Cadence Minerals Plc

 

("Cadence Minerals", "Cadence", or "the Company")

 

Annual Results for the year ended 31 December 2023

Cadence Minerals (AIM/NEX: KDNC) is pleased to announce its final results for the year ending 31 December 2023. The full Annual Report and Audited Financial Statements will be available on the Company's website at https://www.cadenceminerals.com/  and posted to shareholders by 30 June 2024.

Chairman's Statement

 

I am pleased to present the Company's Annual Report and Audited Financial Statements for the year ended 31 December 2023.

 

On behalf of the Cadence Minerals board and management, I want to express my deep gratitude to all our consultants, advisors, service providers, and especially our shareholders. Your support throughout this challenging year has been invaluable to us.

 

Since our company's inception, your board has strived to build a portfolio with enough balance and diversity to weather and thrive in challenging market conditions.

 

However, the year to December 2023 provided Cadence with a particularly unique set of challenges due to severe price movements in many of the underlying commodities we are focused on as a Company. More specifically, we have seen adverse price movements in lithium, rare earths, and iron ore beyond most analyst expectations and fundamental predictions.

 

Cadence has always taken a long-term view of prices, and our models always suggested such dramatic swings would reverse. However, this has not stopped severe and sudden pressure on our share price, coupled with an impact on our ability to raise capital in constrained markets. These factors have weighed heavily on our valuation as a Company during the period in question, and both the board and I are incredibly frustrated that the potential of our portfolio is in no way reflected in our share price performance.

 

Challenging conditions remain across the commodities and resources space. But we are not deterred. We see the potential for significant improvements in the underlying commodities and our key investments and are determined to see this potential translate into a higher share price.

 

On a more optimistic note, analysts continue to see constraints to supply and continued demand from an ever-growing green EV revolution, ranging from infrastructure expansion to cleaner iron ore production and targets for EV penetration reflected in greater demand for Lithium. Added to this, the challenge to control costs as new production is brought to market, combined with expectations that acquisition is the way forward to grow production, are factors that will continue to underpin prices of commodities exposed to the EV sector and the Cadence Minerals portfolio.

 

With this blueprint in place for the foreseeable future, as our portfolio matures and develops, your board will continue to seek new investment opportunities and potential new companies to focus efforts on.

 

The Cadence board sends the best of wishes to all portfolio companies, hoping we can all continue to weather the resource storm and arrive in calmer seas soon. I look forward to a year when commodity prices rebound and our share price start to reflect the fundamental benefits of a diversified portfolio and its potential.

 

Lastly, I would like to thank my fellow board members, staff, partners of the Cadence Community, and all shareholders for their continued support and confidence in our company.

 

Andrew Suckling

 

For further information contact:
Cadence Minerals plc	+44 (0) 20 3582 6636
Andrew Suckling
Kiran Morzaria
WH Ireland Limited (NOMAD & Broker)	+44 (0) 20 7220 1666
James Joyce
Darshan Patel Isaac Hooper
Fortified Securities - Joint Broker	+44 (0) 20 3411 7773
Guy Wheatley
Brand Communications	+44 (0) 7976 431608
Public & Investor Relations
Alan Green

 

Chief Executive Officer's Commentary

 

I am pleased to present the audited results for the year ended 31 December 2023, along with the Strategic Report, which comprehensively reviews our business activities. These results reflect the historical position of the Company's progress and financial standing, and we have included additional information on key post-year-end events in the Strategic Report.

 

When reviewing Cadence's activities over the past year, it's important to note that our two portfolios showed significant differences in performance. On the one hand and by in large our private portfolio delivered to their operational and have a positive long-term outlook for the commodities planned to be produced. On the other hand, our publicly traded portfolio experienced a substantial decrease in value, reflecting the strong outflows of capital from the UK stock market in 2023.

 

The performance of our publicly traded portfolio has continued to reflect the poor performance of the UK markets. This can partly be attributed to inflationary global stock market impacts. However, we believe the primary cause is capital flight from UK markets. In 2023, UK investors withdrew £8 billion from British stock funds, following the withdrawal of £8 billion in 2022 and £1 billion in 2021[*]. This significant shift of retail investors from the UK markets to non-UK-focused equity funds has negatively impacted our portfolio value and Cadence's share price.

 

Our private portfolio saw solid operational performance, with most of our goals delivered during the year. The Amapá iron ore project is our only actively managed asset in the private portfolios and remains the primary focus for Cadence's management. In my capacity as a director of the joint venture, Cadence was heavily involved in the operational progress we have seen this year, which included the delivery of a robust Pre-Feasibility Study ("PFS") with post-tax net present value ("NPV") of US$949 million, the agreement with the state of Amapá on an accelerated timeline for construction and environmental permitting and lastly the execution of a MOU which plots a path to the financing of the project. As of 31 May 2024, our investment has been circa US$13.6 million for 34% of the Amapá iron ore project.

 

In early 2023, Cadence converted its passive private investments into publicly traded equity. This was accomplished through two asset sales. Firstly, our 31.5% interests in Lithium Technology Pty Ltd and Lithium Supplies Pty Ltd ("LT and LS") were sold to Evergreen Lithium, listed on the Australian Stock Exchange in March 2023. Secondly, our 30% interest in licenses within the Yangibana Rare Earth Project ("Yangibana Project") were sold to owner/operator Hastings Technology Metals in January 2023. Cadence had initially invested approximately £1.7 million in these assets. After the year's end, Cadence completed the sale of its stake in Hastings for approximately £1.1 million, and the current value of our stake in Evergreen Lithium is around £0.50 million. These investments substantially decreased in value over the period for the reasons I highlighted above.

 

Given the equity market's overall performance in 2023, we wanted to ensure that we made a profit on our investments rather than hold them at a loss in the future. This objective was achieved during the year in relation to our stake in Hastings and European Metals, which to date have delivered 44.46% and 174.43% realised returns on our original investment, respectively. With Evergreen Lithium, we are subject to a lock-in period, which will expire in March next year.

 

We are excited about advancing the Amapá Iron Ore project in the coming year. This includes obtaining the necessary environmental permits for construction, enhancing the project's economics through increased production and capital savings, and, most importantly, completing metallurgical test work for our planned "green iron" 67% iron ore concentrate.

As for our other investments, we eagerly anticipate Evergreen Lithium's progress. The latest announcement about the start of drilling and its proximity to the Finnis project makes it the most promising investment in our portfolio.

 

Cadence's goal is to minimise the reliance on external capital by growing and reinvesting the profits generated from our assets under management. We are progressing towards this objective, as demonstrated by our investments totalling £10.71 million over the past four years. This amount was financed by £9.92 million from profitable sales in our public portfolio and £0.79 million from equity and debt capital.

 

Kiran Morzaria

 

Investment Review

 

As outlined in the section "Our Business and Investment Strategy," Cadence operates an investment strategy in which we invest in private projects via a private and public equity model. In both investment classes, we take either an active or passive role. We have reported in these segments below.

 

Private Investments, Active

The Amapá Iron Ore Project, Brazil
Interest - 33.12% at 31/12/2023 and 34.01% at 31/05/2024

 

The Amapá Project is a large-scale iron ore mine with associated rail, port, and beneficiation facilities. It began operations in December 2007 but ceased in 2014 due to a geotechnical failure at the port facility, which limited iron ore export. Before closing, the Project made an underlying profit of US$54 million in 2012 and US$120 million in 2011. In 2008, the Project produced 712 thousand tonnes of iron ore concentrate, and production increased to 4.8 million tonnes in 2011 and 6.1 million tonnes in 2012.

 

Investment

In 2019, Cadence entered into a binding investment agreement to invest in and acquire up to 27% of the Amapá iron ore mine, beneficiation plant, railway, and private port owned by DEV Mineração S.A. ("DEV"). The agreement also gave Cadence a first right of refusal to increase its stake to 49%.

 

To acquire its 27% interest, Cadence invested US$6 million over two stages in a joint venture company, Pedra and Branca Alliance ("PBA"). The first stage was for 20% of PBA, for which the consideration was US$2.5 million. The second stage was for a further 7% of PBA for a consideration of US$3.5 million. Both of these investments were completed in the first quarter of 2022. By the end of 2023, Cadence had invested approximately £10.0 million (US$12.7 million) for a 33.12% stake in the Amapá Project. As of 31 May 2023, Cadence has invested approximately £10.8 million (US$13.6 million) for a 34.01% stake in the Amapá Project.

 

Operations Review

During the reporting period, significant strides were made at the Amapá Project. We published a robust PFS early in the year and conducted a port optimisation study that identified potential capital savings. Additionally, we secured an expedited timeline with the Amapá State Environmental Agency for the environmental permits. Our unwavering focus on improving the safety and stability of the Tailings Storage Facility ("TSF") has yielded positive results. Most notably, we proudly announced that our joint venture company, PBA and DEV, entered into a memorandum of understanding ("MOU") with Sinoma Tianjin Cement Industry Design & Research Institute Co., Ltd., a wholly owned subsidiary of Sinoma International Engineering Co., Ltd. ("TCIDR"), for the development and financing of the Amapá Project.

