3,828 (1,063) 2,765
Machinery, plant
and equipment
Critical spare
parts 1,713 - 1,713 1,285 - 1,285
Plant and machinery 86,243 (63) 86,180 66,683 (74) 66,609
Water treatment
plant 2,435 - 2,435 1,129 - 1,129
Furniture and fittings 49 (40) 9 44 (41) 3
Geological equipment 65 (45) 20 47 (47) -
Office equipment 32 (21) 11 35 (17) 18
Other fixed assets 1 (1) - 1 (1) -
Motor vehicles 100 (100) - 128 (128) -
Computer equipment 65 (41) 24 47 (42) 5
Mine development 18,938 - 18,938 20,046 - 20,046
Stripping activity
costs 6,126 - 6,126 3,193 - 3,193
Game animals 217 - 217 185 - 185
Total 139,657 (4,558) 135,099 118,545 (4,072) 114,473
-------- -------------- --------- -------- -------------- ---------
Reconciliation of property, plant, equipment and mine
development - Year ended 31 December 2021
Foreign
Opening Fair value Depreciation exchange Closing
Balance Additions gain charge gain/loss balance
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Buildings and
infrastructure
Land 2,067 - - - (552) 1,515
Buildings 10,991 - - (49) (484) 10,458
Capitalised
road costs 6,177 - - (583) (451) 5,143
Capitalised
electrical sub-station
costs 2,765 - - (253) (202) 2,310
Machinery,
plant and equipment
Critical spare
parts 1,285 571 - - (143) 1,713
Plant and machinery 66,609 29,578 - (4) (10,003) 86,180
Water treatment
plant 1,129 1,503 - - (197) 2,435
Furniture and
fittings 3 10 - (2) (2) 9
Geological equipment - 24 - (2) (2) 20
Office equipment 18 - - (6) (1) 11
Other fixed
assets - - - - - -
Motor vehicles - - - - - -
Computer equipment 5 24 - (5) - 24
Mine development 20,046 528 - - (1,636) 18,938
Stripping activity
costs 3,193 3,433 - - (500) 6,126
Game animals 185 - 51 - (19) 217
Total 114,473 35,671 51 (904) (14,192) 135,099
--------- ---------- ----------- ------------- ----------- ---------
Reconciliation of property, plant, equipment and mine
development - Year ended 31 December 2020
Foreign
Opening Fair value Depreciation exchange Closing
Balance Additions loss charge gain/loss balance
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Buildings and
infrastructure
Land 2,159 - - - (92) 2,067
Buildings 11,480 - - (2) (487) 10,991
Capitalised
road costs 7,064 - - (529) (358) 6,177
Capitalised
electrical sub-station
costs 3,154 - - (230) (159) 2,765
Machinery,
plant and equipment
Critical spare
parts 1,213 123 - - (51) 1,285
Plant and machinery 56,284 12,712 - (5) (2,382) 66,609
Water treatment
plant - 1,129 - - - 1,129
Furniture and
fittings 3 1 - (1) - 3
Geological equipment - - - - - -
Office equipment 24 1 - (5) (2) 18
Other fixed
assets - - - - - -
Motor vehicles 6 - - (5) (1) -
Computer equipment 5 4 - (3) (1) 5
Mine development 20,354 553 - - (861) 20,046
Stripping activity
costs 3,265 66 - - (138) 3,193
Game animals 213 - (18) - (10) 185
Total 105,224 14,589 (18) (780) (4,542) 114,473
--------- ---------- ------------- ------------- ----------- ---------
Game animals
Game animal assets are carried at fair value. The different
levels are de ned as follows:
-- Level 1: Quoted unadjusted prices in active markets for
identical assets or liabilities that the Group can access as
measurement date.
-- Level 2: Inputs other than quoted prices included in level 1
that are observable for the asset or liability either directly or
indirectly.
-- Level 3: Unobservable inputs for the asset or liability.
Levels of fair value measurements - Level 3.
Impairment
The Elandsfontein mine is currently under development. The
Directors have therefore carried out a review of impairment
indicators. As part of the impairment indicator assessment, the net
present value of the life of mine plan is considered. The life of
the mine is most sensitive to the following key estimates and
assumptions:
-- Discount rate;
-- Phosphate rock prices;
-- Phosphate recoveries;
-- Foreign exchange rates; and
-- Operating costs.
Economical recoverable resources represent management's
expectations at the time of completing the assessment of the
carrying value of property, plant, equipment and mine development
and are based on the resource statements and exploration and
evaluation work undertaken by appropriately qualified persons,
forecast phosphate prices which are obtained from independent
external commissioned experts and a forecast South African rand
exchange rate with is aligned with forward market rates. Based on
the assumptions the recoverable amount of assets significantly
exceeds its carrying amount and no impairment indicators were
identified.
Sensitivity Analysis
The following table summarises the potential impact of changes
in the key estimates and assumptions (assessed independently of
each other):
Headroom (%)
Breakeven point
Impact if discount rate at 19% 0
Increased by
4% 59.1
increased by
Impact if selling prices 10% 167.9
reduced by 10% 57.9
increased by
Impact if production tonnes 10% 164.1
reduced by 10% 56.1
increased by
Impact if foreign exchange rates 10% 143.6
reduced by 10% 75.4
increased by
Impact if operating costs: 10% 81.0
reduced by 10% 144.8
(5) Intangible assets - Exploration and evaluation costs
31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec
2021 2021 2021 2020 2020 2020
Amort- Carrying Amort- Carrying
Cost isation value Cost isation value
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Capitalised
costs 44,631 - 44,631 44,348 - 44,348
-------- --------- --------- --------- --------- ---------
The costs of mineral resources acquired and associated
exploration and evaluation costs are not subject to amortisation
until they are included in the life-of-the-mine plan and production
has commenced.
Where assets are dedicated to a mine, the useful lives are
subject to the lesser of the asset category's useful life and the
life of the mine, unless those assets are readily transferable to
another productive mine. In accordance with the requirements of
IFRS 6, the Directors assessed whether there were any indicators of
impairment. No indicators were identified.
Reconciliation of exploration assets
Foreign
Opening exchange Closing
Balance Additions Disposals gain/(loss) balance
US$'000 US$'000 US$'000 US$'000 US$'000
Year ended 31 December
2021
Capitalised exploration
costs 44,348 3,931 (62) (3,586) 44,631
------------- ---------- ---------- ------------- ---------
Foreign
Opening exchange Closing
Balance Additions Disposals gain/(loss) balance
US$'000 US$'000 US$'000 US$'000 US$'000
Year ended 31 December
2020
Capitalised exploration
costs 40,192 257 - 3,899 44,348
------------- ---------- ---------- ------------- ---------
(6) Right-of-use assets
Year ended Year ended
31 December 31 December
2021 2020
US$'000 US$'000
Cost
Brought forward 117 55
Additions - 61
Foreign exchange differences (7) 1
------------ ------------
As at 31 December 110 117
------------ ------------
Amortisation
Brought forward 72 18
Charge for the year 39 51
Foreign exchange differences (8) 3
------------ ------------
As at 31 December 103 72
------------ ------------
Net book value 7 45
------------ ------------
(7) Other financial assets
31 December 31 December
2021 2020
US$'000 US$'000
DMR guarantee (1) 630 687
Eskom guarantee (2) 330 359
Eskom guarantee (3) 334 363
Heritage Western Cape Trust (4) 63 68
------------ ------------
Total 1,357 1,477
------------ ------------
(1) DMR guarantee
Guarantee in favour of the Department of Mineral Resources for
ZAR 10,000,000 in respect of a " nancial guarantee for the
rehabilitation of land disturbed by prospecting/mining".
