Vast Resources plc / Ticker: VAST / Index: AIM / Sector: Mining

30 September 2019

Vast Resources plc
(“Vast” or the “Company”)

Posting of Annual Report

Vast Resources plc, the AIM-listed mining company, is pleased to announce its audited final results for the 13 month period ended 30 April 2019.

A copy of the annual report will be available on the Company’s website at www.vastplc.com.

For further information, visit www.vastplc.com or please contact:

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 (“MAR”).

ABOUT VAST RESOURCES PLC

Vast Resources plc, is an AIM listed mining company with mines in Romania and Zimbabwe focused on the rapid advancement of high quality brownfield projects by recommencing production at previously producing mines in Romania and commencement of the joint venture mining agreement on the Community Concession Block of the Chiadzwa Diamond Fields in Zimbabwe.

The Company’s portfolio includes an 80% interest in the Baita Plai Polymetallic Mine in Romania, where work is currently underway towards developing and recommissioning the mine on completion of funding and the commencement of the of the Community Concession Block in Chiadzwa, Zimbabwe

Vast Resources owns the Manaila Polymetallic Mine in Romania, which was commissioned in 2015, currently on care and maintenance, and is focused on its expansion through the development of a second open pit operation and new metallurgical complex at the Carlibaba Extension Area.

ANNUAL REPORT

OVERVIEW OF THE 13 MONTHS ENDED 30^th APRIL 2019

Vast Resources plc (`Vast’ or the `Group’) has repositioned the business to focus resources on two key mining opportunities in Romania and Zimbabwe with the intention of starting production at these mines in the current financial year. These opportunities comprise the Baita Plai Polymetallic Mine (`BPPM’) in Romania, and the Group’s expected diamond concession in Zimbabwe. This establishes the platform to support Vast’s strategic objective to expand its footprint in these jurisdictions. 

In repositioning the business, the Group has divested its 25.01% stake in its Zimbabwean gold operations, reduced debt, strengthened its management team, and directed resources exclusively to placing its key Romania and Zimbabwean assets into production.

The Group was awarded the Baita licence on 15^th October 2018 but was unable to draw on Tranche B of the Mercuria prepayment facility in order to fund capital expenditure programs at BPPM and the Manaila Polymetallic Mine (`MPM’). The objective of these programs was to restart production at BPPM and to improve operational efficiency at MPM. Consequently, the Group is well advanced in the process of arranging new funding which it is prioritising for BPPM and its diamond concession given the short lead times expected to generate free operational cashflow, and has placed MPM on care and maintenance in expectation of a second funding round at a later stage.

Financial

• US$ 8.6 million gain on disposal of Zimbabwean gold operations.
• US$ 21.4 million reduction in the carrying amounts of loans and borrowings to US$ 5.5 million (2018: US$ 27 million)
• Total revenue, including operations that were discontinued in April 2019, increased to US$ 34.7 million (2018: US$ 30.7 million).
• Revenue from continuing operations increased to US$ 3.4 million (2018: US$ 3.1 million)
• Romanian operations continued to be a net cash absorber given a delay in financing the required capital expenditure to place BPPM into production and to improve profitability at MPM.
• Cash balance at the period end of US$ 0.569 million (2018: US$ 1.3 million).

Operational Development

• Baita Plai Association Licence executed on 15^th October 2018, giving the Group the right to mine at BPPM.
• 1,725 and 242 tonnes of copper and zinc concentrate respectively produced at MPM from April 2018 to December 2018, at which point MPM was placed on care and maintenance.
• 29.41% economic interest acquired in the Blueberry Polymetallic Gold project in Romania which has raised US$ 1 million to meet exploration costs.
• Hiring of key management and technical personnel for the Group’s Zimbabwe diamond opportunity.
• The Chiadzwa Community Diamond Concession Joint Venture was signed post period end.

Funding

Equity:

Fundraising share issues during the year (gross proceeds before cost of issue):

Fundraising share issues post period end (gross proceeds before cost of issue):

Debt

• US$ 3.1 million was repaid to Sub-Sahara Goldia Investments.
• US$ 20.6 million was disposed of as part of the sale and restructuring of Vast’s Zimbabwe operations.

Management

• Appointment of Nick Hatch as Non-executive Director on 9^th May 2018.
• Appointment of Mark Mabhudhu as specialist adviser to and then Executive Director of Vast’s diamond division on 6^th July 2018
• Appointment of Andrew Hall as Head of Corporate Development and Investor Relations on 1^st December 2018.
• Resignation of Carl Kindinger as Group CFO on 10^th February 2019.
• Appointment of Paul Fletcher as Group CFO on 11^th February 2019.

Political

• Continued improved business environment in Zimbabwe

CHAIRMAN’S REPORT

The reporting period and the period to date since, has been a testing one for the Board.  It has been a period marked equally by great opportunities and challenges.  It has also been one of significant change of direction for the Company due to the decision to dispose of our Zimbabwe gold interests and instead use our accumulated in-house knowledge of Zimbabwe by focussing on the Zimbabwe diamond sector.

Romania

In Romania we were delighted in October to acquire the association licence giving the right to mine at Baita Plai.  But we were of course disappointed that the process had proved to have been such a long and exacting one.  We have had to bear monthly dewatering and maintenance costs over a long period.  We have forgone the income that might otherwise have arisen from production.  The delay has been costly. 

Our financial planning for the Romanian operation – both Baita Plai and Manaila – had been underpinned by the Mercuria pre-payment facility from which we had expected a second tranche (Tranche B) of US$5.5 million.  The drawdown of the tranche was delayed and eventually, to our great surprise, was withdrawn in January.  As stated in the Strategic Report this withdrawal was unrelated to the Company’s standing or to the viability of the Company’s Romanian operation.  The effect of this has been to further delay the commissioning of Baita Plai and to force the decision to put Manaila onto care and maintenance while we prioritised Baita Plai.

The process of negotiating and agreeing the detailed documentation necessary for the refinance of Baita Plai has been time consuming but has, at the time of writing, reached an advanced stage.  However, during the waiting period we have prepared a detailed and costed commissioning and production plan for Baita Plai, and have moreover ordered, purchased, or are already implementing the long lead items so that the mine can be commissioned within three months of the drawdown of the finance.

We continue to believe that Baita Plai is a key asset for the Company and that when in production the mine will be transformational for the Company.

Zimbabwe

During the reporting period we have been steadily appraising the diamond opportunities in Zimbabwe and in July 2018 appointed as head of our diamond division Mark Mabhudhu who has a lifetime of experience in senior management roles in the diamond sector including being former CEO of Government owned Zimbabwe Consolidated Diamond Company (pvt) Ltd (‘ZCDC’).  As a result, a number of opportunities have been offered to us and due diligence, where appropriate, has been undertaken.

Considerable effort has now resulted in a formal joint venture agreement with the Chiadzwa Community and the prospect very shortly of a joint venture involving both the Community and ourselves with ZCDC under which the ZCDC joint venture company will be given the right to mine the Chiadzwa Community Concession.  This Concession is in a general area which we had previously referred to as the Marange Diamond Fields.

Indigenisation laws in Zimbabwe, including for diamonds, have now been abolished.  Moreover, we understand that the diamond joint venture with our partners, Chiadzwa Community and ZCDC will, subject to completion of all agreements, entitle the ZCDC joint venture company to retain sale proceeds from the diamonds, that are not required in Zimbabwe, offshore.  This constitutes a significant advantage compared with the position for gold operations where all sales have to be made via the in-country refinery owned by the Reserve Bank, and where remission of proceeds are restricted by the Exchange Control laws.

Although our Zimbabwe gold assets were performing well there were several issues which militated against our ability to extract cash from their operation in the short or medium term for general corporate purposes.  The operation also carried large debt on our balance sheet which was unhelpful in our fundraising negotiations.  We accordingly took the fundamental decision to dispose of our Zimbabwe gold assets and concentrate our resources on the diamond sector.

Directors and management

Executives

Mark Mabhudhu was appointed on 6 July 2018 initially as a specialist advisor to the board of our Zimbabwe subsidiary, but subsequently as executive head of the Company’s diamond division.  Mark, at appointment, had been involved in diamond mining for more than 22 years, both in Zimbabwe and internationally, including 11 years with Debswana, the joint venture company between De Beers and the government of Botswana.  As already stated he had previously been CEO of ZCDC.

Andrew Hall was appointed Head of Corporate Development and Investor Relations on 1 December 2018.  He has a background in natural resource and finance linked businesses and previously worked at a natural resources focussed merchant bank where he established and managed the alternative finance distribution business covering asset managers, private equity, investment banks, family offices and trading houses.

Paul Fletcher was appointed on 8 February 2019 as Chief Financial Officer and has progressed into playing an integral senior role in the management of the Group’s finances.  Paul has formerly held a variety of senior finance and operational roles in trading, processing, and financial businesses in the US, Europe and Asia. 

Non-Executive

As reported in the 2018 Annual Report Nick Hatch was appointed to the Board as a Non-Executive Director on 9 May 2018.  Nick has 35 years of experience in mining investment banking, primarily as a mining analyst and in managing mining and metals research and equities teams, most recently as a Director of Mining Equity Research at Canaccord Genuity in London. 

Funding

During the reporting period US$7.9 million was raised in equity finance (including warrant exercises) and a further US$1.0 net of payments was raised through the Bergen Facility.  US$3.1 million was repaid to Sub-Sahara Goldia Investments Ltd.

At the time of writing we are near to finalisation of documentation on a funding which will be sufficient to fund both the commissioning of Baita Plai and the commencement of diamond mining at the Chiadzwa Community Concession.