 

After the period ended, we continued to improve the project's economics by lowering the initial capital expenditure. We also embarked on metallurgical test work on our ore to achieve a higher grade (67%) iron ore product.

 

Pre-Feasibility Study & Optimisation Studies

 

The results of the PFS were announced in early January 2023. The PFS confirmed the potential for the Amapá Iron Ore Project to produce a high-grade iron ore concentrate and generate strong returns over the life of the mine. It outlined a robust 5.28 Mtpa (dry) operation, which can provide excellent cash flows and a post-tax NPV of US$949 million.

 

We upgraded and increased the Amapá Project Mineral Resource Estimate as part of the PFS. This resulted in a substantial increase in total Measured, Indicated and Inferred Mineral Resources to 276.24 million tonnes grading 38.33% Fe and a maiden Measured Resource of 55.33 Mt grading 39.26% Fe.

 

The Key Highlights of the PFS are below:

 

·           Annual average production of 5.28 million dry metric tonnes per annum ("Mtpa") of Fe concentrate, consisting of 4.36 Mtpa at 65.4% Fe and 0.92 Mtpa at 62% Fe concentrate.

 

·           Post-tax Net Present Value ("NPV") of US$949 million ("M") at a discount rate of 10%.

 

·           Post-tax Internal Rate of Return of 34%, with an average annual life of mine EBITDA of US$235 M annually

 

·           Maiden Ore Reserve of 195.8 million tonnes ("Mt") at 39.34% Fe demonstrates an 85% Mineral Resource conversion.

 

·           Free on Board ("FOB") C1 Cash Costs of US$35.53 per dry metric tonne ("DMT") at the port of Santana. Cost and Freight ("CFR") C1 Cash Costs US$64.23/DMT in China.

 

·           Pre-production capital cost estimate of US$399 million, including the improvement and rehabilitation of the processing facility and the restoration of the railway and the wholly owned port export facility.

 

After achieving positive results in the Preliminary Feasibility Study (PFS), we conducted several studies to enhance the project's economics and engineering. Firstly, we adjusted the layout of the port at Santana by relocating the railway loop further from the shore. A scoping study indicated a potential capital saving of US$28 million for the port refurbishment costs.

 

The second improvement involved reviewing the flowsheet to enhance the quality of the final product beyond the current 65% iron ore concentrate and to reduce operating costs. In the first quarter of 2024, a conceptual flowsheet was developed to produce a 67% iron ore concentrate, which is currently being tested with ore from the mine. In March 2024, a study revealed capital savings of US$63.2 million associated with the beneficiation plant at the Amapá Project.

 

Expedited Permitting Pathway & Re-Rating of Tailings Storage Facility

In September 2023, the Amapá Project shortened its expected environmental permitting timeline from approximately 36 to 12 to 16 months. This means that subject to state approvals, we expect the grant of mine Installation Licenses ("LI") over the wholly owned port, railway, beneficiation plant, and mine during the course of 2024. The application for the railway, beneficiation plant, and mine has been submitted, and we expect the port application to be submitted by the end of July 2024.

 

While the Amapá Project was operating, it held all the necessary permissions to mine, process, transport and ship some six million tonnes of iron ore annually. However, many of these licenses lapsed after it ceased operations in 2014. Cadence has been working alongside the team at the Amapá Project to obtain these licenses and permissions. To date, we have reinstated and extended the railway concession to 2046 (completed in December 2019) and been granted a change of control over the wholly owned port in November 2021, which ensured the federal licenses could be maintained.

 

The Amapá Project owns the required Mining Concessions; however, it must obtain a Mine Extraction and Processing Permit ("Mining Permit") to begin operation. To obtain this permit, the Amapá Project must obtain an LI and, when constructed, an Operational License ("LO") from the Amapá State Environmental Agency.

 

Before the suspension of mining, the Project had numerous LOs across the mining, rail, and port operations. These LOs expired between 2013 and 2018. In 2022, the Amapá Project began regularising the expired environmental permits and started consultation with the Amapá State Environmental Agency and the relevant state authorities. The Amapá Project requested that the requirement for a full environmental impact study be waived. This request for a waiver was on the basis that the previous LOs were granted on an operation that is substantially the same as is currently planned and remains applicable to future operations.

 

As a result of the productive discussions between the various state authorities and the Amapá Project, we are delighted to announce that the Amapá Project is on track to shorten the licensing timeline substantially. We have reached an agreement with the Amapá State Environmental Agency that on the mine and railway, we will be able to submit an Environmental Control Plan - 'PCA' (Plano de Controle Ambiental) and an Environmental Control Report - 'RCA' (Relatório de Controle Ambiental). While a full environmental assessment of the port is still required, the Amapá Project has already initiated some background studies, leading us to anticipate a shortened timeline for the grant of the port LI. This reassurance about the project's future instils confidence in our stakeholders. This timeline is substantially shorter than expected on a greenfield site, where the impact study and associated approval can typically take between 24 and 36 months. The Amapá Project could achieve this in 12 to 16 months.

 

Tailings Storage Facility ("TSF")

One of Cadence's initial investment criteria into the Amapá Project was the safety and stability of the TSF. As such, before entering into the investment agreement with our joint venture partners, we carried out a TSF review by an internationally recognised consultant group and were satisfied with the structure and stability of the TS. Nonetheless, given the lack of reporting and maintenance from 2014 onwards, the TSF at the Amapá Project was considered a high risk. The work carried out since 2019, including maintenance, reporting, drilling and compliance, has meant that the Amapá Project TSF is approaching the lowest risk rating for operating TSF. The intent is for the TSF to continue to improve its risk rating. This will be achieved by completing a dam break study, installing video monitoring on the TSF, and ongoing inspection and remediation of various TSF-associated infrastructure.

 

Secured Bank Settlement Iron Ore Shipments

As per the settlement agreement announced in December 2021 here, the net proceeds of the one shipment carried out in 2022, along with approximately half of the net proceeds from the shipments in 2021, have been used to pay the secured bank creditors. We have continued productive dialogue with the secured bank creditors regarding the best way to repay the historic lender amounts. We believe that a one-time settlement using DEV's stockpile of iron ore as collateral would be the best solution, and we are advancing discussions with the secured bank creditors in this regard.

 

Strategic Development and Financing MOU for the Amapá Iron Ore Project

In October 2023, our joint venture company, PBA and DEV, entered into an MOU with TCIDR. Under the MOU, TCIDR will submit a fixed-price Engineering Procurement and Construction ("EPC") contract for the Amapá Project. The EPC contract and any other services provided by TCIDR are subject to being provided on a competitive basis and to PBA's and DEV's commercial evaluation and approval. TCIDR will be appointed as the General EPC contractor for the Amapá Project once these approvals have been granted and the provision of TCIDR-facilitated project financing is secured. This will require the execution of legally binding documents.

 

Under the MOU, TCIDR will use its best commercial efforts to secure the required financing for the construction and re-development of the Amapá Project, including the necessary guarantees, project finance insurance, and debt financing. In this regard, TCIDR continues its discussion with SinoSure China Export & Credit Insurance Corporation and China Development Bank.

 

Development Plan for the Amapá Project

The goal is to bring this project back into production. Based on the positive results derived from the PFS optimisation study announced in March 2024, which included an increase in output to 5.5 Mtpa annum of iron ore concentrate, we have decided to redesign the mine plan with our joint venture partners to reduce mining costs.

This revision and the revised capex will form the basis of an amended economic assessment of the Project at a PFS level. Additionally, we are fully committed to advancing the development of the 67% Fe product flow sheet, as previously outlined in the announcement on 7 March 2024. We also anticipate it being at a production rate of 5.5 Mtpa. This will also form the basis of an additional amended economic assessment of the Project at a PFS level.

Alongside this, we expect the grant of the LIs by the end of the year, allowing the commencement of construction and the recommissioning of the Project in 2025. Of course, this will be subject to the Project securing appropriate debt and equity financing.

With the various work streams progressing well studies, Cadence and Its joint venture partners have agreed that the lowest risk and currently best commercial approach to developing this project is to bring on a highly experienced mining operator alongside TCIDR as a joint venture partner. We are working towards this goal. However, the above strategy does not preclude the option for our joint venture to develop the project or a trade sale. The funding of debt and equity for the recommissioning and construction of the Project is anticipated to occur at the asset or joint venture level via a third party. In the interim and subject to financing availability, Cadence intends to continue its investment into the Project.

 

Private Investments, Passive

Ferro Verde Iron Ore, Brazil

Interest - 1% on 31/12/2023 and 31/05/2024

 

In 2022, Cadence invested a small amount (£0.21 million) in an advanced iron ore deposit in Brazil the previous year. The Ferro Verde Deposit is located in the southern portion of the state of Bahia, in the northeastern region of Brazil, next to the town of Urandi, some 700 km southwest of Salvador, the state of Bahia.