(2) Eskom guarantee
Guarantee issued to Eskom Holdings SOC Limited in the amount of
ZAR 5,235,712 in respect of "supply agreement (early termination)
guarantee".
(3) Eskom guarantee
Guarantee issued to Eskom Holdings SOC Limited in the amount of
ZAR 5,305,333 in respect of an "electricity accounts
guarantee".
(4) Heritage Western Cape Trust
ZAR 1,000,000 settlement agreement trust fund held in trust by
attorneys on behalf of the Heritage Western Cape Trust until Kropz
Elandsfontein lodged a heritage impact assessment. The heritage
impact assessment was lodged in 2018 and the Group is waiting for
the release and return of the guarantee.
Fair value of other nancial assets
The carrying value of other nancial assets approximate their
fair value.
(8) Inventories
31 December 31 December
2021 2020
US$'000 US$'000
Consumables 600 798
Spare parts 425 23
------------ ------------
Total 1,025 821
------------ ------------
(9) Trade and other receivables
31 December 31 December
2021 2020
US$'000 US$'000
Prepayments and accrued income 238 124
Deposits 46 47
VAT 1,112 1,326
Other receivables 115 114
------------ ------------
Total 1,511 1,611
------------ ------------
Credit quality of trade and other receivables
The credit quality of trade and other receivables are considered
recoverable due to management's assessment of debtors' ability to
repay the outstanding amount.
Credit risk
The maximum exposure to credit risk at the reporting date is the
fair value of each class of receivable mentioned above.
Trade and other receivables past due but not impaired
None of the trade and other receivables were past due at the end
of the reporting dates.
Trade and other receivables impaired
None of the trade and other receivables were considered
impaired. Trade and other receivables have not been discounted as
the impact of discounting is considered to be insigni cant.
Fair value of trade and other receivables
The carrying value of trade and other receivables approximate
their fair value.
Expected credit losses
There are no current receivable balances lifetime expected
credit losses in the current year.
(10) Derivative asset
31 December 31 December
2021 2020
US$'000 US$'000
Convertible loan facility - 8,586
------------- ------------
The Group secured a convertible loan facility from ARC, Kropz's
major shareholder, in June 2020 ("Original Equity Facility") for
the development of Elandsfontein. Under the terms of the
convertible equity facility, ARC committed to provide up to a ZAR
equivalent of US$ 40 million (up to a maximum of ZAR 680 million)
to the Company which will be converted into new ordinary shares.
The cap of ZAR 680 million was put in place as ARC secured this
facility from Rand Merchant Bank in South Africa in order to fulfil
its commitments to the Company. The Company, via Kropz
Elandsfontein, receives the ZAR equivalent of the draw down based
on the actual exchange rate prevailing at the time of the drawdown,
subject to a maximum exchange rate of ZAR 17 to the US$.
The convertible loan facility was used exclusively for Kropz
Elandsfontein's purposes. Immediately upon draw down, new ordinary
shares in the Company are issued to ARC at a fixed share price
(6.75 pence per share) and fixed GBP / US$ exchange rate (0.86).
Drawdowns are at the sole discretion of the Company and no interest
is payable on the drawdown unless equity shares are not issued to
ARC in terms of a drawdown. At 31 December 2020, US$ 21 million of
the facility remained undrawn which equated to 267,555,556 new
ordinary shares to be issued in the Company pursuant to the terms
of the agreement. A Monte-Carlo simulation was applied to simulate
the expected share price at a 60% volatility and the expected share
price was deemed to be 4.37 pence per share. As at 31 December
2021, the Original Equity Facility was fully drawn.
(11) Restricted cash
31 December 31 December
2021 2020
US$'000 US$'000
Short-term deposits 4,858 7,355
------------ ------------
In May 2020, Kropz Elandsfontein and BNP agreed to amend and
restate the term loan facility agreement entered into on or about
13 September 2016 (as amended from time to time). The BNP facility
amendment agreement extends inter alia the final capital repayment
date to Q3 2024, with eight equal capital repayments to commence in
Q4 2022 and an interest rate of 6.5% plus US LIBOR, up to project
completion and 4.5% plus US LIBOR thereafter. In addition, the
amended BNP facility agreement locked up ZAR 200 million of cash
held in the bank account of Kropz Elandsfontein at that time, to be
released by BNP to Kropz Elandsfontein pro rata drawdowns from ARC
in terms of the Original Equity Facility. The locked up funds would
be released by BNP in the ratio of 1:3, representing a drawdown of
ZAR1 for every ZAR3 drawn down from ARC in terms of the Original
Equity Facility. At 31 December 2021, ZAR 77 million remained
locked up and invested with BNP as short-term deposits. BNP
released the remaining ZAR 77 million restricted cash in the bank
account of Kropz Elandsfontein on 10 January 2022.
Fair value of short-term deposits
Due to the short-term nature of restricted cash the carrying
amount is deemed to approximate the fair value.
(12) Cash and cash equivalents
31 December 31 December
2021 2020
US$'000 US$'000
Bank balances 2,460 11,571
Cash on hand 1 1
------------ ------------
Total 2,461 11,572
------------ ------------
Credit quality of cash at bank and short-term deposits,
excluding cash on hand
The Group only deposits cash and cash equivalents with reputable
banks with good credit ratings.
Fair value of cash at bank
Due to the short-term nature of cash and cash equivalents the
carrying amount is deemed to approximate the fair value.
(13) Share capital
Each shareholder has the right to one vote per ordinary share in
general meeting. Any distributable profit remaining after payment
of distributions is available for distribution to the shareholders
of the Company in equal amounts per share. Shares were issued as
set out below:
Share Share Merger
Number of capital premium reserve Total
shares US$'000 US$'000 US$'000 US$'000
At 1 January 2020 283,406,307 363 147,339 (20,523) 127,179
Placing of shares 4,505,060 5 349 - 354
Convertible loan -
issue of shares 244,866,271 306 18,694 - 19,000
Open offer - issue
of shares 25,849,920 32 2,130 - 2,162
Cost of issuing shares - - (320) - (320)
Lapsed warrants - - 30 - 30
Issue of warrants - - (10) - (10)
------------ --------- --------- --------- --------
As at 31 December
2020 558,627,558 706 168,212 (20,523) 148,395
------------ --------- --------- --------- --------
Convertible loan -
issue of shares 350,944,417 488 25,312 - 25,800
------------ --------- --------- --------- --------
At 31 December 2021 909,571,975 1,194 193,524 (20,523) 174,195
------------ --------- --------- --------- --------
Issue of shares in the year ended 31 December 2021:
The changes to the issued share capital of the Company which
occurred between 1 January 2021 and 31 December 2021 were as
follows:
Convertible loan facility
Kropz secured a convertible loan facility from ARC, Kropz's
major shareholder, in June 2020 for the development of
Elandsfontein. Under the terms of the convertible equity facility,
ARC committed to provide up to a ZAR equivalent of US$ 40 million
(ZAR 680 million) to the Company which will be converted into new
ordinary shares ("Original Equity Facility"). The cap of ZAR 680
million was put in place as ARC secured this facility from Rand
Merchant Bank in South Africa in order to fulfil its commitments to
the Company. The Company, via Kropz Elandsfontein, receives the ZAR
equivalent of the draw down based on the actual exchange rate
prevailing at the time of the draw down, subject to a maximum
exchange rate of ZAR 17 to the US$. The convertible loan facility
will be used exclusively for Kropz Elandsfontein's purposes.