Corporate Governance

As stated in the Strategic Report the Company has adopted the Quoted Company Alliance (‘QCA’) code on Corporate Governance.

The Board strives to promote a corporate culture based on sound ethical values and behaviours.  To that end the Company has adopted a strict anti-corruption and whistle blowing policy, but the Directors are not aware of any event in either jurisdiction which might be considered to breach this policy.  The Company has also adopted a code for Directors’ and employees’ dealings in securities which is appropriate for a company whose securities are traded on AIM and is in accordance with the requirements of the Market Abuse Regulation which came into effect in 2016.

The Board is also aware that the tone and culture it sets will greatly impact all aspects of the Company and the way that employees behave, as well as the achievement of corporate objectives.  A large part of the Company’s activities is centred upon an open dialogue with shareholders, employees and other stakeholders.  Therefore, the importance of sound ethical values and behaviours is crucial to the ability of the Company to successfully achieve its corporate objectives.

Appreciation

The continued support of shareholders through times that have been challenging is much appreciated.  Following the funding of the Baita Plai Mine in Romania, and (subject to completion of agreements) of the Chiadzwa Community Concession in Zimbabwe, the Group believes that it will become cash positive.

To fellow directors, thank you for your advice and support, and to management and staff both in Romania and Zimbabwe for their continued effort on behalf of the Company.

Brian Moritz
Chairman

STRATEGIC REPORT

Principal activities, review of business and future developments

Vision
The vision of the Group is to become a mid-tier mining group, one of the largest polymetallic (copper, zinc, silver, and gold) producers in Romania, and a major player in the re-emergence of the mining industry in Zimbabwe, where the Group now has a major focus on its diamond interests.

Principal activities
In Romania the Group is focussed on reopening the Baita Plai Polymetallic Mine (‘BPPM’) where an accelerated commissioning schedule (from the time that funding is secured) aimed at delivering cashflow within six months has been agreed and will be fully implemented following drawdown of full funding now expected to be agreed shortly.  Meanwhile the previously operating Manaila Polymetallic Mine (‘MPM’) remains on care and maintenance pending adoption of a new effective mine plan that will achieve profitability.

In Zimbabwe, following the divestment of its gold mining interests shortly prior to period end, the Group reached an advanced stage in the agreement of joint ventures on a substantial diamond concession in the Chiadzwa Diamond Fields (previously referred to as the Marange Diamond Fields).

In both jurisdictions the Group holds further mining claims or other interests which are under appraisal.

Review of business

Romania

General
Following intensive negotiations between the Romanian Government, related agencies, and Baita SA, as holder of the head licence, the association licence granting the Group the right to mine at BPPM was approved by the State Mining Regulatory Body on 15^th October 2018. Due to matters unrelated to either Vast’s standing or to the viability of Vast’s Romanian operations, the Group was unable to draw down on the US$ 5.5 million second tranche (‘Tranche B’) of the Mercuria prepayment facility. These funds were earmarked for capital expenditure programs at BPPM and MPM with the objective of recommission at BPPM and improving operational efficiency at MPM.

Consequently, the Group has been in the process of arranging, and is now expected shortly to achieve, new funding which as far as Romania is concerned will prioritise BPPM given the project’s short lead time to generating free operational cash flows. MPM will remain on care and maintenance in expectation of a second funding round at a later stage.

BPPM (80% interest, 10% Directors)
The non-availability of Mercuria Tranche B has negatively impacted the Group’s results in Romania and has caused the Group to raise supplemental debt and equity funds during the course of the period. Despite these headwinds, the Group has made progress rehabilitating the BPPM infrastructure and in making improvements as well as significant inroads into implementing long lead items. Specific accomplishments include the following:

• Installation of new, high efficiency pumps
• Securing direct electricity supply
• Cleaning milling and flotation circuits
• Maintained and continued restoration of underground workings and access
• Commenced installation of new, independent electricity supply
• Advanced work on refurbishment of the flotation plant including installation of a new sediment tank
• Commenced installation of the 7 kilometre tailings pipe to the tailings dam
• Cleaning railway in preparation for use
• Acquired and restored a 300 metre drilling rig

Completion is dependent upon obtaining drawdown of funding which is expected to be agreed shortly. The Group estimates that subject to financing being arranged as hoped in the near future profitable production will have been achieved during the now current financial year.

MPM (100%  interest)
1,720 and 242 tonnes of copper and zinc concentrate respectively were produced at MPM from April 2018 to December 2018, at which point MPM was then placed on temporary care and maintenance originally due to adverse winter weather conditions. However, given the absence of funding, the decision was later taken to place the mine on continued care and maintenance until such time that BPPM was funded, and new funding arranged for MPM that was better suited to its investment needs and exploration potential. Revenues increased 10.8% to US$ 3.432 million (2018: US$ 3.098 million).

As highlighted last year, a program of drilling undertaken in 2017 has proven the potential of opening a second open-pit mine at the Carlibaba section of MPM. A JORC compliant Resource statement confirmed a Measured, Indicated and Inferred mineral Resource of 4.6 million tonnes suitable for open-pit mining (3.6 million tonnes Measured and Indicated). Underground mineral Resources in the Measured and Indicated category was determined at 0.399 million tonnes. The implied open pit life is 11 years based on open pit and underground Measured and Indicated Resources at a rate of 30,000 tonnes per month. MPM also has significant underground exploration potential which would be transformative and would require additional investment beyond those planned for the Carlibaba open pit extension and new plant facility. For these reasons, the commercial opportunity is potentially much larger and will require a revised funding and investment strategy.

Blueberry Polymetallic Gold Project (`Blueberry’) (29.41% effective interest).
The Group acquired an effective 29.41% economic interest in Blueberry through EMA Resources Ltd (`EMA’) in a brown field perimeter located at Baia de Aries in the `Golden Quadrilateral’ of Western Romania on which historic work has demonstrated prospectivity for gold and polymetallic minerals. The Group is undertaking exploration on the perimeter with a view to establishing a JORC Resource sufficient to justify an independent IPO.

The following exploration activities were undertaken at the Blueberry prospect:

• Surface geological mapping.
• Archival data searches for information relating to the Baia de Aries polymetallic mine.
• 41 surface diamond drill holes completed for a total core length of 6 717 metres.
• All 6,717 metres of core split with half sent to an independent laboratory for assay and the remaining half kept in storage.
• 300 soil geochemical samples gathered on an approximate 100 metre by 100 metre grid spacing and analysed at an independent laboratory.
• The exploration perimeter divided into eight zones for exploration and preliminary drilling undertaken in 4 of the 8 identified target areas. Drilling successfully intersected mineralised zones containing predominantly gold and silver with certain localities exhibiting polymetallic copper – lead - zinc mineralisation.

Follow up drilling is planned for these areas in order to define the orientations and the extent of the mineralised zones as a number of intersections remain open at depth and along strike.

The soil sampling program encompassed approximately 40% of the exploration area. Further sampling is required to the southwest and the northeast to complete the soil sampling coverage. The soil sampling identified previously unknown areas of mineralisation in the southern portion of the exploration area with gold in soil values of up to 17.7 grams per ton gold.

To date the Group has arranged US$ 1 million third party financing on behalf of the venture.

Other Romanian prospects
Work has been in progress with the benefit of third party money on extending our footprint in Romania through our current claims at Magura Neagra and Piciorul Zimbrului (collectively known as `Zagra’). The Group has undertaken a drilling programme targeting sets of polymetallic veins together with areas of disseminated sulphide mineralization.

The Group continues to believe that exploration of the many mining opportunities that have become dormant over the last two decades will be an attractive prospect for global mining players seeking to capitalize on the projected increase in demand globally for copper occasioned by the global transition to clean energy and electric vehicles.

The Group’s `first mover position’ in Romania has attracted interest in resuscitating the large-scale polymetallic resource projects in Romania. Discussions have been held with global mining players and investors to leverage their financial strength and expertise to jointly exploit these considerable opportunities.

Zimbabwe

In April 2019, the Group divested its 25.01% stake in its Zimbabwean gold related operations which included the producing Pickstone-Peerless Gold Mine (`PPGM’) together with the non-producing Eureka Gold Mine in the course of restoration(`Eureka’), and the dormant Giant Gold Mine (`GGM’). The Group recorded an accounting gain on disposal of US$ 8.6 million. This divestment was driven in part by need to restructure the Group’s balance sheet to enable the financing of strategic projects and by the Group’s strategy to focus resources on opportunities generating high and near term operating free cashflow unrestrained by tight currency controls as represented by BPPM and the expected diamond concession in Zimbabwe.

During the period, the divested Zimbabwean gold operations recorded profits of US$ 8.4 million (2018: US$ 2.3 million) on revenue of US$ 31.2 million (2018: US$ 27.6 million). These results have been heavily impacted by foreign exchange gains arising from a devaluation occasioned by the re-designation of all US dollar balances in Zimbabwe as RTGS (Real Time Gross Settlement) balances. This has resulted in significant gains of US$ 5.7 million mainly arising from foreign exchange revaluation gains on local currency denominated borrowings. On a normalized basis after removing foreign exchange gains, profits from the discontinued Zimbabwean operations increased by 16.4% to US$ 2.683 million (2018: US$ 2.305 million), largely driven by increased milled volumes (up 30% to 383,838 tonnes) and associated increased gold production (up 14% to 749kgs). Both the gain on disposal of US$ 8.6 million and the profits of $US 8.4 million from the divested Zimbabwean gold operations are disclosed as profits from discontinued operations in the consolidated statement of comprehensive income.

Diamond Concession – Chiadzwa Diamond Fields
The Group has completed due diligence on the diamond concession on which it expects to get the full right to mine shortly and has prepared a full operating plan.

