The Directors present the strategic report for MetalNRG plc (the “Company” or “MetalNRG”, and collectively with its subsidiary companies, the “Group”) for the year ended 31 December 2021.
PRINCIPAL ACTIVITY
The Company’s principal activity during the year was that of a natural resources and energy investing company listed on the Main Market for listed securities of the London Stock Exchange.
BUSINESS REVIEW
At the beginning of 2021, the Company held investments in International Mining Company Invest (” IMC “); Uranium in Kyrgyzstan, Goldridge Holdings Limited (” Gold Ridge “); Gold in Arizona and was contemplating an additional investment in a Gold Project in Tanzania via the acquisition of Lake Victoria Gold (” LVG “). Additionally, the Company planned, with the conversion of a Convertible Loan Note (” CLN “), to hold 50% of the equity in BritNRG Limited (” BritNRG “), a vehicle used to acquire conventional oil & gas assets onshore in the UK.
Subsequent to agreeing to make the investment in BritNRG, various issues relating to direct and indirect interests of Mr Pierpaolo Rocco in the co-investor in BritNRG, BritENERGY Holdings LLP (” LLP “), came to light which resulted in the Board accepting the resignation of Mr Rocco as a Director on 19 October 2021 and Mr Rocco’s employment being terminated by the Company on 21 December 2021. Claims have since been lodged by both parties which are outlined below.
Following detailed due diligence, the Board decided not to proceed with the LVG acquisition as there were a number of commercial issues the Board was not satisfied with. The financial support supplied to LVG during the year was converted into equity and the Company now holds a minority equity position in LVG.
In March 2021, the Company announced an exciting business development partnership agreement with EQTEC Plc, a company listed on the AIM market, which is a world leading gasification technology solutions company for sustainable waste-to-energy projects . In May 2021, the Company announced that it had made its first investment with EQTEC in a waste to energy project in Italy via a vehicle created specifically for green energy projects.
The MetalNRG Board sees green, sustainable energy projects as a major opportunity and a key area for growth investments over the coming years. MetalNRG intends to position itself as an Infrastructure Investor, which alongside its technical partner, EQTEC, will invest in projects that are close to delivering revenues. The project teams of both companies then focus on stabilising revenues and profits and then together sell onto investors looking for sustainable and predictable revenue streams. MetalNRG’s value proposition in this space is to develop projects that offer a solid upside that can be sold on.
MetalNRG had investments in the following projects at the end of 2021:
Gold Ridge – Gold in Arizona. The initial plan called for the exploitation of waste dumps and pillars left behind by previous operators. Following the completion of a detailed Competent Person Report by SRK Consulting, which included their recommendations, the Board decided to change its approach. In essence, the SRK report recommended that MetalNRG develop a full and detailed understanding of the areas’ geology and mineralisation as they suggested the area offers a better economic prospect that would be compromised if the waste dumps and pillars were to be exploited upfront. As a result, the Company proceeded with detailed desktop research and the amalgamation of all previous records and results of various campaigns to develop a new database for Gold Ridge. Following the completion of this work, the Company followed SRK’s advice and completed an on-site geochemical sampling program and we are now awaiting laboratory results so that we can determine the next steps forward. The Company is in a process of establishing whether Gold Ridge is more than just a number of previously producing gold mines, and that in fact there is a much larger opportunity available for economic development.
BritNRG – UK Conventional Onshore Oil & Gas. MetalNRG supplied BritNRG with a Convertible Loan Note, which under certain conditions could be converted to give MetalNRG a 50% equity stake in BritNRG. However, due to a number of issues related to this transaction, the conversion was not completed in accordance with the original plan and the transaction (which has been rescinded) is currently the subject of legal proceedings. The Company has brought legal proceedings against Mr Rocco, a former Director, BritENERGY Holdings LLP (the JV partner in BritNRG) and BritNRG itself. The Board and its legal advisors are confident of the Company’s position.
When the transaction was completed, the Company acted as financial guarantor for BritNRG with the North Sea Transition Authority. Due to the change in the interest the Company has in BritNRG, we are in correspondence with the Oil and Gas Authority (“OGA”) to seek clarity on our position as we no longer meet the criteria of being a parent entity of BritNRG.
Additionally, on 9 October 2020, BritNRG (as buyer) and Mr Rupert Lycett-Green (as seller) entered into a Share Purchase Agreement for the sale and purchase of the entire issued share capital of Sunswept Enterprises Limited with the Company as Guarantor. On 22 November 2021, Mr Lycett-Green commenced proceedings against the Company (as guarantor) pursuant to BritNRG’s alleged default on its payment obligations under the Share Purchase Agreement. This claim is currently stayed until 15 July 2022 at the request of Mr Lycett-Green.
