Consolidated statement of cash flows

for the year ended 31 December 2021

Notes to the consolidated financial statements

1.      Reporting entity

The consolidated financial statements for the year ended 31 December 2021 (the "financial statements") comprise GoldStone Resources Limited (the "Company") and its subsidiaries, set out in note 22, (together referred to as the "Group").

The Company is quoted on the AIM market of the London Stock Exchange and is incorporated and domiciled in Jersey (Channel Islands).  The address of its registered office is 2^nd Floor, International House, 41 The Parade, St. Helier, Jersey, JE2 3QQ.  The Company's principal activity is that of a holding company. The Group's principal activity is exploration and mining of gold and associated elements.

2.      Basis of preparation

(a)     statement of compliance and basis of preparation

The Group's annual report is for the year ended 31 December 2021 and includes the consolidated financial statements of the Group prepared in accordance with international accounting standards in accordance with UK-adopted-IFRSs.

The Group financial statements have been prepared using accounting policies set out in note 3 which are consistent with all applicable IFRSs. For these purposes, IFRSs comprise the standards issued by the International Accounting Standards Board and interpretations issued by the International Financial Reporting Interpretations Committee that have been endorsed by the UK Endorsement Board.

The Group financial statements have been prepared under the historical cost convention except for the treatment of share based payments, certain debtors at fair value and derivatives.  The Group financial statements are presented in United States Dollars ("$") and all values are rounded to the nearest thousand except where otherwise stated.

The preparation of consolidated financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and reported amounts in the financial statements.  The areas involving a higher degree of judgement or complexity, or areas where assumptions or estimates are significant to the financial statements, are disclosed in note 2(d).

(b)     going concern

The financial statements have been prepared assuming the Group and Company will continue as a going concern.  In assessing whether the going concern assumption is appropriate, the directors have taken into account all available information for the foreseeable future; in particular for the 12 months from the date of approval of these financial statements.  This assessment included consideration of future revenues as the Group commences commercial gold production, existing cash resources and available facilities.

The Group had available cash of US$336,524 as at 31 December 2021 (2020: US$701,384).

The Group commenced commercial production in January 2022.  This was later than previously anticipated due to permitting issues.  As can be seen in note 15, warrants over 459,035,996 Ordinary Shares were exercised by shareholders during the year to generate funds for the Group and pay down borrowings.  In addition, Asian Investment Management Services Limited ("AIMS"), who hold the secured Gold Loan of US$3.0 million, supported the Group by agreeing to a number of deferments of interest payments and, in September 2021, agreed to an extension of the facility to 31 August 2022 and a gold repayment plan (see note 18).  As a result of the Group not commencing commercial production until early 2022 the first three repayments were not made until January 2022 (see note 18 for further details).  This allowed the Group to exit the default interest rate of 17% on the Gold Loan, reverting back to 14%.

(b)     going concern

The Group is now generating revenues from commercial production.  The financial models and projections prepared by the Board in order to monitor cash flow demonstrate that the Group is a viable going concern.  However, if there are further delays or problems encountered with production, the ability to meet the repayment schedule of the Gold Loan would be at risk.  The Board believes the flexibility and support afforded to the Group by the shareholders and AIMS to date demonstrates that, if required, this would be forthcoming.    AIMS have confirmed their intention to continue to support the Group by agreeing to further extensions of the payment plan, however the interest rate would revert back to the default rate of 17% from September 2022.

At the date of this report the Board is, therefore, confident of the ability of the Group and Company to continue mining and make the on-going operational improvements, as announced in March 2022.  The Board is confident that with the continued support of the shareholders, the Group and Company can meet all its contractual obligations as they fall due for the foreseeable future and therefore, the Board believes it is appropriate to adopt the going concern assumption.

(c)     functional and presentational currency

Items included in the financial statements of each of the Group's subsidiaries are measured using the currency of the primary economic environment in which the entity operates (its functional currency).  These consolidated financial statements are presented in United States Dollars, which is the functional and presentational currency of the Group.

In preparing the financial statements of the individual entities, transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions.  At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the balance sheet date. 

Exchange differences arising on the settlement of monetary items and on the retranslation of monetary items are included in the statement of comprehensive income for the period.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are expressed in United States Dollars using exchange rates prevailing at the balance sheet date.  Income and expense items are translated at the average exchange rates for the period.  Exchange differences arising if any, are classified as other comprehensive income and are transferred to the Group's translation reserve.

When the settlement of monetary items receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign currency gains and losses arising from such items are considered to form part of a net investment in foreign operations and are recognised in other comprehensive income, and presented in the exchange reserve in equity.