Corporate

The Group has repositioned its business, disposing of its Zimbabwean gold operations in order to focus on BPPM and its expected diamond interests. This restructuring has enabled the Group to repay $2.5 million of its loan from Sub-Sahara Goldia Investments (`Sub-Sahara’) and to reduce its borrowings by an additional $18.6 million thereby significantly reducing the Group’s gearing, simplifying the balance sheet, and creating a financial platform for growth and refinancing.  The Group has been actively seeking substantive financing following the withdrawal of Mercuria’s US$ 5.5 million Tranche B to finance BBPM and the diamond opportunity in Zimbabwe.  At the time of writing this report the Group is near to concluding agreed documentation with an institution which will provide funding for the Group’s operations both at BBPM and in Zimbabwe.

During the year the Group strengthened its management team through the hiring of industry experts in the diamond sector.

Strategy

The Group’s strategy is to:

• Attract appropriate funding for the Group – including from institutional investment
• Attract appropriate joint venture partners and public institutions to invest in the Group and projects of mutual interest
• Grow into a mid-tier mining company both organically and through acquisitions financed principally by third parties
• Optimise operations to produce positive cashflows
• Add value to operations by increasing resources and reserves
• If expedient, hold significant minority stakes in new ventures operationally managed by the Group
• Finance growth, where possible in a non-dilutive manner
• Maintain exposure to Zimbabwe and Romania where the Group has acquired in-depth country knowledge
• Continue to work with Government and local communities in Zimbabwe in the diamond sector, and to develop the diamond business in a transparent way for the benefit of all stake holders

Key performance indicators

In executing its strategy, the Board considers the Group’s key performance indicators to be, or will be after recommencement of mining:

Cash cost per tonne milled

• Cash cost per tonne is derived from aggregate cash costs divided by tonnes milled and measures productivity.
• For PPGM the cash cost for the period until discontinuance was US$ 48/tonne (2018: US$ 62/tonne), 23% lower than the 2018 result.
• For MPM the cash cost for the period of production was US$ 70/tonne (2018: US$ 42/tonne), 60% higher than the 2018 result reflecting reduced volumes.

Cash costs per ounce sold for gold and per tonne for concentrate

• Cash cost per ounce sold is calculated by dividing aggregate cash cost by gold ounces produced or concentrate tonnes produced and measures productivity.
• For PPGM the cash cost was US$ 770/ounce (2018: US$ 880/ounce), 12.5% lower than the 2018 result.
• For MPM the cash cost was US$ 2,208/tonne (2018: US$ 1,471/tonne), 50% higher than the 2018 result reflecting reduced volumes.

Plant production volumes as a measure of asset utilisation

• PPGM processed a mill feed of 383,838 tonnes for the period till divestment (2018: 295,424 tonnes), 30% higher than the 2018 level.
• MPM processed mill feed of 62,391 tonnes for the period of production (2018: 106,488 tonnes), 41% lower than the 2018 level.

Total resources and reserves

• These indicators measure our ability to discover and develop new ore bodies, including through acquisition of new mines, and to replace and extend the life of our operating mines. There have been no changes over the previous year other than as a result of the disposal of the Group’s gold interest in Zimbabwe.  The alluvial diamond interest in Zimbabwe where there is an imminent expectation of a right to mine is considered very prospective, but by its nature is not susceptible to the estimation of a JORC Resource.

The rate of utilization of the Group’s cash resources. This is discussed further below.

Cash resources

The Group’s year end position was US$ 0.569 million (2018: US$ 1.3 million).

During the year cash inflows from operating activities (including discontinued activities) were US$ 5.3 million. Excluding discontinued activities, cash outflows from operating activities were US$ 7.9 million.  A significant portion of these outflows are directly related to developing, supporting and maintaining our mining assets, allowing the Group to quickly start production and generate significant revenue at both BPPM and the diamond concession once funding is in place and the diamond special grant is procured. 

Cash outflows from investing activities (including discontinued activities) were US$ 13.3 million. Excluding discontinued activities, cash outflows from investing activities were US$ 1.3 million mainly driven by additions to mining assets in the Group’s Romanian operations.

Cash inflows from funding activities (including discontinued activities) were US$ 7.2 million. Excluding discontinued activities, cash inflows from funding activities were $5.2 million, comprising the net of the proceeds from the issuance of shares of US$ 8.1 million less net repayment of loans and borrowings of US$ 2.9 million.

The Directors monitor the cash position of the Group closely to plan sufficient funds within the business to allow the Group to meet is commitments and continue the development of assets. As part of this process, the Directors closely monitor capital expenditure and the regulatory requirements of the licences to ensure they continue in good standing.

Principal risks and uncertainties

Risk – Going concern
The Group is in an advanced stage of agreeing documentation on a substantial funding. 

However, if this funding should fail it may cast doubt about the Group’s ability to continue as a going concern.  Other material uncertainties constituting this risk include unseasonal severe climatic conditions, unforeseen delays in permits and licences for new mining or plant investments, cost overruns and adverse commodity price movements.

Mitigation/Comments
The Board will continue to engage, or after recommencement of mining will engage, with providers of commodity trade finance, potential joint venture and other investors in order for them to understand the fundamental strength of the Group’s business and attract additional funding when required.  The Board also will, whenever possible, retain sufficient cash margin to offset contingencies. The remittance restrictions for the Zimbabwean gold operations will not apply to the Group’s diamond investments as the Group is advised that foreign currency regulations will allow export proceeds not required to meet costs in Zimbabwe to be retained offshore.

Risk – Mining
Mining of natural resources involves significant risk. Drilling and operating risks include geological, geotechnical, seismic factors, industrial and mechanical incidents, technical failures, labour disputes and environmental hazards.

Mitigation/Comments
Use of strong technical management together with modern technology and electronic tools assist in reducing risk in this area. Good employee relations are also key in reducing the exposure to labour disputes. The Group is committed to following sound environmental guidelines and is keenly aware of the issues surrounding each individual project.

Risk - Commodity prices
Commodity prices are subject to fluctuation in world markets and are dependent on such factors as mineral output and demand, global economic trends and geo-political stability.

Mitigation/Comments
The Group’s management constantly monitors mineral grades mined and cost of production to ensure that mining output becomes or remains economic. As highlighted earlier, due to matters unrelated to both Vast’s standing and the viability of Vast’s Romanian operations, the Group was unable to draw down on the US$ 5.5 million second tranche (‘Tranche B’) of the Mercuria prepayment facility. These funds were earmarked for capital expenditure programs at BPPM and the Manaila Polymetallic Mine (`MPM’) with the objective of restarting production at BPPM and to improve operational efficiency at MPM. Consequently, the Group is well advanced in the process of arranging new funding which it is prioritising for BPPM and its diamond concession given the short lead times expected to generate free operational cash flows, and has placed MPM on care and maintenance in expectation of a second funding round at a later stage.

Risk – Management and Retention of Key Personnel
The successful achievement of the Group's strategies, business plans and objectives depend upon its ability to attract and retain certain key personnel.

Mitigation/Comments
The Group’s policy is to foster a management culture where management is empowered and where innovation and creativity in the workplace are encouraged.  The Group has in place a “Share Appreciation Right Scheme” for Directors and senior executives to provide incentives based on the success of the business.  It is also introducing more specific incentive arrangements for the Group’s diamond business in Zimbabwe.

During the period the Group has been successful in attracting new talent across its businesses.

Risk - Country and Political
The Group’s operations are based in Romania and Zimbabwe.  Emerging market economies could be subject to greater risks, including legal, regulatory, economic, bribery and political risks, and are potentially subject to rapid change.   In addition, there are risks particular to Zimbabwe arising from a scarcity of foreign exchange, difficulty with foreign remittances of funds and the, now albeit very substantially mitigated, risk of indigenisation.

Mitigation/Comments
The Group’s management team is experienced in its areas of operation and skilled at operating within the framework of the local culture in Romania and Zimbabwe to progress its objectives. The Group routinely monitors political and regulatory developments in each of its countries of operation.  In addition, the Group actively engages in dialogue with relevant government representatives to keep abreast of all key legal and regulatory developments applicable to its operations.  The Group has several internal processes and checks in place to ensure that it is wholly compliant with all relevant regulations to maintain its mining or exploration licences within each country of operation.

Risk - Social, Safety and Environmental
The Group's success may depend upon its social, safety and environmental performance, as failures can lead to delays or suspension of its mining activities.

Mitigation/Comments
The Group takes its responsibilities in these areas seriously and monitors its performance across these areas on a regular basis.

Corporate Governance

The Company has adopted the QCA (Quoted Company Alliance) Code on corporate governance.  Details of how the Company complies with this are set out in the Company’s website.  Principles which are required to be dealt with under the Code in the Company’s Annual Report are set out below.

Business model and strategy

This is described above under Strategy and elsewhere in this Report.

Risk Management

In addition to its other roles and responsibilities, the Audit and Compliance Committee is responsible to the Board for ensuring that procedures are in place and are being implemented effectively to identify, evaluate and manage the significant risks faced by the Company.  

The Directors have established procedures, as represented by this statement, for the purpose of providing a system of internal control.  An internal audit function is not considered necessary or practical due to the size of the Company and the close day to day control exercised by the Executive Directors.  The Board works closely with and has regular ongoing dialogue with the Company Financial Director and financial controller and has established appropriate reporting and control mechanisms to ensure the effectiveness of its control systems.

The risks facing the Company are detailed above. The Board seeks to mitigate such risks so far as it is able to do, as explained above, but certain important risks cannot be controlled.  The CEO is primarily responsible to the Board for risk management.