EQTEC Italia – Waste to Energy Project in Italy. In May 2021, the Company announced, in partnership with EQTEC plc, its participation in the acquisition and planned recommissioning of a 1MWe waste-to-energy plant in Italy. Originally commissioned in 2015, the plant was built around EQTEC’s proprietary and patented Advanced Gasification Technology.
MetalNRG joined a consortium led by EQTEC to repower, own and operate the biomass-to- energy p lant (the “Plant”) in Castiglione d’Orcia, Tuscany, Italy. Once operational, it is intended that the plant will transform straw and forestry wood waste from local farms and forests into green electricity and heat for use in the local community.
In March 2022, Eqtec Italia MDC in Italy, updated the Company that the thermal cracking reactor and heat exchanger had been assembled and the piping at the plant was installed. The drying and feeding system, a further development improvement to increase the projects IRR, were ordered and are expected to be on site, on time, to meet the planned commissioning of the plant in the 2nd half of 2022.
IMC – Uranium Project in Kyrgyzstan. The Company continues to hold its investment in IMC’s Kyrgyzstan Uranium project which was issued a mining licence in April 2020. However, project operations are currently on hold due to the Government in Kyrgyzstan banning the exploitation of Uranium. There have been a number of political developments in recent months and the indications are that IMC is likely to have the licence re-instated. However, there are no guarantees at this point and we await further news and confirmation from the Kyrgyzstan Government. With the price of Uranium at current levels the project offers enhanced financial benefits from the original plans.
LVG – Gold in Tanzania. MetalNRG holds a minority equity position in this Gold project in Tanzania which the current owners are seeking to bring into production. MetalNRG will not be increasing its equity position and have received regular updates from LVG.
RESULTS AND DIVIDENDS
The loss of the Group for the year ended 31 December 2021, after taxation, attributable to equity holders of MetalNRG, the Parent Company, amounted to £1,864,279 (2020: £810,133 loss).
The Directors do not recommend the payment of dividends but are working towards establishing a suitable dividend policy can be considered in the future (2021: £nil).
EVENTS AFTER THE REPORTING PERIOD
There are no significant post period events to disclose for the year ended 31 December 2021, other than those set out in Note 19 to the Financial Statements.
PRINCIPAL RISKS AND UNCERTAINTIES
Managements of the business and the execution of the Board’s strategy are subject to a number of key risks and uncertainties:
Mineral exploration
Inherent with mineral exploration is that there are no guarantees that the Company can identify a mineral resource that can be extracted economically. In order to minimise this risk and to maximise the Company’s chance of long-term success, we are committed to the following strategic business principles:
· The Board regularly reviews the Company’s exploration and development programmes and allocates capital in a manner that it believes will maximise risk-adjusted return on capital.
· The Board applies advanced exploration techniques to areas and regions that it believes are relatively under-explored historically.
· Exploration work is conducted on a systematic basis. More specifically, exploration work is carried out in a phased, results-based fashion and leverages a wide range of exploration methods including modern geochemical and geophysical techniques and various drilling methods.
· The Board focuses the Company’s activities on jurisdictions that the Board believes represent low political and operational risk. Moreover, the Board strongly prefers to operate in jurisdictions where the Company’s exploration teams have considerable ‘on the ground’ experience. At the present time, all of the Company’s exploration related projects are in Arizona, USA, a country with established mining codes, stable government, skilled labour force, excellent infrastructure and a well-established mining industry.
Commodity price risk
The principal commodities that are the focus of the Company’s exploration and development efforts (precious metals and base metals specifically gold and copper) are subject to highly cyclical patterns in global demand and supply, and consequently, the price of those commodities can be highly volatile.
Recruiting and retaining highly skilled directors and employees
The Company’s ability to execute its strategy is highly dependent on the skills and abilities of its people. The Board undertakes ongoing initiatives to foster good staff engagement and ensure that remuneration packages are competitive in the market.
Occupational health and safety
Every Director and employee of the Company is committed to promoting and maintaining a safe workplace environment, including adopting COVID safe work practices. The Company regularly reviews occupational health and safety policies and compliance with those policies. The Company also engages with external occupational health and safety expert consultants to ensure that policies and procedures are appropriate as the Company expands its activity levels.