The project is currently progressing with its Definitive Feasibility Study  (DFS). It has a historic inferred resource of 284 million tonnes of iron ore at 31% Fe. The intent is to produce 4.5 Mtpa of 67% Fe. Our intended exit strategy is either when the asset is listed or the owners carry out a trade sale.

 

Private investments, Passive

Sonora Lithium Project, Mexico

Interest - 30% on 31/12/2023 and 31/05/2024

 

Cadence holds an interest in the Sonora Lithium Project through a 30% stake in the joint venture interests in Mexalit S.A. de CV ("Mexalit") and Megalit S.A. de CV ("Megalit").

 

Mexilit and Megalit form part of the Sonora Lithium Project (the "Project"). The Sonora Lithium Project consists of nine granted concessions. Two of the concessions (La Ventana, La Ventana 1) are owned 100% by subsidiaries of Ganfeng Lithium Group Co., Ltd ("Ganfeng"). El Sauz, El Sauz 1, El Sauz 2, Fleur and Fleur 1 concessions are owned by Mexilit S.A. de C.V. ("Mexilit"), which is owned 70% by Ganfeng and 30% by Cadence. The Buenavista and San Gabriel concessions are owned by Megalit, which is owned 70% by Ganfeng and 30% by Cadence. Ganfeng Lithium has been developing the project, which consists of an open-pit mine and a lithium chemical product processing facility. The principal planned lithium product for the project is lithium hydroxide.

 

In April 2022 and May 2023, the Mexican Government changed its Mining Law, which included prohibiting lithium concessions, declaring lithium as a strategic sector, and giving exclusive rights for lithium mining operations to a state-owned entity. These changes were not meant to affect existing concessions, such as those held by Mexilit and Megalit. Ganfeng and Cadence believe the reforms should not impact their project's concessions because they were granted before the Mining Law Reform. This aligns with the principles of legality and non-retroactivity of laws outlined in the Constitution of Mexico.

 

While Ganfeng was in discussions with the Secretary of Economy, the General Directorate of Mines ("DGM") started reviewing nine lithium concessions held by Mexican subsidiaries, including those owned by Mexilit and Megalit.

 

The DGM warned that the concessions could be cancelled if the Mexican subsidiaries did not provide enough evidence within a specified timeframe to prove their compliance with minimum investment obligations for developing lithium concessions from 2017 to 2021.

 

As of May 2023, Mexilit and Megalit had submitted extensive evidence of their timely compliance with the minimum investment obligations for the lithium concessions. However, in August 2023, the DGM issued a formal decision notice to the Mexican subsidiaries, cancelling nine lithium concessions, including those owned by Mexilit and Megalit.

 

The cancellations for the lithium concessions issued by the DGM are not final and are subject to ongoing appeals. Ganfeng and Cadence believe that the Mexican Subsidiaries have complied with their minimum investment obligations, as Mexican law requires. The mine development investment by the Mexican Subsidiaries has significantly exceeded the minimum investment obligations, and the Mexican Subsidiaries regularly submitted annual reports detailing their operations within the prescribed period annually. Ganfeng and Cadence have filed administrative review recourses before the Secretary of Economy against the resolutions cancelling the concessions, as they believe these resolutions violate Mexican and international law and infringe upon their fundamental due process rights.

 

In November 2023, Cadence issued a Request for Consultations and Negotiations ("Request") to the Government of Mexico under the United Kingdom-Mexico Bilateral Investment Treaty ("BIT"). The Request pertains to the alleged revocation of the mining concessions for the Sonora Lithium Project (the "Project") by the Mexican General Directorate of Mines, as announced by Cadence on 31 August 2023, and related acts and omissions by Mexico.

 

The affected concessions include those granted to Mexilit S.A. de CV ("Mexilit") and Minera Megalit S.A. de CV ("Megalit"), which are joint venture companies in which Cadence holds a 30% stake through REMML.

 

In their Request, Cadence and REMML have identified various BIT obligations that Mexico has breached, including Mexico's obligation not to unlawfully expropriate the investments of UK investors such as Cadence and REMML and its obligation to treat such investments fairly and equitably.

 

In accordance with Article 10 of the BIT, Cadence and REMML have requested consultations and negotiations with Mexico to resolve the dispute amicably. The BIT provides for disputes to be resolved by international arbitration if they cannot be resolved through consultation and negotiation.

 

INVESTMENT REVIEW (CONTINUED)

PUBLIC EQUITY

 

The public equity investment segment includes active and passive investments in our trading portfolio. The trading portfolio consists of investments in listed mining entities that the board believes possess attractive underlying assets. The focus is to invest in mining companies that are significantly undervalued by the market and where there is substantial upside potential through exploration success and/or the development of mining projects for commercial production. Ultimately, the aim is to make capital gains in the short to medium term. Investments are considered individually based on various criteria and are typically traded on the TSX, ASX, AIM or LSE.

 

During the period, our public equity investments generated an unrealised loss of £3.10 million (2022: £4.59 million). These unrealised losses tracked our largest holding, European Metals Holdings ("EMH"), down some 49% over the year. Overall, our return to date on our investment inEMH is approximately 147%. We realised an accounting loss from sales of £3.70 million (2022: profit of £0.55 million) of our Hastings investment as it is booked against the sale price of the licenses rather than against our original purchase value, using the later metric our return on the original investment (inclusive of post-year-end sales) was circa 44.46%. Our investment in EMH is the only active investment in the public equity portfolio.

 

The movement in public portfolio values during the year is summarised below.

 

	Commentary	£,000
Portfolio value at the beginning of period		5,244
Transfer of privately held assets to publicly held assets at market value	Transfer of Yangibana Licenses and Evergreen investments.	6,962
Disposal of public Investments during the year	The majority of disposal was in EMH, with proceeds reinvested into Amapá.	(2,150)
Realised and Unrealised loss on portfolio value for the year	The majority of the loss was driven by a reduction in EMH's and Hastings share price	(5,894)
Portfolio value at the end of the year		4,162

 

As of 31 December 2023, our public equity stakes consisted of the following:

 

Company	31-Dec-23 £,000	31-Dec-22 £,000	31-Dec-21 £,000	31-Dec-20 £,000
European Metals Holding Ltd	2,339	4,882	11,287	13,426
Charger Metals NL	-	301	342	-
Macarthur Minerals Ltd	-	-	181	329
Evergreen	1,481
Hasting Technology Metals	321
Eagle Mountain Mining Ltd	-	37	122	-
Miscellaneous	21	24	42	6
Total	4,162	5,244	11,974	13,761

 

Public Equity, Active

European Metals Holdings Limited ("European Metals")
Interest - 7.0% at 31/12/2023 and 2.96% on 31/05/2024

 

European Metals owns 49% of Geomet s.r.o. with 51% owned by České Energetické Závody, a.s. ("CEZ"). CEZ is a significant energy group listed on various European Exchanges. Geomet s.r.o. owns 100% of Cinovec which hosts a globally significant hard-rock lithium deposit with a total Indicated Mineral Resource of 372.4Mt at 0.45% Li2O and 0.04% Sn and an Inferred Mineral Resource of 323.5Mt at 0.39% Li2O and 0.04% Sn containing a combined 7.22 million tonnes Lithium Carbonate Equivalent and 263kt of tin, as reported to ASX on 28 November 2017 (Further Increase in Indicated Resource at Cinovec South).

 

An initial Probable Ore Reserve of 34.5Mt at 0.65% Li2O and 0.09% Sn reported on 4 July 2017 Cinovec Maiden Ore Reserve -has been declared to cover the first 20 years' mining at an output of 22,500tpa of battery-grade lithium carbonate reported on 11 July 2018 (Cinovec Production Modelled to Increase to 22,500tpa of Lithium Carbonate). This makes Cinovec the largest hard-rock lithium deposit in Europe, the fourth largest non-brine deposit in the world and a globally significant tin resource.

 

Cinovec is centrally located for European end-users and is well serviced by infrastructure, with a sealed road adjacent to the deposit, rail lines located 5 km north and 8 km south of the deposit and an active 22 kV transmission line running to the historic mine.

 

On January 30, 2023, European Metals announced that the Cinovec Project has been classified as a Strategic Project for the Usti Region of the Czech Republic. This classification means that the project has priority for grant funding from the Just Transition Fund ("JTF") co-funding. The total amount allocated by the Just Transition fund for the Czech Republic is CZK 41 billion (€1.64 billion), of which the Usti region has been allocated CZK 15.8 billion (approximately €632 million).

 

In July 2023, European Metals completed a capital raising of approximately €6 million from the European Bank for Reconstruction and Development ("EBRD") as a strategic investment in the Company and the development of the Cinovec Project. Furthermore, the results of the Lithium Chemical Plant (LCP) pilot program have confirmed the robustness of the Cinovec LCP process flowsheet and provide a strong foundation for executing the Cinovec Project.

 

The pilot program, conducted at ALS Laboratories in Perth, Western Australia, aimed to confirm the LCP flowsheet and produce enough marketing samples for potential off takers to test in their own laboratories. The pilot program has achieved these objectives without necessitating any further development of the LCP process flowsheet.

