CONSOLIDATED STATEMENT OF CASH FLOWS

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION

For the period ended 31 August 2024

1.    Corporate information and principal activities

Andrada Mining Limited ("Andrada") was incorporated and domiciled in Guernsey on 1 September 2017 and admitted to the AIM market in London on 9 November 2017. The Company's registered office is at PO Box 282, Oak House, Hirzel Street, St Peter Port, Guernsey GY1 3RH and it operates from Illovo Edge Office Park, 2nd Floor, Building 3, Corner Harries and Fricker Road, Illovo, Johannesburg, 2116, South Africa. This financial information is for the period ended 31 August 2024 and comparative figures for the six-month period ended 31 August 2023 and for the year ended 29 February 2024 are shown.

      As at 31 August 2024, the Andrada Group comprised:

¹ Held directly by Andrada Mining Limited

² Held by Greenhills Resources Limited

³ Held by Andrada Mining (Namibia) Pty Limited. Acquired 15% non-controlling interest during the period.

⁴ Held by Mokopane Tin Company Pty Limited

⁵ Held by Pamish Investments 71 Pty Limited

This financial information is presented in Pound Sterling (£) because that is the currency in which the Group has raised funding on the AIM market in the United Kingdom. Furthermore, Pound Sterling (£) is the functional currency of the ultimate holding company, Andrada Mining Limited. The Group's key subsidiaries, Andrada Namibia and Uis Tin Mining Company Pty Limited ("UTMC"), use the Namibian Dollar ("NAD") as their functional currency. The period-end spot rate used to translate all Namibian Dollar balances was £1 = NAD23.42 and the average rate for the period was £1 = NAD23.51.

2.    MATERIAL ACCOUNTING POLICIES

a.   Basis of accounting

The consolidated interim financial information has been prepared in accordance with UK-adopted international accounting standards. The consolidated interim financial information also complies with the AIM Rules for Companies, NSX Listing Requirements, OTCQB Listing Requirements and the Companies (Guernsey) Law, 2008 and shows a true and fair view.

The material accounting policies applied in preparing these consolidated financial statements are set out below. These policies have been consistently applied throughout the period. The consolidated financial statements have been prepared under the historical cost convention except as where stated.

The interim financial information for the six months to 31 August 2024 is unaudited and does not constitute statutory financial information. The statutory accounts for the year ended 29 February 2024 are available on the Company's website.

b.   Going concern

The Group closely monitors and manages its liquidity risk and day-to-day working capital requirements. Cash forecasts are regularly produced, considering the global logistical challenges around sales, to ensure that there is sufficient cash within the Group to meet its obligations. The Group runs sensitivities for different scenarios, including but not limited to changes in commodity prices and exchange rates. The Group also routinely monitors the covenants associated with the borrowing facilities and proactively engages with Bank Windhoek, the lender, where there is any risk. The Group met the covenant requirements for the 31 August 2024 measurement period and, based on the latest forecasts, the Group will be able to meet its covenant obligations for the testing period to February 2025. For the purpose of assessing going concern, the Directors have prepared forecasts to November 2026.

The main estimates considered as part of the Directors' going concern assessment are production profiles, tin, lithium and tantalum prices, exchange rates and committed capital. The production profile is based on the Group's current achieved production post the completion of the expansion project, as well as the additional production on the successful completion of the continuous improvement capital project and ore sorter projects. In addition, the Group successfully raised £7.1m through the funding of Bank Windhoek, secured a partnership with SQM for the Lithium Ridge project, and maintains the possibility of future funding through a strategic partner. This further supports the liquidity requirements of the Group and its ability to meet its obligations in the ordinary course of business. The Group also retains the ability to flex its ongoing exploration and metallurgical capital expenditures in line with cash availability as well as macro-economic circumstances.

Based on the forecasts, additional funding will be required within the next 12 months for the purpose of envisaged capital and exploration projects without a strategic partner. As the Group is also entering a new market with reference to lithium sales, which are close to near-term production, the cash flow forecast has assumed the successful completion of the lithium pilot plant in order to deliver the business strategy. Further funding would be required for additional exploration and capital projects as well as studies related to the feasibility of the future growth phases. The Group believes it has several options available to it, including but not limited to use of the overdraft facility, restructuring of the debt, additional debt or equity, cost reduction strategies as well as potential off-take arrangements. The Directors are already at an advanced stage of securing additional funding for the next 12 months. However, this is yet to be finalised as at the date of approval of the financial statements. Thus, the Group is reliant on additional funding, which is not guaranteed. This indicates the existence of a material uncertainty which may cast significant doubt on the Group's ability to continue as a going concern and, therefore, the Group may be unable to realise its assets and discharge its liabilities in the ordinary course of business.

