The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 (the "UK MAR") which is part of UK law by virtue of the European Union (Withdrawal) Act 2018. The information is disclosed in accordance with the Company's obligations under Article 17 of the UK MAR. Upon the publication of this announcement, this inside information is now considered to be in the public domain. 

31 July 2023

Kropz Plc

("Kropz" or the "Company")

Final Audited Results for the Year ended 31 December 2022,
Posting of Annual Report and Accounts,
Notice of General Meeting

and

Restoration of Trading on AIM

Kropz Plc (AIM: KRPZ), an emerging African producer and developer of plant nutrient feed minerals, announces Final Audited Results for the Year ended 31 December 2022 and the publication of the Company's Annual Report and Accounts.

The full financial report will be available online immediately on the Company's website at www.kropz.com and will be posted to shareholders that have elected to receive printed copies today.  Printed copies will, therefore, be available to shareholders during the course of the week.

The Company will hold a General Meeting for the purposes of approving the Annual Report which will be held at the offices of Memery Crystal at 165 Fleet Street, London EC4A 2DY on 1 September 2023 at 12.00 p.m.

Following the publication of the results for the year ended 31 December 2022, the Company has requested that the suspension of trading in its shares to be lifted with effect from 7.30 a.m. today, Monday 31 July 2023.

Highlights

Key developments during the 2022 financial year

Corporate

·    Kropz plc ("Kropz" or the "Company") issued 6,700,000 ordinary shares, at an exercise price of £0.001 an ordinary share, in the Company to key members of the executive management team, including certain Persons Discharging Managerial Responsibilities in January 2022. The issue of ordinary shares was due to awards vesting that had been issued under the Company's Long-Term Incentive Plan of 31 July 2020, announced on 4 August 2020;

·     The fifth and final drawdown on the US$ 5 million equity facility with the ARC Fund, Kropz's major shareholder ("Further Equity Facility"), as announced on 26 February 2021, occurred on 10 March 2022 for US$ 200,000;

·    The third and fourth final drawdowns on the ZAR 200 Million Equity Facility with the ARC Fund ("ZAR 200 Million Equity Facility"), as announced on 29 September 2021, occurred on 25 March 2022 for ZAR 40 million and on 26 April 2022 for ZAR 33 million;

·     As announced on 27 April 2022, Kropz Elandsfontein entered into an agreement with the ARC Fund for a ZAR 25 million (approximately US$ 1.60 million) bridge loan facility ("Loan 1") to meet cash requirements in respect of Kropz Elandsfontein and the drawdown of Loan 1 took place on 28 April 2022. Loan 1 was unsecured, repayable on demand, with no fixed repayment terms and was repayable by Kropz Elandsfontein on no less than two business days' notice. Interest was payable on Loan 1 at 14% nominal per annum and compounded monthly;

·      As announced on 11 May 2022, Kropz entered into a new conditional convertible equity facility of up to ZAR 177 million (approximately US$ 11 million) ("ZAR 177 Million Equity Facility") with the ARC Fund to fund Elandsfontein to first revenues from bulk concentrate sales - this was approved by Kropz shareholders and became unconditional on 1 June 2022; and

·      The first drawdown on the ZAR 177 Million Equity Facility occurred on 2 June 2022 for ZAR 103.5 million (approximately US$ 7 million). After set-off against Loan 1, Kropz received an amount of ZAR 78.5 million (approximately US$ 5 million);

·      The second drawdown on the ZAR 177 Million Equity Facility was made on 7 July 2022 for ZAR 60 million (approximately US$ 4 million);

·      On 9 August 2022, a final drawdown on the ZAR 177 Million Equity Facility was made for ZAR 13.5 million (approximately US$ 0.9 million);

·     As announced on 20 July 2022, Mark Summers expressed his intention to leave the Company and he resigned as Chief Executive Officer ("CEO") and Executive Director of the Company in January 2023;

·    As announced on 9 August 2022, Kropz, Kropz Elandsfontein and ARC Fund agreed to a further ZAR 121.5 million (approximately US$ 7.3 million) bridge loan facility ("Loan 2") to meet immediate cash requirements at Kropz Elandsfontein. A draw down of ZAR 60 million (approximately US$ 3.6 million) on Loan 2 was made on 9 August 2022. Loan 2 was unsecured, repayable on demand, with no fixed repayment terms and was repayable by Kropz Elandsfontein on no less than two business days' notice. Interest was payable on Loan 2 at the South African prime overdraft interest rate plus 6%, nominal per annum and compounded monthly;

·    The second drawdown on Loan 2 was made on 1 September 2022 for ZAR 47 million (approximately US$ 2.8 million). The third and final draw down of ZAR 14.5 million on Loan 2 was made on 29 September 2022;

·      As announced on 14 September 2022, Machiel Reyneke retired as a non-executive director of the Company and was replaced by Gerrit Duminy, as non-executive director and representative of the ARC Fund;

·      As announced on 30 September 2022, Kropz, Kropz Elandsfontein and ARC Fund agreed to a further ZAR 126 million (approximately US$ 7 million) bridge loan facility ("Loan 3") to meet immediate cash requirements at Kropz Elandsfontein. A draw down of ZAR 60.5 million (approximately US$ 3.4 million) on Loan 3 was made on 6 October 2022. Loan 3 was unsecured, repayable on demand, with no fixed repayment terms and was repayable by Kropz Elandsfontein on no less than two business days' notice. Interest was payable on Loan 3 at the South African prime overdraft interest rate plus 6%, nominal per annum and compounded monthly;

·  The second and final drawdown on Loan 3 was made on 28 October 2022 for ZAR 65.5 million (approximately US$ 3.7 million);

·     As announced on 14 November 2022, Kropz entered into a new conditional convertible equity facility of up to ZAR 550 million (approximately US$ 31.6 million) ("ZAR 550 Million Equity Facility") with ARC Fund to progress the ramp-up of operations at Elandsfontein and provide working capital to the Company for general corporate purposes and further funding of early site works, at the Hinda project in the Republic of Congo - which was approved by Kropz shareholders and became unconditional on 30 November 2022;

·    The first drawdown on the ZAR 550 Million Equity Facility occurred on 1 December 2022 for ZAR 307.5 million (approximately US$ 18.1 million). After set-off of Loan 2 and Loan 3 of ZAR 247.5 million, Kropz received an amount of ZAR 60 million (approximately US$ 3.5 million);

·  The second drawdown on the ZAR 550 Million Equity Facility of ZAR 135 million (approximately US$ 7.9 million) occurred on 22 December 2022; and

·    As announced on 7 December 2022, Michelle Lawrence resigned as chief operating officer of Kropz and as an executive director of Kropz Elandsfontein with effect from 1 January 2023.  Mark Maynard was appointed chief operating officer with effect from 1 January 2023.