(d)     use of estimates and judgements

In the application of the Group's accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources.  The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant.  Actual results may differ from these estimates.  The estimates and underlying assumptions are reviewed on an ongoing basis.  Revisions to accounting estimates are recognised in the period in which the estimates are revised if the revision affects only that period, or in a period of the revision and future periods if the revision affects both current and future periods.

The following are the key estimates and judgements that have a significant risk of resulting in a material adjustment within the next year:

(i)         valuation of exploration and evaluation expenditure

The application of the Group's accounting policy for exploration and evaluation expenditure requires judgement in determining whether it is likely that future economic benefits are likely from future exploration.  If information becomes available suggesting that recovery of expenditure is unlikely, the amount capitalised is written off in the consolidated statement of comprehensive income in the period when the new information becomes available.

(ii)        impairment of intangible and tangible assets

The assessment of tangible and intangible assets for any internal and external indications of impairment involves judgement.  Each reporting period, the Group assesses whether there are any indicators of impairment, if indicated then a formal estimate of the recoverable amount is performed and an impairment loss recognised to the extent that the carrying amount exceeds recoverable amount.  Recoverable amount is determined as the value in use.  Determining whether the projects re impaired requires an estimation of the recoverable value of the individual areas to which value has been ascribed.  The value in use calculation requires the entity to estimate the future cash flows expected to arise from the projects in order to calculate present value. 

(iii)       production start date

The Group assesses the stage of the mine under construction to determine when the mine moves into production stage.  The criteria used to assess the start date are determined based on the complexities and operational status of the mine.  The Group considers various criteria to assess when the mine is commercially operational and should be reclassified from Assets under construction to 'Producing Mines' or 'Property plant and equipment.' Some of the criteria will include, but not limited to the following:

·    completion of a reasonable period of testing the mine plant and equipment;

·    completion of the commissioning period;

·    ability to produce metal in a saleable form;

·    ability to sustain ongoing production of metal; and

·    ability to be able to export product for commercial sale.

When a mine construction project moves into the production stage, the capitalisation of certain mine construction costs cease and costs are either regarded as inventory or expenses except for costs that qualify for capitalisation relating to mining assets.  This is also the point at which the depreciation/amortisation recognition criteria commences.

(iv)       inventory

Net realisable tests are performed at least annually and represent the future sale price of the product based on prevailing spot metal prices at the reporting date, less estimated costs to complete production and bring the product to sale.

Stockpiles are measure by estimating the number of tonnes added and removed from the stockpile, the number of contained gold ounces based on assay data and estimated recovery percentage based on expected processing method. 

(v)        ore reserves and resources

Ore reserves are estimates of the amount of ore that can economically and legally be extracted from the mine.  The Group estimates its ore reserves and mineral resources, based on information compiled by appropriately qualified person relating to the geological data on the size, depth and share of the ore body and requires complex geological judgments to interpret the data.  The estimation of recoverable reserves is based upon factors such as estimates of foreign exchanges rates, commodity prices, future capital requirements and production costs along with geological assumptions and judgements made in estimating the size and grade of the ore body.  Changes in the reserve or resource estimates may impact upon the carrying value of exploration and evaluation asses, mine properties, property plant and equipment provision for rehabilitation and deprecation/amortisation charges.

(v)        mine rehabilitation provision

The Group assesses its mine rehabilitation provision annually.  Significant estimates and assumptions are made in determining the provision for the mine rehabilitation as there are numerous factors that will affect the ultimate liability payable.  These factors include estimates of the extent and cost of rehabilitation activities, technological changes, regulatory changes and changes in discount rates.  Those uncertainties may result in future actual expenditure differing from the amounts currently provided.  The provision at the reporting date represents managements base estimate of the present value of the rehabilitation provision.  

(vi)       valuation of share warrants

The fair value of share warrants is calculated using the Black-Scholes model.  The model requires a number of inputs to calculate the fair value of the warrants.  Volatility is based on the Group's trading performance and the risk-free rate is determined using a 3-year UK government bond.  The directors have reviewed the underlying inputs and are happy that these appear reasonable. 

3.      Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements.

(a)     basis of consolidation

The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 31 December 2021. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has:

·    power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee); 

·    exposure, or rights, to variable returns from its involvement with the investee; and 

·    the ability to use its power over the investee to affect its returns.

Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

·    the contractual arrangement with the other vote holders of the investee;

·    rights arising from other contractual arrangements; and

·    the Group's voting rights and potential voting rights.

The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

All intra-group transactions, balances, income and expenses are eliminated on consolidation. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group's accounting policies.