 

The pilot program has provided extensive data throughout all of the LCP process steps, contributing to the confirmation of design and engineering for the ongoing Definitive Feasibility Study (DFS) and the post-DFS execution of the Cinovec Project.

 

Public Equity, PassivE

Evergreen Lithium Limited, Australia
Interest - 8.74% at 31/12/2023 and 8.74% on 31/05/2024

 

In July 2022, Cadence Minerals received approximately 15.8 million shares in Evergreen Lithium ("Evergreen") when Cadence sold its 31.5% stake in Lithium Technologies and Lithium Supplies ("LT and LS") to Evergreen as announced on 27 June 2022.

 

During 2023 Evergreen was listed on the Australian Stock Exchange ("ASX"). Before listing, Cadence's equity stake in Evergreen was 13.16%; due to the IPO and associated fundraising, this was reduced to 8.74%. At the time of writing, the value of this stake is approximately £0.71 million; our initial investment into this asset was £0.83 million.

 

A further AS$ 6.63 million (£3.80 million) shares in Evergreen are due to Cadence on achieving certain performance milestones by Evergreen. Further details of these milestones can be found in the Evergreen prospectus. Cadence's shares are subject to a 2-year escrow agreement as determined by the listing rules of the ASX (expiring in May 2025).

 

On acquiring LT and LS, Evergreen became the 100% owner of three exploration tenements. The Bynoe Lithium Project and Fortune Lithium Project (awaiting grant of exploration permit) are located in the Northern Territory, and the Kenny Lithium Project is located in Western Australia.

 

The Bynoe Lithium Project is Evergreen's flagship prospect. Evergreen Lithium Limited, Australia, it is located contiguous to Core Lithium's Finnis hard rock lithium project situated in the strongly endowed Litchfield pegmatite province. Evergreens' tenure covers 231 km2, providing Evergreen and Cadence, as shareholders, with a regional-scale project area and significant scope to achieve a regional-scale discovery in the event of exploration success.

 

Evergreen, listed on the ASX, has continued to progress the development of these assets, with some initial positive results from the geochemical results on both the Byone and Kenny lithium prospects. Most importantly, Evergreen secured all the required permits to commence its drilling programme over the Bynoe project after the period ended and is due to start drilling this year. The exploration strategy for the near term will include auger and AC/RB drilling to test soil sample geochemical anomalies, geophysical targets and high-potential areas identified in recent mapping and desktop interpretation programs. The auger and AC/ RB programs will also allow the geology team to test beneath the shallow cover units, which are common in this area.

 

Public Equity, Passive

Hastings Technology Metals, Australia
Interest - 1.9% on 31/12/2023 and 0% on 31/05/2024

 

In June 2022, Cadence entered into a binding agreement to sell its working interest in the leases in the Yangibana Project to Hastings Technology Metals (ASX: HAS) ("Hastings"), the current owner and operator of the Yangibana Rare Project. Cadence sold its privately held investment, being a 30% working interest in the Yangibana Project tenements, to Hastings for A$9 million (£5.1 million), which was satisfied via the issue of publicly held investment of 2,452,650 new ordinary shares in Hastings to Cadence. The transaction was completed in January 2023. At the time of writing, Cadence had disposed of the entire investment in Hastings. Cadence's initial investment into this asset was £0.91 million. The realised return on our original acquisition is approximately 30%, and the sale proceeds have been reinvested into the Amapá project.

 

At the end of February 2024, Cadence disposed of its interest in Hastings Technology Metals. The realised return on our original acquisition of 30% of the mineral concessions (£0.9 million) was approximately 30% or (£0.3 million), and the sale proceeds were reinvested into the Amapá project.

 

Financial Review

 

Total comprehensive income for the year attributable to equity holders was a loss of £3.02m (2022: £5.49m). This decrease in loss from the previous year of approximately £2.47m is mainly due to the reduced amount of realised and unrealised profits and losses on for the year of approximately £1.85m relating to our share investment portfolio (listed financial investments) held during the year, and the disposal of our interest in Mojito which contributed £3.9m profit. In 2023 our unlisted investments provided a realised gain of £1m. Administrative expenses were down £0.14m from £1.44m to £1.30m, and foreign exchange gains were up £0.294m from £0.003 to £0.297m.

 

Basic negative earnings per share was 1.762p (2022: 3.355p).

 

The net assets of the Group at the end of the period were £18.45 million (2022: £21.32 million). This decrease of approximately £3m reflects the losses and shares issued in the year.

 

Principal Risks and Uncertainties

 

Cadence continuously monitors its risk exposures and reports its review to the Board. The Board reviews these risks and focuses on ensuring effective systems of internal financial and non-financial controls are in place and maintained.

 

The main business risk is considered to be investment risk.

 

The Company faces external risks that can materially impact or influence the investment environment within which the Company operates and can include changes in commodity prices, and the numerous factors which can influence those changes, including economic recession and investor sentiment and including the current and potential effects of the coronavirus pandemic.

 

Commodity prices have an impact on the investment performance and prospects of all our investments. The extent of the impact varies depending on a wide variety of factors but depend largely by where the investment sits on the mineral development curve. The majority of Cadence's investments sit at the more advanced stage of the development curve. Commodity price risk is pervasive at all stages of the development curve, but other prominent risks such as exploration risk and technical and funding risks at the exploration/development stage, may be considered to be weighted higher earlier in the curve than pure commodity risk which tends to have a greater impact on producers.

 

The Company's investments are located in jurisdictions other than the UK and therefore carries with it country risk, regulatory/permitting risk, political risk and environmental risk. Our investments can be at different stages of development and each stage within the mining exploration and development cycle can carry its own risks.

 

Where possible Cadence seeks to mitigate these risks by structuring its investments in a format which the Board can influence, obtain high level oversight (often at board level) and use legal agreements to provide control mechanisms (often negative control) to protect the Company's investments. In addition, we seek to further mitigate our risk exposure by obtaining a deep fundamental understanding of an asset, its potential economics, operating and legal environment and its management team, prior to investment.

 

It should be noted that because the Company does not operate its project investments on a day-to-day basis, there is a risk that the operator does not meet deadlines or budgets; fails to propose or pursue the appropriate strategy; does not adhere to the legal agreements in place or does not provide accurate or sufficient information to Cadence on a timely basis.

 

The Equity Investment segment of the Company's investments is exposed to price risk within the market, interest rate changes, liquidity risk and volatility. Although the investment risk within the portfolio is dependent on many factors, the Group's principal investments at the year-end are in companies with significant iron ore and lithium assets and, to some extent, dependent on the market's view of these commodities or chemicals and/or the market's view of the management of the companies in managing those assets. As with our private investment, the Board seeks to mitigate this by obtaining a deep fundamental understanding of an asset and its potential economics; its operating and legal environment and its management team, prior to any investment by Cadence.

 

All countries carry political risk that can lead to interruption of activity. Politically stable countries can have enhanced environmental and social risks; risks of strikes and changes to taxation; whereas less developed countries can have, in addition, risks associated with changes to the legal framework; civil unrest and government expropriation of assets. The Company has working knowledge of the countries in which the joint venture holds exploration licences, and its local joint venture partner has experienced local operators to assist the Company in its management of its investment in order to help reduce possible political risk.

Directors' Section 172 Statement

The following disclosure describes how the Directors have had regard to the matters set out in section 172(1)(a) to (f) and forms the Directors' statement required under section 414CZA of The Companies Act 2006. This new reporting requirement is made in accordance with the new 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:

 

·    the likely consequences of any decisions in the long-term;

·    the interests of the Company's employees;

·    the need to foster the Company's business relationships with suppliers/customers and others;

·    the impact of the Company's operations on the community and environment;

·    the Company's reputation for high standards of business conduct; and

·    the need to act fairly between members of the Company.

 

As set out above in the Strategic Report the Board remains focused on providing for shareholders through the long term success of the Company. The means by which this is achieved is set out further below.

 

Likely consequences of any decisions in the long-term;

The Chairman's Statement, the Chief Executive Officer's Commentary and the Strategic Review set out the Company's strategy. In applying this strategy, particularly in seeking new Project Investments and strategic holdings in other public companies, the Board assesses the long term future of those companies with a view to shareholder return. The approach to general strategy and risk management strategy of the group is set out in the Statement of Compliance with the Quoted Companies Alliance ("QCA") Corporate Governance Code (the "QCA Code") (Principles 1 and 4).

 

Interest of Employees;

The Group has a very limited number of employees, and all have direct access to the Executive Directors on a daily basis and to the Chairman, if necessary. The Group has a formal Employees' Policy manual which includes process for confidential report and whistleblowing.