COVID-19
The COVID-19 Coronavirus pandemic has caused a severe adverse effect on the business environment on a global scale. The Group may continue to be affected by disruptions to its operations, in light of government responses to the spread of COVID-19 or other potential pandemics. The Board is aware of the various risks that the pandemic presents that include but are not limited to financial, operational, staff and community health and safety, logistical challenges and government regulation. At present, the Board believes that there should be no significant material disruption to its operations in the near term, but the Board continues to monitor these risks and the Group’s business continuity plans.
FINANCIAL INSTRUMENTS
The Group’s financial instruments comprise investments, cash at bank and various items such as available for sale assets, other debtors, loans and creditors. The Group has not entered into derivative transactions and nor does it trade financial instruments as a matter of policy.
Credit Risk
The Group’s credit risk arises primarily from cash at bank, other debtors and the risk that a counterparty fails to discharge its obligations. At 31 December 2021, (2020: £nil) no shares in the Company were un-paid for and no assets were impaired.
The Company’s credit risk primarily arises from inter-company debtors, which are considered to form part of the Company’s investment in the subsidiaries (see Note 8 to the Financial Statements) and cash at bank and other debtors. Should the subsidiaries’ exploration activities not be successful, it is possible that these debtors may become irrecoverable.
Liquidity Risk
Liquidity risk arises from the management of cash funds and working capital. The risk is that the Group will fail to meet its financial obligations as they fall due. The Group operates within the constraints of available funds and cash flow projections are produced and regularly reviewed by management.
Interest rate risk profile of financial assets
The only financial assets (other than short term debtors) are cash at bank and in hand, which comprises money at call. The directors believe the fair value of the financial instruments is not materially different to the book value.
Foreign currency risk
The Group has a United States subsidiary and it operates in Europe through its UK subsidiary with an investment in Italy, which can affect the Group’s sterling denominated reported results as a consequence of movements in the Sterling/US dollar/Euro exchange rates. The Group also incurs costs denominated in foreign currencies which gives rise to short term exchange risk. The Group does not currently hedge against these exposures as they are deemed immaterial and there is no material exposure as at the year-end (2020: £nil).
Market risk
The Group is also exposed to market risk arising from unlisted investments which are stated at their fair value.
KEY PERFORMANCE INDICATORS (KPIs)
The financial statements of a natural resource investing company can provide a moment in time snapshot of the financial health of the Company but do not provide a reliable guide to the performance of the Company or its Board.
At this stage in the Company’s development the Directors regularly monitor key performance indicators associated with funding risk, being primarily projected cash flows associated with general administrative expenses and projected cash flows on a project-by-project basis. This year, the Company has been able to raise the funds as needed to finance its activities.
KPIs are not appropriate as a means of assessing the value creation of a company which is involved in natural resource investments, and which currently has no turnover. The Board considers that the detailed information in the Business Review in the Strategic Report is the most appropriate guide to the Group’s performance during the year.
SECTION 172 (1) STATEMENT
MetalNRG and its Board members understand the importance and relevance of considering stakeholder groups in long term decision making; we therefore engage in a systematic manner with our key stakeholders.
First and foremost, the Directors act in a way that they consider, in good faith and with the information available, to be most likely to promote the success of our Company and of all our stakeholders. This includes considering the interests of employees, contractors, advisors and consultants, maintaining high standards of business conduct while considering the impact on communities and the environment.
Section 172 specifies that the Directors must act in good faith when promoting the success of the Company and have regards (amongst other things) to the following:
· the likely consequences of any Board decision in the long-term;
· to the extent the Company has employees, the interests of the Company’s employees;
· the need to foster the Company’s business relationships with suppliers, customers and others;
· the impact of the Company’s operations on the community and the environment;
· the desirability of the Company’s maintaining a reputation for high standards of business conduct;
· and to act fairly as between members of the Company
The Board of Directors is collectively responsible for the decisions made towards the long-term success of the Company.
Considering the broad range of interests in the Company is an important part of the way the Board makes decisions; however, in balancing those different perspectives, it won’t always be possible to deliver everyone’s desired outcome.
Engaging with stakeholders
We consistently engage with stakeholders to inform our decisionmaking and to support the Board’s understanding of how our activities impact them. Specifically, the Directors take time to meet and discuss various topics with our advisors, contractors, suppliers, brokers and our shareholders.