(b)     financial instruments

(i) non-derivative financial assets

The Group recognises loans and receivables at fair value on the date that they are originated.  All other financial assets are recognised initially on the trade date, which is the date that the Group becomes party to the contractual provisions of the instrument.

The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred.  Any interest in such transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.  The Group classifies non-derivative financial assets into the following categories: loans and receivables and cash and cash equivalents.

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses. Loans and receivables comprise trade and other receivables.

Cash and cash equivalents comprise bank balances only.

(ii) non-derivative financial liabilities

The Group recognises financial liabilities initially on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument.  The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.

The Group classifies non-derivative financial liabilities into trade and other payables.

(iii) share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of the ordinary shares are recognised as a deduction from equity, net of tax effects.

(iv) deferred shares

Deferred shares are classified as equity and held in the capital contributions reserve account.

(c)     share based payments

The Group has applied the requirements of IFRS 2 - 'Share based payment.' IFRS 2 has been applied to all grants of equity instruments.

The fair value of warrants and the employee share option scheme is calculated at the grant date using the Black-Scholes model.  The resulting cost is charged to the statement of comprehensive Income over the vesting period or in line with the services provided in consideration for the issue. 

(d)     property, plant and equipment

Upon completion of mine construction, the assets initially charged to 'Assets under construction' are transferred to 'Plant and equipment and motor vehicles' or 'Producing mines.'  Items of 'Plant and equipment and motor vehicles' and 'Producing Mines' are stated at cost, less accumulated depreciation and accumulated impairment losses.

During the production period expenditure directly attributable to the construction of each individual asset are capitalised as 'Assets under construction' up to the period when the asset is ready to be put into operation.  When an asset is put into operation it is transferred to 'Plant and equipment and motor vehicles' or 'Producing mines.' Additional capital cost incurred subsequent to the date of commencement of operation of the asset are charged directly to 'Plant and equipment motor vehicles' or 'Producing mines', i.e. where the asset itself was transferred.

The initial cost of an asset comprises its purchase price or construction cost, any costs directly attributable to bringing the asset into operation, the initial estimate of the rehabilitation obligation and, for qualifying assets, borrowing costs.  The purchase price or construction cost is the aggregate amount paid and the fair value of any other consideration given to acquire the asset.

When a mine construction project moves into production stage, the capitalisation of certain mine construction costs ceases and costs are either regarded as inventory or expensed, except for costs which qualify for capitalisation relating to mining asset additions or improvements, underground mine development or mineable reserve development.

Property, plant and equipment is stated at cost less accumulated depreciation and any recognised impairment loss.  Depreciation is charged so as to write off the cost or valuation of assets over their estimated lives, using the straight-line method, unless otherwise indicated, on the following bases:

Gold samples                          no depreciation charged

Computer equipment              over three years

Office equipment                    over four years

Field/geological equipment    over four years

Motor vehicles                        over four years

The carrying value of tangible fixed assets is reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.  The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sale proceeds and the carrying amount of the asset is recognised in income.

(e)       intangible assets - exploration and evaluation

The costs of exploration properties and leases, which include the cost of acquiring prospective properties and exploration rights and costs incurred in exploration and evaluation activities, are capitalised as intangible assets as part of exploration and evaluation assets.

Exploration and evaluation assets are carried forward during the exploration and evaluation stage and are assessed for impairment in accordance with indicators of impairment set out in IFRS 6 - 'Exploration for and Evaluation of Mineral Resources.'

In circumstances where a property is abandoned, the cumulative capitalised costs relating to the property are written off in the period.  No amortisation is charged prior to commencement of production.

Once commercially viable reserves are established and development is sanctioned, exploration and evaluation assets are transferred to assets under construction.

When commercial production commences, exploration, evaluation and development costs previously capitalised are amortised. 

Exploration and evaluation costs incurred after commercial production start date in relation to evaluation of potential mineral reserves and resources that are expected to result in increase of reserves are capitalised as evaluation and exploration assets within intangible assets.  Oncer there is evidence that reserves are increased, such costs are tested for impairment and transferred to producing mines.

(f)      impairment of financial assets

A financial asset is impaired if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset, and that loss event(s) had an impact on the estimated future cash flows of that asset that can be estimated reliably.

The Group considers evidence of impairment for financial assets measured at amortised cost at both a specific asset and collective level.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset's original effective interest rate. Losses are recognised in the statement of comprehensive income.

The carrying amount of the Group's non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated.  An impairment loss is recognised if the carrying amount of an asset exceeds its recoverable amount.