Elandsfontein

·     The focus at the Elandsfontein project continued to be the production ramp-up of the mine and beneficiation plant;

·    BNP released the ZAR 77 million (approximately US$ 5 million) restricted cash in the bank account of Elandsfontein on 10 January 2022 upon satisfaction of BNP's requirement for Kropz to bridge the funding shortfall in respect of Kropz Elandsfontein as announced on 1 September 2021;

·      During 2022, further delays were experienced in the commissioning ramp up of operations at Elandsfontein resulting in further funding shortfalls due to:

·      The requirement to re-engineer parts of the fine flotation circuit as proposed by the vendor;

·      The lack of operator expertise and experience; and

·      Mining rates and associated delivery of ore to the plant being compromised due to the presence of competent banks of hard material within the orebody, that were previously unknown. Subsequently, the vendor has provided design changes which were implemented at the plant, additional operator training was conducted and new equipment was brought to site to facilitate mechanical breaking which has been effective to date, but alternative methods are being considered;

·     To quantify and assess the impact of this hard material on the future mine plan, an infill drilling programme was undertaken;

·     Independent geological consultants were commissioned which provided an updated JORC (2012) compliant Mineral Resource Estimate ("MRE"):

·    Updated MRE now caters for improved geotechnical characteristics of the ore in addition to the grade characteristics;

·    Increase in total phosphate resources at Elandsfontein to 106.58 million tonnes ("Mt");

·    Downgrade of much of the previously Measured resource to Indicated, and downgrade of previously Indicated resources to Inferred. Total Measured and Indicated resource tonnage has reduced by approximately 76%. The updated resource considered core recovery, average drill hole spacing and sample count;

·     Grade has improved, with the refined lithological contacts and improved estimates from the infill drilling and pit sampling programme. This correlates well with the current pit intersections; and

·      Proven reserve of 7.31 Mt at 10.71% P₂O₅.

Hinda

·    Since 31 December 2021, management has been reviewing the Hinda Updated FS and financial model as prepared by Hatch;

·      Various capital cost optimisation initiatives have been identified for investigation ahead of detailed design;

·      Development alternatives are being considered and potential funding options investigated; and

·      Potential funding solutions for the development of Hinda are being evaluated and considered.

Key developments post the financial year end

Corporate

·    As announced on 16 January 2023, Kropz appointed Louis Loubser to the board of the Company as Chief Executive Officer ("CEO") and executive director;

·      The third drawdown on the ZAR 550 Million Equity Facility of ZAR 60 million (approximately US$ 3.5 million) occurred on 25 January 2023;

·      The fourth drawdown on the ZAR 550 Million Equity Facility of ZAR 40 million (approximately US$ 2.2 million) occurred on 27 February 2023; and

·      Management is in the process of refinancing the BNP facility (outstanding amount US$ 18,750,000) and currently expects that a replacement loan will be in place in the third quarter of 2023 before the expiry of the facility.

Elandsfontein

·     First bulk shipment and sale of 33,000 tonnes of phosphate concentrate from Kropz Elandsfontein was announced on 23 January 2023;

·    A second shipment and sale of 20,000 tonnes of phosphate concentrate from Kropz Elandsfontein was announced on 14 March 2023;

·       During April 2023 two further shipments of 33,000 tonnes and 11,000 tonnes were sold and a further 33,000 tonnes in June 2023;

·       As announced on 14 March 2023, Kropz, Kropz Elandsfontein and ARC Fund agreed to further ZAR 285 million (approximately US$ 15.5 million) bridge loan facilities ("Loan 4") to meet immediate cash requirements at Kropz Elandsfontein. A first draw down of ZAR 25 million (approximately US$ 1.4 million) on Loan 4 was made on 14 March 2023. Loan 4 is unsecured, repayable on demand, with no fixed repayment terms and is repayable by Kropz Elandsfontein on no less than two business days' notice. Interest is payable on Loan 4 at the South African prime overdraft interest rate plus 6%, nominal per annum and compounded monthly; and

·       A second draw down on Loan 4 for an amount of ZAR 90 million was made on 28 March 2023, a third drawdown of ZAR 30 million was made on 25 April 2023 and a fourth draw down of Loan 4 was made on 23 June 2023.

Hinda

·       Potential funding solutions for the development of Hinda are being evaluated and considered;

·       Continued engagement with local government regarding project development; and

·       Reduced sized project is currently being assessed to propose a fit-for-purpose low capex project to prove the concept of producing phosphate concentrate in the Congo and exporting it.

For further information visit www.kropz.com or contact:

About Kropz Plc

Kropz is an emerging African phosphate producer and developer with projects in South Africa and in the Republic of Congo. The vision of the Group is to become a leading independent phosphate rock producer and to develop into an integrated, mine-to-market plant nutrient company focusing on sub-Saharan Africa.

Chairman's Statement

Dear shareholder,

In the course of 2022, we faced significant challenges in achieving desired production levels at Elandsfontein. Thanks to our major shareholder, African Rainbow Capital ("ARC") additional funding was provided to meet these challenges.

On 16 January 2023, we were delighted to announce that appointment of Louis Loubser, a very experienced mining operations executive, as the Chief Executive Officer of the Company.  In March 2023 also ARC agreed to provide a ZAR 285 million bridge loan facility to Kropz Elandsfontein.

Since early 2023, production has improved at Elandsfontein, though not yet to planned levels, and we were delighted to announce the first bulk shipment of phosphate rock was made in January as well as a further 5 shipments that have been made in 2023 to date. The focus now is on achieving further sustainable increases in production and grade.

The Board thanks all the members of the executive, management, the teams on the ground, contractors, auditors and advisers for all their efforts and assistance during the year. I would also like to thank Mark Summers, the former CEO, for his service to the Company and wish him well for his future endeavours. We once again want to thank our major shareholder, ARC, for their further commitment and continued support.

Lord Robin William Renwick of Clifton

Non-executive Chairman

28 July 2023

Strategic Report for the year ended 31 December 2022

Market overview

Phosphate rock prices have dropped significantly since their peak in 2022 following the invasion of Ukraine on 24 February 2022.  As of 2023, the market for phosphate rock has remained relatively stable, with modest price increases observed in the first few months of the year. The demand for phosphate continues to be strong from the agricultural sector, particularly from key markets such as the US, Brazil, China and India. There is a growing need for increased food production in India, China and especially Africa. However, there are still concerns around supply constraints impacted by the war in Ukraine and other geopolitical events. Lastly, the US is expected to become an increased importer of phosphate rock as supplies dwindle in central Florida and North Carolina. As a result, some price volatility is expected to continue over the near term. However, considering the macro economic drivers, the overall market is expected to remain relatively stable with modest price increases over the medium to long term.

Elandsfontein rock concentrate is expected to be able to enjoy a slight premium in pricing due to its low cadmium, low calcium and P₂O₅ ratio as well as advantageous freight to Asia, Australia and New Zealand.

Significant changes in the state of affairs

Share issues

The issued share capital at 31 December 2021 was 909,571,975 ordinary shares (2020: 558,627,558).

On 18 January 2022, Kropz announced the issue of 6,700,000 ordinary shares, at an exercise price of £0.001 an ordinary share, in the Company to key members of the executive management team, including certain Persons Discharging Managerial Responsibilities. The issue of ordinary shares was due to awards vesting that had been issued under the Company's Long-Term Incentive Plan of 31 July 2020 as announced on 4 August 2020.