 

Need to foster the Company's business relationships with suppliers/customers and others;

The nature of the Group's business is such that the majority of its business relationships are with joint venture partners, the boards of directors of the companies in which the Group has strategic stakes to the extent that such relationships are permitted, and with suppliers for services. As the success of the business primarily depends on its relationship with its partners and investees, the Executive Directors manage these relationships on a day-to-day basis. Where possible, the Group will take a board, or similar appointment, in strategic investees to ensure that there is a close and successful ongoing dialog between the parties. Service providers are paid within their payment terms and the Group aims to keep payment periods under 30 days wherever practical.

 

Impact of the Company's operations on the community and environment;

The Group takes its responsibility within the community and wider environment seriously. Its approach to its social responsibilities is set out in the Statement of Compliance with the QCA Code (Principle 3).

 

The desirability of the Company maintaining a reputation for high standards of business conduct;

The Directors are committed to high standards of business conduct and governance and have adopted the QCA Code. Where there is a need to seek advice on particular issues, the Board will consult with its lawyers and nominated advisors to ensure that its reputation for good business conduct is maintained.

 

The need to act fairly between members of the Company;

The Board's approach to shareholder communication is set out in the Statement of Compliance with the (Principle 2). The Company aims to keep shareholders fully informed of significant developments in the Group's progress. Information is disseminated through Stock Exchange announcements, website updates and, where appropriate video/web casts. During the year the Company issued various RNS and videos to update shareholders. All information is made available to all shareholders at the same time and no individual shareholder, or group of shareholders, is given preferential treatment.

REPORT OF THE DIRECTORS

The Directors present their annual report together with the audited financial statements of the Company for the Year Ended 31 December 2023.

 

Principal activity

The Company is an investment entity. The principal activity of the Company is that of holding assets involved in the identification, investment and development of mineral resources.

 

Domicile and principal place of business

Cadence Minerals plc is domiciled in the United Kingdom, which is also its principal place of business.

 

Business review and Future Development

The results of the Company are shown in the financial statements below.

 

Results and Dividends The Directors do not recommend the payment of a dividend. A review of the performance of the Company and its future prospects is included in the Strategic Report.

 

Key Performance Indicators

Due to the current status of the Company, the Board has not identified any performance indicators as key other than cash management and the carrying value of investments. Having sufficient cash for business operations is vital and must be managed accordingly. The Directors review and manage the Group's cash flow on a monthly basis. The financial strategy is to ensure that, wherever possible, there are sufficient funds to cover corporate overheads and exploration expenditure for as long a period as possible.  Management has confidence that financing of the Company can continue as and when required, albeit the board is keen to avoid excessive dilution and will manage the financing process with that objective in mind.  Investments are closely managed and monitored; further details are included in the Chairman's statement.

 

The monitoring and management of the carrying value of investments are specified in the strategic report and financial statements.

 

Furthermore, the Company has ensured that where possible it has built operational flexibility in its corporate and exploration expenditure to be paused should the financing environment prove difficult and cash preservation prove essential.

 

Principal risks and uncertainties

The principal risks and uncertainties facing the Company involve are specified in the strategic report.

 

Financial risk management objectives and policies

The Company's principal financial instruments are available for sale assets, trade receivables, trade payables, loans and cash at bank. The main purpose of these financial instruments is to fund the Company's operations.

 

It is, and has been throughout the period under review, the Company's policy that no trading in financial instruments shall be undertaken. The main risks arising from the Company's financial instruments are liquidity risk and interest rate risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below. Further information is available in Note [12].

 

Liquidity risk

The Company's objective is to maintain a balance between continuity of funding and flexibility through the use of equity and its cash resources.  Further details of this are provided in the principal accounting policies, headed 'going concern' and Note [12] to the financial statements.

 

Interest rate risk

The Company only has borrowings at fixed coupon rates and therefore minimal interest rate risk, as this is deemed its only material exposure thereto. The Company seeks the highest rate of interest receivable on its cash deposits whilst minimising risk.

 

Market risk

The Company is subject to market risk in relation to its investments in listed Companies held as available for sale assets.

 

Foreign exchange risk

The Company operates foreign currency bank accounts to help mitigate the foreign currency risk, and currently has little exposure except through its investments.

 

Political Donations and Expenditure

No charitable or political contributions were made during the current or previous year.

 

Directors

The membership of the Board is set out below.  All directors served throughout the period unless otherwise stated.

 

Andrew Suckling

Kiran Morzaria

Donald Strang

Adrian Fairbourn

 

Substantial shareholdings

Interests in excess of 3% of the issued share capital of the Company which had been notified as at 25 June 2024 were as follows:

 

	Ordinary shares held Number	Percentage of capital %
Hargreaves Lansdown (Nominees) Limited (15942)	24,323,172	12.31%
Interactive Investor Services Nominees Limited (SMKTISAS)	17,008,661	8.61%
Hargreaves Lansdown (Nominees) Limited (VRA)	15,574,748	7.88%
Barclays Direct Investing Nominees Limited	14,774,129	7.48%
Interactive Investor Services Nominees Limited (SMKTNOMS)	10,721,024	5.42%
HSDL Nominees Limited	10,298,276	5.21%
JIM Nominees Limited	9,682,068	4.90%
Hargreaves Lansdown (Nominees) Limited (HLNOM)	9,673,643	4.89%
Vidacos Nominees Limited	6,970,562	3.53%
Link Market Services Trustees (Nominees)Limited	6,380,000	3.23%
Peel Hunt Partnership Limited	6,191,966	3.13%

 

Payment to suppliers

It is the Company's policy to agree appropriate terms and conditions for its transactions with suppliers by means ranging from standard terms and conditions to individually negotiated contracts and to pay suppliers according to agreed terms and conditions, provided that the supplier meets those terms and conditions.  The Company does not have a standard or code dealing specifically with the payment of suppliers.

 

Trade payables at the year end all relate to sundry administrative overheads and disclosure of the number of days purchases represented by year end payables is therefore not meaningful.

 

Events after the Reporting Period

Events after the Reporting Period are outlined in Note 15 to the Financial Statements.

 

Going concern

The Directors have prepared cash flow forecasts for the period ending 30 June 2025 which take account of the current cost and operational structure of the Company, as described further in the financial statements.

 

The cost structure of the Company comprises a high proportion of discretionary spend and therefore in the event that cash flows become constrained, costs can be quickly reduced to enable the Company to operate within its available funding.

 

These forecasts demonstrate that the Company has sufficient cash funds available to allow it to continue in business for a period of at least twelve months from the date of approval of these financial statements.  Accordingly, the financial statements have been prepared on a going concern basis.

 

Directors' Responsibilities Statement

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

 

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the Company financial statements in accordance with UK adopted International Accounting Standards (IAS).  Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs and profit or loss of the Company for that period. In preparing these financial statements, the Directors are required to:

 

-     select suitable accounting policies and then apply them consistently;

-     make judgements and estimates that are reasonable and prudent;

-     state whether applicable IFRSs have been followed, subject to any material departures disclosed and explained in the financial statements;

-     prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

 

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. 

In so far as each of the Directors are aware:

 

·   there is no relevant audit information of which the Company's auditors are unaware; and

·   the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information.

 

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. 

 

Auditors

 

PKF Littlejohn LLP offer themselves for re-appointment as auditor in accordance with Section 489 of the Companies Act 2006.

 

ON BEHALF OF THE BOARD

 

Kiran Morzaria

 

Corporate Governance

Introduction to Governance

 

The Directors recognise that good corporate governance is a key foundation for the long-term success of the Company. As the Company is listed on the AIM market of the London Stock Exchange and is subject to the continuing requirements of the AIM Rules. The Board has therefore adopted the principles set out in the Corporate Governance Code for small and midsized companies published by the Quoted Companies Alliance ("QCA Code"). The principles are listed below.

 

While building a strong governance framework, we also try to ensure that we take a proportionate approach and that our processes remain fit for purpose as well as embedded within the culture of our organisation. We continue to evolve our approach and make ongoing improvements as part of building a successful and sustainable company.

 

1.    Establish a strategy and business model which promote long-term value for shareholders

Our strategy is to identify undervalued assets with irreplaceable strategic advantages that will deliver capital growth to our shareholders. We invest in these assets and where required help deliver capital growth. To meet long-term demand, we believe the metals and mining sectors require focused investment capital from knowledgeable investors that understand the substantial risk of the mineral resource sector and how to mitigate these risks to maximise potential returns for our investors.

 

A more detailed description of its Strategy and Business Model is available in the strategic report. Details on the principal risks and uncertainties which the Company faces are specified in the strategic report. The Company seeks to share this vision and details of the implementation of its strategy through internal dialogue with employees as well as external communications by way of public announcements and dissemination of information through this website and the annual report and accounts.

 

2.    Seek to understand and meet shareholder needs and expectations

The Board is committed to maintaining an open dialogue with shareholders. Communication with the Board is committed to maintaining an open dialogue with shareholders. Communication with shareholders is coordinated by the CEO. Cadence encourages two-way communication with institutional and private investors. The Company's major shareholders maintain an active dialogue and ensure that their views are communicated fully to the Board. Where voting decisions are not in line with the Company's expectations the Board will engage with those shareholders to understand and address any issues. The Company Secretary is the main point of contact for such matters.