In particular, the products the Company mines and is seeking to identify are traded globally at prices reflecting supply and demand rather than the cost of production.  In Romania, the Company seeks to protect its cash flow by means of a long term offtake agreement, but it does not hedge future production.

Maintenance of a well functioning Board of Directors led by the Chairman

Current membership of the Board is as follows:

Name                       Role                                                  Appointed
Brian Moritz             Non-executive Chairman                  6 October 2016
Andrew Prelea         Chief Executive Officer                     1 March 2018
Roy Tucker              Finance Director                               5 April 2005
Craig Harvey           Chief Operating Officer                     1 March 2018
Eric Diack                Non-executive director                      30 May 2014
Nick Hatch               Non-executive director                      9 May 2018

All the Non-executive Directors are considered to be independent.

All the Directors are subject to re-election at intervals of no more than three years.

The table illustrates the success of the Board in refreshing its membership.

The Board is well balanced both in its skill sets and in the domicile of its members.  Of the Executive Directors, Andrew Prelea is resident in Romania, Roy Tucker in the UK, and Craig Harvey in Southern Africa.  Of the Non-Executive Directors, Nick Hatch and Brian Moritz are resident in the UK, whilst Eric Diack resides in Southern Africa.

All of the current Non-executive Directors are considered to be independent.  None of them have been a Director for a sufficient length of time to prejudice such independence.

Non-executive Directors are committed to devote 3 days per month to the Company. Executive Directors devote substantially the whole of their time to the Company.

Where possible Directors are physically present at board meetings, but, due to the wide divergence of locations, Directors may be present by telephone.

During the thirteen month period ended 30 April 2019 there were six full board meetings in addition to twelve meetings on specific issues.  Of the Directors holding office throughout the period, Brian Moritz, Andrew Prelea, Roy Tucker and Eric Diack, attended all the full meetings either in person or by telephone.

Appropriate skills and experience of the Directors

The CVs of the Directors - three executives and three Non executives - as disclosed on the website, are set out below.  In addition, the Company has employed the outsourced services of Ben Harber of Shakespeare Martineau as company secretary.

Andrew Prelea – Chief Executive Officer
Andrew has been involved with Vast since 2013 and has spearheaded the development of the Company’s Romanian portfolio. Beginning his career in the early 1990s as a bulk iron ore and steel trader in Romania, he then went on to develop his career in the property and earthmoving sector in Australia before returning to Romania in 2003, initially to focus on the development of properties for the Romanian Ministry of Defence and latterly, private sector developments. Throughout his 26-year career, Andrew has developed extensive investor and public relations experience and has advised the Romanian government on wide ranging high-level topics including social housing and economic policy. He has built a strong network of contacts across the mining and metals industries and Europe and southern Africa, in addition to policy makers and governmental authorities.

Brian Moritz - Chairman
Brian is a Chartered Accountant and former Senior Partner of Grant Thornton UK LLP, London; he formed Grant Thornton’s Capital Markets Team which floated over 100 companies on AIM under his chairmanship. In December 2004, he retired from Grant Thornton UK LLP to concentrate on bringing new companies to the market. He specialises in natural resources companies, primarily in Africa, and was formerly chairman of Metal Bulletin plc, African Platinum plc and Chromex Mining plc as well as currently being chairman of several junior mining companies.

Roy Tucker – Finance Director
Roy is a Chartered Accountant with 43 years of high level and broad spectrum professional and business experience. He has been the founder of a London banking group, served on bank boards and had a position as a major shareholder of a substantial London commodity house. He is also the founder of Legend Golf and Safari Resort in South Africa. He has substantial investment in the Romanian property sector.

Craig Harvey – Chief Operating Officer
Craig began his career with Gold Fields of SA in 1988 as a bursary student in Economic Geology where he worked on various gold, platinum, coal and exploration projects. At Harmony Gold he managed the mineral resources on various operations and was involved in due diligence on acquisitions. He joined Simmer and Jack with a focus on shallow hydro-thermal gold deposits in the Eastern Transvaal and later moved into a corporate role managing and auditing the mineral resource process across all gold and uranium operations. Craig spent 3 years in a Principal Consultant role for Ravensgate based in Perth, Australia, where he conducted numerous resource estimations, valuations and technical reports mainly in gold, uranium, copper and iron ore. Craig joined Vast Resources as a consultant in 2013 and became Chief Operating Officer in March 2017. During his tenure with Vast Resources, he has been heavily involved in both Zimbabwe and Romania.

Eric Diack – Non-Executive Officer
Eric is a Chartered Accountant with many years’ experience in the mining and industrial landscape. Eric is the former CEO of Anglo American Ferrous Metals Divisions, and has served on numerous major listed and unlisted company boards, mainly associated with Anglo American. He is currently a member of the Bidvest Group and Aveng boards which are large South African listed companies with extensive international operations.

Nick Hatch – Non-Executive Director
Nick has 35 years’ experience in mining investment banking, primarily as a mining analyst and in managing mining & metals research and equities teams. He was most recently Director of Mining Equity Research at Canaccord Genuity in London. Nick’s experience includes researching and advising on mining companies and projects across the globe and across the commodity spectrum and includes companies of all sizes. Nick left investment banking in 2017, and has recently set up his own company, Nick Hatch Mining Advisory Ltd, to provide mining research, business development and financing advice. He holds a degree in Mining Geology and is a Chartered Engineer.

The Company believes that the current balance of skills in the Board as a whole reflects the broad range of commercial and professional skills that the Company requires.  Among the Executive Directors, Andrew Prelea is experienced in general management, including identifying and negotiating new business opportunities; Roy Tucker is a Chartered Accountant with many years experience in general financial management; and Craig Harvey is a qualified geologist experienced in constructing and operating mines.

Among the Non-executives Brian Moritz is a Chartered Accountant with senior experience.  In addition to his financial skills he has former experience as a Registered Nominated Adviser.  Eric Diack is also a Chartered Accountant with experience in operational as well as financial management.  Nick Hatch is a qualified geologist with experience in evaluating mining companies and natural resource projects.

Importantly, Directors without geological qualifications have significant experience with junior companies in the natural resources sector.

Evaluation of Board Performance

The Group is in the process of fast evolution and at this stage in the Company’s development it is not deemed necessary to adopt formal procedures for evaluation of the Board or of the individual Directors.  There is frequent informal communication between members of the Board and peer appraisal takes place on an ongoing basis in the normal course of events however the Board will keep this under review and may consider formalised independent evaluation reviews at a later stage in the Company’s development

Given the size of the Company, the whole Board is involved in the identification and appointment of new Directors and as a result, a Nominations Committee is not considered necessary at this stage.  The importance of refreshing membership of the Board is recognised and has been implemented.  In 2018 Andrew Prelea was appointed to replace Roy Pitchford as CEO, and Nick Hatch replaced Brian Basham as a Non-executive Director.  The Directors believe that the Board operates efficiently and cost effectively for the benefit of all stakeholders.  Nevertheless, it is envisaged that the Board will be strengthened in due course as and when new projects are operated by the Company.

Maintenance of Governance Structures and Processes

The corporate governance structures which the Company is able to operate are limited by the size of the Board, which is itself dictated by the current size and geographical spread of the Company’s operations, with Directors resident in the UK, Romania and Southern Africa.  With this limitation, the Board is dedicated to upholding the highest possible standards of governance and probity.

The Chairman, Brian Moritz:

• leads the Board and is primarily responsible for the effective working of the Board;
• in consultation with the Board ensures good corporate governance and sets clear expectations with regards to Company culture, values and behaviour;
• sets the Board’s agenda and ensures that all Directors are encouraged to participate fully in the activities and decision-making process of the Board.

The CEO, Andrew Prelea:

• is primarily responsible for developing Vast’s strategy in consultation with the Board, for its implementation and for the operational management of the business;
• is primarily responsible for new projects and expansion;
• is responsible for attracting finance and equity for the Company;
• runs the Company on a day-to-day basis;
• implements the decisions of the Board;
• monitors, reviews and manages key risks;
• is the Company’s primary spokesperson, communicating with external audiences, such as investors, analysts and the media.

The Chief Operating Officer, Craig Harvey:

• is responsible for operational improvements and efficiency of mining operations in Romania;
• is responsible for expansion and exploration of projects at the mine level;
• is responsible for the re-opening of the Baita Plai mine;
• assists and advises on the operation and expansion of the Zimbabwe operations and projects;
• provides technical input on new projects.

The Finance Director, Roy Tucker:

• is responsible for the administration of all aspects of the Group;
• assisted by the Chief Financial Officer oversees the accounting function of all group companies;
• runs the UK head office as the only UK based Executive Director;
• assisted by the Chief Financial Officer deals with all matters relating to the independent audit;
• is the main point of contact with the Company’s lawyers and Nomad, and the London Stock Exchange.

The Remuneration Committee is chaired by Nick Hatch and comprises Eric Diack and Nick Hatch.  It meets on an ad hoc basis when required. The Remuneration Committee is responsible for establishing a formal and transparent procedure for developing policy on executive remuneration and to set the remuneration packages of individual Directors. The Committee’s policy is to provide a remuneration package which will attract and retain Directors and management with the ability and experience required to manage the Company and to provide superior long-term performance. 

The Audit and Compliance Committee is chaired by Eric Diack and comprises Nick Hatch and Eric Diack.  It normally meets twice per annum to inter alia, consider the interim and final results. In the latter case the auditors are present and the meeting considers and takes action on any matters raised by the auditors arising from their audit.