On 7 March 2022, Kropz announced the fifth and final drawdown of US$ 200,000 on the US$ 5 million equity facility with the ARC Fund, Kropz's major shareholder ("Further Equity Facility"), and this was settled by the issue of 3,474,536 new ordinary shares at the issue price of 4.20 pence per share to ARC on 10 March 2022.  In addition, in accordance with the Original Equity Facility, any fees associated with the bank guarantee provided by ARC, would be settled by the issue of new ordinary shares to ARC.  ARC notified the Company that the final guarantee fees due to ARC amounted to US$ 311,733 and was settled by the issue of 3,971,712 new ordinary shares at the issue price of 6.75 pence per share to ARC on 10 March 2022.

The issued share capital at 31 December 2022 was 923,718,223 ordinary shares (2021: 909,571,975).

Projects

Elandsfontein overview

Elandsfontein hosts the second largest phosphate deposit in South Africa, after Foskor's operation at Phalaborwa.  Elandsfontein has been developed with the capacity to produce circa one million tonnes per annum ("Mtpa") of phosphate rock concentrate from a shallow mineral resource which is expected to be sold on both local and international markets. The Company owns 74% of the issued share capital of Kropz Elandsfontein, the company which owns the Elandsfontein project.

Elandsfontein's geographic location and proximity to logistics infrastructure are advantageous and allow for easy access to both local and international markets.

Prior to 2022, in excess of US$ 170 million was spent at Elandsfontein on project capital expenditure to construct the original and optimisation phases of the processing plant and infrastructure, initial mining and capitalised working capital. Following a suspended commissioning process in 2017, Kropz Elandsfontein conducted further geological drilling and a metallurgical test programme to define a robust process circuit, to cater for the increased variability of ore present within the Elandsfontein resource.  As a result of competent banks of hard material encountered in the pit, further drilling was conducted in 2022 and consequently a revised mineral resource estimate was produced as further discussed below.

Activity for the year ended 31 December 2022

The 2021 construction activities at Elandsfontein had largely been completed and mining activities which recommenced in October 2021 resulted in first ore being introduced into the plant in December 2021 with first production of phosphate rock concentrate ("Concentrate") being achieved in March 2022. The focus for the 2022 financial year, which continued into 2023, was to fully commission the plant, remove bottlenecks and establish specific operating parameters for the production ramp up phases towards steady state capacity.

Mining and geology

Delays were experienced in the ramp-up of operations at Elandsfontein, largely being driven by continued ore variability in the current mining area. Mining rates and associated delivery of ore to the plant were compromised due to the presence of competent banks of hard material within the orebody that were previously unknown.

Following additional infill drilling, relogging of historical cores and mapping of ore exposures as intersected within the current mining horizon, an updated JORC (2012) compliant Mineral Resource Estimate ("MRE") was announced on 10 January 2023. 

Based on the current mining conditions, on-site learnings and revised geological interpretations, it was considered prudent that the mineral resource be reclassified.

The updated Elandsfontein resource is defined below, on a total (gross) and net attributable basis.

The resource estimate was updated after including the geological information contained in 30 additional sonic boreholes with recoveries above 90%. The additional drillholes have provided significant insight in terms of the geological interpretation, mineralised lithologies and data confidence. Differences are further seen in the elevation with regards to the top contact of mineralisation. The 2022 modelling further utilised implicit modelling which created additional refined contacts between lithologies. The optimised modelling has contributed to improved grades over the more accurately estimated areas and will improve planning in terms of anticipating mineralised horizons, and lithology types which are not always visibly distinguishable.

The 2022 reserve estimate was impacted by the reclassification of the resource estimate. Reserves are estimated at 17.42 Mt at a P₂O₅ grade of 9.19% of which 7.31 Mt is proven at 10.71% P₂O₅, where previously no proven tonnes were stated in 2018.

There is a 46 Mt difference between the 2018 and 2022 estimates, which is mainly due to the downgrade in the measured and indicated resource categories in the 2022 resource estimate.

Plant and processing

Hot commissioning (C4) activities and production ramp up was undertaken during 2022. Plant stability was difficult to achieve due to the influence of varying quantities of ultra fine material contained in the ore and poor flotation conditioning.

Despite power generation issues in South Africa causing intermittent load shedding, we were able to mitigate the adverse effects on our production by utilizing emergency backup generators on several occasions.  However, it is important to note that this has led to increased operating costs.

Environmental Management Programme ("EMPr")

The Department of Mineral Resources and Energy ("DMRE") approved the Kropz EMPr on 20 November 2015. Due to transitional provisions in terms of Section 12 (5) of the National Environmental Act ("NEMA"), as amended, DMRE directed Kropz during 2016 to amend its EMPr to bring it into line with amendments in NEMA. Since there was an appeal against the DMRE having approved the Mining Right, this only became possible after the Minister of the DMRE dismissed the appeal against the Mining Right on 14 December 2017.

The amendments to the EMPr were subsequently made during 2020.  The updated EMPr was submitted to the DMRE in September 2020. On 26 March 2021, management received the approved updated EMPr for the Elandsfontein project from the DMRE. The updated EMPr strongly emphasizes the adherence to the required rehabilitation measures.

Offsets

In November 2019, the DMRE directed Kropz to carry out a further Offset Study to be done by an independent specialist which was subjected to a thirty-day public participation process ("PPP").

In July 2020, Kropz Elandsfontein submitted a revised Offset Study to the DMRE. Herein, Management put forward its objections regarding the 2015 Offset Study originally submitted to the DMRE and contended that the 2015 Offset Study did not adequately consider Kropz's effective innovative rehabilitation measures already demonstrated.

Following due consideration of all the comments and responses received during the thirty-day public participation period, management received notification from the DMRE on 4 March 2021 that the conditions required to cater for the offsets of land will be removed from the Elandsfontein EMPr.

It is understood that several appeals against the DMRE's decision were lodged with the Department of Forestry, Fisheries and the Environment, and the outcome of this matter remains pending.

Water use licence ("WUL")

An appeal against the Elandsfontein WUL was heard from 1 to 4 February 2021. Following four sittings on the matter, where final evidence was presented to the Water Tribunal, it was announced on 9 September 2021, that the appeal was dismissed.

Dewatering of the aquifer continued in accordance with the updated ground water management plan and monitoring activities remain in line with the WUL conditions.

Safety, health and environment

As at 31 December 2022, the Lost Time Injury Frequency Rate ("LTIFR"), per 200,000 man hours, was 1.290 (2021 - 0.698). The increase in LTIFR is related to four Lost Time injuries as compared to three in the previous reporting period of which one was a reportable injury. No major environmental incidents were reported during the year. Kropz Elandsfontein held various wellness campaigns during 2022, which included a blood donation drive, HIV and AIDS awareness and general health (i.e., blood pressure).

Corporate social responsibility ("CSR") and sustainability

The execution of the five-year Social and Labour Plan ("SLP"), aligned with the 2018 South African Mining Charter, and approved by the DMRE, remains on track. During the reporting period, Kropz Elandsfontein has commenced with the development of the next iteration of the SLP and submitted it in Q4 of 2022.  The DMRE requested minor amendments, which were submitted in March 2023 for final approval.  The plan includes progressive improvements to obtain compliance on the employment equity and procurement objectives of the South African Mining Charter scorecard.

The following strategic focus areas have been identified for the updated SLP:

·      Education;

·      Social wellness;

·      Local economic development; and

·      Urban reconstruction and infrastructure upgrades.