The Board considers and discusses information received from across the organisation to help it understand the impact of its operations, and the interests and views of our key stakeholders. The Board of Directors are presented with a CEO report and financial management accounts on a monthly basis and, from time to time, commentary from other relevant executive team members. The CEO report and financial management accounts form the basis for formal Board meetings. In addition to the formal Board meetings, but also informal meetings of the Board are regularly held. At the beginning of each financial year, a strategic business plan and budgets are presented to the Board by the CEO and these form the basis for on ongoing and regular reviews of the Company’s performance.
The Company regularly releases social media commentary, which any stakeholder can reply to, our PR advisors monitor comments on social media and will review the comments with the CEO and together they will develop and adjust their communications plan based on issues that arise.
As a result of these activities, the Board has an overview of engagement with stakeholders, and other relevant factors, which enables the Directors to comply with their legal duty under Section 172 of the Companies Act 2006.
Employees, contractors and consultants
The Company has few employees, however we do work with a number of contractors and consultants and the Board will engage with all three of the above as we see them as an extension of the Company when working together. We hold regular face to face and zoom meetings to ensure that all health & safety matters are adhered to and that the Company’s Code of Conduct is followed by all. We also actively seek their input to further improve performance, health and safety and our own engagement processes. Due to the fact that we work with specialist consulting firms, we also recognise that in certain areas their knowledge and expertise might be better than our own and we will take advice from them but we will retain ultimate responsible on those matters.
Partners
The Company works in close partnership with EQTEC plc to develop waste to energy projects which is part of our efforts towards zero emission. Our first joint investment in Italy is a good example of how we work closely together in the interest of all stakeholders involved in the project. While recommissioning the plant we have been involved with all decision making processes, engaging with local political representatives who have an interest in the project while at the same time working closely with the contractors and suppliers on site to secure ultimate success. We have attended regular meetings and are part of the Board of the SPV set up to manage the project.
Governments & Regulators
We seek to build strong and transparent relations with host governments and regulatory bodies, this is carried out by the Board members of the SPV’s who are charged with developing the specific asset, together we will agree the framework to follow and they will adopt it to the local environment and regulation and report back to the Company’s main Board via monthly reports. These reports are discussed at Board meetings and the CEO is charged with supplying the SPV’s management and Board with feedback. For example, our partner in Kirgizstan holds regular meetings with government representatives in country seeking to resolve the uranium mining license suspension in country. Prior to any meeting we discuss our approach internally and following every meeting the local management team supplies the Board with a written report on the meeting and supplies us with any written correspondence along with its translation, the Board will discuss these documents and will supply feedback were required.
Community & Environment
MetalNRG is extremely conscious of the potential impact on the environment its activities may have and also the local communities. As a Board we consider these aspects carefully in our decision making and we ensure that environmental considerations and implications are integrated in the business plans developed by the SPV’s developing specific assets. The SPV also have to follow their industry requirements on environmental impact and in most of our assets environment impact studies must be presented to the regulators. The Company’s Board will work with the SPV’s management to adhere to the regulators requirements and provide guarantees as and when they might be required.
Maintaining High standards of Business Conduct
MetalNRG Plc is incorporated in the UK and governed by the Companies Act 2006. The company has adopted a Code of Conduct and the Board recognises the importance of maintaining a good level of corporate governance, which together with the requirements to comply with Market Regulatory rules ensure that stakeholders interest are safeguarded. The Board requires ethical behaviour and business practices to be implemented throughout its business and the SPV’s it has an interest in. Our anti-bribery statement is clear and straightforward and the Company expects and demands professional, honest and fair behaviour at all times and there is a zero tolerance for bribery and unethical behaviour, which as a Board we follow with conviction.
Shareholders
As a listed company on the London Stock exchange, the Board responsibilities are clear and spelled out, our legal advisors work closely with us on ensuring compliance. The investor section on our web site serves as our primary method for shareholder communications, we publish our reports, results and other relevant information on the Company and its assets. Regular dialogue is maintained with our shareholders through presentations, meetings and social media. The Company conducts a quarterly review of its shareholders and reviews the results at Board level, the Board also engages formally with shareholders at the AGM.
The requirements for compliance to Section 172 of the Companies Act will be monitored on an ongoing basis and the Board is committed to making ongoing improvements in this area.
CLIMATE RELATED FINANCIAL DISCLOSURES
Following the Government’s announcement to extend the mandatory reporting against the disclosure framework published by the Financial Stability Board’s Taskforce on Climate-related Financial Disclosures (the “TCFD”), which came into effect on 17 January 2022, the Company will be required to make climate-related financial disclosures (“CRFDs”) in the financial year commencing 6 April 2022 which are due to be published next year.