Immediately upon draw down, new ordinary shares in the Company are
issued to ARC at a fixed share price (6.75 pence per share) and
fixed GBP / US$ exchange rate (0.86) and pursuant to the amended
preference share subscription agreement ("PSSA"), Kropz plc shall
subscribe for further non-redeemable preference shares in Kropz
Elandsfontein. Drawdowns are at the sole discretion of the Company
and no interest is payable on the drawdown unless equity shares are
not issued to ARC in terms of a draw down. The Original Equity
Facility was fully drawn during 2021.
Kropz secured a further convertible loan facility of up to US$ 5
million (not exceeding a maximum of ZAR 85 million) from ARC
("Further Equity Facility") in February 2021, to be used
exclusively for the Hinda Updated FS and general corporate purposes
for Kropz. Quarterly drawdowns under the Further Equity Facility
are at the sole discretion of Kropz. Immediately upon draw down,
new ordinary shares in the Company are issued to ARC at a fixed
share price (4.202 pence per share) and fixed GBP / US$ exchange
rate (0.73).
The first drawdown on the Further Equity Facility was for US$ 2
million which was paid by way of issue of 34,745,359 new ordinary
shares at the issue price of 4.202 pence per ordinary share to the
ARC Fund on 10 March 2021.
The fourth drawdown on the Original Equity Facility was for US$
7 million which was paid by way of issue of 89,185,185 new ordinary
shares at the issue price of 6.75 pence per ordinary share to the
ARC Fund on 10 March 2021.
The fifth drawdown on the Original Equity Facility was for US$
11 million which was paid by way of issue of 140,148,148 new
ordinary shares at the issue price of 6.75 pence per ordinary share
to the ARC Fund on 23 June 2021.
The second drawdown on the Further Equity Facility was for US$ 2
million which was paid by way of issue of 34,745,359 new ordinary
shares at the issue price of 4.202 pence per ordinary share to the
ARC Fund on 23 June 2021.
The sixth and final drawdown on the Original Equity Facility was
for US$ 3 million which was paid by way of issue of 38,222,222 new
ordinary shares at the issue price of 6.75 pence per ordinary share
to the ARC Fund on 10 September 2021.
The third drawdown on the Further Equity Facility was for US$
400,000 which was paid by way of issue of 6,949,072 new ordinary
shares at the issue price of 4.202 pence per ordinary share to the
ARC Fund on 10 September 2021.
The fourth drawdown on the Further Equity Facility was for US$
400,000 which was paid by way of issue of 6,949,072 new ordinary
shares at the issue price of 4.202 pence per ordinary share to the
ARC Fund on 10 December 2021. At year end, US$ 200,000 of the
Further Equity Facility remained undrawn.
Share based payment arrangements
Employee Share Option Plan and Long-Term Incentive Plan
As more fully described in the Directors' Report, the Company
operates an ownership-based scheme for executives and senior
employees of the Group. In accordance with the provisions of the
plans, executives and senior employees may be granted options to
purchase parcels of ordinary shares at an exercise price determined
by the Board based on a recommendation by the Remuneration
Committee.
The following plans have been adopted by the Company:
-- an executive share option plan used to grant awards on
Admission of the Company to AIM and following Admission (the "ESOP
Awards") - a performance and service-related plan pursuant to which
nominal-cost options can be granted; and
-- an executive long-term incentive plan (the "LTIP Awards") - a
performance and service-related plan pursuant to which conditional
share awards, nominal-cost options and market value options can be
granted, (together, the "Incentive Plans").
An option-holder has no voting or dividend rights in the Company
before the exercise of a share option.
ESOP Awards
ESOP Awards were issued at the time of the Admission of the
Company's shares to the AIM market of the London Stock Exchange in
November 2018.
The ESOP Awards will vest as to performance as follows:
-- 20% of the award shall vest for growth in share price of 100%
from the Admission placing price (40 pence);
-- a further 20% of the award shall vest for growth in share
price of 250% from the Admission placing price;
-- a further 30% of the award shall vest for growth in share
price of 350% from the Admission placing price; and
-- a further 30% of the award shall vest for growth in share
price of 500% from the Admission placing price.
The value of the options was calculated by way of a Monte Carlo
Simulation using the following assumptions.
ESOP Award assumptions at issue date
Share price GBP 0.40
Exercise price GBP 0.40
Expected volatility 40%
Expected dividends 0%
Risk-free interest rate 2.1%
Option life 10 years
The expected volatility is based on the historic volatility.
Options are stated in UK Pound Sterling as the Company is listed on
the AIM market of the London Stock Exchange.
Ian Harebottle resigned on 29 February 2020 and the 3,362,609
ESOP options awarded to him lapsed and expired on that date.
LTIP Awards
During 2020, the Company granted conditional share awards over
ordinary shares in the Company to key members of the executive
management team under its LTIP Awards plan. These LTIP Awards have
performance conditions aligned to the implementing the Company's
strategic plans, including appropriate weightings on the successful
commissioning of the Elandsfontein mine and completion of an
updated feasibility study on the Hinda project.
As announced on 4 August 2020, the Company granted LTIP Awards
to key members of the executive management team, including certain
Persons Discharging Managerial Responsibilities ("PDMRs"),
including Mark Summers and Chief Operating Officer ("COO") Michelle
Lawrence, under its LTIP Awards.
The LTIP Awards are nil priced options over a total of 6,700,000
ordinary shares. Of this total, 2,350,000 LTIP Awards were granted
to each of Mark Summers and Michelle Lawrence and 1,000,000 to
Patrick Stevenaert. The LTIP Awards vested on 31 December 2021 and
were exercised in January 2022, pursuant to the terms of the LTIP
Plan Rules (as set out in the Company's Admission Document),
including financial and non-financial performance conditions and,
in respect of Mark Summers and Michelle Lawrence, continued
employment by the Company.
The value of the options was calculated by using the
Black-Scholes model, using the following assumptions.
LTIP Award assumptions at issue date
Share price GBP 0.085
Exercise price GBP 0.001
Expected volatility 26%
Expected dividends 0%
Risk-free interest rate 1.1%
Option life 3 years
As announced on 2 July 2021, the Company granted LTIP Awards to
key members of the executive management team, including certain
Persons Discharging Managerial Responsibilities ("PDMRs"),
including Mark Summers and Chief Operating Officer ("COO") Michelle
Lawrence, under its LTIP Awards.
The LTIP Awards are nil priced options over a total of 7,800,000
ordinary shares. Of this total, 2,400,000 LTIP Awards were granted
to each of Mark Summers and Michelle Lawrence and 900,000 to
Patrick Stevenaert. The LTIP Awards will vest on various dates from
30 June 2022 to 31 December 2024, subject to the terms of the LTIP
Plan Rules (as set out in the Company's Admission Document),
including financial and non-financial performance conditions and,
in respect of Mark Summers and Michelle Lawrence, continued
employment by the Company.
The value of the options was calculated by using the
Black-Scholes model, using the following assumptions.
LTIP Award assumptions at issue date
Share price GBP 0.055
Exercise price GBP 0.001
Expected volatility 30%
Expected dividends 0%
Risk-free interest rate 1.3%
Option life 7 years
The charge to profit and loss for share options was US$ 812,000
(31 December 2020: US$ 238,000).
The LTIP Awards are nil priced options over a total of
14,500,000 ordinary shares representing 1.6% of the Company's
issued share capital at 31 December 2021. Following the grant of
the LTIP Awards, together with the existing 4,827,746 ESOP Awards,
the ESOP Awards and LTIP Awards represent 2.1% of the Company's
issued share capital at 31 December 2021.