Through collaboration with the local community forum, the execution of various community development projects continued during 2022 and the selection of new projects formed part of the 2022 - 2026 SLP.  The Saldanha Bay Municipality ("SBM") confirmed alignment with their Infrastructure Development Plan ("IDP") and has endorsement of the various SLP projects.

SLP LED Projects

Education support

During 2022 Kropz Elandsfontein continued to support the Hopefield Primary School teacher's programme.  Infrastructure upgrades were done at two Early Childhood Development ("ECD") centres in Hopefield.  One of the upgrades was required to enable final registration of the ECD centre.  For the 2022-2026 SLP, Education will remain a key focus area.

Disabled project

During 2022, with the assistance of a local NGO, a needs analysis was carried out for various disabled individuals in Hopefield.  This identified necessary infrastructure upgrades which included the installation of handrails, wheelchair pathways etc. Fourteen recipients within the Hopefield community benefited from this project.

Hopefield Thusong community centre upgrade

The infrastructure upgrade of the community centre included the addition of two new rooms, a kitchen and bathroom facilities.  The handover of the Thusong Centre took place at an official handover ceremony with the SBM mayor during 2022.

Ad-Hoc CSR Projects

Through engagements with various stakeholders, Kropz Elandsfontein supported the following initiatives and organizations:

1)   Schools ECO Club (Annual Science camp and ECO awards)

2)   Silwerblare pensioners social club

3)   Universal Rugby club (Infrastructure and annual awards)

4)   Mfesane (Disabled day)

5)   All saints Anglican church (Annual event)

Stakeholder Engagement

Kropz Elandsfontein continues to engage with the local community on a regular basis and held a community meeting during 2022 to provide an update on the state of the business and various other issues.  Kropz Elandsfontein also issued quarterly newsletters to the community to keep them updated on the business as well as various initiatives and projects.

Post reporting period events

Transport and logistics

As announced on 23 November 2021, Transnet provided Kropz Elandsfontein with a draft port access agreement to support the long-term export of Elandsfontein's phosphate rock through the port of Saldanha. Final contract negotiations are underway. An interim agreement, with tariffs and a forecast of export quantities, is in place while the agreement is being finalised. Exports through Cape Town will potentially be required for no more than 350,000 tonnes of Elandsfontein's eventual production of approximately 1 million tonnes per annum, if capacity through the port of Saldanha is unavailable for a limited period of time.

Sales

The first bulk shipment and sale of 33,000 tonnes of phosphate concentrate from Kropz Elandsfontein was announced on 23 January 2023 with a second shipment and sale of 20,000 tonnes of phosphate concentrate as was announced on 14 March 2023.  During April 2023, two further shipments of 33,000 tonnes and 11,000 tonnes were sold and a further 33,000 tonnes in June 2023.  These exports occurred through the port of Saldanha.

Hinda

The Hinda project, currently 100% owned by Cominco S.A., is believed to be one of the world's largest undeveloped phosphate reserves. Ownership is expected to be diluted to 90% through the participation of the Republic of Congo ("RoC") government. Hinda consists of a sedimentary hosted phosphate deposit located approximately 40 km northeast of the city of Pointe-Noire. The project is fully permitted.

Prior to acquisition by Kropz, more than US$ 40 million was spent on project development, including drilling, metallurgical test work and feasibility studies. Since its acquisition by Kropz, a further US$ 4.7 million has been spent.

Activity for the year ended 31 December 2022

Kropz has been reviewing the Hinda Updated Feasibility Study ("Updated FS") and the financial model as prepared by Hatch.

Highlights of the Updated FS

·      The phased approach studied will initially deliver 1 Mtpa phosphate rock concentrate through the existing Port of Pointe-Noire ("Phase 1"), expanding to 2 Mtpa phosphate rock concentrate through a new port facility at Pointe Indienne ("Phase 2");

·      The phased approach is intended to reduce up-front execution capital requirements by making use of existing port facilities, thus limiting the first phase to 1 Mtpa phosphate rock concentrate;

·      The Hinda Updated FS demonstrates low technical and mining risk and attractive project economics;

·      The mineral resource is unchanged from the 2018 Competent Persons Report, with 201 million tonnes of measured mineral resource at 11.6% P₂O₅ and 381 million tonnes of indicated mineral resource at 9.8% P₂O₅;

·      The Hinda Updated FS delivers a minimum 28-year life of mine ("LOM"), extracting 31 million tonnes of ore in Phase 1 and 214 million tonnes of ore in Phase 2;

·      Estimated Phase 1 capital cost is US$ 355 million, Phase 2 capital cost is US$ 310 million (in real 2021 terms), with a nominal, peak funding requirement of US$ 392 million, as the first phase cash flows supports the subsequent Phase 2 expansion capital expenditure;

·      Phase 1 operating cost on a free-on-board ("FOB") basis is US$ 63 per tonne phosphate rock concentrate, and Phase 2 operating cost is US$ 70 per tonne phosphate rock concentrate, inclusive of mining royalties;

·      Using a December 2021 price forecast received from CRU on a FOB Pointe-Noire basis, the real LOM earnings before interest and taxation margin is US$ 65 per tonne of phosphate rock concentrate;

·      There is an estimated three-year execution schedule; and

·      Base case, nominal internal rate of return ("IRR") of 19.2% and base case, ungeared, nominal net present value ("NPV") (at 11.1% discount rate) of US$ 397 million.

The Hinda Updated FS included detailed engineering of the open pit mine, associated mine dewatering and surface water management, the beneficiation plant and all associated infrastructure, tailings storage facilities and water storage dam, a gas fired power plant and gas supply pipeline, a 30 kV overhead line ("OHL") to support construction and early works, mine access roads, an accommodation camp and port infrastructure. Costs and schedules associated with procurement, construction management and commissioning are also included.

Hatch delivered a robust execution strategy, which provides high confidence in achieving execution success. The beneficiation plant employs standard and proven technologies, and the design is based on extensive laboratory and pilot-scale test work completed between 2013 and 2016.

Further Opportunities

A mine plan was run scheduling the immediate commencement of Phase 2 production, i.e. 2 Mtpa of phosphate rock concentrate to be exported through a new port facility. This opportunity led to a conservative increase in ungeared NPV (at 11.1% discount rate) to US$ 543 million with an IRR of 21%. The estimated capital cost for the immediate commencement of Phase 2 is US$ 618 million, based on the study work completed. If this option is studied further, it will be possible to further optimise both capital and operating costs. Collaboration with other market players to share in costs of infrastructure such as port, power and roads are also an opportunity to consider.

Further opportunities also exist to enter into a long-term power purchase agreement with one of several companies already established in-country. The capital cost of the gas fired power plant would therefore be removed from the estimate, although this would be offset by an increase in power costs.

A number of other capital cost optimisation initiatives have been identified for investigation ahead of detailed design which should further improve project economics.

Updated ESIA

The project has an approved environmental compliance certificate issued in April 2020, valid for 25 years. As a result of the modifications to the project in the Hinda Updated FS, the ESIA has been updated to comply with local regulations. The RoC Ministry of Environment has approved the Updated ESIA and the project has a valid environmental compliance certificate.