 

The Company seeks out appropriate platforms to communicate to a broad audience its current activities, strategic goals and broad view of the sector and other related issues. This includes but is not limited to media interviews, website videos in -person investor presentations and written content. Communication to all stakeholders is the direct responsibility of the Senior Management team. Managers work directly with professionals to ensure all inquiries (through established channels for this specific purpose such as email or phone) are addressed in a timely matter. Managers also ensure that the Company communicates with clarity on its proprietary internet platforms. The Board routinely reviews the Company communication policy and programmes to ensure the quality communication with all stakeholders.

 

The Board believes that the Annual Report and Accounts, and the Interim Report published at the half-year which can be found on the Company's website, play an important part in presenting all shareholders with an assessment of the Company's position and prospects. All reports and press releases are published under the "Investors" tab of the Company's website.

 

 

3.    Take into account wider stakeholder and social responsibilities and their implications for long-term success

The Board recognises its prime responsibility under UK corporate law is to promote the success of the Company for the benefit of its members as a whole. The Board also understands that it has a responsibility towards employees, partners, customers, suppliers and to the community and environment it operates in as a whole.

 

Communication with and feedback from these various groups is achieved in a variety of ways. The Executive Directors hold investor roadshows and webcasts on a regular basis, at which feedback from shareholders is sought. Regular dialogue is maintained with employees through regular discussion and updates given by the Executive Directors.

 

The nature of the Cadence's business as an investment company means that although it has no direct effect on the working environments and communities of the companies it invests in, it nonetheless liaises with the management of its investee companies to understand their approach to stakeholder engagement and their policies, which will form part of its investment criteria.

 

4.    Embed effective risk management, considering both opportunities and threats, throughout the organisation

The Board has an established Audit Committee, a summary of its roles and responsibilities is available on the corporate governance webpage. The Committee is specifically charged with ensuring that Cadence as a whole has the appropriate policies and processes in place to identify the risks which the Company is exposed to and to proactively mitigate those risks as appropriate.

 

The Company maintains a register of risks and publishes an overview of significant risks and uncertainties in its Annual Report. Please refer to the Company's Annual Report and Accounts for further details on the principal risks and uncertainties which the Company faces.

 

The Company receives regular feedback from its external auditors on the state of its internal controls. The Board maintains a register of risks and publishes an annual summary of the significant risks and uncertainties in the Annual Report.

 

5.    Maintain the Board as a well-functioning, balanced team led by the chair

The Board is comprised of Andrew Suckling the Non-Executive Chairman, a Non-Executive Director and two Executive Directors. The CEO, Kiran Morzaria, is engaged to work a minimum of a 27-hour week and is an employee of the Company. The Finance Director, Donald Strang, is engaged to work a minimum of a 27-hour week.

 

The Board deemed that given the stage and development of the Company, it would be more cost efficient to employ a full-time accountant which along with the finance director ensure that Company's financial systems are robust, compliant, and support current activities and future growth.

 

The service agreements of the Non-Executive Directors anticipate that the Non-Executive Chairman should spend 5 working days per month and the Non-Executive Director 3 working days per month. All Directors dedicate such time as required to effectively perform their roles.

 

The roles of the Chairman and CEO are clearly separated. The Directors ensure the skills required to undertake their roles are kept current through training and consultation with subject matter experts as required.

 

5.            Maintain the board as a well-functioning, balanced team led by the chair (continued)

The CEO is responsible for the operational management of the business of Cadence and for the implementation of strategy and policies as agreed by the Board. The non-executive Chairman is responsible for the leadership and effective working of the Board, for setting the Board agenda, and ensuring that Directors receive accurate, timely and clear information.

 

The CEO is responsible for the operational management of the business of Cadence and for the implementation of strategy and policies as agreed by the Board. The Non-Executive Chairman is responsible for the leadership and effective working of the Board, for setting the Board agenda, and ensuring that Directors receive accurate, timely and clear information.

 

The Non-Executive Directors are not considered independent under the FRC Code as they hold options in the Company. However, the Board considers that the Non-Executive Directors are independent of management under all other measures and are able to exercise independence of judgement. Whilst conflicts of interest are fully disclosed and understood, as appropriate Non-Executive Directors exercise independence of judgement. No Director is involved in discussions or decisions where he has a conflict of interest. An Audit Committee and a Remuneration Committee support the Board.

 

Cadence intends that the Board endeavours to hold full board meetings at least 3 times each year. The attendance of Board members for meetings during the current financial year is as follows:

 

Andrew Suckling	3 of 5
Adrian Fairbourn	3 of 5
Kiran Morzaria	5 of 5
Donald Strang	5 of 5

 

6.    Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities

Directors who have been appointed to the Company have been chosen because of the skills and experience they offer. The Board continually strives to ensure that it has the right balance of knowledge, skills, experience and contacts across the sectors in which it operates. This is evaluated in line with Cadence's business model as it changes.

 

It is of primary importance that the Board's knowledge is kept  up to date in a rapidly changing mining and metals marketplace. This is achieved by maintaining a broad network of contacts across the industry and ensuring regular dialogue is held and feedback obtained by both the executive and non-executive directors as appropriate.

 

As necessary, Directors receive externally provided refresher and update training specific to their individual roles.

 

The Company Secretary advises the Board members on their legal and corporate responsibilities and matters of corporate governance.

 

Biographical details of each of the Directors are given in the strategic report and on the website.

 

7.    Evaluate board performance based on clear and relevant objectives, seeking continuous improvement

On 28 September 2018, the Company adopted the QCA Code. Prior to this point, given the nature and the development of the Company, it did not set Key Performance Indicators.

 

The Company now measures its performance, and therefore inherently the performance of the Board as a unit, against Key Performance Indicators. Due to the current status of the Company, the Board has not identified any performance indicators as key other than cash management and the carrying value of investments.

 

The performance of the Executive Directors is monitored and regularly reviewed by the Non-Executive Directors. Such review considers both the KPIs outlined above, The Board intends to introduce qualitative performance measurements for the Executive Directors to ensure that the right degree of focus is applied to the strategic direction as well as the current financial performance of the business.

 

8.    Promote a corporate culture that is based on ethical values and behaviours

The Company has a strong ethical culture, which is promoted by the actions of the Board and Executive team.

These include the following key policies which govern its ethical culture.

 

·    Equal opportunities policy

·    Code of conduct

·    Whistleblowing policy

·    Health and safety policy

·    Email and internet policy

·    Social media policy

 

The Company has an anti-bribery policy and has implemented adequate procedures described by the Bribery Act 2010. The Company reports on its compliance to the Board on an annual basis. The Company has undertaken a review of its requirements under the General Data Protection Regulation, implementing appropriate policies, procedures and training to ensure it is compliant.

 

9.    Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders

The Company encourages two-way communication with both its institutional and private investors and responds quickly to all significant queries received. The "Investors" tab of our website contains all required regulatory information together with other information which shareholders may find useful.

 

The AGM is an important forum for shareholder engagement, and the directors are always available immediately after the AGM to listen to the views of any shareholders in attendance and to provide them with an update on the business.

 

10.  Maintain governance structures and processes that are fit for purpose and support good decision-making by the board

Details of the Company's corporate governance arrangements are provided within this Corporate Governance section of the Annual Report and Accounts. The Board considers the appropriateness of these arrangements against the size and complexity of the Company as it evolves over time.

 

The Chairman leads the Board and is responsible for ensuring its effectiveness in all aspects of its role. The Chairman promotes a culture of openness and debate, in particular by ensuring the Non-Executive Directors provide constructive challenge to the Executive Directors.

 

The matters reserved for the board are:

·    Definition of the strategic goals for the Company, sets corporate objectives to enable the goals to be met, and measures performance against those objectives;

·    Ensuring that the necessary financial and human resources are in place to both meet its obligations to all stakeholders and to provide a platform for profitable growth;

·    Recommending any interim and final dividends;

·    Approving all mergers and acquisitions and all capital expenditure greater than £200,000;

·    Receiving recommendations from the Audit Committee in relation to the reporting requirements and the appropriate accounting policies for the Company, the appointment of auditors and their remuneration, and the identification and management of risk;

·    Receives recommendations from the Appointments Committee concerning the appointment of executive directors, and from the Remuneration Committee concerning the remuneration of the executive directors;

·    Determination of  the fees paid to the Non-Executive Directors.

 

The CEO has the overall responsibility for creating, planning, implementing, and integrating the strategic direction of the Company. This includes responsibility for all components and departments of a business. The CEO also ensures that the organisation's leadership maintains constant awareness of both the external and internal competitive landscape, opportunities for expansion, customer base, markets, new industry developments and standards.

 

The Finance Director works alongside the CEO and has overall control and responsibility for all financial aspects of company strategy. The Finance Director takes overall responsibility of the Company's accounting function and ensures that Company's financial systems are robust, compliant and support current activities and future growth. The Finance Director will co-ordinate corporate finance and manage company policies regarding capital requirements, debt, taxation, equity and acquisitions as appropriate.