Equity warrants
As part of the equity facility and fundraising, on 4 August 2020
the Company granted 121,837 warrants over the ordinary shares of
0.1 pence each in the Company, exercisable at 6.75 pence per
Ordinary Share for a period of two years from issue.
The warrants were issued to brokers in relation to their
involvement in issuance of equity instruments of the Company. The
services provided relate to share issuance and share issuance
expenses are included within equity. The warrants were valued at
the year end using a Black-Scholes valuation model. The charge to
share premium account in respect of warrants issued during the year
was US$ nil (2020: US$ 10,000).
121,837 equity warrants remained in place at 31 December 2021
(2020: 121,837 equity warrants).
(14) Reserves
Nature and purpose of reserves
Foreign exchange translation reserve
The foreign exchange translation reserve comprises all foreign
currency differences arising from the translation of the assets,
liabilities and equity of the entities included in these
consolidated nancial statements from their functional currencies to
the presentational currency. A decrease in the reserve of US$
10,141,000 (2020: addition US$ 2,281,000) was recorded due to
changes in the foreign currencies used to translate assets,
liabilities and equity at consolidation.
Share premium
The share premium account represents the amount received on the
issue of ordinary shares by the Company, other than those
recognised in the merger reserve described below, in excess of
their nominal value and is non-distributable.
Merger reserve
The merger reserve represents the amount received on the issue
of ordinary shares by the Company in excess of their nominal value
on acquisition of subsidiaries where merger relief under section
612 of the Companies Act 2006 applies. The merger reserve consists
of the merger relief on the issue of shares to acquire Kropz SA on
27 November 2018 and Cominco Resources on 30 November 2018. The
merger reserve also includes differences between the book value of
assets and liabilities acquired and the consideration for the
business acquired under common control.
Share-based payment reserve
The share-based payment reserve arises from the requirement to
value share options and warrants in existence at fair value (see
Note 13).
(15) Shareholder loans and derivative
31 December 31 December
2021 2020
US$'000 US$'000
ARC 16,196 15,703
Convertible debt - ARC 6,191 -
Derivative liability 2,656 -
------------ ------------
25,043 15,703
------------ ------------
ARC
The loans are: (i) US$ denominated, but any repayments will be
made in ZAR at the then prevailing ZAR/US$ exchange rate; (ii)
carry interest at monthly US LIBOR plus 3%; and (iii) are repayable
by no later than 1 January 2035 (or such earlier date as agreed
between the parties to the shareholder agreements).
Convertible debt - ARC
On 20 October 2021, the Company entered into a new convertible
equity facility of up to ZAR 200 million ("New ZAR Equity
Facility") with ARC, the Company's major shareholder. The Company
made a drawdown of ZAR 90 million of the New ZAR Equity Facility on
26 October 2021 and a further ZAR 37 million on 9 December 2021 and
ZAR 73 million remained undrawn at 31 December 2021 . Interest is
payable at 14% nominal, compounded monthly. At any time during the
term of the New ZAR Equity Facility, repayment of the New ZAR
Equity Facility capital amount will, at the election of ARC, either
be in the form of the conversion into ordinary shares of 0.1 pence
each ("Ordinary Shares") in the Company and issued to ARC, at a
conversion price of 4.5058 pence per Ordinary Share each,
representing the 30-day Volume Weighted Average Price ("VWAP") on
21 September 2021, and at fixed exchange rate of GBP 1 = ZAR 20.24
("Conversion"), or payable in cash by the Company at the end of the
term of the New ZAR Equity Facility which is 27 October 2026 . Two
further draw downs were made in 2022, one on 25 March 2022 for ZAR
40 million and ZAR 33 million on 26 April 2022. The New ZAR Equity
Facility is fully drawn at the date of this report.
Convertible liability
It was determined that the conversion option embedded in the
convertible debt equity facility be accounted for separately as a
derivative liability. Although the amount to be settled is fixed in
ZAR, when converted back to Kropz's functional currency, will
result in a variable amount of cash based on the exchange rate at
the date of conversion. The value of the liability component and
the derivative conversion component were determined at the date of
draw down using a Monte Carlo simulation. The debt host liability
was bifurcated based on the determined value of the option.
Subsequently, the embedded derivative liability is adjusted to
reflect fair value at each period end with changes in fair value
recorded in profit and loss (refer to Note 31).
Fair value of shareholder loans
The carrying value of the loans approximates their fair
value.
(16) Finance lease liabilities
Year ended Year ended
31 December 31 December
2021 2020
US$'000 US$'000
In respect of right-of-use assets
Balance brought forward 48 40
Additions during the year - 60
Repayments during the year (39) (53)
Foreign exchange differences (2) 1
------------- -------------
Lease liabilities at end of year 7 48
------------- -------------
Maturity
Current 7 42
Non-current - 6
------------- -------------
Total lease liabilities 7 48
------------- -------------
(17) Other financial liabilities
31 December 31 December
2021 2020
US$'000 US$'000
BNP 30,041 30,118
Greenheart Foundation 545 495
Total 30,586 30,613
------------ ------------
Maturity
Non-current 26,291 28,113
Current 4,295 2,500
------- -------
Total 30,586 30,613
------- -------
BNP
A US$ 30,000,000 facility was made available by BNP to Kropz
Elandsfontein in September 2016. Interest was charged at three
months US LIBOR plus 4.5% and was initially repayable quarterly
over 2 years. The rst capital repayment was due on 31 March
2018.
The Group was unable to fund the instalment payments on the loan
as they fell due in early 2018 and consequently, under the terms of
the facility agreement, was in default from 1 April 2018. On 20
September 2018 the Group and BNP conditionally agreed a waiver of
the breach and restructure of the facility under which the rst
capital repayment was deferred to 30 September 2020. In addition,
BNP provided the necessary consents required to facilitate all the
contemplated transactions leading up to the admission of Kropz plc
to AIM. The waiver and restructured facility were only contingent
on the admission of Kropz plc's shares to trading on AIM by 30
November 2018, which did occur on that date. The facility has been
fully drawn down.
During January 2020, given the delays in the recommissioning of
Elandsfontein, Kropz Elandsfontein was once again placed into
default by BNP. In May 2020, Kropz Elandsfontein and BNP agreed to
amend and restate the term loan facility agreement entered into on
or about 13 September 2016 (as amended from time to time). The BNP
facility amendment agreement extends inter alia the final capital
repayment date to Q3 2024, with eight equal capital repayments to
commence in Q4 2022 and an interest rate of 6.5% plus US LIBOR, up
to project completion and 4.5% plus US LIBOR thereafter. In
addition, the amended BNP facility agreement locked up ZAR 200
million of cash held in the bank account of Kropz Elandsfontein at
that time, to be released by BNP to Kropz Elandsfontein pro rata
drawdowns from ARC in terms of the Original Equity Facility. The
locked up funds would be released by BNP in the ratio of 1:3,
representing a drawdown of ZAR 1 for every ZAR 3 drawn down from
ARC in terms of the Original Equity Facility. Financial closure
occurred on 25 June 2020.
In accordance with IFRS 9, the Group recognised a loss in 2020
of US$ 1,109,000 in profit and loss arising from the modification
of the loan.
Greenheart Foundation
A loan has been made to the Group by Greenheart Foundation which
is interest-free and repayable on demand. Mark Summers, a Director
of the Kropz plc, is a Director of Greenheart Foundation.
Fair value of other nancial liabilities
The carrying value of the loans approximate their fair
value.