Mining Investment Agreement ("MIA")

The MIA, which sets out the legal and fiscal framework under which Cominco S.A. would invest and operate within the RoC was signed by all parties on 10 July 2018 and ratified by the RoC Government on 27 December 2021.

Déclaration d'Utilité Publique ("DUP")

The Ministry of Land Tenure and Public Domain is responsible for managing land tenure and legal land rights in RoC. The land commission has evaluated the land usage requirements of the Hinda Project and liaises with legal property owners and traditional land users to determine, based on the legislation, a baseline for land use to be used for compensation and relocation.

The main declaration of public utility (DUP) process has covered an area of 30 km². Public consultations were organized by Cominco and CM2E. Land surveys were carried out from end of November 2020 until mid-January 2021, followed by an optimisation session in line with the Updated FS. The final report is still to be finalised.

The MIA states that expropriation costs and compensations are to be borne by the government of the RoC and that Cominco can prefinance some or all of the costs.

Mineral resources

The Hinda resource is defined below, on a total (gross) and net attributable basis. No additional drilling was conducted in 2022.

Mineral Resource Statement, as declared by SRK on 31 August 2018

Safety, health and environment

No environmental or safety incidents were reported during the year.

Sustainability

In line with the MIA and its commitments, Cominco S.A. continued its interactions with the local communities associated with the Hinda project. On-going projects include the usage of project site manpower, the funding of teachers at local schools, educational support for vulnerable children, specific projects for woman, water boreholes and food security projects through the establishment of orchards, vegetable gardens and small-scale agriculture projects.

Post reporting period events

Prior to commencing Phase 1, a reduced sized test project is currently being assessed to propose a fit-for-purpose low capex project to prove the concept of producing phosphate concentrate in the Congo and exporting it. The project will focus on the mining and processing the section of the resource which does not require flotation.

Strategy

The Company's long-term strategy is to build a portfolio of high-quality phosphate mines and to be a major player within the sub-Saharan African plant nutrient sector. Its priority is to bring Elandsfontein to steady-state production and profitability whereafter the development of Hinda will be prioritised.

Business model

The Company's business model is to source high-quality resources and to bring them into production to contribute to the Company's strategic competitiveness and profitability.

Once production has commenced at Elandsfontein and Hinda, the Company may consider acquiring additional assets and/or adding downstream beneficiation opportunities, where the Board believes shareholder value could be increased.

Objectives and outlook for the year ahead

Objectives

Kropz

Kropz's overriding objective is to deliver strong shareholder and stakeholder returns over the long term.

Elandsfontein

The primary focus of the year ahead will be to further increase the ramp-up of operations to achieve steady state while optimising process recoveries and mining costs. Optimised production capacity is expected to be determined over the next 12 months and will be based on the maximum profitability.

Hinda

Further to the completion of the Hinda Updated FS in December 2021, management is working to secure funding to commence with project development in accordance with the MIA.

Outlook

Kropz's Elandsfontein project delivered first production in early 2022. The Company is confident in the inherent value contained within each of its core assets. Global phosphate rock demand and pricing is robust, and the work being carried out will provide Kropz with direction for the next phase of its development, subject to short-term challenges being managed. The year ahead should provide the Company with a solid foundation for its future development.

Financial review for the year ended 31 December 2022

Summary of key financial indicators for the year:

·      Impairment in the value of mine property, plant and equipment and inventory at Kropz Elandsfontein of US$ 93 million;

·      Cash and cash equivalents of US$ 2 million (2021: US$ 2 million)

·      Various equity and debt raises as set out in "Highlights" on page 1;

·      Trade and other payables of US$ 7 million (2021: US$ 4 million); and

·      Property, plant, equipment and development and exploration assets, after the impairment above, of US$ 111 million (2021: US$ 180 million).

Key performance indicators

The Company is a mining and development entity whose assets comprise a mine and plant in the ramp-up phase in South Africa and an exploration asset in the RoC. Currently, minor revenues have been generated from local sales in South Africa during 2022 with first bulk sale in January 2023. The key performance indicators for the Company will be achieving steady state production and the advancement of the Hinda project.

Principal risks and uncertainties

The Company and its subsidiaries ("the Group") are subject to various risks relating to political, economic, legal, social, industry, business and financial conditions. The following risk factors, which are not presented in any order of priority, do not purport to be a complete list or explanation of all the risks involved in the Company or the Group's activities.

Access to financing

The ramp up at Elandsfontein, the capital expenditure plans of the Group and the further development and exploration of mineral properties in which the Group holds interests or which the Group may acquire, may depend upon the Group's ability to obtain financing through joint ventures, debt financing, equity financing or other means. No assurance can be given that the Group will be successful in obtaining any required financing as and when needed on acceptable terms or at all, which could prevent the Group from further development and exploration or additional acquisitions.

Failure to obtain additional financing on a commercial and timely basis may cause the Group to postpone its capital expenditure plans, forfeit its rights in properties or reduce or terminate operations. Reduced liquidity or difficulty in obtaining future financing could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

The Group's Projects may require greater investment than currently expected or suffer delays or interruptions, which could cause cost overruns. Any such delay, interruption or cost overruns in implementing the Group's planned capital investments could result in the Group failing to complete the Projects and a reduction in future production volumes, which could have a material adverse effect on the Group's business, financial condition, results of operations and prospects. In addition, the Projects may not prove to be commercially viable upon completion.

The Group's ability to obtain future financing will depend in part on its ability to achieve positive cash flows from its current operations within time and budget, an extended commissioning ramp-up period will have an adverse impact on the business and financial performance of the Group.  Refer to note 2a to the Group financial statements which explains that the Group is reliant on revenue from production ramp up and expect to require additional financing and a material uncertainty exists that may that cast significant doubt on the Group's ability as a going concern.

Dependence on maintenance of good relationship with regulatory and governmental departments

The Group relies on the maintenance of good relationships with regulatory and governmental departments in South Africa and the RoC. Failure to maintain these relationships may adversely impact the Group's performance.

Ramp-up of Elandsfontein

The Elandsfontein project may require further funding to achieve steady state operations in Q4 2023. Any delays in securing of additional funding will have an adverse impact on the business and financial performance of the operation. There can be no guarantee that implementation of the recently completed modifications identified by the Company and its technical consultants will result in a successful long-term operation of the mine. Failure to achieve ramp-up of the Elandsfontein project, or a significant delay in the completion of ramp-up, could result in a material adverse impact on the business, and the financial performance and position of the Group.

Access to infrastructure

Mining, processing, development and exploration activities depend, to a significant degree, on adequate infrastructure. In the course of developing Hinda, the Group may need to construct and support the construction of infrastructure, which includes permanent water supplies, tailings storage facilities, power, logistics services and access roads.

Reliable roads, power sources and water supply are important determinants, which affect capital and operating costs. Unusual or infrequent weather phenomena, sabotage, government or other interference in the maintenance or provision of such infrastructure could materially adversely affect the Group's operations, financial condition and results of operations. Any such issues arising in respect of the supporting infrastructure or on the Group's sites could materially adversely affect the Group's results of operations or financial condition.