The chairman, Brian Moritz, attends the meetings of these committees when requested to do so.
Matters reserved for the Board include:

• Vision and strategy
• Production and trading results
• Financial statements and reporting
• Financing strategy, including debt and other external financing sources
• Budgets, acquisitions and expansion projects, divestments and capital expenditure and business plans
• Corporate governance and compliance
• Risk management and internal controls
• Appointments and succession plans
• Directors’ remuneration

Shareholder Communication
The Board is committed to maintaining effective communication and having constructive dialogue with its shareholders.  The Company has close ongoing relationships with its private shareholders as explained above under Principle Two.  The Company is desirous of obtaining an institutional shareholder base, and institutional shareholders and analysts will have the opportunity to discuss issues and provide feedback at meetings with the Company.

The Investors section of the Company’s website provides all required regulatory information as well as additional information shareholders may find helpful including: information on Board members, advisors and significant shareholdings, a historical list of the Company’s Announcements, its corporate governance information, the Company’s publications including historic annual reports and notices of annual general meetings, together with share price information.

The results of shareholder meetings will be publicly announced through the regulatory system and displayed on the Company’s website with suitable explanations of any actions undertaken as a result of any significant votes against resolutions.

Outlook

While the period has been challenging the Group has completed a successful divestment of its Zimbabwean gold operations and is in the last stages of arranging finance to focus on its key assets, BPPM and the Zimbabwean diamond concession. These projects which by industry standards offer low cost entry, are expected to generate high returns and strong operational free cashflow generation, providing the platform for Vast’s expansion.

As stated last year, the forecast global growth in electric vehicles remains likely to create, over the next decade, a shortage of copper. Whereas global supply and demand for copper is currently broadly balanced, worldwide there is a decline in ore grades, while community resistance and water supply issues are holding back discovery and exploitation such that management continues to believe that current supply will be overtaken by demand in a  few years placing upward pressure on copper prices and spurring investment in new copper mining capacity.  Management also believes that the business environment in Zimbabwe will continue to improve as the government establishes an attractive base for sustainable foreign investment, and that the Group, having obtained the licence for BPPM and having established significant first mover know-how, will begin to see traction on its other Romanian opportunities. Management believes that a combination of a bullish outlook on polymetallics together with a reduction in Romanian and Zimbabwean country risk premiums will provide significant medium-term growth in the share price and bode well for the financial performance of these businesses.

Many thanks to fellow Board members and management for the commitment and hard work that has been put into the Group.

On behalf of the Board,

Andrew Prelea
Group Chief Executive Officer

Group statement of comprehensive income
for the period ended 30 April 2019

The accompanying accounting policies and notes on pages 29 to 63 form an integral part of these financial statements.

Group statement of changes in equity
for the for the period ended 30 April 2019

The accompanying accounting policies and notes on pages 29 to 63 form an integral part of these financial statements.

Company statement of changes in equity
for the for the period ended 30 April 2019

The accompanying accounting policies and notes on pages 29 to 63 form an integral part of these financial statements.

Group and Company statements of financial position
As at 30 April 2019

The accompanying accounting policies and notes on pages 29 to 63 form an integral part of these financial statements. The parent Company reported a loss after taxation for the year of US$ 3.237 million (2018: US$ 2.378 million). The financial statements on pages 24 to 63 were approved and authorised for issue by the Board of Directors on 29 September and were signed on its behalf by:

Roy C. Tucker                                                                                                                       Registered number          5414325
Director                                                                                                                                  29 September 2019

Group and Company statements of cash flow
for the period ended 30 April 2019

The accompanying notes and accounting policies on pages 29 to 63 form an integral part of these financial statements.

Statement of accounting policies
for the period ended 30 April 2019

General information
Vast Resources plc and its subsidiaries (together “the Group”) are engaged principally in the exploration for and development of mineral projects in Sub-Saharan Africa and Eastern Europe. Since incorporation the Group has built an extensive and interesting portfolio of projects in these jurisdictions. The Company’s ordinary shares are listed on the AIM market of the London Stock Exchange.

Vast Resources plc was incorporated as a public limited company under UK Company Law with registered number 05414325. It is domiciled and registered at 60 Gracechurch Street, London EC3V 0HR.

Basis of preparation and going concern assessment
The principal accounting policies adopted in the preparation of the financial information are set out below. The policies have been consistently applied throughout the current year and prior year, unless otherwise stated. These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs and IFRIC interpretations) issued by the International Accounting Standards Board (IASB) as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies preparing their accounts under IFRS.

During the period, the Group changed its year end from 31 March 2019 to 30 April 2019. The consolidated financial statements incorporate the results of Vast Resources plc and its subsidiary undertakings for the thirteen-month period ended 30 April 2019 and are therefore not entirely comparable to the previous year’s results for the twelve-month period ended 31 March 2018.

The financial statements are prepared under the historical cost convention on a going concern basis.

In April 2019 the Group disposed of its Zimbabwean gold operations to focus on its mining assets in Romania and its Marange diamond concession in Zimbabwe. The Group will require further funding in order to put these assets into production and to meet United Kingdom entity overheads and Romanian and Zimbabwean working capital needs. The Directors are confident that the Company will be able to raise such funds as it considers appropriate to meet such requirements over the course of the next 24 months, in cash. While no binding financing agreement is in place at the date of this Report, the Group is well advanced in the process of arranging new funding that will allow Vast to place the Baita Plai Polymetallic Mine (`BPPM’) into production and will enable the commencement of operations at the Group’s diamond concession, upon the imminent  issuance of a special grant. Upon successfully funding these key assets, the Group would then be in a position to focus resources to secure the necessary investment to upgrade the Manaila Polymetallic Mine (`MPM’) which is currently on care and maintenance. These conditions indicate the existence of material uncertainty which may cast significant doubt about the Group’s and Company’s ability to continue as a going concern.  The financial statements do not include the adjustment that would result if the Group and Company were unable to continue as a going concern.

Changes in Accounting Policies
At the date of authorisation of these financial statements, a number of Standards and Interpretations were in issue but were not yet effective. The Directors do not anticipate that the adoption of these standards and interpretations, or any of the amendments made to existing standards as a result of the annual improvements cycle, will have a material effect on the financial statements in the year of initial application.

Areas of estimates and judgement
The preparation of the Group financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge of current events and actions, actual results may ultimately differ from those estimates. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities in the next financial year are discussed below:

a)           Impairment of intangibles and mining assets
The Group reviews, on an annual basis, whether deferred exploration costs, acquired either as intangible assets, as property, plant and equipment, or as mining options or licence acquisition costs, have suffered any impairment. The recoverable amounts are determined based on an assessment of the economically recoverable mineral reserves, the ability of the Group to obtain the necessary financing to complete the development of the reserves and future profitable production or proceeds from the disposition of recoverable reserves. Actual outcomes may vary. In the event that the Group is unable to secure financing for developing its Romanian assets, US$ 5.1 million of mining assets would be impaired. The disposal value of the remaining fixed assets held by the Group’s Romanian operations is not easily quantifiable

b)           Going concern and Inter-company loan recoverability
The Group's cash flow projections, which have used conservative assumptions on forward commodity prices, indicate that the Group should have sufficient resources to continue as a going concern, although, as stated in the Principal Risks section of the Strategic Report and the basis of preparation and going concern assessment above, the Group will require additional funding for its near-term investment plans. While the Group is confident of its capacity to raise this funding, should it not materialise, or if the projections not be realised, the Group's going concern would depend on the success of future fund-raising initiatives. These conditions indicate the existence of material uncertainty which may cast significant doubt about the Group’s and Company’s ability to continue as a going concern.
The recoverability of inter-Company loans advanced by the Company to subsidiaries depends also on the subsidiaries realising their cash flow projections.

c)           Estimates of fair value
The Group may enter into financial instruments, which are required by IFRS to be recorded at fair value within the financial statements. In determining the fair value of such instruments, the Directors are required to apply judgement in selecting the inputs used in valuation models such as the Black Scholes or Monte Carlo models. Inputs over which the Directors may be required to form judgements related to volatility, vesting periods, risk free interest rates, commodity price assumptions and discount rates. In addition, where a valuation requires more complex fair value considerations the Directors may appoint third party advisers to assist in the determination of fair value.

The fair value measurement of the Group’s financial and non-financial assets and liabilities utilises market observable inputs and data as far as possible. Inputs used in determining fair value measurements are categorised into different levels based on how observable the inputs used in the valuation technique utilised are (the ‘fair value hierarchy’):

Level 1: Quoted prices in active markets for identical items (unadjusted).

Level 2: Observable direct or indirect inputs other than Level 1 inputs.

Level 3: Unobservable inputs (i.e. not derived from market data).

The classification of an item into the above levels is based on the lowest level of the inputs used that has a significant effect on the fair value measurement of the item.

d)           Provisions
The Group is required to estimate the cost of its obligations to realise and rehabilitate its mining properties.

The estimation of the cost of complying with the Group’s obligations at future dates and in economically unpredictable regions, and the application of appropriate discount rates thereto, gives rise to significant estimation uncertainties.

e)           VAT recoverable
In countries where the Group has productive mining operations carried out by its subsidiaries those subsidiaries are registered for Value Added Tax (VAT) with their respective local taxation authorities and, as their outputs are predominantly zero-rated for VAT, receive net refunds of VAT in respect of input tax borne on their inputs. This amount is carried as a receivable until refunded by the State

The amount carried as a receivable is determined in accordance with the returns submitted to the taxation authorities.

Basis of consolidation
Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

De-facto control exists in situations where the Company has the practical ability to direct the relevant activities of the investee without holding the majority of the voting rights. In determining whether de-facto control exists the Company considers all relevant facts and circumstances, including:

• The size of the Company’s voting rights relative to both the size and dispersion of other parties who also hold voting rights.
• Substantive potential voting rights held by the Company and by other parties.
• Other contractual arrangements.
• Historic patterns in voting attendance.