(18) Provisions
Reconciliation of provisions - Year ended 31 December 2021
Foreign
Opening Additions/ exchange Closing
Balance Adjustments gains balance
US$'000 US$'000 US$'000 US$'000
Provision for dismantling
costs 2,477 (42) (194) 2,241
Provisions for rehabilitation 1,834 112 (154) 1,792
--------- ------------- ---------- ---------
Total 4,311 70 (348) 4,033
--------- ------------- ---------- ---------
Reconciliation of provisions - Year ended 31 December 2020
Foreign
Opening Additions/ exchange Closing
Balance Adjustments gain balance
US$'000 US$'000 US$'000 US$'000
Provision for dismantling
costs 650 1,854 (27) 2,477
Provisions for rehabilitation 3,052 (1,089) (129) 1,834
--------- ------------- ---------- ---------
Total 3,702 765 (156) 4,311
--------- ------------- ---------- ---------
Dismantling and rehabilitation provisions
All environmental rehabilitation and dismantling provisions at
year-end have been reviewed by management and adjusted as
appropriate for changes in legislation, technological and other
circumstances. The expected timing of any out ows of these
provisions will be on the closure of the mine. Estimates are based
on costs that are reviewed regularly and adjusted as appropriate
for new circumstances. In determining the environmental
rehabilitation liability, an inflation rate of 4.5% (2020: 5%) was
assumed to increase the rehabilitation liability for the next 11
years (2020: 10 years), and a rate of 7.46% (2020: 7.71%) to
discount that amount to present value.
(19) Trade and other payables
31 December 31 December
2021 2020
US$'000 US$'000
Trade payables 2,527 4,471
Other payables - 17
Accruals 1,016 292
------------ ------------
Total 3,543 4,780
------------ ------------
Fair value of trade and other payables
Trade and other payables are carried at amortised cost, with
their carrying value approximating their fair value.
(20) Commitments
31 December 31 December
2021 2020
US$'000 US$'000
Authorised capital commitments 1,871 14,815
------------ ------------
The committed expenditure relates to plant construction.
(21) Directors' remuneration, interests and transactions
The Directors of the Company and the two executives of Kropz
Elandsfontein and Cominco Resources are considered to be the Key
Management Personnel of the Group. Details of the Directors'
remuneration, Key Management Personnel remuneration which totalled
US$ 1,942,127 (2020: US$ 1,413,184) (including notional option cost
and social security contributions) and Directors' interests in the
share capital of the Company are disclosed in the Directors'
Report. Amounts reflected relate to short-term employee benefits
and were converted to US$ at the 31 December 2021 GBP exchange rate
of 0.727 and ZAR exchange rate of ZAR 14.789.
The highest paid Director in the year received remuneration,
excluding notional gains on share options, of US$ 542,739 (2020:
US$ 295,516).
(22) Finance income
Year ended Year ended
31 December 31 December
2021 2020
US$'000 US$'000
Foreign currency gains - 109
Interest income received 480 1,135
------------- -------------
Total 480 1,244
------------- -------------
(23) Operating expenses
Year ended Year ended
31 December 31 December
2021 2020
US$'000 US$'000
Fair value (gain) / loss on game animals (51) 18
Amortisation of right of use asset 39 51
Depreciation of property, plant and machinery 904 780
Employee costs (excluding share option
cost) 1,392 933
Share option cost 812 238
Electricity and water - mine operations 1,067 807
Inventory expense 183 16
Mining costs 9 167
Plant operating costs and recoveries 217 833
Professional and other services 821 951
Auditor's remuneration in respect of audit
of the Group and parent 86 89
Auditor's remuneration in respect of audit
of the Cominco Group 42 32
Component auditor's remuneration in respect
of audit of South African controlled entities 68 56
Other expenses 914 941
------------- -------------
Total 6,503 5,912
------------- -------------
(24) Staff costs
Year ended Year ended
31 December 31 December
2021 2020
No. No.
The average monthly number of employees
was:
Operations 11 9
Finance and administration 6 6
Management 3 3
------------- -------------
20 18
------------- -------------
Year ended Year ended
31 December 31 December
2021 2020
US$'000 US$'000
Aggregate remuneration (including Directors):
Wages and salaries (including bonuses) 1,274 823
Social security costs 115 109
Share-based payments 812 238
Pension costs 3 1
2,204 1,171
------------- -------------
(25) Finance expense
Year ended Year ended
31 December 31 December
2021 2020
US$'000 US$'000
Shareholder loans 670 611
Foreign exchange losses 4,382 1,857
Bank debt 2,024 2,061
BNP - debt modification loss (Note 17) - 1,109
BNP - debt modification present value
adjustment amortisation (258) (119)
BNP amendment fee amortisation 227 104
Finance leases 1 2
Other 345 289
------------- -------------
Total 7,391 5,914
------------- -------------
(26) Loss on disposal of subsidiary
On 15 February 2021, the Group divested of its interests in
Aflao, the phosphate project located in Ghana by selling its
shareholding in First Gear Exploration Ltd ("First Gear
Exploration"), a 50% owned subsidiary of the Company, to Consortium
Minerals Ltd ("Consortium") (the "Disposal"). As a result of the
sale, Kropz has no further interest in Aflao.
Consortium is a subsidiary of Russell Brooks Ltd, who was a
minority shareholder in First Gear Exploration, with a 15%
shareholding prior to the Disposal.
The consideration for the sale of the Kropz interest in First
Gear Exploration was:
-- US$ 5,000 cash ("Share Consideration"); and
-- US$ 322,529 ("Loan Consideration") deferred cash
consideration in respect of the shareholder loan from Kropz to
First Gear Exploration, which is being novated to Consortium.
The Share Consideration was payable by Consortium within seven
days of completion. The Loan Consideration will be payable by
Consortium to Kropz upon, the earlier of,
(i) the sign-off by a competent person of a definitive
feasibility study on the Aflao deposit, as defined in the JORC Code
2012 edition; or
(ii) Consortium disposing or transferring the Shares prior to
the event described in (i) being achieved; or
(iii) Consortium disposing or transferring the prospecting right
prior to the event described in (i) being achieved.
As at the date of this report, the Loan Consideration remains
outstanding and the amount has not been accounted for as
recoverability is not certain.
This disposal allows the Company to focus on its strategy of
developing the Elandsfontein phosphate project in South Africa and
progressing the Hinda phosphate project in the RoC.
The loss on disposal was calculated as follows:
US$'000
Consideration 5
Net liabilities on disposal (348)
Non-controlling interest on disposal 181
Derecognition of exploration and evaluation
assets (62)
--------
Loss on disposal (224)
--------
(27) Taxation
Major components of tax charge Year ended Period ended
31 December 31 December
2021 2020
US$'000 US$'000
Deferred
Originating and reversing temporary differences - -
Current tax
Local income tax recognised in respect
of prior year - (36)
-------------- -------------
Total - (36)
-------------- -------------
Reconciliation of tax charge
Year ended Year ended
31 December 31 December
2021 2020
US$'000 US$'000
Loss before tax (18,258) (1,967)
------------- -------------
Applicable UK tax rate 19% 19%
Tax at applicable tax rate (3,469) (374)
Adjustments for different tax rates in
the Group (2,177) (1,219)
Non-taxable losses / (gains) 786 (1,631)
Disallowable expenditure 759 648
Prior year tax charge - (36)
Losses carried forward not recognised 4,101 2,576
------------- -------------
Tax (credit) / charge - (36)
------------- -------------
The movement in tax liabilities is summarised below:
Year ended Year ended
31 December 31 December
2021 2020
US$'000 US$'000
Balance brought forward - 174
Current year charge - (36)
Tax paid - (128)
Foreign exchange differences - (10)
-------------- -------------
Balance carried forward - -
-------------- -------------
The Group had losses for tax purposes of approximately US$ 52.1
million as at 31 December 2021 (2020: US$ 43.8 million) which,
subject to agreement with taxation authorities, are available to
carry forward against future profits. They can be carried forward
indefinitely.