As a result of their review, and despite the aforementioned material uncertainty, the Directors have confidence in the Group's forecasts and that additional funding will be forthcoming. Accordingly, the Directors continue to adopt the going concern basis in preparing the consolidated financial statements. The financial statements do not include any adjustments that would result if the Group were unable to continue as a going concern.

c.   Basis of consolidation

i.  Subsidiaries

Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. Inter-company transactions, balances and unrealised gains/losses on transactions between Group companies are eliminated. When necessary, amounts reported by subsidiaries have been adjusted to conform with the Group's accounting policies.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. Any excess or deficit of consideration paid over the carrying amount of the non-controlling interests is recognised in equity of the parent in transactions where the non-controlling interests are acquired or sold without loss of control. The Group has elected to recognise this effect in retained earnings.

ii. Non-controlling interests

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

d.   Critical accounting estimates and judgements

In the application of the Group's accounting policies, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are relevant. Actual results may differ from these estimates. Information about significant areas of estimation uncertainty considered by management in preparing the interim financial information is provided below.

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

i.  Going concern and liquidity

Significant estimates were required in forecasting cash flows used in the assessment of going concern, including tin, tantalum and lithium prices, levels of production, operating costs, and capital expenditure requirements. For further details, refer to the going concern considerations laid out earlier in Note 2(b).

ii. Decommissioning and rehabilitation obligations

Estimating the future costs of environmental and rehabilitation obligations is complex and requires management to make estimates and judgements, as most of the obligations will be fulfilled in the future and contracts and laws are often not clear regarding what is required. The resulting provisions (see Note 18) are further influenced by changing technologies and by political, environmental, safety, business, and statutory considerations.

The Group's rehabilitation provision is based on the net present value of management's best estimates of future rehabilitation costs. Judgement is required in establishing the disturbance and associated rehabilitation costs at period end, timing of costs, discount rates, and inflation. In forming estimates of the cost of rehabilitation which are risk-adjusted, the Group assessed the Environmental Management Plan and reports provided by internal and external experts. Actual costs incurred in future periods could differ materially from the estimates, and changes to environmental laws and regulations, life of mine estimates, inflation rates, and discount rates could affect the carrying amount of the provision.

In determining the amount attributable to the rehabilitation liability, management used a risk-free discount rate of 12.31% (August 2023: 13% and February 2024: 12.31%), an inflation rate of 4.8% (August 2023: 5.3% and February 2024: 4.8%) and an estimated mining period of 12.1 years (August 2023: 12.9 years and February 2024: 12.6 years), being the Phase 1 expansion life of mine. The rates used are in line with the Namibian market rates. The decrease in the mining period is as a result of the increased mining volumes post the Phase 1 Expansion. The carrying amount of the rehabilitation obligations for the Group at 31 August 2024 was £1 270 629 (August 2023: £912 550 and February 2024: £1 152 121).

iii.         Impairment indicator assessment for exploration and evaluation assets

Determining whether an exploration and evaluation asset is impaired requires an assessment of whether there are any indicators of impairment, including specific impairment indicators prescribed in IFRS 6 "Exploration for and Evaluation of Mineral Resources". If there is any indication of potential impairment, an impairment test is required based on value in use of the asset. The valuation of intangible exploration assets is dependent upon the discovery of economically recoverable deposits which, in turn, is dependent on future tin prices, future capital expenditures, environmental and regulatory restrictions, and the successful renewal of licences.

The Directors have concluded that there are no indications of impairment in respect of the carrying value of Namibian intangible assets at 31 August 2024 based on planned future development of the Namibian projects and current and forecast tin prices. Exploration and evaluation assets are disclosed fully in Note 10. 

iv.         Impairment assessment for property, plant and equipment

Management has reviewed the Uis Tin Mine for indicators of impairment and has considered, among other factors, the operations to date at the Uis Tin Mine, forecast commodity prices, production profile, inflation rate, post-tax real discount rate and market capitalisation of the Group. Management identified the reduction in the tin price as an indicator of impairment. In undertaking the impairment review, management has also reviewed the underlying life of mine ("LoM") valuation model for Uis. The LoM valuation model is on a fair value less cost to develop basis and includes assessments of different scenarios associated with capital improvements and expansion opportunities. The impairment testing performed by management did not result in an impairment.