(g)        provisions

(i)         general

Provisions are recognised when (a) the Group has a present obligation (legal or constructive) as a result of a past event and (b) it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.  If the effect of the time value of money is material, provisions are discounted using a risk free rate that reflects, where appropriate, the risks specific to the liability.  When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

ii)         rehabilitation provision

The Group records the present value of estimated costs of legal and constructive obligations require to restore the operating locations in the period in which the obligation is incurred.  The nature of these restoration activities include dismantling and removing structures, rehabilitating mines, dismantling operating facilities, closure of plant and waste sites and restoration, reclamation and revegetation of affected areas.

The obligation generally arises when the asset is installed or the group or environment is disturbed at the production location.  When the liability is initially recognised, the present value of the estimated cost is capitalised by increasing the carrying amount of the related mining asset to the extent that it was incurred prior to the production of related ore.  Over time, the discounted liability is increased for the change in present value based on the discount rates that reflect current market assessments and the risks specific to the liability. 

The periodic unwinding of the discount is recognised in the Group income statement as a finance cost.  Additional disturbances or changes in rehabilitation costs will be recognised as additions or charges to the corresponding assets and rehabilitation liability when they occur.  Any reduction in the rehabilitation liability and therefore any deduction from the rehabilitation asset may not exceed the carrying amount of that asset.  If it does, any excess over the carrying value is taken immediately to the Group income statement.

If the change in estimate results in an increase in the rehabilitation liability and therefore an addition to the carrying value of the asset, the Group is required to consider whether this is an indication of impairment of the asset as whole and test for impairment in accordance with IAS 36.

(h)        related parties

For the purposes of the Group financial statements, the following parties are considered to be related:

·    Where one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions

·    Entities under common control; and

·    Key management personnel

In considering each possible related party relationship, attention is directed to the substance of the relationship, not merely the legal form.

Related parties may enter into transactions which unrelated parties might not and transactions between related parties may not be affected on the same terms, condition and amounts as transaction between unrelated parties.  It is the nature of transactions with related parties that they cannot be presume to be carried out on an arms length basis.

(i)         taxation

Current and deferred tax is charged or credited in the statement of comprehensive income, except when it relates to items charged or credited directly to equity, in which case the related tax is also dealt with in equity. Current tax is calculated on the basis of the tax laws enacted or substantively enacted at the reporting date in the countries where the Company and its subsidiaries operate.

Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised, except for differences arising on investments in subsidiaries where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.

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

Deferred tax is calculated based on rates enacted or substantively enacted at the reporting date and expected to apply when the related deferred tax asset is realised or liability settled.

(j)      inventories

Metal in circuit consists of in-circuit material at properties with milling or processing operations and dore awaiting refinement, all valued at the lower of average cost and net realisable value.  In-process inventory costs consist of direct production costs (including mining, crushing and processing and site administration costs) and allocated indirect costs (including depreciation, depletion and amortisation of producing mines and mining interests).

Ore stockpiles consist of stockpiled ore, ore on surface and crushed ore, all valued at the lower of average cost and net realisable value.  Ore stockpile costs consist of direct production costs (including mining, crushing and processing and site administration costs) and allocated indirect costs (including depreciation, depletion and amortisation of producing mines and mining interests).

Finished goods consist of dore bars that have been refined and assayed and are in the form that allows them to be sold.  Finished goods valued at the lower of average cost and net realisable value.  Finished goods cost consist of direct production costs (including mining, crushing and processing and site administration costs) and allocated indirect costs (including depreciation, depletion and amortisation of producing mines and mining interests).

(k)     finance cost

Borrowing costs directly relating to the acquisition, construction or production of a qualifying capital project under construction are capitalised and added to the project cost during construction until such time the asset are considered substantially ready for intended use i.e commercial production.  When funds are borrowed specifically to finance a project, the amount capitalised represents the actual borrowing costs incurred.

Any general borrowing costs are recognised in the profit and loss period in which they are incurred.

4.       Adoption of new and revised standards

(a)     new and amended standards

The  following standards and amendments were applicable for annual financial statements beginning on or after 1 January 2021:

·    Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16: Interest Rate Benchmark Reform - Phase 2

The above amendments had no impact on the consolidated financial statements of the Group.

(b)     new standards in issue but not yet effective

The new and amended standards and interpretations that are issued, but not yet effective up to the date of issuance of the Group's financial statements are disclosed below. 