Furthermore, any failure or unavailability of the Group's operational infrastructure (for example, through equipment failure, disruption to its transportation arrangements or reduced port capacity) could materially adversely affect the production output from its mines or development of a mine or project.

Limited or reduced port capacity at the Port of Saldanha, as well as the associated cost increase for procuring alternative logistics could have an adverse impact on the business and financial performance of the Group.

Operational targets

The financial performance of the Group is subject to its ability to achieve a target concentrate specification and production efficiency at its Elandsfontein project, according to its pre-determined budget. Failure to do this may result in failure to achieve operational targets with a consequent material adverse impact on the business, operations and financial performance of the Group.

Excessive overburden stripping, non-economical mining of ore, ore losses and the dilution of feed grade to the processing facility could all have an adverse impact on the processing operations. Furthermore, high variability in the daily feed grades could also have an adverse impact on operations and financial performance of the Group.

Any further unscheduled interruptions in the Group's operations due to mechanical, electrical or other failures or industrial relations related issues or problems or issues with the supply of goods or services could have a serious impact on the financial performance of those operations. Furthermore, any interruption or disruption in the supply chain of key production chemicals sourced from international suppliers could materially adversely affect the production output from the mine.

New entrant risk

Kropz Elandsfontein will, once production has been achieved of a commercial saleable grade product, be a new entrant in the global phosphate rock market, selling its products into a globally competitive and established market.

There can be no guarantee that the sales estimates set by Kropz Elandsfontein will be achieved until a successful track record has been achieved. Not achieving appropriate selling prices for its commercial grade products, would have a material adverse effect on the business, operations and financial performance of the Group.

Mining and mineral processing risks

The business of mining and mineral processing involves a number of risks and hazards, including industrial accidents, labour disputes, community conflicts, activist campaigns, unusual or unexpected geological conditions, geotechnical risks, ore variability, equipment failure, changes in the regulatory environment, environmental hazards, ground water and weather and other natural phenomena such as earthquakes and floods. The Group may experience material mine or plant shutdowns or periods of reduced production as a result of any of the above factors. Such occurrences could result in material damage to, or the destruction of, mineral properties or production facilities, human exposure to pollution, personal injury or death, environmental and natural resource damage, delays in mining, monetary losses and possible legal liability, and may result in actual production differing, potentially materially, from estimates of production, whether expressly or by implication. There can be no assurance that the realisation of operating risks and the costs associated with them will not materially adversely affect the results of operations or financial conditions of the Group.

Geotechnical, ore variability, geological and hydrogeological risks could have a material adverse impact on the safety, business and financial performance of the Group's operation.

Failure to successfully dewater the mining area and maintain water levels in the mining area at the Elandsfontein project could have a material adverse impact on the operational performance, financial performance and financial condition of the Group.

Enforcement of contractual rights in the RoC

The legal system in the RoC is based on the French civil law system (the Civil Code of the former French Equatorial Africa), which has enacted the Uniform Act to harmonise business law in Africa in order to guarantee legal and judicial security for investors and companies in its member states, as well as a Uniform Act on Arbitration Law, allowing recourse to a standard arbitration mechanism for the settlement of contractual disputes arising from civil or commercial contracts concluded in the RoC as an alternative to RoC courts for legal proceedings relating to contracts.

Under Congolese law, parties may enter into private contracts in the language of their choice, however, a French translation is always required for them to be used before any constituted authority in the RoC. In addition, enforcement of contracts concluded outside of Congo before an RoC court, administrations and other constituted authorities, requires their prior registration with the Office for Registration and Stamp Duties and, in the absence of a specific exemption, payment of the applicable registration fees and stamp duties.

Certain contracts concluded in the RoC (such as leases) must also be presented for registration with the Office for Registration and Stamp Duties, due to their nature and listing in the General Tax Code, Volume 2. Moreover, certain contracts (such as commercial leases) must also be notarised or authenticated by a notary if concluded as private deeds, prior being registered as described above.

If any of these processes are not strictly followed, the RoC courts and administrations may disregard the concerned contract and, as regards the requirement to register certain contracts with the Office for Registration and Stamp Duties, the tax administration may apply fines of 100% of the amount of registration fees due. Further, the tax administration tends to disregard any payment convention exemption for the purpose of applying these fines.

If any of the Group's contracts are deemed unenforceable, this could have a material adverse effect on the operations and financial results of the Group.

Commodity pricing

The future profitability and viability of the Group's operations will be dependent upon the market price of phosphate rock to be sold by the Group. Mineral prices fluctuate widely and are affected by numerous factors beyond the control of the Company. The level of interest rates, the rate of inflation, the world supply of mineral commodities, the global level of demand from consumers and the stability of exchange rates can all cause significant fluctuations in prices. Such external economic factors are in turn influenced by changes in international investment patterns, monetary systems and political developments. Commodity prices have fluctuated widely in recent years, and future price declines could cause commercial production to be impracticable, thereby having a material adverse effect on the Company's business, financial condition and results of operations. A significant or sustained downturn in commodity prices would adversely affect the Group's available cash and liquidity and could have a material adverse effect on the business, results of operations and financial condition of the Group in the longer term.

In addition to adversely affecting the Group's reserve estimates and its financial condition, declining commodity prices can impact operations by requiring a reassessment of the feasibility of a particular project. Such a reassessment may be the result of a management decision or may be required under financing arrangements related to a particular project. Even if the Elandsfontein project and the Hinda project are ultimately determined to be economically viable, the need to conduct such a reassessment may cause substantial delays or may interrupt operations until the reassessment can be completed.

Environmental regulation and environmental compliance

Mining operations have inherent risks and liabilities associated with damage to the environment and the disposal of waste products occurring as a result of mineral exploration and production. Environmental and safety legislation and regulation (e.g. in relation to reclamation, disposal of waste products, pollution and protection of the environment, protection of wildlife and otherwise relating to environmental protection) is frequently changing and is generally becoming more restrictive with a heightened degree of responsibility for companies and their Directors and employees and more stringent enforcement of existing laws and regulations. Future changes could impose significant costs and burdens on the Group (the extent of which cannot be predicted) both in terms of compliance and potential penalties, liabilities and remediation.

Breach of any environmental obligations could result in penalties and civil liabilities and/or suspension of operations, any of which could adversely affect the Group. Further, approval may be required for any material plant modifications or additional land clearing and for ground disturbing activities. Delays in obtaining such approvals could result in the delay to anticipated exploration programmes or mining activities.

There may also be unforeseen environmental liabilities resulting from mining activities, which may be costly to remedy. If the Group is unable to fully remedy an environmental problem, it may be required to stop or suspend operations or enter into interim compliance measures pending completion of the required remedy. The potential exposure may be significant and could have a material adverse effect on the Group. The Group has not purchased insurance for environmental risks (including potential liability for pollution or other hazards as a result of the disposal of waste products occurring from exploration and production) as it is not generally available at a price which the Group regards as reasonable.

In South Africa, the Regulations Pertaining to the Financial Provision for Prospecting, Exploration, Mining or Production Operations 2015 (R1147 of 20 Nov 2015) provides that the holder of a mining right must provide for rehabilitation and remediation costs, with particular reference to when the mine is decommissioned at the end of mining, or production operations. It is expected that mining operations at Elandsfontein will cease in year 2032. The under-provision of such a rehabilitation liability could result in future liabilities being payable, which could have a material adverse impact on the financial condition of the Group.