A net deferred tax asset of approximately US$ 14.6 million
(2020: US$ 12.3 million), after set off of accelerated depreciation
allowances in respect of fixed assets of US$ 34.7 million (2020:
US$ 29.9 million), arises in respect of these losses. It has not
been recognised as steady state production has not been reached.
The deferred tax asset and deferred tax liability relate to income
tax in the same jurisdiction and the law permits set off.
(28) Earnings per share
The calculations of basic and diluted loss per share have been
based on the following loss attributable to ordinary shareholders
and weighted average number of ordinary shares outstanding:
Year ended Year ended
31 December 31 December
2021 2020
US$'000 US$'000
(Loss) / Profit attributable to ordinary
shareholders (13,787) 1,531
Weighted average number of ordinary shares
used in basic (loss) / earnings per share 765,871,834 383,896,428
Share options and warrants - 11,649,583
------------- --------------
Weighted average number of ordinary shares
used in diluted (loss) / earnings per
share 765,871,834 395,546,011
------------- --------------
Basic (loss) / earnings per share (US$
cents) (1.80) 0.40
Diluted (loss) / earnings per share
(US$ cents) (1.80) 0.39
------------- --------------
Because the Group was in a net loss position attributable to
ordinary shareholders in 2021, diluted loss per share excludes the
effects of ordinary share equivalents consisting of share options
and warrants, which are anti-dilutive.
(29) Notes to the statement of cash flows
Issue of shares
Year ended 31 December 2021
Non-cash
consideration Cash consideration Total
US$'000 US$'000 US$'000
Equity facility - issue of shares - 25,800 25,800
- 25,800 25,800
---------------------------------------------------- ------------------- --------
Year ended 31 December 2020
Non-cash
consideration Cash consideration Total
US$'000 US$'000 US$'000
Placing of shares - 354 354
Equity facility - issue of shares - 19,000 19,000
Open offer - issue of shares - 2,162 2,162
Cost of issuing shares - (320) (320)
---------------- ------------------- --------
As at 31 December 2020 - 21,196 21,196
---------------- ------------------- --------
Net debt reconciliation
Year ended 31 December 2021
Foreign
Opening Accrued Fair value Cash exchange Closing
Balance interest movements movements gain/(loss) balance
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Other financial
assets 1,477 - - - (120) 1,357
Shareholder loan
payable and derivative (15,703) (670) (653) (8,037) 20 (25,043)
Other financial
liabilities (30,613) 31 - (54) 50 (30,586)
Finance leases (48) - - 39 2 (7)
--------- ---------- ----------- ----------- ------------- ---------
Total (44,887) (639) (653) (8,052) (48) (54,279)
--------- ---------- ----------- ----------- ------------- ---------
Year ended 31 December 2020 (restated - refer to Note 2)
Foreign
Opening Accrued Modifi-cation Cash exchange Closing
Balance interest New agreements loss movements gain/(loss) balance
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Other financial
assets 1,534 - - - (57) 1,477
Shareholder
loan payable
and derivative (14,701) (611) - (411) 20 (15,703)
Other financial
liabilities (29,982) - - (1,109) 464 14 (30,613)
Finance
leases (40) - (60) 53 (1) (48)
--------- ---------- --------------- -------------- ----------- ------------- ---------
Total (43,189) (611) (60) (1,109) 106 (24) (44,887)
--------- ---------- --------------- -------------- ----------- ------------- ---------
Reconciliation of working capital items:
Year ended 31 December 2021
Foreign
Opening Cash Capital exchange Closing
Balance movements allocated gain/(loss) balance
US$'000 US$'000 US$'000 US$'000 US$'000
Trade and other receivables 1,611 (256) - 156 1,511
Inventories 821 291 - (87) 1,025
Trade and other payables (4,780) (3,178) 2,599 1,816 (3,543)
Total (2,348) (3,143) 2,599 1,885 (1,007)
--------- ----------- ----------- ------------- ---------
Year ended 31 December 2020 (restated - refer Note 2)
Foreign
Opening Cash Capital exchange Closing
Balance movements allocated gain/(loss) balance
US$'000 US$'000 US$'000 US$'000 US$'000
Trade and other receivables 329 1,278 - 4 1,611
Inventories 875 (17) - (37) 821
Trade and other payables (1,536) (28) (3,328) 112 (4,780)
Total (332) 1,233 (3,328) 79 (2,348)
--------- ----------- ----------- ------------- ---------
(30) Related parties
Kropz plc and its subsidiaries
The following parties are related to Kropz plc:
Name Relationship
Mark Summers Director
Mike Nunn Director
Linda Beal Director
Mike Daigle Director
Lord Robin William Renwick Director
Machiel Johannes Reyneke Director
Kropz SA Subsidiary
Elandsfontein Land Holdings Subsidiary
(Pty) Ltd ("ELH")
Kropz Elandsfontein Subsidiary
West Coast Fertilisers (Pty) Subsidiary
Ltd
Xsando (Pty) Ltd Subsidiary
Cominco Resources Limited Subsidiary
Cominco S.A. Subsidiary
Cominco Resources (UK) Ltd Subsidiary
Kropz International Shareholder
The ARC Fund ("ARC") Shareholder
Details of remuneration to KMP are contained in Note 21 to the
Consolidated Financial Statements.
In addition to share issues to related parties set out in Note
13 to the Consolidated Financial Statements, the following
transactions were carried out with related parties:
Related party balances
Loan accounts - owed to related parties
31 December 31 December
2021 2020
US$'000 US$'000
ARC 16,196 15,703
Convertible debt - ARC 6,191 -
Derivative liability (refer Note 15) 2,656 -
Greenheart Foundation (refer Note 17) 545 495
------------ ------------
Total 25,588 16,198
------------ ------------
Related party balances
Interest accrued to related parties
Year ended Year ended
31 December 31 December
2021 2020
US$'000 US$'000
ARC 670 611
------------- -------------
Total 670 611
------------- -------------
Convertible loan facilities
As described in Note 13, the Company made drawdowns totalling
US$ 25.8 million (2020: US$ 19 million) under its convertible loan
facilities from ARC.
(31) Categories of financial instrument
Financial assets and liabilities by category
The accounting policies for nancial instruments have been
applied to the line items below:
31 December 31 December
2021 2020
US$'000 US$'000
Financial assets at amortised cost
Trade and other receivables 399 285
Other financial assets 1,357 1,477
Restricted cash 4,858 7,355
Cash and cash equivalents 2,461 11,572
------------ ------------
Total 9,075 20,689
------------ ------------
Financial assets at fair value
Derivative asset - 8,586
------------ ------------
Financial liabilities at amortised cost
Trade and other payables 3,543 4,780
Finance leases 7 48
Shareholder loans 22,387 15,703
Other financial liabilities 30,586 30,613
------------ ------------
Total 56,523 51,144
------------ ------------
Financial liabilities at fair value
Derivative liability 2,656 -
------------ ------------
Recognised fair value measurements
The net fair value and carrying amounts of financial assets and
financial liabilities are disclosed in the Consolidated Statement
of Financial Position and in the notes to the Consolidated
Statement of Financial Position.