The Group intends to adopt these new and amended standards and interpretations, if applicable, when they become effective;

·    IFRS 17: Insurance Contracts

·    Amendments to IAS 1: Classification of Liabilities as Current or Non-Current

·    Amendments to IFRS 3: Reference to Conceptual Framework

·    Amendments to IAS 16: Property, Plant and Equipment: proceeds before intended use

·    Amendments to IAS 37: Onerous contracts - costs of Fulfilling a Contract

·    IFRS 1: First time adoption of International Financial Reporting Standards: subsidiary as a first time adopter

·    IFRS 9: Financial Instruments: Fees in the ''10 per cent'' test for derecognition of financial liabilities

·    IAS 41: Agriculture - Taxation in fair value measurement

·    Amendments to IAS 8: Definition of accounting estimates

·    Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting Policies

·    Amendments to IAS 12: Deferred Tax related to assets and liabilities arising from a single transaction.

Where relevant, the Group evaluates the effect of new Standards, amendments to published Standards and Interpretations issued but not effective, on the presentation of the financial statements.  The directors have assessed there to be no material impact on the financial statements.

5.       Operating segments

The Group has two reportable segments, exploration and corporate, which are the Group's strategic divisions. For each of the strategic divisions, the Group's CEO, deemed to be the Chief Operating Decision Maker ("CODM"), reviews internal management reports on at least a monthly basis.  The results are then subsequently shared with the Board.  The Group's reportable segments are:

Exploration and Evaluation: the exploration operating segment is presented as an aggregation of the Homase and Akrokeri licences (Ghana).  Expenditure on exploration activities for each licence is used to measure agreed upon expenditure targets for each licence to ensure the licence clauses are met.

Corporate: the corporate segment includes the holding company costs in respect of managing the Group. There are varying levels of integration between the corporate segment and the combined exploration activities, which include resources spent and accounted for as corporate expenses that relate to furthering the exploration activities of individual licences.

information about reportable segments for the year ended 31 December 2021

information about reportable segments for the year ended 31 December 2020

6.         Expenses by nature

The operating loss is stated after charging:

7.         Finance cost

The Gold Loan (see note 18) is repayable in gold, at the choice of the lender.  As the Group is now in production the Loan has been restated in the year to reflect the gold price as at 31 December 2021.  The resulting loss of US$728,887 is reported as a finance cost.

8.       Property, plant and equipment

*  During the period, the Group's exploration and evaluation assets, which represent the mining assets in Ghana, were transferred from intangible assets to property, plant and equipment as the Group moved towards commencement of commercial production in 2022.

reconciliation of property, plant and equipment - 31 December 2021

*  Includes a provision for rehabilitation costs of £901,284.

reconciliation of property, plant and equipment -31 December 2020

9.       Intangible assets - exploration and evaluation

The Group's intangible assets comprise wholly of exploration and evaluation assets in respect of AKHM in Ghana.

Once commercially viable reserves are established and development is sanctioned, exploration and evaluation assets are transferred to assets under construction.

10.     Taxation

          current and deferred tax

The Company is subject to Jersey income tax at the rate of 0%. The Group is also registered for income tax purposes with the South African Revenue Service.  Due to the loss making position of the Group in all jurisdictions there is no tax charge and no deferred tax asset has been recognised in the current or prior periods due to the uncertainty and timing of future profits. As a result, no reconciliation has been prepared.

11.     Trade and other receivables

Other receivables include US$27,955 (2020: US$1,852,791) in respect of the fair value of share warrants issued in the current and prior period.

12.     Inventory

Inventory is recognised at the lower of cost or net realisable value.

13.       Cash and cash equivalents

The cash and cash equivalents balance at the year-end was made up of balances in the following currencies:

14.     Provision for rehabilitation

The Group has a liability for restoration, rehabilitation and environmental costs arising from its mining operations. Estimates of the cost of this work including reclamation costs, close down and pollution control are made on an ongoing basis, based on the estimated life of the mine. The provision represents the net present value of the best estimate of the expenditure required to settle the obligation to rehabilitate any environmental disturbances caused by mining operations.

15.     Capital and reserves

(a)     share capital

During the year the Company issued the following 1 pence fully paid shares:

*Proceeds of exercise used to pay down shareholder loan (note 18).

(b)        ordinary shares

Each holder of ordinary shares is entitled to receive dividends as declared from time to time and is entitled to one vote per share at meetings of the Company.

(c)       deferred shares

Each holder of deferred shares shall not be entitled to receive notice of, attend or vote at any meeting of the Company (other than a meeting of the holder of the deferred shares), shall not be entitled to any dividends or other distributions (whether on a winding up of the Company or otherwise).  On a winding up of the Company, each deferred share shall confer upon its holder the right to receive an amount equal to the nominal amount paid up on such deferred share. 

The Company has not concluded any share repurchases since its incorporation.

(d)     dividends

No dividends were proposed or declared during the period under review (2020: Nil).