Government regulation and political risk

The Group's operating activities are subject to laws and regulations governing expropriation of property, health and worker safety, employment standards, waste disposal, protection of the environment, mine development, land and water use, prospecting, mineral production, exports, taxes, labour standards, occupational health standards, toxic wastes, the protection of endangered and protected species and other matters. While the Directors believe that the Group is in compliance with all material current laws and regulations affecting its activities, future changes in applicable laws, regulations, agreements or changes in their enforcement or regulatory interpretation could result in changes in legal requirements or in the terms of existing permits and agreements applicable to the Group or its properties, which could have a material adverse impact on the Group's current operations or planned development projects. Where required, obtaining necessary permits and licences can be a complex, time-consuming process and the Group cannot assure whether any necessary permits will be obtainable on acceptable terms, in a timely manner or at all.

The costs and delays associated with obtaining necessary permits and complying with these permits and applicable laws and regulations could stop or materially delay or restrict the Group from proceeding with any future exploration or development of its properties. Any failure to comply with applicable laws and regulations or permits, even if inadvertent, could result in interruption or closure of exploration, development or mining operations or material fines, penalties or other liabilities.

The Group has operations located in South Africa and the RoC and the Group's activities may be affected in varying degrees by political stability and governmental regulations. Any changes in regulations or shifts in political attitudes in South Africa and the RoC are beyond the control of the Group and may adversely affect its operations.

Adverse sovereign action

The Group is exposed to the risk of adverse sovereign action by the governments of South Africa and RoC. The mining industry is important to the economies of these countries and thus can be expected to be the focus of continuing attention and debate. In similar circumstances in other developing countries, mining companies have faced the risks of expropriation and/or renationalisation, breach or abrogation of project agreements, application to such companies of laws and regulations from which they were intended to be exempt, denials of required permits and approvals, increases in royalty rates and taxes that were intended to be stable, application of exchange or capital controls, and other risks.

Environmental, social and governance ("ESG") and climate change

As the focus on ESG increases, there are increasing environmental, social and governance risks that may affect the Group's ability to raise capital; obtain permits; work with communities, regulators and Non-Governmental Organisations ("NGOs") and/or protect its assets from impairments.

At Kropz, we acknowledge that our business activities affect the society and environment around us, and that we have an opportunity and an implicit duty to ensure this impact is positive. We also believe that efficient and sustainable operations are a necessity for long-term value creation.

We are committed to taking responsibility when conducting our business by integrating ESG factors into our investment decisions and operational processes. Given the stage of development of Kropz, social initiatives have been limited to those outlined above at Elandsfontein.

Climate change could potentially affect the demand for fertilisers by impacting global agricultural activity.  This in turn could affect the demand for fertiliser feed materials, and could cause events such as prolonged droughts that could reduce the availability of water at the different project sites.

As the Kropz operations develop, more initiatives will be undertaken on the ESG front and progress on these will be reported on in the next annual report.

Governance

The Board considers sound governance as a critical component of the Group's success and the highest priority. The Company has an effective and engaged Board, with a strong non-executive presence from diverse backgrounds, and well-functioning governance committees. Through the Group's compensation policies and variable components of employee remuneration, the Remuneration and Nomination Committee ("Remuneration Committee") of the Board seeks to ensure that the Company's values are reinforced in employee behaviour and that effective risk management is promoted.

More information on our corporate governance can be found in the Corporate Governance Report on pages 43 to 54.

Directors' section 172 statement

The following disclosure describes how the Directors have had regard to the matters set out in section 172 and forms the Directors' statement required under section 414CZA of The Companies Act 2006. This reporting requirement is made in accordance with the corporate governance requirements identified in The Companies (Miscellaneous Reporting) Regulations 2018, which apply to company reporting on financial years starting on or after 1 January 2019.

The matters set out in section 172(1) (a) to (f) are that a Director must act in the way they consider, in good faith, would be most likely to promote the success of the Company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to:

a.   the likely consequences of any decision in the long term;

b.   the interests of the Company's employees;

c.   the need to foster the Company's business relationships with suppliers, customers and others;

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

e.   the desirability of the Company maintaining a reputation for high standards of business conduct; and

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

The analysis is divided into two sections, the first to address stakeholder engagement, which provides information on stakeholders, issues and methods of engagement. The second section addresses principal decisions made by the Board and focuses on how the regard for stakeholders influenced decision-making.

Section 1: Stakeholder mapping and engagement activities within the reporting period

The Company continuously interacts with a variety of stakeholders important to its success, such as equity investors, joint venture partners, debt providers, employees, government bodies, local community and vendor partners. The Company works within the limitations of what can be disclosed to the various stakeholders with regards to maintaining confidentiality of market and/or commercially sensitive information.

Section 2: Principal decisions by the Board

Principal decisions are defined as both those that have long-term strategic impact and are material to the Group, but also those that are significant to key stakeholder groups. In making the following principal decisions, the Board considered the outcome from its stakeholder engagement, the need to maintain a reputation for high standards of business conduct and the need to act fairly between the members of the Company.

During the financial year ending 31 December 2022

A third drawdown of ZAR 40 million occurred on 16 March 2022 and the fourth drawdown of ZAR 33 million occurred on 26 April 2022 of the ZAR 200 Million Equity Facility. The ZAR 200 Million Equity Facility is fully drawn at the date of this annual report.

Convertible loan facility for ZAR 177 million from ARC, entered into on 11 May 2022

As announced on 27 April 2022, a funding shortfall of approximately US$ 11 million (approximately ZAR 177 million) was expected due to slower than expected progress in the ramp up of operations at Kropz Elandsfontein, production of sufficient phosphate rock concentrate for the first bulk sale would move to later than originally expected.

The ZAR 177 Million Equity Facility was in addition to the ZAR 200 Million Equity Facility, which ARC and the Company entered into in February 2021.

As announced on 27 April 2022, Kropz and ARC entered into a further ZAR 25 million (approximately US$ 1.60 million) bridge loan facility (the "Loan 1") to meet immediate cash requirements at Elandsfontein at the end of April 2022. When the ZAR 177 Million Equity Facility became unconditional, Loan 1 was offset against it leaving ZAR 152 million available for future drawdown. 

The ZAR 177 Million Equity Facility comprises a total commitment of up to ZAR 177 million provided by ARC, which was to be drawn down subject to ARC's discretion.

At any time during the term of the ZAR 177 Million Equity Facility, repayment of the ZAR 177 Million Equity Facility capital amount would, at the election of ARC, either be:

·      In the form of the conversion into ordinary shares of 0.1 pence each in the Company and issued to ARC, at a conversion price of 9.256 pence per ordinary share each, representing the 30-day VWAP on 4 May 2022, and at a fixed exchange rate of ZAR 1 = GBP 0.0504 ("Further Conversion"); or

·      Payable in cash by the Company at the end of the term of the ZAR 177 Million Equity Facility.

Following a Conversion, the Company will apply for the newly issued Ordinary Shares in the capital of the Company to be admitted to trading on AIM, a market operated by London Stock Exchange plc ("AIM").