The consolidated financial statements present the results of the Company and its subsidiaries ("the Group") as if they formed a single entity. Inter-company transactions and balances between Group companies are therefore eliminated in full.

The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date on which control ceases.

Business combinations
The financial information incorporates the results of business combinations using the purchase method. In the statement of changes in equity, the acquirer’s identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the Group statement of comprehensive income from the date on which control is obtained. The assets acquired have been valued at their fair value. Any excess of consideration paid over the fair value of the net assets acquired is allocated to goodwill. Any excess fair value over the consideration paid is considered to be negative goodwill and is immediately recorded within the income statement.

Where business combinations are discontinued, whether by closure or disposal to third parties, any resultant gain or loss on the discontinued operation is identified separately and dealt with in the Group’s consolidated income statement as a separate item.

Financial instruments
IFRS 9 supersedes IAS 39 Financial Instruments: Recognition and Measurement with new requirements for the classification and measurement of financial assets and liabilities, impairment of financial assets and hedge accounting.

IFRS 9 introduces a new forward-looking impairment model based on expected credit losses to replace the incurred loss model in IAS 39. This determines the recognition of impairment provisions as well as interest revenue.

The Group adopted IFRS 9 from 1 April 2018 with retrospective effect in accordance with the transitional provisions.

The Group’s principal financial assets are cash and cash equivalents and receivables.

The Group has assessed the impact of IFRS 9 on the impairment of its financial assets and has concluded that the change in the impairment is immaterial.

While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss was immaterial.

The Group's financial assets consist of cash and cash equivalents and other receivables. The Group's accounting policy for each category of financial asset is as follows:

Financial assets held at amortised cost
Trade receivables and other receivables are classified as financial assets held at amortised cost. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.

Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the Group will be unable to collect all of the amounts due under the terms receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable. For receivables, which are reported net, such provisions are recorded in a separate allowance account with the loss being recognised within administrative expenses in the statement of comprehensive income. On confirmation that the receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.

The Group’s financial assets held at amortised cost comprise other receivables and cash and cash equivalents in the statement of financial position.

Cash and cash equivalents
These amounts comprise cash on hand and balances with banks. Cash equivalents are short term, highly liquid accounts that are readily converted to known amounts of cash. They include short-term bank deposits and short-term investments.

Any cash or bank balances that are subject to any restrictive conditions, such as cash held in escrow pending the conclusion of conditions precedent to completion of a contract, are disclosed separately as “Restricted cash”.

There is no significant difference between the carrying value and fair value of receivables.

Financial liabilities
The Group’s financial liabilities consist of trade and other payables (including short terms loans) and long term secured borrowings. These are initially recognised at fair value and subsequently carried at amortised cost, using the effective interest method. Where any liability carries a right to convertibility into shares in the Group, the fair value of the equity and liability portions of the liability is determined at the date that the convertible instrument is issued, by use of appropriate discount factors.

             
Foreign currency
The functional currency of the Company and all of its subsidiaries outside Romania is the United States Dollar, while the functional currency of the Company’s Romanian subsidiaries is the Romanian Lei (RON), these are the currencies of the primary economic environment in which the Company and its subsidiaries operate.

Transactions entered into by the Group entities in a currency other than the currency of the primary economic environment in which it operates (the “functional currency”) are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the date of the statement of financial position.  Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are similarly recognised immediately in profit or loss, except for foreign currency borrowings qualifying as a hedge of a net investment in a foreign operation.

The exchange rates applied at each reporting date were as follows:

• 30 April 2019                         $1.3036: £1          and        $1: RON 4.2440         and $1: RTGS 3.2641
• 31 March 2018        $1.4012: £1          and        $1: RON 3.7779         and $1: RTGS 1
• 31 March 2017        $1.2253: £1          and        $1: RON 4.2615         and $1: RTGS 1

On 22 February 2019 all US dollar balances in Zimbabwe were restated as RTGS (Real Time Gross Settlement) balances, as a separate and distinct currency tradeable against the US dollar. The initial inter-bank trading rate with the US dollar was US$ 1: RTGS 2.5.

Intangible assets - Mining rights
Mineral rights are recorded at cost less amortisation and provision for diminution in value. Amortisation will be over the estimated life of the commercial ore reserves on a unit of production basis.

Licences for the exploration of natural resources will be amortised over the lower of the life of the licence and the estimated life of the commercial ore reserves on a unit of production basis.

Inventories
Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value. Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Weighted average cost is used to determine the cost of ordinarily inter-changeable items.

Mining inventory includes run of mine stockpiles, minerals in circuit, finished goods and consumables. Stockpiles, minerals in circuit and finished goods are valued at their cost of production to their point in process using a weighted average cost of production, or net realisable value, whichever is the lower. Low grade stockpiles are only recognised as an asset when there is evidence to support the fact that some economic benefit will flow to the Company on the sale of such inventory. Consumables are valued at their cost of acquisition, or net realisable value, whichever is the lower.

Investment in subsidiaries
The Company’s investment in its subsidiaries is recorded at cost less any impairment.

Non-controlling interests
For business combinations completed on or after 1 January 2010 the Group has the choice, on a transaction by transaction basis, to initially recognise any non-controlling interest in the acquiree which is a present ownership interest and entitles its holders to a proportionate share of the entity's net assets in the event of liquidation at either acquisition date fair value or, at the present ownership instruments' proportionate share in the recognised amounts of the acquiree's identifiable net assets. Other components of non-controlling interest such as outstanding share options are generally measured at fair value.

The total comprehensive income of non-wholly owned subsidiaries is attributed to owners of the parent and to the non-controlling interests in proportion to their relative ownership interests.

Revenue
Revenue from the sales of goods is recognised when the Group has transferred the significant risks and rewards of ownership to the buyer and it is probable that the Group will receive the previously agreed upon payment. These criteria are considered to be met when the goods are delivered to the buyer. Where the buyer has a right of return, the Group defers recognition of revenue until the right to return has lapsed. However, where high volumes of sales are made to established wholesale customers, revenue is recognised in the period where the goods are delivered less an appropriate provision for returns based on past experience. Delivery of gold and metal concentrates is the Group’s single performance obligation under its contracts with its customers. The same policy applies to warranties.

Under IFRS 15, the freight service on export commodity contracts with CIF/CFR terms represents a separate performance obligation, and a portion of the revenue earned under these contracts, representing the obligation to perform the freight service, is deferred and recognised over time as this obligation is fulfilled, along with the associated costs for which the point of recognition is dependent on the contract sales terms. The Group’s agreed terms with Mercuria, currently its sole buyer of concentrates, require that the seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination. The impact of applying this methodology versus that currently adopted by the Group during the year ended 30^th April 2019 is not material as the transfer of risks and rewards generally coincides with the transfer of control at a point in time. The timing and amount of revenue recognised by the Group for the sale of commodities is therefore not materially affected. The Group’s gold sales, which form part of discontinued operations, were also not affected by this standard.

Provided the amount of revenue can be measured reliably and it is probable that the Group will receive any consideration, revenue for services is recognised in the period in which they are rendered.

Pension costs
Contributions to defined contribution pension schemes are charged to profit or loss in the year to which they relate.

Production expenses
Production expenses include all direct costs of production but exclude depreciation of property plant and equipment involved in the mining process, and mine and Company overhead.

Property, plant and equipment
Land is not depreciated. Items of property, plant and equipment are initially recognised at cost and are subsequently carried at depreciated cost. As well as the purchase price, cost includes directly attributable costs and the estimated present value of any future costs of dismantling and removing items. The corresponding liability is recognised within provisions.

Depreciation is provided on all other items of property and equipment so as to write off the carrying value of items over their expected useful economic lives. It is applied at the following rates:

Buildings                                    –               2.5% per annum, straight line
Plant and machinery                  –               15% per annum, reducing balance
Fixtures, fittings & equipment     –               20% per annum, reducing balance
Computer assets                        –               33.33% per annum, straight line
Motor vehicles                            –               15% per annum, reducing balance

Development costs associated with the development of the Zimbabwean diamond project have been expensed as the concession has yet to receive a Special Grant.

Capital works in progress: Property, plant and equipment under construction are carried at its accumulated cost of construction and not depreciated until such time as construction is completed or the asset put into use, whichever is the earlier.

Proved mining properties
Depletion and amortisation of the full-cost pools is computed using the units-of-production method based on proved reserves as determined annually by management.

Provision for rehabilitation of mining assets
Provision for the rehabilitation of a mining property on the cessation of mining is recognised from the commencement of mining activities. This provision accounts for the full cost to rehabilitate the mine according to good practice guidelines in the country where the mine is located, which may involve more than the stipulated minimum legal commitment.

When accounting for the provision the Company recognises a provision for the full cost to rehabilitate the mine and a matching asset accounted for within the non-current mining asset. The rehabilitation provision is discounted using a risk-free rate, which is linked to the currency in which the costs are expected to be incurred, and the applicable inflation rate applied to the cash flows. The unwinding of the discounting effect is recognised within finance expenses in the income statement.

Share based payments
Equity-settled share-based payments
Where share options are awarded to employees, the fair value of the options at the date of grant is charged to profit or loss over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition.

Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to profit or loss over the remaining vesting period.

Where equity instruments are granted to persons other than employees, the fair value of goods and services received is charged to profit or loss, except where it is in respect to costs associated with the issue of shares, in which case, it is charged to the share premium account.

Cash-settled share-based payments
The Company also has cash-settled share-based payments arising in respect of a performance programme (see Note 22). A liability is recognised in respect of the fair-value of the benefit received under the programme and charged to profit or loss over the vesting period. The fair-value is re-measured at each reporting date with any changes taken to profit or loss.