(e)     description and purpose of reserves

(i) share capital

Share capital consists of amounts subscribed for share capital at nominal value.

(ii) share premium

Share premium consists of amounts subscribed for share capital in excess of nominal value.

(iii) foreign exchange reserve

Cumulative gains and losses on translating the net assets of overseas operations to the presentation currency.

(iv) capital contribution reserve

Capital contribution reserve consists of deferred shares classified as equity.

(v) share options reserve

Share options and warrants reserve consists of the fair value of options and warrants outstanding at the year end.

(vi) accumulated deficit

Accumulated deficit reserve represents the cumulative net gains and losses recognised in the consolidated statement of comprehensive income.

16.       Earnings per share

The calculation of basic and diluted earnings per share at 31 December 2021 was based on the losses attributable to ordinary shareholders of US$1,523,095 (2020: US$610,095), and an average number of ordinary shares in issue of 353,369,120 (2020: 252,004,667).

The Group has the following instruments which could potentially dilute basic earnings per share in the future:

17.       Share based payment arrangements

At 31 December 2021, the Group has the following share-based payment arrangements.

(a)     share option programmes (equity-settled)

The Group has adopted an Option Scheme in order to incentivise key management and staff. Pursuant to the option scheme, a duly authorised committee of the Board of the Company may, at its discretion, grant options to eligible employees, including directors, of the Company or any of its subsidiaries, to subscribe for shares in the Company at a price not less than the higher of (i) the closing price of the shares of the Company on the Stock Exchange on the date of grant of the particular option or (ii) the nominal value of the shares.

There were no market conditions within the terms of the grant of the options therefore the main vesting condition for all the options awarded was that the director or employee remained contracted to the Group at the date of exercise.

The conditions relating to the grants of the share option programmes are as follows:

The terms relating to the grants of the share option programmes are that on exercise date, the receiver of the options must still be employed by the Company, or in the case of the receiver being retrenched or retired, before three months thereafter, or in the case of the death of the receiver, before six months thereafter.

There were no such options granted during the year ended 31 December 2021 (2020: same).

(b)     reconciliation of outstanding share options

There are no options outstanding at 31 December 2021 (2020: same).

(c)        warrants

All Ordinary Shares issued (excluding deferred shares) pursuant to the exercise of warrants rank pari passu in all respects with the ordinary shares.

The fair value of the warrants issued was measured based on the Black-Scholes formula. Expected volatility was estimated by considering historical volatility of the Company's share price over the period commensurate with the expected return.

reconciliation of outstanding warrants

the number and weighted average exercise prices

The warrants outstanding at 31 December 2021 have a weighted exercise price of 3.0p (2020: 2.6p) and a weighted average life of 0.5 years (2020: 1.5 years).

(d)        measurement of fair value

The inputs used in measuring the fair values of the warrants at grant date were as follows:

The risk free rate has been determined based on 3 year UK government bonds.

Total fair value recognised in the share options and warrants reserve in respect of warrants issued in the year  was US$ nil (2020: $3,305,509).

(e)        expense recognised in statement of comprehensive income

The fair value of the warrants issued on 27 December 2018 has been reflected within trade and other receivables and is being released and initially capitalised as part of the exploration asset, over the period of the loan facility; see note 11 and 18 for further details.  The amount capitalised during the year was US$67,100 (2020: US$67,400).

The fair value of the warrants issued on 19 March 2020 has been reflected within trade and other receivables and is being released and initially capitalised as part of the exploration asset over the period of the bond facility, see note 11 and 18 for further details.  The amount capitalised during the year was US$75,130 (2020: US$295,000).

The fair value of the warrants issued on 22 June 2020 has been reflected within trade and other receivables and is being released and initially capitalised as part of the exploration asset over the period of the gold loan facility, see note 11 and 18 for further details.  The amount capitalised during the year was US$1,682,615 (2020: US$1,252,328).

18.     Borrowings

Shareholder loan

The Company entered into a loan agreement with Paracale Gold Limited (''Paracale''), the Company's major shareholder, in December 2018, for a loan of up to US$1,224k.

In consideration of entering into the loan agreement, Paracale, were issued with 40,352,377 warrants to subscribe for such number of 1p ordinary shares at an exercise price of 1.2p per share, at any time during the period through to 2 June 2022.

In June 2021 Paracale exercised warrants totalling 32,352,377 new ordinary shares of which 20,352,377 at a price of 1.2 pence were set against the loan (US$344,364). The balance of the warrants were exercised for cash. A further exercise in July 2021 for 20,000,000 ordinary shares of 1.2p (US$333,166) was also used to reduce the loan.