This note provides an update on the judgements and estimates
made by the Group in determining the fair values of the financial
instruments.
(i) Financial instruments Measured at Fair Value
The financial instruments recognised at fair value in the
Statement of Financial Position have been analysed and classified
using a fair value hierarchy reflecting the significance of the
inputs used in making the measurements. At the reporting date, the
Group had a convertible facility with ARC. The US$ amount of the
facility is convertible into ordinary shares of the parent entity
(Note 15).
(ii) Fair value hierarchy
-- The fair value hierarchy consists of the following levels
-- Quoted prices in active markets for identical assets and liabilities (Level 1);
-- Inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either directly (as
prices) or indirectly (derived from prices) (Level 2); and
-- Inputs for the asset and liability that are not based on
observable market date (unobservable inputs) (Level 3).
Level Level Level
1 2 3 Total
US$'000 US$'000 US$'000 US$'000
2021
Derivative asset - - - -
--------- --------- --------- ---------
2020
Derivative asset - - 8,586 8,586
--------- --------- --------- ---------
Level Level Level
1 2 3 Total
US$'000 US$'000 US$'000 US$'000
2021
Derivative liability - - 2,656 2,656
--------- --------- --------- ---------
2020
Derivative liability - - - -
--------- --------- --------- ---------
There were no transfers between levels for recurring fair value
measurements during the year. The Group's policy is to recognise
transfers into and transfer out of fair value hierarchy levels as
at the end of the reporting period.
(iii) Reconciliation: Level 3 fair value measurement
Year Year
ended ended
31 December 31 December
2021 2020
US$'000 US$'000
Derivative asset
Opening balance 8,586 -
Fair value (loss) / gain recognised
in profit and loss (4,139) 8,586
Extinguished on issuance of equity (4,447) -
------------- -------------
Closing balance - 8,586
------------- -------------
Derivative liability
Opening balance - -
Fair value at initial recognition (2,015) -
Fair value loss recognised in profit -
and loss (653)
Foreign exchange 12 -
Closing balance (2,656) -
--------
(iv) Valuation technique used to determine fair value
Derivative asset:
A Monte-Carlo simulation was applied to simulate the expected
share price at a 60% volatility multiplied by the number of shares
to be issued pursuant to the Original and Further Equity Facility
compared to the quoted market share price.
Derivative liability:
A Monte-Carlo simulation was applied to value the option
component of the convertible debt at a 30% volatility in share
price, 14% volatility in the GBP:ZAR exchange rate and risk free
rate of 0.76% multiplied by the number of shares to be issued
pursuant to the drawn amounts under the New ZAR Equity Facility. A
change of US$ 1.8 million in value would be observed should share
price volatility increase over 60%, risk free rate above 10% and
foreign exchange starting rate above R34/GBP.
(32) Financial risk management objectives
Capital risk management:
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern in order to
provide returns for shareholders and bene ts for other stakeholders
and to maintain an optimal capital structure to reduce the cost of
capital.
The capital structure of the Group consists of shareholder and
external debt, which includes loans and borrowings (excluding
derivative nancial liabilities) disclosed in Notes 15 and 17 and
equity as disclosed in the Statement of Financial Position.
Shareholder and external third-party loans from foreign entities
to South African companies are subject to the foreign exchange
controls as imposed by the South African Reserve Bank ("SARB"). All
inward loans into South Africa require approval by the SARB and all
loans in the current capital structure have been approved by the
SARB and all entities in the Group are compliant with the SARB
approvals relevant to the entity concerned and the approvals
granted by the SARB.
Liquidity risk:
Prudent liquidity risk management implies maintaining suf cient
cash and marketable securities, the availability of funding through
an adequate amount of committed credit facilities and the ability
to close out market positions. Due to the dynamic nature of the
underlying businesses, Group treasury maintains exibility in
funding by maintaining availability under committed credit
lines.
The Group's risk to liquidity is a result of obligations
associated with nancial liabilities of the Group and the
availability of funds to meet those obligations. The Group manages
liquidity risk through an ongoing review of future commitments and
credit facilities.
The table below analyses the Group's nancial liabilities into
relevant maturity groupings based on the remaining period at the
statement of nancial position to the contractual maturity date. The
amounts disclosed in the table are the contractual undiscounted
cash ows. Balances due within 12 months equal their carrying
balances as the impact of discounting is not signi cant.
Between Between
Less one two and Over
than and five five
one year two years years years
US$'000 US$'000 US$'000 US$'000
At 31 December 2021
Shareholder loans payable - - 13,711 24,246
Trade and other payables 3,543 - - -
Finance leases 7 - - -
Other financial liabilities 5,676 15,950 11,509 -
---------- ----------- --------- ---------
Total 9,226 15,950 25,220 24,246
---------- ----------- --------- ---------
Less Between Between
than one one and two and Over
year two years five years five years
US$'000 US$'000 US$'000 US$'000
At 31 December 2020
Shareholder loans payable - - - 15,703
Trade and other payables 4,780 - - -
Finance leases 42 6 - -
Other financial liabilities 2,500 5,155 27,479 -
---------- ----------- ------------ ------------
Total 7,322 5,161 27,479 15,703
---------- ----------- ------------ ------------
Credit risk:
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in nancial loss to the
Group. The Group's nancial assets include trade and other
receivables, loans receivable, other nancial assets and cash and
cash equivalents.
Ongoing credit evaluation is performed on the nancial conditions
of the counterparties to the trade and other receivables, loans
receivable and other nancial assets. The Group only deposits cash
with major banks with high quality credit standing and limits
exposure to any one counter-party. No credit limits were exceeded
during the reporting period, and management does not expect any
losses from non-performance by these counterparties.
Interest rate risk:
As the Group has signi cant interest-bearing assets, the Group's
income and operating cash ows are substantially dependent on
changes in market interest rates. At 31 December 2021, if interest
rates on the shareholder and BNP loans (denominated in US$) had
been 1% higher/lower with all other variables held constant,
post-tax losses and equity for the year would have been
approximately US$ 541,000 (2020: US$ 450,000) higher/lower
respectively.
Foreign currency risk:
Foreign currency risk is the risk that the fair value or future
cash flows of an exposure will fluctuate because of changes in
foreign exchange rates. The Group's exposure to the risk of changes
in foreign exchange rates relates primarily to the Group's
financing activities (when financial liabilities and cash are
denominated other than in a company's functional currency).
Most of the Group's transactions are carried out in South
African Rand. Foreign currency risk is monitored closely on an
ongoing basis to ensure that the net exposure is at an acceptable
level.
The Group maintains a natural hedge whenever possible, by
matching the cash inflows (revenue stream) and cash outflows used
for purposes such as capital and operational expenditure in the
respective currencies.
The Group's net exposure to foreign exchange risk was as
follows:
Functional currency
South
African British
Rand Pound Total
As at 31 December 2021 US$'000 US$'000 US$'000
----------------------------------- --------- -------- ---------
Financial assets denominated
in US$ - 313 313
------------------------------------ --------- -------- ---------
Financial liabilities denominated
in US$ (46,196) - (46,196)
------------------------------------ --------- -------- ---------
Net foreign currency exposure (46,196) 313 (45,883)
------------------------------------ --------- -------- ---------
Functional currency
South
African British
Rand Pound Total
As at 31 December 2020 US$'000 US$'000 US$'000
----------------------------------- --------- -------- ---------
Financial assets denominated
in US$ - 971 971
------------------------------------ --------- -------- ---------
Financial liabilities denominated
in US$ (44,238) - (44,238)
------------------------------------ --------- -------- ---------
Net foreign currency exposure (44,238) 971 (43,267)
------------------------------------ --------- -------- ---------
Foreign currency sensitivity analysis:
The following tables demonstrate the sensitivity to a reasonably
possible change in South African Rand and GBP exchange rates, with
all other variables held constant.