The forecasts require estimates regarding forecast tin, tantalum and lithium prices, ore resources, production, operating and capital costs. Under the base case forecast scenario, management used a forecast tin price of $26 000, tantalum price of $150 000, lithium price of $2 960 dropping to $1 051 in FY 2027, a post-tax real discount rate of 8.7%, an inflation rate of 5.5%, and a life of mine of 30 years. The forecast indicates sufficient headroom as at 31 August 2024.

The complex judgement in determining the recoverable amount of mining assets requires an estimation of the future tin price. The estimation of future tin price is subject to uncertainty considering the volatility of the market. Management has therefore compared the forecast tin price with the economic consensus estimates. Furthermore, a sensitivity analysis was performed by lowering the forecast tin prices by 5%, which also indicated sufficient headroom as at 31 August 2024.

As an additional test, management performed certain sensitivity calculations. These included raising the discount rate to 9.7% post-tax real rate, lowering plant recovery by 5% and increasing operating costs by 5%. In each of these circumstances, the forecast indicated sufficient headroom as at 31 August 2024.

v. Depreciation

Judgement is applied in making assumptions about the depreciation charge for mining assets when using the unit-of-production method in estimating the ore tonnes held in reserves. The relevant reserves are those included in the current approved LoM plan, which relates to the Phase 1 expansion. Judgement is also applied when assessing the estimated useful life of individual assets and residual values. The assumptions are reviewed at least annually by management, and the judgement is based on consideration of the LoM plan as well as the nature of the assets. The reserve assumptions included in the LoM plan are evaluated by management.

vi.         Capitalisation and depreciation of waste stripping

The Group has elected to capitalise the costs of waste stripping activities as these are necessary to allow improved access to the ore and, therefore, will result in future economic benefits. The costs of drilling, blasting, and load and haul of waste material are capitalised until such time that the underlying ore is used in production. These costs are then expensed on a proportional basis. The capitalised costs are included in the mining asset in property, plant and equipment and are expensed back into the statement of comprehensive income as depreciation. Capitalisation of waste stripping requires the Group to make judgements and estimates in determining the amounts to be capitalised. These judgements and estimates include, among others, the expected life of mine stripping ratio for each separate open pit, the determination of what defines separate pits, and the expected volumes to be extracted from each component of a pit for which the stripping asset is depreciated.

vii.        Determination of ore reserves

The estimation of ore reserves primarily impacts the depreciation charge of evaluated mining assets, which are depreciated based on the quantity of ore reserves. Reserve volumes are also used in calculating whether an impairment charge should be recorded where an impairment indicator exists.

The Group estimates its ore reserves and mineral resources based on information compiled by appropriately qualified persons relating to geological and technical data on the size, depth, shape, and grade of the ore body and related to suitable production techniques and recovery rates. The estimate of recoverable reserves is based on factors such as tin prices, future capital requirements and production costs, along with geological assumptions and judgements made in estimating the size and grade of the ore body. There are numerous uncertainties inherent in estimating ore reserves and mineral resources. Consequently, assumptions that are valid at the time of estimation may change significantly if or when new information becomes available.

viii.       Valuation of inventories

Judgement is applied in making assumptions about the value of inventories and inventory stockpiles, including tin prices, plant recoveries and processing costs, to determine the extent to which the Group values inventory and inventory stockpiles. The Group uses forecast tin prices to determine the net realisable value of the run of mine ("ROM") stockpile and the tin concentrate inventory on hand at period end. Inventory stockpiles are measured using actual mining and processing costs.

ix.         Determining the fair value of royalty debt

The measurement of the royalty obligation factors in numerous key inputs, and management makes use of a technical expert. These inputs include the forecast of the tin production and price over a period of 30 years, the risk-free rate and the credit spread. The tin price forecast was based on estimates provided by the Group as of 31 August 2024. The risk-free rate was based on the United States Constant Maturity Treasury rates commensurate with the terms as of the valuation date, as reported on the Federal Reserve website. The Group used a credit spread of 10.58% computed by backsolving the convertible notes to par and further adjusted down 3.5% to account for the lower risk factor as a result of the ongoing operations at Uis Tin Mining Company. The operating subsidiary attracts a lower risk factor due to it being closely aligned to the underlying tin mining operation and its performance since commissioned, relative to the holding company, which is implicitly subordinated. The royalty obligation is measured at fair value through profit and loss.