At 31 December 2021, Paracale had exercised all its warrants.

Gold Loan

The Company entered into a loan agreement with Asian Investment Management Services Limited ("AIMS") in June 2020, for a gold loan of up to 2,000 troy ounces of gold at a price of US$1,500 per troy ounce, equating to a value of US$3.0 million before expenses.

On 20 September 2021, AIMS agreed to extend the maturity date on the US$3 million secured gold loan to 31 August 2022. The extension restructures the repayment obligations as shown below. The Company retains the right to repay the Gold Loan early without penalty.

Interest will continue to accrue at the default rate of 17% until January 2022, then will revert to the original interest rate of 14% until maturity. In conjunction with the extension, the Company has agreed a repayment schedule for the Gold Loan and accrued and ongoing interest, as set out below:

In the event that any payment is not made when due in accordance with the agreed repayment schedule, this will be deemed an event of default. Any interest that is not paid when due will accrue interest at the default rate of 17% until payment.

In January 2022, a payment of 19Kg of gold was made in order to repay the interest due for October, November and December 2021.  It was further agreed with AIMS that in order to enable the Company to efficiently manage shipments, it shall not be deemed an event of default if the monthly payments set out in the Company's announcement on 20 September 2021 are not made at the end of each month.

In consideration of entering into the loan agreement AIMS were issued with 120,000,000 warrants to subscribe for such number of Ordinary Shares at an exercise of 3.0 pence per share (the "Exercise Price"), at any time during the period through to 22 June 2022.  This resulted in an increase in the share option reserve and other receivables of US$2.9 million in the prior period.  At 31 December 2021, AIMS had exercised all of their warrants.

Bonds

In March 2020 the Company issued twenty-six unsecured bond notes of US$50,000 each to certain existing and new investors, raising, in aggregate, US$1.3 million before expenses.  Paracale Gold and Nguvu Holdings

Limited (formerly BCM Investments Limited) the Company's major shareholders, each subscribed for six bonds with a value of, in aggregate, US$0.3 million respectively.  During the year, twenty of the bond notes were redeemed in cash or shares.    In conclusion of entering into the Bonds, a total of 52,000,000 warrants were issued to subscribe for such number of Ordinary Shares at the Exercise Price, at any time during the period through to 22 June 2022.  At 31 December 2021, 26,000,000 warrants remain outstanding.

19.     Trade and other payables

20.      Financial instruments

(a)     financial risk management

The Group's principal financial instruments comprise of cash, receivables and payables including the various loans and bonds.  Financial risk management of the Group is governed by policies and guidelines described in the Group's Financial Reporting Memorandum approved by the Board.  Group policies and guidelines cover interest rate risk, foreign currency risk, credit risk and liquidity risk.  The objective of financial risk management is to contain, where appropriate, exposures in these financial risks to limit any negative impact on the Group's financial performance and financial position.

(b)     credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty fails to meet its contractual obligations.  The maximum credit risk exposure relating to financial assets is represented by their carrying value as at the consolidated statement of financial position date. The Group's exposure to significant concentration on credit risk on trade and other receivables is considered low.

(c)     liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset when they fall due.  Ultimate responsibility for liquidity risk management rests with the Board, which has established an appropriate liquidity risk management framework for the management of the Group's liquidity management requirements.  The Group manages liquidity risk by continuously monitoring forecast and actual cash flows, and by preserving cash resources through minimising the cash burn out rate achieved through cost reduction.  The financial liabilities of the Group are mainly creditors which are payable on demand, hence it is the opinion of the Board that an analysis of liabilities by maturity dates is not appropriate.

(d)        market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the Group's income or the value of its holding in financial instruments.  The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

(i) foreign currency risk

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.  The Group has cash assets denominated in Sterling, United States Dollars and Ghana Cedis and incurs liabilities for its working capital expenditure in one of these denominations.  Payments are made in Sterling (GBP), United States Dollars (US$) and Ghana Cedis (GHS), or Euro at the pre-agreed price and converted (if necessary) as soon as payment needs to occur.  Currency conversions and provisions for expenditure are only made as soon as debts are due and payable.  The Group is therefore exposed to currency risk in so far as its liabilities are incurred in South African Rand and Ghanaian Cedi and fluctuations occur due to changes in the GHS/US$ exchange rates. The Group's policy is not to enter into any currency hedging transactions.

The directors consider currency risk to be manifested in the expenditure made on a day to day basis in Sterling, Ghanaian Cedi and US Dollars.  The directors have undertaken a policy of holding cash raised in Sterling and US Dollars and to convert funds to Ghanaian Cedi as and when required.