Accordingly, the Company will disclose the following information:
1) a description of the Company’s governance arrangements in relation to assessing and managing climate-related risks and opportunities;
2) a description of how the Company identifies, assesses, and manages climate-related risks and opportunities;
3) a description of how processes for identifying, assessing, and managing climate-related risks are integrated into the Company’s overall risk management process;
4) a description of:
a. the principal climate-related risks and opportunities arising in connection with the Company’s operations, and
b. the time periods by reference to which those risks and opportunities are assessed;
5) a description of the actual and potential impacts of the principal climate-related risks and opportunities on the Company’s business model and strategy;
6) an analysis of the resilience of the Company’s business model and strategy, taking into consideration different climate-related scenarios;
7) a description of the targets used by the Company to manage climate-related risks and to realise climate-related opportunities and of performance against those targets; and
8) a description of the key performance indicators used to assess progress against targets used to manage climate-related risks and realise climate-related opportunities and of the calculations on which those key performance indicators are based.
CAPITAL MANAGEMENT
The Company’s objective when managing capital is to safeguard the Group’s ability to continue as a going concern and develop its mining, exploration and investment activities to provide returns for shareholders. The Group’s funding comprises equity and debt. The Directors consider the Company’s capital and reserves to be capital. When considering the future capital requirements of the Group and the potential to fund specific project development via debt, the Directors consider the risk characteristics of all the underlying assets in assessing the optimal capital structure.
DIRECTORS’ REPORT
The Directors are pleased to submit their Annual Report and audited financial statements for MetalNRG plc (the “Company” and collectively with its subsidiaries the “Group”) for the year ended 31 December 2021.
The Strategic Report contains details of the Group’s principal activities and includes an Operational Review which provides detailed information on the development of the Group’s businesses during the year ended 31 December 2021 and which provided indications of likely future developments and events that have occurred after the Balance Sheet date. The Strategic Report also contains details of Risks and Uncertainties of the Group’s exposure to risks and uncertainties and the Company’s risk management.
This Directors’ Report includes the information required to be included under the Companies Act 2006 or, where provided elsewhere, an appropriate cross-reference is given. The Corporate Governance Statement, approved by the Board, is provided on pages 16 to 20 and is incorporated by reference herein.
GOING CONCERN
In common with many other natural resource investing and mineral exploration companies, the Company raises finance for its natural resources and energy investing activities in tranches as and when required. When any of the Group’s projects move to the development stage specific project financing is required.
The Directors prepare budgets that extend beyond the period of 18 months from the date of this report. Taking into account the Company’s cash resources at the year-end, these projections include the proceeds of further fund-raisings that may be required within the next 12 months to meet the Group’s overheads and planned project expenditure and maintain the Company and its subsidiaries as going concerns. Although the Company has been successful in raising funding in the past, there is no guarantee that it will be able to raise sufficient funding in the future. This represents a material uncertainty related to events or conditions which may cast significant doubt on the Company’s and the Group’s ability to continue as going concerns and accordingly the Company and the Group may be unable to realise their assets and discharge their liabilities in the normal course of business. Nevertheless, the Directors are confident that that they will be able to secure additional funding when required to meet further costs for the foreseeable future as well as its corporate overheads and the Directors therefore believe that the going concern basis is appropriate for the preparation of the Group’s financial statements.
RISKS AND UNCERTAINTIES AND FINANCIAL INSTRUMENTS
The business of mineral exploration, evaluation and development has inherent risks. The Company’s exposure to risks is explained in Risks and Uncertainties in the Strategic Report together with the policies of the Board for the review and management of those risks.
THE GROUP’S PERFORMANCE AND FUTURE DEVELOPMENTS
A review of the Group’s projects and their performance during the financial year and details of future developments and an indication of the outlook for the future, are contained in the Strategic Report.
The Board will continue with its strategic plans to generate growth in value for shareholders in line with its business model which is explained in the Strategic Report.
DIRECTORS
The Directors of the Company during the year were:
Christopher Peter Latilla-Campbell – Non-Executive Chairman of the Board and Chairman of the Audit Committee
Rolf Ad Gerritsen – Chief Executive Officer
Pierpaolo Rocco – Executive Director, Oil & Gas – resigned 19 October 2021
Christian Schaffalitzky de Muckadell – Non-Executive Director and Chairman of the Remuneration Committee
Approved by the Board of Directors
and signed on behalf of the Board
Rolf Gerritsen
Director
28 April 2022