 

The Board is supported by two committees being the Audit Committee and Remuneration Committee. The Audit Committee advises the Board on the reporting requirements and the appropriate accounting policies for the Company, the appointment of auditors and their remuneration, and the identification and management of risk. The Remuneration Committee advises the Board on all matters pertaining to the remuneration of the Executive Directors.

 

Board Members

The Board comprises of a Non-Executive Chairman, one Non-Executive Director and two Executive Directors.

 

Andrew Suckling, Non-Executive Chairman

Andrew has over 25 years' experience in the commodity industry. He began in 1994 as a trader on the London Metal Exchange and subsequently became a founding partner, research analyst and trader with the multi-billion fund management group Ospraie. Andrew is a graduate of Brasenose College, Oxford University, earning a BA (Hons) in Modern History in 1993 and an MA in Modern History in 2000.  Andrew is the chair of the Audit and Remuneration Committee.

 

Kiran Morzaria, Chief Executive Officer

Kiran holds a B.Eng. from the Camborne School of Mines and an MBA (Finance). He has over 20 years' experience in the mineral resource industry, working in both operational and management roles. The first four years of his career were spent in exploration, mining and civil engineering, after which he was involved in the acquisition, recommissioning and eventual sale of the Vatukoula Gold Mine.

 

Donald Strang, Finance Director

Donald is a member of the Australian Institute of Chartered Accountants and has over 20 years of experience in both publicly listed and private enterprises in Australia, Europe and Africa. He has considerable corporate and international expertise, and over the past decade, has focused on mining and exploration activities.

 

Adrian Fairbourn, Non-Executive Director

Adrian began his career as an investment analyst before moving to build and manage the highly successful alternative fund-of-funds operation at the Bank of Bermuda. Adrian has co-managed a multi-family office in London, responsible for hedge fund investments, direct investments and also asset-raising for co-investment opportunities. He has successfully assisted in over $US1 billion of structuring, capital and fundraising projects for private companies and alternative funds. Adrian is a member of the Audit and Remuneration Committee.

 

The Board is responsible for formulating, reviewing and approving the Company's strategy, financial activities and operating performance. Day-to-day management is devolved to the Executive Directors, who are charged with consulting the Board on all significant financial and operational matters. The Board retains ultimate accountability for governance and is responsible for monitoring the activities of the executive team.

 

The roles of Chairman and Chief Executive Officer are split in accordance with best practice. The Chairman has the responsibility of ensuring that the Board discharges its responsibilities. The Chairman is responsible for the leadership and effective working of the Board, for setting the Board agenda, and ensuring that Directors receive accurate, timely and clear information. No one individual has unfettered powers of decision.

 

The two Executive Directors are comprised of a Chief Executive Officer ("CEO") and Finance Director. The CEO has the overall responsibility for creating, planning, implementing, and integrating the strategic direction of the Company. This includes responsibility for all components and departments of a business. The CEO also ensures that the organisation's leadership maintains constant awareness of both the external and internal competitive landscape, opportunities for expansion, customer base, markets, new industry developments and standards.

 

The non-executive directors are not considered independent under the Financial Reporting Council's Corporate Governance Code (April 2016) ("FRC Code") as they both have options in the Company. However, the Board considers that both non-executives are independent of management under all other measures and able to exercise independence of judgement.

 

The Committees

Audit Committee

The Audit Committee consists of two non-executive members of the board and meet at least once a year.

The principal duties and responsibilities of the Audit Committee include:

·      Overseeing the Company's financial reporting disclosure process; this includes the choice of appropriate accounting policies

·      Monitor the Company's internal financial controls and assess their adequacy

·      Review key estimates, judgements and assumptions applied by management in preparing published financial statements

·      Assess annually the auditor's independence and objectivity

·      Make recommendations in relation to the appointment, re-appointment and removal of the company's external auditor

 

Remuneration Committee

The Remuneration Committee consists of two non-executive members of the board and meet at least once a year.

The principal duties and responsibilities of the Remuneration Committee include:

·      Setting the remuneration policy for all Executive Directors

·      Recommending and monitoring the level and structure of remuneration for senior management

·      Approving the design of, and determining targets for, performance related pay schemes operated by the company and approve the total annual payments made under such schemes

·      Reviewing the design of all share incentive plans for approval by the Board and shareholders

 

 

·      None of the Committee members have any personal financial interest (other than as shareholders and option holders), conflicts of interest arising from cross-directorships or day-to-day involvement in the running of the business. No director plays a part in any financial decision about his or her own remuneration.

 

Principle and Approach of the Board

Cadence is committed to achieve and maintain high standards of governance. As such, the Board has chosen to adopt the Quoted Companies Alliance Corporate Governance Code for Small and Mid-Size Quoted Companies 2018 ("the QCA Code"). Detailed below is how the Board applies the 10 principles of Corporate Governance, which form part of the QCA code.

 

Internal Controls

The Directors acknowledge their responsibility for the Company's systems of internal controls and for reviewing their effectiveness. These internal controls are designed to safeguard the assets of the Company and to ensure the reliability of financial information for both internal use and external publication. While they are aware that no system can provide absolute assurance against material misstatement or loss, in light of increased activity and further development of the Company, continuing reviews of internal controls will be undertaken to ensure that they are adequate and effective.

 

Risk Management

The Board considers risk assessment to be important in achieving its strategic objectives. There is a process of evaluation of performance targets through regular reviews by Senior Management to forecasts. Project milestones and timelines are reviewed regularly.

 

Business Risk

The Board regularly evaluates and reviews any business risks when reviewing project timelines. The types of risks reviewed include:

·      regulatory and compliance obligations

·      environmental requirements

·      commodity price, interest rate, liquidity and volatility risks

·      political and country risks where appropriate.

 

Insurance

The Company maintains insurance in respect of its Directors and Officers against liabilities in relation to the Company.

 

Treasury Policy

The Company finances its operations through equity and holds its cash as a liquid resource to fund the obligations of the Company. Decisions regarding the management of these assets are approved by the Board.

 

Securities Trading

The Board has adopted a Share Dealing Code that applies to Directors, Senior Management and any employee who is in possession of 'inside information'. All such persons are prohibited from trading in the Company's securities if they are in possession of 'inside information'. Subject to this condition and trading prohibitions applying to certain periods, trading can occur provided the individual has received the appropriate prescribed clearance.

 

Remuneration Report

On behalf of the Board, I am pleased to present the Directors' Remuneration Report summarising the Company's remuneration policy and providing information on the Company's remuneration approach and arrangements for Executive Directors, Non-Executive Directors and Senior Executive Management for the year ended 31 December 2023.

 

This report is prepared in accordance with the QCA Remuneration Committee Guide for small and mid-sized quoted companies, revised in 2020. A summary of the Remuneration Committee's role, membership and relevant qualifications can be found in the corporate governance section.

 

Remuneration Committee meetings are held at least once a year with the primary focus of setting goals for the coming period and then assessing results at the end of that period. During the year, the Remuneration Committee met 2 times and;

 

·      Benchmarked the Boards Remuneration, both fixed and variable and as a whole, and compared it to AIM-listed companies of a similar market capitalisation.

·      Reviewed the above comparisons and establish short, medium and long-term incentive schemes, which it then recommended to the Board for approval,

·      Reviewed the performance of the Board against targets and awarded incentives covering the reporting period.

 

The Board recognises that Directors' remuneration is of legitimate concern to the shareholders.  The Company operates within a competitive environment; performance depends on the individual contributions of the Directors and employees, and it believes in rewarding vision and innovation.

 

Policy on executive Directors' Remuneration

The policy of the Board is to provide executive remuneration packages designed to attract, motivate and retain Directors of the calibre necessary to maintain the Company's position and to reward them for enhancing shareholder value and return.  It aims to provide sufficient levels of remuneration to do this but to avoid paying more than is necessary.  The remuneration will also reflect the Directors' responsibilities and contain incentives to deliver the Company's objectives.

 

Salary and Fees

Benchmarking data indicates that at the time of the review, for Salary and Fees, Cadence is slightly above the median remuneration for an exploration and mining company between a £5 million and £15 million market capitalisation on the AIM market. As such the renumeration committee recommended no changes to salary or fees.

 

Share Awards (Share Incentive Plan)

No share awards we made during this period.

 

Pensions

The Company only operates a basic pension scheme for its directors and employees as required by UK legislation. The Company made the following pension contributions in the year: K Morzaria £4,403 (2022: £4,403) and D Strang £Nil (2022: £2,201).

 

Benefits in kind

No benefits in kind were paid during the year to 31 December 2023 or the year ended 31 December 2022.

 

Notice periods

Andrew Suckling, Kiran Morzaria, Donald Strang and Adrian Fairbourn each have a 12 month rolling notice period.

 

Share option incentives

At 31 December 2023 each Director held 1,800,000 (31 December 2022: 1,800,000) options which are exercisable at any time before 30 April 2026. The exercise price is 29p. No options were exercised by Directors during the period (2022: None).