The exchange rates converted to United States Dollars affecting the Group were as follows:

A strengthening (weakening) of GBP or GHS against all other currencies at 31 December 2021 would have affected the measurement of financial instruments denominated in a foreign currency and increased (decreased) equity and profit or loss by the amounts shown below.  This analysis is based on foreign currency exchange rate variances that the Group considered to be reasonably possible at the end of the reporting period. The analysis assumes that all other variables, in particular interest rates, remain constant.  The sensitivity analysis includes only outstanding foreign currency denominated financial assets and liabilities and adjusts this translation at year end for a percentage change in foreign currency rate thus indicating the potential movement in equity.

The percentage change in foreign currency rate used to adjust the translation of outstanding foreign currency denominated financial assets and liabilities is in the opinion of the directors appropriate.

(ii) interest rate risk

The risks caused by changes in interest rates are minimal since the Group's only interest bearing financial asset pertains to cash. The Group has a loan arrangement with Paracale as detailed in note 18.  The interest rate is fixed at 6% for the duration of the term of the loan.  The Group also has a loan agreement with AIMS.  The interest rate is fixed at 14% or 17%.  The Group is therefore not subject to a significant amount of risk due to fluctuations in the prevailing levels of market interest rates and as such has not prepared a sensitivity analysis.

21.       Related parties

The key management personnel is considered to be only the directors.  Details of their remuneration are disclosed below.

salaries and other short-term benefits - detail:

(*) Represents the value of accrued fees for the period 31 December 2020 to 31 December 2021 for each director. 

The total amount payable to the highest paid director in respect of emoluments was US$120,000 (2020: US$120,000).  No directors exercised any share options during the year (2020: nil).

Bill Trew's remuneration is paid to Oxus Mining Limited, a company in which he is a director. Nothing was paid in the year and has all been accrued.

E Priestley's remuneration was paid to Santon Consultancy Services Limited, a company in which she is a director.  R Wilkins's remuneration was paid to KSJ Investments Limited, a company in which he is a director.

During 2018, the Company entered into a loan agreement for an amount up to US$1,224k with Paracale, the Company's major shareholder and a company in which Bill Trew, the Company's chairman, is interested.  At year end the balance was US$743k (2020: US$1,346k), as at 31 December 2021 and included interest accrued to date of US$19 (2020: US$177k)- see note 18 for further details.

On 16 March 2020 the Company entered into a bond agreement with Paracale and Nguvu Holdings Limited (formerly BCM Investments Limited), for 6, 14% bonds of US$50K each.  In addition 12,000,000 warrants over 1.0p Ordinary Shares of the Company were awarded to both parties at 3.0p each.  Bill Trew is a director and shareholder of Paracale and A List is a director of Nguvu Holdings Limited (formerly BCM Investments Limited) see note 18 for further details.

During the year, MAED (UK) Limited ("MAED") began undertaking the update of the Definitive Economic Plan ("DEP") report which was originally prepared in 2019 by them.  This was an agreed review under the original engagement between MAED and the Company.  MAED is a related party, as it is wholly owned by the Company's non-executive chairman Bill Trew.  At the year end there is an amount owing to MAED of US$266,109 (2020: US$nil), for services provided during the financial year.

22.       Group entities

Details of the Group's subsidiaries at the end of the reporting period are as follows:

(*) Held indirectly via GoldStone Akrokeri Limited

Under Article 105(11) of the Companies (Jersey) Law 1991, the directors of the holding company need not prepare separate accounts (i.e. company only accounts) if consolidated accounts for the Company are prepared, unless required to do so by the members of the Company by ordinary resolution. The members of the Company have not passed a resolution requiring separate accounts and, in the directors' opinion, the Company meets the definition of a holding company. As permitted by the law, the directors have elected not to prepare separate accounts.

23.     Ultimate controlling party

The directors believe that there is no ultimate controlling party of the Group.

24.     Subsequent events

On 4 January 2022, the Company announced that it had commenced commercial gold production and that repayments of Gold Loan instalments were to be made out of stock held and a further gold pour (see note 18).  Shipment of this gold was announced on 17 January 2022.

The Board issued an operational and exploration update in March 2022.

On 10 June 2022 shares in the Company were temporarily suspended from trading on AIM pending an announcement in respect of the armed robbery at the mine which was made on 29 June 2022.  The shares were readmitted for trading on 29 June 2022.

On 23 June 2022, the Company announced the exercise of 14,000,000 warrants to subscribe for new Ordinary Shares of 1 penny at a price of 3.0 pence per share.  The exercise provided £420,000 of additional funding to the Company.

**ENDS**