x. Fair value estimation on the consideration paid during the acquisition of mining rights

As part of the accounting for the acquisition of the non-controlling interest in UTMC, part of the consideration was settled using the ML 129 licence. Due to the nature of the assets, certain exploration activities were undertaken, but the information gathered was insufficient to delineate a Mineral Resource as defined by the JORC 2012 (Joint Ore Reserves Committee) Mineral Reporting Code, or any other broadly accepted mineral reporting standard. When the fair value of assets recorded in the statement of financial position cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the discounted cash flow ("DCF") model.

The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. As a result, management estimated the fair value to be equivalent to the exploration costs, which served as the base amount for the transaction.

3.    Adoption of new and revised standards

The following amendments, standards and interpretations were adopted by the Group from 1 March 2023:

·      Amendments to IAS 12 - International Tax Reform - Pillar Two Model Rules

·      Lease Liability in a Sale and Leaseback - Amendments to IFRS 16 Leases

·      Classification of Liabilities as Current or Non-Current and Non-current Liabilities with Covenants - Amendments to IAS 1 Presentation of Financial Statements

·      Amendments to IAS 7 - Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures - Supplier Finance Arrangements

·      Amendments to IAS 12 Income Taxes - Deferred Tax related to Assets and Liabilities arising from a Single Transaction

·      Amendments to IAS 1 - Presentation of Financial Statements and IFRS Practice Statement 2 Making Judgements - Disclosure of Accounting Policies

      These amended standards and interpretations have not had a significant impact on the consolidated financial statements.

Accounting standards and interpretations not applied

The following standards, interpretations and amendments are effective for the period beginning 1 March 2024:

·      Lack of Exchangeability - Amendments to IAS 21 - The Effects of Changes in Foreign Exchange Rates

·      Amendments to the Classification and Measurement of Financial Instruments - Amendments to IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures

·      Annual improvements to IFRS 1 (First-time Adoption of International Financial Reporting Standards), IFRS 7 (Financial Instruments: Disclosures and its accompanying guidance on implementing IFRS 7), IFRS 9 (Financial Instruments), IFRS 10 (Consolidated Financial Statements) and IAS 7 (Statement of Cash Flows).

·      Amendments to IAS 1 - Classification of Liabilities as Current or Non-current and Non-current Liabilities with Covenants.

The updated standards, interpretations and amendments may have a significant impact on the consolidated financial statements in the future as the Group holds financial instruments recognised under IFRS 9 and IFRS 7.

4.    Revenue

5.    Cost of sales

6.    Administrative expenses

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

Other costs mainly consist of corporate overheads necessary to run the South African head office.

7.    Finance INCOME AND EXPENSES

8.    Taxation

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

Accumulated losses in the subsidiary undertakings for which there is an unrecognised deferred tax asset are £16 421 555 (August 2023: £9 379 913 and February 2024: £13 903 618)

9.    Loss per share from continuing operations

The calculation of a basic loss per share of 0.21 pence (August 2023: loss per share of 0.18 pence and February 2024: loss per share of 0.56 pence) is calculated using the total loss for the period attributable to the owners of the Company of £3 215 983 (August 2023: loss of £2 755 819 and February 2024: loss of £8 438 465) and the weighted average number of shares in issue during the period of 1 591 793 522 (August 2023: 1 538 528 155 and February 2024: 1 551 422 631). Due to the loss for the period, the diluted loss per share is the same as the basic loss per share. The number of potentially dilutive ordinary shares in respect of share options, warrants and shares to be issued as at 31 August 2024 is 165 830 346 (August 2023: 76 309 563 and February 2024: 165 625 801). These potentially dilutive ordinary shares may have a dilutive effect on future earnings per share.

10.  Intangible assets

The additions to the evaluation and exploration asset during the period mainly consist of expenses capitalised as part of the Phase 2 exploration drilling project, the metallurgical test work programme, environmental studies, and region exploration projects.