The first drawdown of ZAR 103.5 million was made on 2 June 2022.

The ZAR 177 Million Equity Facility will bear interest at 14% per annum and will be compounded monthly and will be payable in cash to ARC by the Company.

The term of the ZAR 177 Million Equity Facility is from 2 June 2022 to the earlier of:

·      Five years from 2 June 2022; or

·      One year after the term loan facility provided by BNP Paribas to Kropz Elandsfontein (in the amount not exceeding US$ 30 million), has been repaid;

The ZAR 177 Million Equity Facility is secured by the shares that Kropz holds in Cominco Resources Ltd.

The ZAR 177 million Equity Facility was above the authorisation limits given at the Annual General Meeting in June 2021. Specific shareholder approval was required for the ZAR 177 Million Equity Facility, which shareholder approval was obtained on 30 May 2022. Ordinary shares to be issued to ARC in terms of the ZAR 177 Million Equity Facility, if so elected by ARC, would be a maximum of 96,378,566 ordinary shares.

Convertible loan facility for ZAR 550 million from ARC, entered into on 14 November 2022

As announced on 14 November 2022, Kropz entered into a new convertible equity facility of up to ZAR 550 million ("ZAR 550 Million Equity Facility") (approximately US$ 31.6 million), with ARC in order to progress the ramp-up of operations at the Elandsfontein project.  In addition, the funding would also provide working capital to the Company for general corporate purposes and further funding, of approximately US$ 1 million for working capital and early site works, at the Hinda project in the Republic of the Congo.

The ZAR 550 Million Equity Facility comprises a total commitment of up to ZAR 550 million provided by ARC, which can be drawn down at the discretion of Kropz, as follows:

·      Loan 2 and Loan 3 were settled by way of a first advance under the New ZAR 550 Million Equity Facility, once approved and unconditional, leaving ZAR 302.5 million available for further drawdown over the facility term; and

·      The remaining ZAR 302.5 million of the ZAR 550 Million Equity Facility was available from the date that all the conditions were met (the "Effective Date") and up to 15 December 2023. Each drawdown, however, remains subject to ARC's sole discretion.

At any time during the term of the ZAR 550 Million Equity Facility, the repayment of the ZAR 550 Million Equity Facility capital amount will, at the election of ARC, either be:

·      In the form of the conversion into ordinary shares of 0.1 pence each ("Ordinary Shares") in the Company and issued to ARC, at a conversion price of 4.579 pence per Ordinary Share each, representing the 30-day VWAP on 21 October 2022, and at fixed exchange rate of ZAR 1 = GBP 0.048824 ("Conversion"); or

·      Payable in cash by the Company at the end of the term of the ZAR 550 Million Equity Facility.

Following a Conversion, the Company will apply for the newly issued Ordinary Shares in the capital of the Company to be admitted to trading on AIM, a market operated by London Stock Exchange plc ("AIM").

The New ZAR 550 Million Equity Facility will bear interest at the South African prime overdraft interest rate plus 6 per cent., nominal per annum and compounded monthly ("Interest"). Interest will be payable in cash to ARC by the Company.

The term of the ZAR 550 Million Equity Facility will be from the Effective Date, to the earlier of:

·      5 years from the Effective Date; or

·      2 years after the term loan facility provided by BNP Paribas to Elandsfontein (in the amount not exceeding US$ 30 million), has been repaid in full, or such later date as ARC may agree in writing;

The ZAR 550 Million Equity Facility will be available for drawdown until 15 December 2023.

The ZAR 550 Million Equity Facility is secured by the shares which Kropz holds in Cominco Resources Ltd ("Share Charge").

Approval from the South African Reserve Bank for the ZAR 550 Million Equity Facility was obtained on 17 November 2022 and shareholder approval on 30 November 2022.

The key stakeholder groups that could be materially impacted are existing shareholders and potential investors.

Existing shareholders may have conflicting interests with the ZAR 177 Million Equity Facility and ZAR 550 Million Equity Facility due to potential dilution of their shareholding. The Directors considered the impact of this and concluded that obtaining the convertible facility from ARC was the only funding opportunity available to the Company in order to secure funding for the delivery of the Elandsfontein project to first revenue. Various funding alternatives had been investigated by the Directors, in conjunction with its brokers and advisers, over the last year, both from an equity raise perspective and through possible project finance facilities.  Equity markets were subdued and no new or existing equity investors were prepared to provide the required funding.

Due to the fact that Machiel Reyneke and Gerrit Duminy, the ARC representatives on the Board, and Mike Nunn, representing Kropz International are considered to be concert parties, they were not permitted to consider or vote on the approval of the proposed ZAR 177 Million Equity Facility and ZAR 550 Million Equity Facility by the Board. The independent, non-executive Directors, being Lord Robin Renwick, Linda Beal and Mike Daigle, and the CEO, Mark Summers, in consultation with the nominated adviser, considered the transaction to be fair and reasonable.

As a result of the ZAR 200 Million Equity Facility, ZAR 177 Million Equity Facility and the ZAR 550 Million Equity Facility, ARC could increase its interest in the Company by a further approximate 8.3%, taking its eventual interest in the Company to approximately 91.5%.

First drawdown of the ZAR 550 Million Equity Facility for ZAR 307.5 million (approximately US$ 18.1 million) was made on 1 December 2022 which comprised:

·      Set-off of Loan 2 and Loan 3 of ZAR 247.5 million;

·      ZAR 10 million for the Company's general corporate purposes and funding of ongoing running costs of the Hinda Project; and

·      ZAR 50 million in respect of working capital for Elandsfontein.

A second drawdown of ZAR 135 million (approximately US$ 7.9 million) of the ZAR 550 Million Equity Facility was made on 22 December 2022.

Post 31 December 2022

A third drawdown of ZAR 60 million (approximately US$ 3.5 million) of the ZAR 550 Million Equity Facility was made on 25 January 2023 and a fourth drawdown of ZAR 40 million (approximately US$ 2.2 million) on 27 February 2023.

As announced on 14 March 2023, Kropz, Kropz Elandsfontein and ARC Fund agreed to further ZAR 285 million (approximately US$ 15.5 million) bridge loan facilities ("Loan 4") to meet immediate cash requirements at Kropz Elandsfontein. A first draw down of ZAR 25 million (approximately US$ 1.4 million) on Loan 4 was made on 14 March 2023.

Loan 4 is unsecured, repayable on demand, with no fixed repayment terms and is repayable by Kropz Elandsfontein on no less than two business days' notice. Interest is payable on Loan 4 at the South African prime overdraft interest rate plus 6%, nominal per annum and compounded monthly.

A second draw down on Loan 4 for an amount of ZAR 90 million was made on 28 March 2023, a third drawdown of ZAR 30 million was made on 25 April 2023 and a fourth drawdown of ZAR 80 million was made on 23 June 2023.

This Strategic Report was approved by the Board of Directors.

Louis Loubser

Chief Executive Officer

28 July 2023

Consolidated Statement of Financial Position

As at 31 December 2022

The notes below form an integral part of these Consolidated Financial Statements. The Financial Statements were approved and authorised for issue by the Board of Directors and signed on its behalf by:

Louis Loubser

Chief Executive Officer

28 July 2023