The impact on the Group's profit before tax is due to changes in
the fair value of monetary assets and liabilities. The Group's
exposure to foreign currency changes for all other currencies is
not material.
A 10% movement in the Rand and Pound against the US Dollar would
increase/(decrease) net assets by the amounts shown below. This
analysis assumes that all other variables, in particular interest
rates, remain constant.
As at As at
31 December 31 December
2021 2020
Increase/ Increase/
(Decrease) (Decrease)
US$'000 US$'000
------------------------ ------------- -------------
Effects on net assets
Rand:
- strengthened by 10% (4,620) (4,424)
- weakened by 10% 4,620 4,424
------------------------ ------------- -------------
Effects on net assets
GBP:
- strengthened by 10% 31 97
- weakened by 10% (31) (97)
------------------------ ------------- -------------
(33) Segment information
Operating segments
The Board of Directors consider that the Group has one operating
segment, being that of phosphate mining and exploration.
Accordingly, all revenues, operating results, assets and
liabilities are allocated to this activity.
Geographical segments
The Group operates in two principal geographical areas - South
Africa and the RoC.
The Group's non-current assets by location of assets are
detailed below.
South
Africa Congo Group
US$'000 US$'000 US$'000
As at 31 December 2021
Total non-current assets 136,431 44,663 181,094
--------- ---------- ---------
South
Africa Congo Group
US$'000 US$'000 US$'000
As at 31 December 2020
Total non-current assets 116,027 44,316 160,343
--------- ---------- ---------
(34) Non-controlling interests
31 December 31 December
2021 2020
US$'000 US$'000
(Restated
- Note 2)
As at beginning of year 5,729 4,391
Share of losses for the year (4,471) (3,462)
Share of other comprehensive income (1,043) (86)
Disposal of subsidiary 181 -
Kropz plc's investment in non-redeemable
preference shares of Kropz Elandsfontein
attributable to non-controlling interest 5,382 4,886
As at end of the year 5,778 5,729
------------- -------------
(35) Material subsequent events
As announced on 18 January 2022, Kropz issued 6,700,000 ordinary
shares, at an exercise price of GBP0.001 an ordinary share, in the
Company to key members of the executive management team, including
certain Persons Discharging Managerial Responsibilities ("PDMRs"),
The issue of ordinary shares are due to awards vesting and issued
under its Long Term Incentive Plan ("LTIP Awards"), issued on 31
July 2020 as announced on 4 August 2020. Of the total above,
2,350,000 ordinary shares were issued to Mark Summers, 2,350,000
ordinary shares to Michelle Lawrence and 1,000,000 to Patrick
Stevenaert.
On 23 February 2022, the South African Minister of Finance
announced that the corporate tax rate would be reduced from 28% to
27% for the years of assessment beginning on or after 1 April 2022.
This is a non-adjusting post balance sheet event.
The fifth and final drawdown on the Further Equity Facility
occurred on 10 March 2022 for US$ 200,000 which was paid by way of
issue of 7,446,248 new ordinary shares at the issue price of 4.202
pence per ordinary share to the ARC Fund.
The third drawdown on the New ZAR Equity Facility occurred on 25
March 2022 for ZAR 40 million and the fourth drawdown on the New
ZAR Equity Facility occurred on 26 April 2022 for ZAR 33
million.
BNP Paribas released the ZAR 77 million restricted cash in the
bank account of Kropz Elandsfontein (Pty) Ltd on 10 January 2022,
upon satisfaction of the requirement by BNP Paribas for the Group
to bridge the funding shortfall in respect of Elandsfontein as
announced on 1 September 2021. The funding shortfall was satisfied
when the New ZAR Equity Facility was secured from ARC.
As announced on 27 April 2022, a further funding shortfall of
ZAR 177 million is expected due to slower than expected progress in
the ramp up of operations at Elandsfontein. The delay was largely
driven by the need to re-engineer parts of the fine flotation
circuit proposed by the vendor, but further exacerbated by early
unpredicted ore variability and lack of operator experience. As a
result, production of sufficient phosphate rock concentrate for the
first bulk sale will move to later than originally expected.
Kropz and ARC entered into a ZAR 25 million (approximately US$
1.60 million) bridge loan facility (the "Loan") on 27 April 2022 to
meet cash requirements in April 2022 and draw down of the Loan took
place on 28 April 2022. The Loan is repayable on demand, and there
are no fixed repayment terms. It is repayable by Kropz on no less
than two business days' notice. Interest is payable on the Loan at
14% nominal, compounded monthly.
On 11 May 2022, Kropz entered into a new conditional convertible
equity facility of up to ZAR 177 million ("ZAR 177 Million Equity
Facility"), with ARC to fund the Company's Elandsfontein phosphate
project to first revenues from bulk concentrate sales:
-- The ZAR 177 Million Equity Facility comprises a total
commitment of up to ZAR 177 million provided by ARC, which can be
drawn down following a written request from Kropz and at the
discretion of ARC;
-- At any time during the term of the ZAR 177 Million Equity
Facility, repayment of the ZAR 177 Million Equity Facility capital
amount will, at the election of ARC, either be:
-- In the form of the conversion into ordinary shares of 0.1
pence each ("Ordinary Shares") in the Company and issued to ARC, at
a conversion price of 9.256 pence per Ordinary Share each,
representing the 30-day Volume Weighted Average Price ("VWAP") on 4
May 2022, and at a fixed exchange rate of ZAR 1 = GBP 0.0504
("Conversion"); or
-- Payable in cash by the Company at the end of the term of the New ZAR Equity Facility;
-- The first drawdown was made on 2 June 2022 and the Loan was
set-off against the first drawdown of the ZAR 177 Million Equity
Facility;
-- Following a Conversion, the Company will apply for the newly
issued Ordinary Shares in the capital of the Company to be admitted
to trading on AIM;
-- The ZAR 177 Million Equity Facility bears interest at 14% per
annum compounded monthly ("Interest"). Interest will be payable in
cash to ARC by the Company;
-- The term of the ZAR 177 Million Equity Facility will be from
the Effective Date to the earlier of:
-- Five years from the Effective Date; or
-- One year after the term loan facility provided by BNP Paribas
to Kropz Elandsfontein (in the amount not exceeding US$ 30
million), has been repaid;
-- The ZAR 177 Million Equity Facility is secured by the shares
that Kropz holds in Cominco Resources Ltd ("Share Charge"); and
-- The ZAR 177 Million Equity Facility was conditional on:
-- approval from the South African Reserve Bank ("SARB"). The
SARB application was lodged on 16 May 2022 and the approval
received on 1 June 2022; and
-- shareholder approval which was received on 30 May 2022.
First drawdown of the ZAR 177 Million Equity Facility of ZAR
103.5 million was made on 2 June 2022. The Loan of ZAR 25 million
was set off against the first draw down and the net amount of ZAR
78.5 million received by the Company.
(36) Ultimate controlling party
The Directors consider Ubuntu-Botho Commercial Enterprises
Proprietary Limited to be the ultimate controlling party of the
Company
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END
FR PPUPWQUPPGAB
(END) Dow Jones Newswires
June 30, 2022 02:00 ET (06:00 GMT)
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