Financial Results for the year ended 31 December 2020
MetalNRG plc (LON:MNRG), the natural resource investing and exploration company, announces final results for the year ended 31 December 2020 (“Final Results”).
STRATEGIC REPORT
PRINCIPAL ACTIVITY
The Company’s principal activity during the year was that of a natural resource investing company listed on the Main Market for listed securities of the London Stock Exchange.
BUSINESS REVIEW
The Company has had an eventful year with key successes, but also faced some difficulties due to this year’s restrictions. The Company comes out of 2020 stronger than it was 12 months ago, after our first full year on the Main Market of the London Stock Exchange having moved over from the NEX Exchange Growth market. We reviewed numerous investment opportunities but decided to focus on three projects in particular: Oil & Gas in Romania, Oil & Gas in the UK, and Lake Victoria Gold in Australia with its assets in Tanzania. MetalNRG also made progress on the Goldridge asset in Arizona and took steps to address its investment in IMC’s uranium asset in Kyrgyzstan, which has been impacted by the Government’s imposed ban on the exploitation of Uranium in the country. The following provides a short summary on each of the projects:
Oil & Gas in Romania: following initial internal desk-based due diligence we appointed consultants to complete a detailed report on the assets in Romania. However, during this period oil prices were under severe pressure and we saw a complete crash in the oil price, which made the initially discussed economic terms less attractive. As a result, we revised the financial terms of our offer to the vendors, who subsequently chose not to accept the terms put forward.
Oil & Gas UK: the Company spent a number of months completing due diligence on the Sunswept assets in Lincolnshire. The Company invested via a convertible loan note which can be converted into equity in BritNRG Ltd, the special purpose vehicle created specifically for Oil & Gas projects. The unique operating model, which involves a few Private Investors investing in the Special Purpose Vehicle and becoming part of the management team, enables the Company’s interests to be aligned with those of the management team. BritNRG has now completed the transaction and has taken operational control of the Sunswept assets, with Pierpaolo Rocco as CEO and focused on operational improvement as well as health & safety.
Lake Victoria Gold: following an initial internal assessment of the gold assets in Tanzania, owned by Lake Victoria Gold Ltd, MetalNRG entered into Head of Terms to acquire 100% of the equity in the Australian based company. Due diligence was not straight forward, as the impact of Covid-19 and the resulting travel restrictions meant that site visits from London were impossible to complete. Our due diligence raised potential issues which were investigated further. The due diligence highlighted an ownership issue around 2 licences that Lake Victoria Gold holds under option and were part of the presented mining plan. This meant that the parties failed to agree on valuation and as a result the Board decided not to pursue the investment in Lake Victoria Gold. During the period that we completed our due diligence, MetalNRG agreed to advance funds to Lake Victoria Gold which have now been converted into that company’s equity and the Company now owns 3.8% of Lake Victoria Gold’s equity.
IMC: which owns a Uranium asset in Kyrgyzstan was subjected to a country wide ban, as reported last year, on the exploitation of Uranium by the Government and as a result we have not been able to progress work as originally planned towards production. MetalNRG currently owns 9.9% of the asset. The Company has an agreement with IMC that if and when the Government agrees to pay damages to IMC, the Company will receive funds recovered equal to its equity portion held in IMC. MetalNRG will also receive $3 for every $1 that the Company has provided in financial support to IMC over and above the equity investment in IMC during this period. A new Government has now been elected and the Uranium ban, imposed by the previous Government, is under review. We look forward to a positive outcome in this country.
Goldridge, Arizona: good progress was made at the beginning of the year; two site visits were completed by our contractors in the US and the results were announced to market. The initial focus was to determine the economic
value of the waste dumps left by the previous operators outside level 6. A second visit focused on sampling a number of the pillars underground at levels 4 and 6. The results we announced were encouraging, however due to the severe restrictions imposed in Arizona as a result of Covid-19 access to the site was limited in the second part of the year. Importantly, during the lockdown period, we reviewed all data available to us on the project and decided to review the geological structures connecting the three previously producing gold mines. As soon as we were able to, we completed a site visit and updated the Competent Person Report on the asset; the results are currently under review and an announcement to market will be made as soon as is possible. The review was completed in March 2021.
The next 12 months are going to see us work hard on a number of fronts, both developing existing assets and hopefully adding to our investment portfolio and we look forward to keeping the market up to speed with our progress.
RESULTS AND DIVIDENDS
The loss of the Group for the year ended 31 December 2020, after taxation, attributable to equity holders of MetalNRG, the Parent Company, amounted to £810,133 (10 months ended 31 December 2019: £584,855 loss).
The Directors do not recommend the payment of dividends but are confident that a suitable dividend policy can be considered in the future (10 months ended 31 December 2019: £nil).
EVENTS AFTER THE REPORTING PERIOD
There are no significant post balance sheet events to disclose for the year ended 31 December 2020, other than those set out in Note 18 to the Financial Statements.
PRINCIPAL RISKS AND UNCERTAINTIES
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 the counterparty fails to discharge its obligations. At 31 December 2020, £nil (31 December 2019 – £25,000) was unpaid for shares in the Company but not 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, as per the Group. 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 interest earned in the year was negligible. The directors believe the fair value of the financial instruments is not materially different to the book value.
Foreign currency risk
The Group has Australian and United States subsidiaries, which can affect the Group’s sterling denominated reported results as a consequence of movements in the Sterling/Australian dollar/US dollar 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 (at 31 December 2019 – £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 investment 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
The Directors have acted in a way that they considered, in good faith, to be most likely to promote the success of MetalNRG plc (the “Company”) for the benefit of its members, and in doing so had regard, amongst other matters to:
· the likely consequences of any 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 between members of the Company
The Directors also took into account the views and interests of a wider set of stakeholders, including our regulator, the Government and non-government organisations.
Considering the broad range of interests 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.
How does the Board engage with stakeholders?
The Board will sometimes engage directly with certain stakeholders on certain issues, but the size and distribution of our stakeholders means that stakeholder engagement often takes place at an operational level.
In addition, to ensure a more efficient and effective approach, certain stakeholder engagement is led at Group level, in particular where matters are of group-wide significance or have the potential to impact the reputation of the Group.
The Board considers and discusses information from across the organisation to help it understand the impact of its operations, and the interests and views of our key stakeholders. It also reviews strategy, financial and operational performance, as well as information covering areas such as key risks, and legal and regulatory compliance. This information is provided to the Board through reports sent in advance of each board meeting, and through in-person presentations.
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.
The purpose of MetalNRG plc is to act as a natural resource investing company. Due to the nature of the Company, no decisions were made by the Directors during the reporting period which required them to have regard to the matters set out in section 172 of the Companies Act 2006.
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 and exploration 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.
Approved by the Board of Directors
and signed on behalf of the Board
Rolf Gerritsen
Director and Chief Executive Officer
28 April 2021