Remuneration shares
Where remuneration shares are issued to settle liabilities to employees and consultants, any difference between the fair value of the shares on the date of issue and the carrying amount of the liability is charged to profit or loss.

Stripping costs
Costs incurred in stripping the overburden to gain access to mineral ore deposits are accounted for as follows:

Stripping costs incurred during the development phase of the mine (before production begins) are capitalised as part of the depreciable cost of building, developing and constructing the mine. Capitalised costs are amortised using the units of production method, once production begins.

Stripping costs incurred during the production phase of the mine which give rise to the production of usable inventory are accounted for in accordance with the principles contained in the Group’s policy on Inventories.  Stripping costs incurred in the production phase of the mine which result in improved access to ore are capitalized and recognized as additions to non-current assets provided that it is probable that the future economic benefit from improved access to the ore body associated with the stripping activity will flow to the Company, that it is possible to identify the component of the ore body to which access has been improved and that the costs relating to the stripping activity associated with that component of the ore body can be measured reliably.

Tax
The major components of income tax on the profit or loss include current and deferred tax.

Current tax
Current tax is based on the profit or loss adjusted for items that are non-assessable or disallowed and is calculated using tax rates that have been enacted or substantively enacted by the reporting date.

Tax is charged or credited to the statement of comprehensive income, except when the tax relates to items credited or charged directly to equity, in which case the tax is also dealt with in equity.

Deferred tax
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the statement of financial position differs to its tax base, except for differences arising on:

• The initial recognition of goodwill;
• The initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit; and
• Investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference and it is probable that the differences will not reverse in the foreseeable future.

Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised.

The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date and are expected to apply when deferred tax liabilities/(assets) are settled/(recovered). Deferred tax balances are not discounted.

New IFRS accounting standards
The following are the major new IFRS accounting standards in issue and effective from 1 January 2019

IFRS 16 Leases
The principal impact of IFRS 16 will be to change the accounting treatment by lessees of leases currently classified as operating leases. Lease agreements will give rise to the recognition by the lessee of an asset, representing the right to use the leased item, and a related liability for future lease payments. Lease costs will be recognised in the income statement in the form of depreciation of the right of use asset over the lease term, and finance charges representing the unwind of the discount on the lease liability. The adoption of IFRS 16 does not materially impact the carrying value of lease liabilities given the Group’s negligible leasing exposure.

Notes to financial statements
for the period ended 30 April 2019

1       Segmental analysis

The Group operates in one business segment, the development and mining of mineral assets. The Group has interests in two geographical segments being Southern Africa (primarily Zimbabwe) and Europe (primarily Romania).

The Group’s operations are reviewed by the Board (which is considered to be the Chief Operating Decision Maker (‘CODM’)) and split between mining exploration and development and administration and corporate costs.

Exploration and development is reported to the CODM only on the basis of those costs incurred directly on projects. All costs incurred on the projects are capitalised in accordance with IFRS 6, including depreciation charges in respect of tangible assets used on the projects.

Administration and corporate costs are further reviewed on the basis of spend across the Group.

Decisions are made about where to allocate cash resources based on the status of each project and according to the Group’s strategy to develop the projects.  Each project, if taken into commercial development, has the potential to be a separate operating segment.  Operating segments are disclosed below on the basis of the split between exploration and development and administration and corporate.

There are no non-current assets held in the Company’s country of domicile, being the United Kingdom (2018: $nil).

Revenue analysis by geographical location, product and customer

100% of gold bullion and mineral concentrate sales (2018: 100%) in both Romania and Zimbabwe were made to a single customer in each respective country.

Romanian revenues form part of continuing operations. All Zimbabwean revenues form part of discontinued operations.

2     Group loss from operations

3     Auditor’s remuneration from continuing operations

4       Finance expense from continuing operations

5       Taxation

           There was no taxation charge for continuing operations during the year (2018: US$ nil).

Deferred tax assets are only recognised in the Group where the company concerned has a reasonable expectation of future profits against which the deferred tax asset may be recovered.

However, these losses will only be recoverable against future profits, the timing of which is uncertain, and a deferred tax asset has not been recognised in respect of these losses. A deferred tax asset has not been recognised in respect of accumulated tax losses for the Company.

6       Employees from both continuing and discontinued operations

7       Directors’ remuneration

The Directors are considered to be the key management of the Group and Company.

Four of the Directors at the end of the period have share options receivable under long term incentive schemes. The highest paid Director received an amount of $244,166 over the thirteen-month period (2018: $196,359).

Included within the above remuneration are amounts accrued at 30 April 2019

8       Earnings per share

9       Loss for the financial year

The Company has adopted the exemption allowed under Section 408(1b) of the Companies Act 2006 and has not presented its own income statement in these financial statements.

10          Property, plant and equipment

10          Property, plant and equipment (cont.)

11     Investments in subsidiaries

The principal subsidiaries of Vast Resources plc, all of which are included in these consolidated Annual Financial Statements, are as follows:

The table above shows the principal subsidiaries of the Company. A full list of all group subsidiaries is given in Note 29, at the end of this report.

12     Investment in joint venture and subsidiary company

On 1 April 2018 the Group acquired a 25.01% interest in Delta Gold (Private) Limited (“Delta”) for US$ 4.5 million which was held indirectly through the Group’s interest in Dallaglio Investments (Private) Limited (“Dallaglio”). Delta is incorporated in Zimbabwe and is the owner of the Eureka Gold Mine which at the time of the acquisition was on care and maintenance. The goodwill arising on this transaction was US$ 0.6 million

The Group previously held a 25.01% interest in a Joint venture, Cordillera (Private) Limited (Cordillera), which was indirectly held through the Group’s interest in Breckridge Investments (Private) Limited, the operating company for the Pickstone Peerless mine in Zimbabwe. Cordillera is incorporated in Zimbabwe and its main interest is the provision of custom milling services to artisanal miners operating in the vicinity of the Pickstone Peerless Gold Mine. On 1 April 2018 the Joint Venture was fully absorbed into the operations of Breckridge Investments (Private) Limited.

Both of these investments have been disposed of as part of the Group’s disposal of its gold operations in Zimbabwe. The associated fixed asset additions associated with these investments are disclosed within the fixed asset note.

No detailed disclosures have been made of these transactions as, in the opinion of the Directors, they are not material to the financial statements.

13     Profit after taxation from discontinued operations

On 23rd April 2019, the Group disposed of its remaining 25.01% interest in Dallaglio Investments (Private) Limited, the holding company for the Pickstone Peerless and Eureka Gold mines in Zimbabwe. On 24th April 2019, the group disposed of its 100% interest in Canape Investments (Private) Limited, the holding company for its gold investments in Zimbabwe. The aggregate consideration received for these disposals was $3.5 million.

The amounts included within the profit (loss) after taxation from discontinued operations are as follows:

The net assets and non-controlling interests derecognised in arriving at the gain on disposal are as follows:

The breakdown of the components of profit after tax from discontinued operations in the period is as follows:

Cash generated by / absorbed in:

14     Loans to group companies

Loans to Group companies are repayable on demand.  The treatment of this balance as non-current reflects the Company’s expectation of the timing of receipt.

15     Inventory

16     Receivables

At the reporting date, included within VAT receivable is an amount in respect of VAT owed to African Consolidated Resources SRL of US$ 710,362 (RON 3,014,349) The amount represents VAT paid on the Baita Plai Mine’s care and maintenance operations. As reported last year, ANAF, the Romanian revenue authority had refused to accept aforesaid amount as a legitimate VAT receivable as a mining licence was not then in place for Baita Plai Mine. On 15th October 2018, the mining licence was granted. The Romanian Court has instructed an independent VAT audit and, subsequent to the reporting date, the audit has been completed satisfactorily and supports the Group’s claim for repayment.

17     Loans and borrowings
Non-current secured borrowings consist of:

Non-current secured borrowings consist of:

• US$ 4,000,000 (2018: US$ 4,000,000) secured offtake finance from Mercuria Energy Trading SA. The loan is secured by a pledge on 49.9% of the shares of the Group’s subsidiary Sinarom Mining Group SRL and bore annual interest of 9.4%.
• US$ 43,449 (2018: US$ 69,131) asset financing loans secured on the underlying movable assets belonging to ACR SRL.

Current secured borrowing consists of:

• US$ 978,453 (2018: US$ 4,080,000) loan from Sub-Sahara Goldia Investments Ltd secured by a pledge over 50.1% of the shares of the Group’s subsidiary Sinarom Mining Group SRL. The loan bears interest at 12% per annum and is repayable within the year.

Current unsecured borrowing consists of:

• US$ 189,072 (2018: US$ 220,156) loans from the non-controlling interests in African Consolidated Resources SRL, the holder of the rights to the Baita Plai Mine. The loans from the non-controlling interests are interest free and have no fixed terms of repayment. There is no expectation that this loan will be called.
• US$ 309,635 (2018: nil) loan from M Semere bearing an interest rate of 6%. There is no expectation that this loan will be called.

Reconciliation of liabilities arising from financing activities

*Loan disposal cashflows are included in investing activities

18     Trade and other payables

19     Provisions

As more fully set out in the Statement of Accounting Policies on page 33, the Group provides for the cost of the rehabilitation of a mining property on the cessation of mining. Provision for this cost is recognised from the commencement of mining activities.

This provision accounts for the estimated full cost to rehabilitate the mine at Manaila according to good practice guidelines in the country where the mine is located, which may involve more than the stipulated minimum legal commitment. The comparative figures include provisions in respect of Pickstone Peerless which was divested in April 2019.