 

The remuneration of the Directors was as follows:

 

	A Fairbourn		A Suckling		K Morzaria		D Strang		Total
	£		£		£		£		£
Year to 31 December 2023
Salary and fees	48,000		120,000		230,000		120,000		518,000
Total	48,000		120,000		230,000		120,000		518,000
Year to 31 December 2022
Salary and fees	48,000		120,000		230,000		120,000		518,000
Cost of shares awarded (1)	19,680		19,680		44,477		38,304		122,141
Total	67,680		139,680		274,477		158,304		640,141

 

(1)   The cost of shares awarded represents the value of the shares awarded to the Directors for milestones reached.

 

At 31 December 2023 £58,000 (2022: £Nil)was outstanding to directors.

 

The high and low share price for the year were 16.625p and 4.85p respectively (year ended 31 December 2022: 31.225p and 8.5p). The share price at 31 December 2023 was 5.75p (31 December 2022: 11.35p).

 

Andrew Suckling

 

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF CADENCE MINERALS PLC

Opinion

We have audited the financial statements of Cadence Minerals Plc (the 'company') for the year ended 31 December 2023 which comprise the Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Changes in Equity, the Statement of Cash Flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and UK-adopted international accounting standards.

In our opinion, the financial statements:

·    give a true and fair view of the state of the company's affairs as at 31 December 2023 and of its loss for the year then ended;

·    have been properly prepared in accordance with UK-adopted international accounting standards; and

·    have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors' assessment of the group's and parent company's ability to continue to adopt the going concern basis of accounting included

·    Obtaining and evaluating management's going concern assessment, including their assumptions, key risks and uncertainties, and any available supporting documentation.

·    Assessing the historical forecasting accuracy and consistency of the going concern assessment with information obtained from other areas of the audit, such as our audit procedures on management's impairment assessments.

·    Testing the clerical accuracy of the assessment

·    Evaluating whether the assumptions made by management are reasonable and appropriately conservative, considering the Group's relevant principal risks and uncertainties. We challenged the assumptions and estimates made by management where necessary.

·    Evaluating the adequacy of working capital, including assessing the reasonableness of assumptions used in the cash flow forecasts and budgets and any plans to address potential shortfalls.

·    Performing sensitivity analysis on management's assumptions, including applying incremental adverse cash flow sensitivities to assess the potential impact of severe but plausible scenarios such as significant movement in prices level 1 investments.

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

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

Our application of materiality

The scope of our audit was influenced by our application of materiality. The quantitative and qualitative thresholds for materiality determine the scope of our audit and the nature, timing and extent of our audit procedures. The materiality applied to the financial statements was set at £289,000 (2022: £223,000), with performance materiality set at £202,300 (2022: £223,300).

Materiality has been calculated as 2% (2022: 1.5%) of the benchmark of net assets, which we have determined, in our professional judgement, to be one of the principal benchmarks within the financial statements relevant to members of the Company in assessing financial performance. The reason for the change was to ensure that materiality would be more or less consistent with prior year as the overall risk has not changed.

We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £14,450 (2022: £15,950).

We applied the concept of materiality both in planning and performing the audit, and in evaluating the effect of misstatement.

Our approach to the audit

In designing our audit, we determined materiality, as above, and assessed the risk of material misstatement in the financial statements. We addressed the risk of management override of internal controls, including evaluating whether there was evidence of bias by the directors that represents a risk of material misstatement due to fraud. In particular we looked at areas involving significant accounting estimates and judgements by the directors and considered future events that are inherently uncertain, such as the fair value of unquoted investments and the value of the share options scheme.

In addition, we focused our audit on the significant risk areas including the Key Audit Matter as outlined below.

A full scope audit was performed on the complete financial information of the Company.

Key audit matters

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

Key Audit Matter	How our scope addressed this matter
Carrying value of Financial Assets (Refer to note 6)
The Company held investments with a value of £15.8m as at 31 December 2023. These are valued in accordance with IFRS 13 and the fair value hierarchy; and classified as per IFRS 9. There is the risk that these investments have not been valued in accordance with IFRS 13 and IFRS 9 and require impairment. Investments which fall under Tier 3 of the fair value hierarchy are subject to significant management estimate and judgment, which increases the risk of material misstatement. The group's investments include £4,1m (2022:£6,2m) invested in level 1 listed investments, which are not subject to management judgement or estimation, and are valued at their year-end share price per the relevant exchange. The balance of the group's investments are in unlisted companies and categorised as Level 3 investments.  Given the value of the investments is material at the year end and significant judgement needed when valuing level 3 investment we have assessed valuation of investments as a Key audit matter.	Our audit work will include: § Reviewing and challenging the valuation methodology for the investments held and ensuring that the carrying values are supported by sufficient and appropriate audit evidence. § Ensuring that all asset types are categorised according to IFRS, including the accounting disclosures as required under IFRS 9; § Reviewing the movement in investments to ensure they are accounted for and disclosed correctly in line with IFRS 9; § Reviewing disclosures in relation to said assets; § Ensuring that Cadence Minerals Plc has full title to the investments held; § Ensuring that appropriate disclosures surrounding the estimates made in respect of any valuations are included in the financial statements; and § Considering whether the transactions have been accounted for correctly within the financial statements. Based on the work performed, we are satisfied that the carrying value of the financial assets is materially correct and adequately disclosed
Carrying value and classification of loans receivable from Investee (refer to note 7)
There is a risk that the loan amounts are not recoverable given that no repayments were made by the debtors for the loans outstanding and in addition to the existing loans another loan was extended. There is also a risk that the loans have not been accounted for in accordance with IFRS 9. Risk has been assessed as a Key Audit Matter due to the uncertainty over the recoverability of £3.9 million in loans from REM Mexico.	Our audit work will include: § Ensuring that the loans have been classified and disclosed correctly in accordance with IFRS 9; § Discussing with Management to ascertain their justification for no IFRS 9 ECL charge being recognised in the year. Challenge management's key assumptions and consider whether the loans are fully recoverable or whether an IFRS 9 ECL charge is required; and § Ensuring that the loans are correctly classified as current or non-current in accordance with the payment terms per the loan agreements. Cadence holds an interest in the Sonora Lithium Project through REM Mexico, which has a 30% stake in the joint venture interests in Mexalit S.A. de CV ("Mexalit") and Megalit S.A. de CV ("Megalit"). The remaining 70% is held by Ganfeng Lithium Group Co., Ltd ("Ganfeng") Following a change in the Mexican Mining Law and the submission of evidence to support the investment spend to the regulatory authorities, a preliminary cancellation of nine lithium concessions was issued in August 2023. The cancellations are not final and both Ganfeng and Cadence have filed administrative review recourses before the Secretary of Economy against the resolutions cancelling the concessions, as they believe these resolutions violate Mexican and international law and infringe upon their fundamental due process rights. The case is still ongoing and the recovery of these loans from REM Mexico is dependent on the success of the administrative review. If the concessions are not granted back and compensation is not received from the Mexican government for concessions, a full impairment of the loan may be required. Further details are disclosed in the critical accounting estimates of these financial statements.

 

Other information

The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

·    the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

·    the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

·    adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

·    the financial statements are not in agreement with the accounting records and returns; or

·    certain disclosures of directors' remuneration specified by law are not made; or

·    we have not received all the information and explanations we require for our audit.

Responsibilities of directors

As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

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

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

·    We obtained an understanding of the company and the sector in which it operates to identify laws and regulations that could reasonably be expected to have a direct effect on the financial statements. We obtained our understanding in this regard through discussions with management and application of cumulative audit knowledge and experience of the sector.

·    We determined the principal laws and regulations relevant to the company in this regard to be those arising from Companies Act 2006, AIM listing rules, GDPR, QCA compliance, International Financial Reporting Standards (in compliance with the Companies Act 2006) and tax legislation within the United Kingdom.

·    We designed our audit procedures to ensure the audit team considered whether there were any indications of non-compliance by the company with those laws and regulations. These procedures included, but were not limited to:

o  Discussions with management

o  Review of board minutes 

o  Review of legal and professional expenditure

o  Review of letter of good standing

 

·    We also identified the risks of material misstatement of the financial statements due to fraud. We considered, in addition to the non-rebuttable presumption of a risk of fraud arising from management override of controls, that the potential for management bias was in the valuation of investments. We addressed the risk by challenging the assumptions and judgements made by management when auditing that significant accounting estimate. 

·    As in all of our audits, we addressed the risk of fraud arising from management override of controls by performing audit procedures which included, but were not limited to: the testing of journals; reviewing accounting estimates for evidence of bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business.

Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation.  This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Use of our report

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.  Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose.  To the fullest extent permitted by law, we do not accept or assume responsibility to anyone, other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

 

Zahir Khaki (Senior Statutory Auditor)                                                                                                     15 Westferry Circus

For and on behalf of PKF Littlejohn LLP                                                                                                               Canary Wharf

Statutory Auditor                                                                                                                                                     London E14 4HD