When accounting for the provision the Group recognises a provision for the full cost to rehabilitate the mine and a matching asset accounted for within the non-current mining asset.

20     Financial instruments – risk management

Significant accounting policies
Details of the significant accounting policies in respect of financial instruments are disclosed on page 31. The Group’s financial instruments comprise available for sale investments, cash and items arising directly from its operations such as other receivables, trade payables and loans.

Financial risk management
The Board seeks to minimise its exposure to financial risk by reviewing and agreeing policies for managing each financial risk and monitoring them on a regular basis. No formal policies have been put in place in order to hedge the Group and Company’s activities to the exposure to currency risk or interest risk; however, the Board will consider this periodically. No derivatives or hedges were entered into during the year.

The Group and Company is exposed through its operations to the following financial risks:

• • Credit risk
  • Market risk (includes cash flow interest rate risk and foreign currency risk)
  • Liquidity risk

The policy for each of the above risks is described in more detail below.

The principal financial instruments used by the Group, from which financial instruments risk arises are as follow:

• • Receivables
  • Cash and cash equivalents
  • Trade and other payables (excluding other taxes and social security) and loans
  • Available for sale investments

The table below sets out the carrying value of all financial instruments by category and where applicable shows the valuation level used to determine the fair value at each reporting date.  The fair value of all financial assets and financial liabilities is not materially different to the book value.

Credit risk
Financial assets, which potentially subject the Group and the Company to concentrations of credit risk, consist principally of cash, short-term deposits and other receivables. Cash balances are all held at recognised financial institutions. Other receivables are presented net of allowances for doubtful receivables.  Other receivables currently form an insignificant part of the Group’s and the Company’s business and therefore the credit risks associated with them are also insignificant to the Group and the Company as a whole.

The Company has a credit risk in respect of inter-company loans to subsidiaries. The recoverability of these balances is dependent on the commercial viability of the exploration activities undertaken by the respective subsidiary companies. The credit risk of these loans is managed as the directors constantly monitor and assess the viability and quality of the respective subsidiary's investments in intangible mining assets.

Maximum exposure to credit risk

The Group’s maximum exposure to credit risk by category of financial instrument is shown in the table below:

The Company’s maximum exposure to credit risk by class of financial instrument is shown in the table below:

Market risk
Cash flow interest rate risk
The Group has adopted a non-speculative policy on managing interest rate risk.  Only approved financial institutions with sound capital bases are used to borrow funds and for the investments of surplus funds.

The Group and the Company seeks to obtain a favourable interest rate on its cash balances through the use of bank deposits. At the reporting date, the Group had a cash balance of $0.569 million (2018: $1.300 million) which was made up as follows:

At the reporting date, the Company had a cash balance of $0.218 million (2018: $0.208 million) which was made up as follows:

The Group had interest bearing debts at the current year end of US$ 5.330 million (2018: US$ 9.464 million). These are made up as follows:

Borrowings of US$ 4 million carry a floating interest rate with the remainder having fixed rates. An increase in interest rates of 1% would increase the annual finance expense by US$ 40,000.

Foreign currency risk
Foreign exchange risk is inherent in the Group’s and the Company’s activities and is accepted as such. The majority of the Group’s expenses are denominated in United States Dollars and therefore foreign currency exchange risk arises where any balance is held, or costs incurred, in currencies other than United States Dollars. At 30 April 2019 and 31 March 2018, the currency exposure of the Group was as follows:

The effect of a 10% strengthening of Sterling against the US dollar at the reporting date, all other variables held constant, would have resulted in decreasing post tax losses by $5,952 (2018: $13,527 decrease). Conversely the effect of a 10% weakening of Sterling against the US dollar at the reporting date, all other variables held constant, would have resulted in increasing post tax losses by $5,952 (2018: $13,527 decrease)

At 30 April 2019 and 31 March 2018, the currency exposure of the Company was as follows:

Liquidity risk
Any borrowing facilities are negotiated with approved financial institutions at acceptable interest rates. All assets and liabilities are at fixed and floating interest rate. The Group and the Company seeks to manage its financial risk to ensure that sufficient liquidity is available to meet the foreseeable needs both in the short and long term. See also references to Going Concern disclosures in the Strategic Report on page 9.

As set out in Note 18, of the consolidated trade and other payables balance of $2.226 million, $1,302 million is due for payment within 60 days of the reporting date. The maturity profile of interest bearing debts are highlighted above.

Capital
The objective of the Directors is to maximise shareholder returns and minimise risks by keeping a reasonable balance between debt and equity. In previous years the Company and Group has minimised risk by being purely equity financed. In the current year, the Group has assumed debt risk but has kept the net debt amount as low as possible.

21     Share capital

* Details of the shares issued during the year are as shown in the table below and in the Statement of Changes of Equity on pages 25-26.

There were no shares reserved for issue under share options at 30 April 2019 (2018: nil).

The deferred shares carry no rights to dividends or to participate in any way in the income or profits of the Company.  They may receive a return of capital equal to the amount paid up on each deferred share after the ordinary shares have received a return of capital equal to the amount paid up on each ordinary share plus £10,000,000 on each ordinary share, but no further right to participate in the assets of the Company.  The Company may, subject to the Statutes, acquire all or any of the deferred shares at any time for no consideration.  The deferred shares carry no votes.

The ordinary shares carry all the rights normally attributed to ordinary shares in a company subject to the rights of the deferred shares.

See also Note 27 on page 61 for details of share issues after the reporting date.

Directors and Management financing agreement
As previously reported, on 6 January 2016 the Directors of the Company, together with certain senior managers, subscribed an aggregate amount of £0.5 million for new ordinary shares of 0.1p each in the Company, together with one warrant for each share issued; these warrants carry an entitlement either to one share at a price of 130 per cent of the issue price of the shares to which the warrant related or to a number of shares to be determined by a calculation based on a Black Scholes valuation of the shares at the time of exercise. 62,500,000 new Ordinary Shares were issued by the Company together with 62,500,000 warrants.

As at 31 March 2018, the Directors and senior managers held 5,208,313 unexercised warrants. None of these have been exercised in the current year and all remain unexercised at 30 April 2019. The last date for exercise is 31 March 2021.

Existing shareholders financing agreement
As reported in the report for the year to 31 March 2016, on 4 March 2016 the Company entered into an agreement with a number of existing shareholders (the “Investors“) for their subscription for up to £0.8 million, on similar terms as those agreed with the Directors and Management, detailed above. A total of 190,211,632 shares were subscribed for; in addition, 190,211,632 warrants were issued.

At 31 March 2018 there remained 6,613,756 warrants unexercised by these investors. None of these have been exercised in the current year and all remain unexercised at 30 April 2019. The last date for exercise is 31 March 2021.

22     Share based payments

Equity – settled share-based payments
The Company has granted share options and warrants to Directors, staff and consultants.

In June 2015, the Company also established a Share Appreciation Scheme to incentivise Directors and senior executives. The basis of the Scheme is to grant a fixed number of 'share appreciation rights' (SARs) to participants. Each SAR is credited rights to receive at the discretion of the Company ordinary shares in the Company or cash to a value of the difference in the value of a share at the date of exercise of rights and the value at date of grant. The SARS are subject to various performance conditions.

The tables below reconcile the opening and closing number of SAR’s in issue at each reporting date:

The tables below reconcile the opening and closing number of share options and warrants in issue at each reporting date:

*Extended from June 2019

Note: These warrants are only exercisable in the event of a default in repayment of the Mercuria Tranche A pre-payment off-take facility of US$ 4,500,000 (Mercuria Warrants).

The weighted average remaining lives of the SARs, share options or warrants outstanding at the end of the period is 34 months (2018: 22 months). Of the 686,856,043 SARs, options and warrants outstanding at 30 April 2019 (2018: 732,896,249), 613,856,043 (2018: 701,040,706) are fully vested in the holders and are exercisable at that date.

Fair value of share options
The fair values of share options and warrants granted have been calculated using the Black Scholes pricing model which takes into account factors specific-to-share incentive plans such as the vesting periods of the plan, the expected dividend yield of the Company’s shares and the estimated volatility of those shares.  Based on the above assumptions, the fair values of the options granted are estimated to be:

Volatility has been based on historical share price information. A higher rate of volatility is used when determining the fair value of certain options in order to reflect the special conditions attached thereto.

Based on the above fair values the expense arising from equity-settled share options and warrants made was $263,967 (2018: $26,747).

Cash-settled share-based payments
The Directors of the Company had set up an Employee Benefit Trust (EBT) in which a number of employees and directors were participants (the ‘Participants’).  The EBT held shares on behalf of Participants until such time as those Participants exercised their right to require the EBT to sell the shares.  On the sale of the shares the Participants would have received the appreciation of the value in the shares above the market price on the date that the shares were purchased by the EBT, subject to the first 5% in growth in the share price, on an annual compound basis, being retained by the EBT.  The Participants were to pay 0.01p per share to acquire their rights. 

In view of the large reduction in the Company’s share price since the EBT was set up, the value of the rights of the Participants under the EBT has become negligible, and accordingly the EBT has been terminated by the sale of the shares and the application of the sale proceeds in repayment of the loan by The Company to the EBT.

In the event of an increase in the Company’s share price to a figure substantially in excess of 6p, the Company would have a liability to Participants equal to the rights that the Participants would have had under the EBT.

The EBT rights of Participants are set out in the table below.

Fair value of Participants’ rights
The fair values of the rights granted to participants under the EBT have been calculated using a Black Scholes valuation model.  Based on the assumptions set out in the table below, as well as the limitation on the growth in share price attributable to the participants (as set out in the table above) the fair-values are estimated to be: