Company RNS

Annual Report & Accounts for the year ended 31 December 2016

By June 30, 2017 No Comments

This is a truncated version of the 2016 Annual Report. The full report can be downloaded in PDF format here

Papua Mining plc

(“Papua” or “the Company”)

Financial Statements for the year ended 31 December 2016

Papua Mining plc, a UK company focused on the exploration of gold and copper deposits in Papua New Guinea, is pleased to announce its Annual Report and Accounts for the year ended 31 December 2016, which will be posted to shareholders today. The Annual Report and Accounts are also available on the Company’s website.

For further information on the Company please visit www.papuamining.com or contact:

 Papua Mining plc
Hugh McCullough, Director +353 1 532 9535
Cenkos Securities plc – Nominated Adviser and Broker
Derrick Lee/Beth McKiernan +44 131 220 6939

 

 

Chairman’s Statement

 

I am pleased to present our report for Papua Mining plc (“Papua” or “the Company”) for the financial year ending 31st December 2016. We have completed additional exploration work on our Mt Visi licence in Papua New Guinea while rationalizing our groundholding and relinquishing two additional licences which had not shown sufficient promise in the initial exploration programmes.

 

Papua now holds six Exploration Licences granted by the Minister for Mining in PNG all of which are located in the central part of New Britain Island. The total area under licence is approximately 1,400 square kilometres.

 

Greenfields exploration programmes such as ours in PNG have been very much out of favour amongst the investing community in the last few years. Nonetheless, the work we have carried out has confirmed our belief that we are close to discovery of a copper porphyry system near surface at Mt Visi. Notwithstanding the currently depressed view that the market takes of early stage projects such as ours, we firmly believe that this will change in due course as the lack of recent exploration activity globally leads to an inevitable dearth of new projects to take to production. At that time, the technical attractiveness of what we have established at Mt Visi, and also at Tripela, will be recognized, thus presenting an opportunity to realise true value for the shareholders.

 

This is the objective of your Board. To further prove the existence of a commercially mineralised porphyry at Mt Visi or at Tripela will require significant drilling which in turn will require significant financing. Raising such finance in current market conditions and at the current share price has proven extremely difficult. The Board is examining ways in which the value of the work to date in PNG may be preserved and protected for the benefit of the shareholders until such time as the realisation of that value may be achieved in the way most advantageous to the shareholders.

 

This year, you will again notice that the audit report for the 2016 financial statements has been qualified with respect to the issue of going concern. Our financial resources are still limited while we consider the matters referred to above. We are in discussions with investors that should they prove successful, may provide additional funds that could assist the company forward. At this stage, we cannot comment on the likely success of these discussions, or that they will fully reflect the value of what we have discovered in PNG. Should we fail in our discussions, we cannot guarantee that the company will be able to continue trading indefinitely.

 

As was the case last year, we continue to have the support of members of staff and former members of staff, as well as the Board of Directors who are receiving little or no remuneration for their efforts. We are very grateful for this support.

 

I would like to thank my Board and our people in Papua New Guinea for their loyalty and commitment to the Company’s future. I hope that we will be able to demonstrate the value of what we have achieved in PNG to such an extent that the shareholders will see that value reflected in the share price.

 

 

Michael Gordon Jolliffe

 

29 June 2017

 

 

Review of Operations

Papua Mining plc, (“PML”) through its two PNG – incorporated subsidiaries, holds six exploration licences (“ELs”) with a total area of 1,400 square kilometres in the central part of New Britain island. Details of the ELs currently held are given on the project pages of our Company website www.papuamining.com

 

Mt Visi target

The Mt. Visi area was identified as a porphyry copper gold target through remote sensing studies and follow- up reconnaissance fieldwork in May 2014. The initial prospecting discovered significant copper and gold mineralisation in surface outcrop and significantly the mineralization is associated with potassic alteration at surface. Follow up, grid – based soil sampling confirmed extensive copper gold mineralization and a porphyry alteration zonation around the potassic alteration. The first drill targets were delineated at the Kanavuli prospect in this remote, inaccessible area and between December 2015 and March 2016 five diamond core drillholes were drilled using a small heli-portable drill rig for a total metreage of 776 metres, with the deepest hole being drilled to a downhole depth of 211 metres.

 

Details of the holes completed are given in Table 1 below.

 

HoleID Easting Northing Elevation Azimuth Dip Length
V22DDH001 260885 9363807 1165 35 -55 191 m
V22DDH002 260885 9363807 1165 215 -55 68 m
V22DDH003 260753 9363886 1187 115 -55 211 m
V22DDH004 260878 9363871 1165 120 -70 133 m
V22DDH005 260885 9363807 1165 22 -75 173 m

Table 1: Diamond drill hole parameters for the Mt. Visi Prospect drilling programme

 

Results of the drilling programme were reported in the 2015 Annual Report. Potassic alteration and anomalous copper mineralization within a dioritic intrusion were confirmed by the drilling but no ore-grade mineralization was intersected. We believe the intersected diorite could well represent a narrow finger stemming from a much larger, and more intensely mineralised, porphyry apophysy and infer a large porphyry target at depth around and below the drilled area. Given the relatively depressed state of the resource investment market in the region during 2016 only limited funds were directed at further fieldwork in the area and follow-up drilling was postponed.

 

During the third quarter of the year in review, ridge & spur geochemical sampling was completed over a northwest-southeast trending corridor centered on the Kanavuli target with the surveys spanning the eastern margin of EL2051, the western half of EL2322 and the northern margin of EL1804.

The programme comprised of three elements: An infill grid over the Southeast soil anomaly;

Ridge & Spur samping over the Mt. Visi Corridor; and

Float and outcrop sampling over the Mt. Visi Corridor.

 

Infill soil grid on the Southeast anomaly

Some 99 soil samples were collected from the southeastern portion of the previously completed soil grid at Mt. Visi. This southeastern zone had shown some elevated copper values and it was determined that those results warranted follow up sampling. The results so far obtained have confirmed the anomalous nature of this area. Highest copper values of 697ppm and 408ppm are generally coincident with the originally defined anomaly. Overall, the work confirms that the Southeast Anomaly is indeed anomalous in terms of copper in soil and is worthy of further evaluation. This evaluation will enable the Company to establish the next phase of activity at Mt. Visi and the associated cost.

 

Ridge & Spur Sampling

The purpose of ridge and spur sampling is to quickly and cost-effectively delineate any broadly anomalous zones which may occur in the selected target area. In theory the soil profile along ridgelines is suitable for soil sampling and should produce results that essentially reflect significant underlying bedrock mineralisation. The sampling interval was 50 metres along ridgelines.

 

In general, the copper in soil values are more consistently anomalous some distance (2-3 kilometres) from the already drilled target at Mt. Visi than they are in the immediate proximity of that target itself or indeed around the Southeast Anomaly zone. In addition to following up the encouraging results from the drilling previously completed at Mt. Visi, these results point to the necessity to carry out further exploration in the area east and south east of Mt. Visi to confirm the source of the anomalism, as these may reflect additional porphyry centres. Some support for this view comes from the rock sampling results given below.

 

Rock sample results

The rock sampling was carried on a reconnaissance basis to see if any in situ float hosted mineralisation could be identified whilst completing the ridge and spur soil sampling. The key points arising from the analysis of the rock samples are:

 

Copper: 8 values greater than 800ppm, with a maximum value of 36,063ppm; almost all of the significant values occur in a zone between 3,000 and 4,000 metres east of the drilled area at Mt. Visi.

 

Molybdenum: 5 values greater than 15ppm, with a maximum of 1,253ppm; the highest values occur 3,900 metres east of the drilled area.

 

Zinc: 12 values greater than 800ppm, with a maximum value of 8,238ppm; the anomalous values fall within the same zone as the copper mineralisation.

 

Silver: 3 values greater than 15ppm, with a maximum value of 100ppm; the peak value occurs 3,000 metres east of the drilled area.

 

Although most of the rock samples were collected in creek valleys, as this is where the outcrop is exposed, the soil sampling does seem to pick up the anomalism south and west of the copper in rock mineralization. In summary, the zone 3,000 to 4,000 metres east of the drilled area at Mt Visi appears prospective in terms of hosting a mineralisation centre and warrants follow up work. Another anomalous zone 1,700 metres north of the drilled target with copper values up to 405ppm may also warrant follow up work once the data have been fully assessed.

 

The infill sampling on the Southeast Anomaly has added definition to that anomaly while not yet producing a clearcut, standalone drilling target.

 

Intriguingly, the ridge and spur sampling suggests that an area 2-3 kilometres southeast of the drilled area at Mt. Visi is more strongly anomalous for copper than the drilled target itself. The rock sampling confirms this area as worthy of follow-up mapping. Anomalous zones north and south of Mt. Visi could also reflect porphyry centres.

 

This new work expands our area of interest in this highly attractive, mineralised porphyry system with the potential for a number of porphyry centres within the system as a whole. We believe that the exploration results to date clearly support our view that the Mt. Visi area is a prime target for the location of significant, mineralized copper porphyries.

 

The data obtained validated the decision to undertake further work at Mt. Visi and, whilst there can be no guarantee of commercial success, Mt. Visi remains an exciting target. Further exploration work in this area is clearly warranted in order to delineate drill targets.

 

The Tripela target and other licences

Exploration activities on our other licences, including the Tripela porphyry target in EL1462, were limited to desk studies.

 

Geological mapping and sampling in 2011 and 2012 discovered significant copper and molybdenum soil anomalism at Tripela in licence area EL1462 in the West New Britain Province. Float and outcrop sampling and geological mapping delineated numerous occurrences of in situ, high grade copper and molybdenum mineralisation with grades up to 29% copper returned from outcrop assays. Subsequent shallow diamond drilling confirmed the presence of zoned argillic and phyllic alteration which we believed to be marginal to a porphyry body. Follow-up, deeper drilling intersected high temperature, inner propylitic alteration, characteristic of nearby porphyry development.

 

As described above the work to date has identified a significant porphyry system with strong vectors supporting the potential for an economic copper-gold porphyry orebody. The next phase of drilling at Tripela will be designed to test for the projected porphyry core. However, as announced in our interim statement last year that drilling programme has been postponed until market conditions improve.

 

An aggregate total of 9,031 metres has been drilled within EL1462 over the past four years. The drilling and petrology on drill cores at Tripela has confirmed the presence of a significant hydrothermal system at depth, with strong inner propylitic alteration (epidote-albite-hematite) intervals in diorite, below intense phyllic alteration assemblages (silica-sericite-pyrite) hosted predominantly in volcanics. A major shear zone, coupled with concentrations of copper, molybdenum and arsenic in mineralized D veins, is believed to be linked to a source intrusion. Reports from four consultants provide important independent validation of the excellent results achieved at Tripela Prospect during the reporting period, marking this as one of the major recent exploration programmes in central New Britain.

 

  • CMC Consulting – geology report,

 

  • Rinne Geological Consulting – geology report

 

  • Panda Geoscience – petrography studies

 

  • Spectral Geoscience Pty – spectral analysis

 

The discovery of the potassic alteration zone at the heart of a porphyry system with associated copper and gold mineralization, in EL2322 some 40 kilometres to the northeast of Tripela has further strengthened the case for a significant mineralized porphyry centre at Tripela. Further work proposed at Tripela is targeted at delineating the expected potassic core of the hydrothermal system, within the inner propylitic envelope. However, drilling operations have been suspended until market conditions are more favourable.

 

Directors Report

 

Principal Activity

The principal activities of the Group are the exploration for gold and copper resources in Papua New Guinea (PNG). The Group’s strategy is to explore for and, where the Directors believe that it is commercially feasible, develop deposits of gold and/or copper within the territory of PNG.

 

The Group currently holds six Exploration Licences granted by the Minister for Mining in PNG. The licences are located in the central part of New Britain.

 

Financial overview

The loss for the year is in line with the Directors’ expectations. With significant funding being raised in June

2014 and further funding completed in December 2015 and October 2016, the Directors are hopeful that they will secure additional funding when required to do so. The Directors are also of the view that the investment sentiment in the resource sector will improve, to the extent that the exploration success the Company has achieved to date should enable it to raise sufficient additional exploration funding to continue the exploration programmes in Papua New Guinea.

 

A detailed review of the Group’s business, including its targets and strategies is given in the Chairman’s

Statement and the Review of Operations.

 

Results and Dividends

The results for the year are in line with Directors’ expectations. The consolidated loss for the financial year, after taxation, amounted to ($8,198,001) (2015: ($10,173,377)). The Directors do not recommend a dividend.

 

Going Concern

As noted in the Chairman’s statement, Papua Mining plc will continue to seek additional equity funding as and when available in order to continue its exploration programmes in the short term and for general working capital purposes.

 

The Directors have prepared a cash flow forecast up to 30 June 2018 which supports the Directors’ reasonable expectation that Papua Mining plc has adequate resources to continue in operational existence throughout this period. This cash flow forecast assumes that the exploration programmes will only continue with additional equity funding secured by the Group. Thus, they have adopted the going concern basis of accounting in preparing the annual financial statements.

 

Directors

The Directors in office during the year are listed below. The interests of the Directors in the shares of the

Company at the relevant dates were as follows:

 

As at31 December

2016

Ordinary

Shares

As at31 December

2015

Ordinary

Shares

As at31 December

2014

Ordinary

Shares

Number of options held at31 December

2016

Michael Jolliffe 185,004 185,004 185,004 626,763
Hugh McCullough 504,571 504,571 354,571 1,997,886
Kieran Harrington 328,392 328,392 328,392 1,997,886
Keith Lough
Gunnar Palm
Michael Somerset-Leeke 37,991,102 23,191,102 11,991,102
John Hutchinson

 

 

On December 21, 2015 Michael Jolliffe surrendered 250,000 options which he held at 31 December 2014, Hugh McCullough surrendered 796,908 options which he held at 31 December 2014 and Kieran Harrington surrendered 796,908 options which he held at 31 December 2014.

 

Substantial Shareholdings

As at 22 June 2017, being the latest practical date prior to publication of this document, the Company was aware of the following holdings of 3% or more of the issued share capital of the Company:

% of the

Company’s

Shares in the company issued share capital
Thalassa Holdings Limited 40,000,000 26.32
Michael Somerset-Leeke 37,991,102 25.00
South Pacific Mining Holdings Limited 11,384,621 7.49
Salida Capital (Europe) Limited 14,885,000 9.79
Paul and Michelle Johnson 6,365,000 4.19
Marnie Holdings Limited 4,850,000 3.19

 

Directors’ remuneration

Salaries were severely curtailed for executive directors during 2016, and suspended in full for the non- executive directors during 2016. There were no benefits paid to Directors during 2016.

 

The Group made no payments into the private pension schemes Directors during 2016. No share options were granted to Directors during the year.

Full details of Directors’ emoluments are set out in note 19 of the financial statements.

 

Environmental Policy

The Group’s projects are subject to the relevant PNG laws and regulations relating to environmental matters.

 

The Group’s strategy is to explore for and, where the Directors believe that it is commercially feasible, develop deposits of gold and/or copper within the territory of PNG. It is the Group’s intention to conduct its activities in a professional and responsible manner, for the benefit of the Company’s shareholders, its employees and the national and local communities within which it operates.

 

The Group aims to, at all times, conduct its operations in an environmentally responsible manner and in accordance with relevant legislation. The Group aims to adopt Best Practice policies as recommended by the World Bank, the International Council on Mining & Metals (“ICMM”) and others where the Group deems that local legislation to be inadequate in terms of environmental protection. The Group has in place a detailed Field Operations Guidelines Manual which covers in considerable detail the measures to be taken by field personnel to minimize any negative environmental impact of current exploration activities on the environment.

 

The Group also recognises the enormous potential of its activities for positive impact on the communities in which it operates and strives to optimise these positive impacts as far as is possible.

 

Directors’ Indemnities

The Group has no current insurance to cover its Directors and officers against the costs of defending themselves in legal proceedings taken against them in that capacity and in respect of any damages resulting from those proceedings.

 

 

Political contributions

No political donations have been made.

 

Corporate Governance

The Board of Directors is committed to maintaining high standards of corporate governance and is accountable to the Company’s shareholders for the proper corporate governance of the Group. The UK Corporate Governance Code does not apply to AIM companies, and PM plc instead follows the principles of corporate governance set out in the QCA Guidelines. PM plc operates within the mining sector in an effective and efficient way, with integrity and due regard for the interests of shareholders, and applies principles of general governance applicable to the size and stage of development of the Group.

 

Audit Committee

The Audit Committee ensures the operation of good financial practices throughout the Group, ensures that controls are in place to protect the assets of the Group, reviews the integrity of financial information, reviews the interim and annual financial statements and reviews all aspects of the audit programme.

 

The Audit Committee is chaired by Mr. Michael Jolliffe and also comprises Mr. Michael Somerset-Leeke who replaces Mr. Gunnar Palm who resigned on 9 June 2017.

 

Remuneration Committee

The Remuneration Committee is responsible for establishing a formal and transparent procedure for developing policy on executive remuneration and for setting the remuneration packages of individual Executive Directors, and will meet at least twice per annum.

 

The Remuneration of Non-Executive Directors will be a matter for the executive members of the Board. The Remuneration Committee is chaired by Mr. Michael Jolliffe and also comprises Mr. Michael

Somerset-Leeke who replaces Mr. Gunnar Palm who resigned on 9 June 2017.

 

Auditor

The auditor, Grant Thornton, Dublin has indicated its willingness to continue in office and a resolution proposing that they be re-appointed will be put to the Annual General Meeting.

 

Statement of Disclosure to Auditor

The Directors who held office at the date of approval of the Directors’ Report confirm that, so far as they are each aware, there is no relevant audit information of which the Company’s auditor is unaware and each Director has taken all steps that he ought to have taken as a Director in order to make himself aware of any relevant audit information and to establish that the Company’s auditor is aware of that information.

 

Shareholders’ consent will be sought at the Annual General Meeting which will propose the reappointment of Grant Thornton Dublin as independent auditor of the Company and to authorise the Directors to determine the auditor’s remuneration.

 

 

Statement of Directors’ Responsibilities

The Directors are responsible for preparing the Strategic Report, the Director’s Report and the financial statements in accordance with applicable law and regulations.

 

Company law requires the Directors to prepare financial statements for each financial year giving a true and fair view of the state of affairs of the group for each financial year. The Directors are required by the AIM Rules of the London Stock Exchange to prepare group financial statements in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union (“EU”) and have elected to prepare the company financial statements in accordance with IFRS as adopted by the EU.

 

The group financial statements are required by law and IFRS adopted by the EU to present fairly the financial position of the Group and the Company and the financial performance of the Group. The Companies Act

2006 provides in relation to such financial statements that references in the relevant part of that Act to financial statements giving a true and fair view are references to their achieving a fair presentation.

 

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period.

 

In preparing the Group and Company financial statements, the Directors are required to:

 

  • select suitable accounting policies and then apply them consistently;

 

  • make judgments and accounting estimates that are reasonable and prudent;

 

  • state whether they have been prepared in accordance with IFRSs adopted by the EU;

 

  • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

 

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s and the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

 

The Group’s report and accounts will be published on the Group’s website and in this regard the Directors accept responsibility for the maintenance and integrity of the PM plc website.

 

Annual General Meeting and Recommendation

The Board considers that the resolutions to be proposed at the Annual General Meeting are in the best interests of the Company and the Group as a whole and its unanimous recommendation is that shareholders support these proposals as the Directors intend to do in respect of their own holdings.

 

On behalf of the board

 

Hugh McCullough

Director

 

29 June 2017

 

 

Independent auditor’s report

To the members of Papua Mining plc

 

 

We have audited the financial statements of Papua Mining plc for the year ended 31 December 2016 which comprise the consolidated and parent company statements of financial position, the consolidated statement of comprehensive income, the consolidated and parent company statements of changes in equity, the consolidated and parent company statements of cash flow, and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

 

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

 

Respective responsibilities of directors and auditor

As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

 

Scope of the audit of the financial statements

A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at www.frc.org.uk/auditscopeukprivate.

 

Basis for qualified opinion on financial statements

In forming our opinion on the financial statements, we have considered the evidence available in respect of the going concern basis of preparation of the financial statements which was limited. The Company and Group are reliant on further investment from third parties in order to continue in operational existence for a period of at least 12 months from the date of approval of these financial statements. Whilst the directors have attempted to raise additional finance, this has not been done to date and evidence of receiving further investment is not available. The financial statements (and notes thereto) do not include adjustments that would result if the company were unable to realise its assets and discharge its liabilities in the normal course of business. These matters and their possible effects are described more fully on page 26.

 

Qualified opinion on financial statements

In our opinion, except for the possible effects of the matter described in the Basis for qualified opinion paragraph, the financial statements:

 

  • the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 December 2016 and of the group’s loss for the year then ended;

 

  • the group financial statements have been properly prepared in accordance with IFRSs as adopted by the

European Union;

 

  • the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act

2006; and

 

  • the financial statements have been prepared in accordance with the requirements of the Companies Act

2006

 

Emphasis of matter – carrying value of intangible assets

In forming our opinion, we have considered the adequacy of disclosures made in Note 9 to the financial statements, in relation to the Directors’ assessment of the carrying value of the Group’s exploration licenses and deferred exploration costs amounting to $1.87million. The realisation of the intangible assets is dependent on the successful development or disposal of precious metal and other minerals in the Group’s licence areas. Such successful development is dependent on several variables including the existence of commercial deposits of precious metal and other minerals, availability of finance and the market price of precious metal and other minerals. These conditions indicate the existence of a material uncertainty around the valuation of the exploration licences and deferred exploration costs. In view of the significance of these uncertainties we consider that they should be drawn to your attention.

 

The financial statements do not include the adjustments that would result if the exploration and evaluation assets were not recoverable. Our opinion is not qualified in these respects.

 

Opinions on other matter prescribed by the Companies Act 2006

In our opinion the information given in the Strategic Report and Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

 

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

 

  • adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

 

  • the parent company financial statements are not in agreement with the accounting records and returns;

or

 

  • certain disclosures of directors’ remuneration specified by law are not made or

 

  • we have not received all the information and explanations we require for our audit.

 

Except for the evidence of receiving further investment, as referred to in the basis of qualified opinion paragraph, we have received all of the information and explanations we require for our audit.

 

 

 

Aidan Connaughton

Senior Statutory Auditor

 

for and on behalf of Grant Thornton

Chartered Accountants and Statutory Auditors

Molyneux House Bride Street Dublin 8

Ireland

 

29 June 2017

 

 

Consolidated statement of financial position at 31 December 2016

 

Note 2016US$ 2015US$
Assets
Non-current assets
Intangible assets 9 1,869,300 9,270,355
1,869,300 9,270,355
Current Assets
Cash and cash equivalents 12 461,911 299,183
Other Debtors 18,042
461,911 317,225
Total assets 2,331,211 9,587,580
Equity and liabilities
Equity attributable to shareholders of the parent
Share capital 13 8,317,196 8,230,864
Share premium 13 15,359,416 14,444,849
Other reserves 3,087,062 3,087,062
Share based payment reserve 1,413,914 1,368,830
Retained deficit (26,010,955) (17,812,954)
Total equity 2,166,633 9,318,651
Current liabilities
Trade and other payables 15 164,578 268,929
Total equity and liabilities 2,331,211 9,587,580

 

Company statement of financial position at 31 December 2016

 

Note 2016US$ 2015US$
Assets
Non-current assets
Intangible assets 9 500,000 1,768,631
Investments 10 2,444,110
Trade and other receivables 11 1,369,300 4,852,222
1,869,300 9,064,963
Current Assets
Cash and cash equivalents 12 453,517 286,897
Other Debtors 18,042
453,517 304,939
Total assets 2,322,817 9,369,902
Equity and liabilities
Equity attributable to shareholders of the parent
Share capital 13 8,317,196 8,230,864
Share premium 13 15,359,416 14,444,849
Other reserves 2,425,281 2,425,281
Share based payment reserve 1,413,914 1,368,830
Retained deficit (25,357,568) (17,372,373)
Total equity 2,158,239 9,097,451
Current liabilities
Trade and other payables 15 164,578 272,451
Total equity and liabilities 2,322,817 9,369,902

 

 

Consolidated statement of comprehensive income for the year ended 31 December 2016

 

 

Note 2016US$ 2015US$
Administrative expenses (8,198,001) (10,176,680)
Operating loss 6 (8,198,001) (10,170,680)
Finance income 5 3,303
Loss before taxation

Income tax expense

 

7

(8,198,001)

(10,173,377)

Loss for the year attributable to the owners of the company  

(8,198,001)

 

(10,173,377)

Other comprehensive income
Total comprehensive income attributable to the owners of the company  

(8,198,001)

 

(10,173,377)

Loss per share attributable to shareholders

Basic

 

 

8

 

 

(0.08)

 

 

(0.20)

Diluted 8 (0.08) (0.20)

 

The Company has elected to take exemption under section 408 of the Companies Act 2006 to not present the parent Company statement of comprehensive income. The loss for the Company is shown in the statement of changes in equity.

 

 

Consolidated statement of changes in equity for the year ended 31 December 2016

 

 

Share Capital US$ Share Premium US$ Other Reserve US$ Share Based Payment Reserve US$ Retained Deficit US$ Total Equity US$
At 1 January 2015Comprehensive income 8,194,453 14,117,154 3,087,062 1,351,176 (7,639,577) 19,110,268
Loss for the year and
total comprehensive
incomeTransactions (10,173,377) (10,173,377)
with owners
Issue of share capital 36,411 327,695 364,106
Share based payment 17,654 17,654
Total transactions
with owners 36,411 327,695 17,654
At 31 December 2015 8,230,864 14,444,849 3,087,062 1,368,830 (17,812,954) 9,318,651
Comprehensive income
Loss for the year and
total comprehensive
incomeTransactions (8,198,001) (8,198,001)
with owners
Issue of share capital 86,332 914,567 1,000,899
Share based payment 45,084 45,084
Total transactions
with owners 86,332 914,567 45,084 1,045,983
At 31 December 2016 8,317,196 15,359,416 3,087,062 1,413,914 (26,010,955) 2,166,633

 

 

Share capital

Represents the par value of shares in issue.

 

Share premium

Represents amounts subscribed for share capital in excess of nominal value, net of directly attributable issue costs.

 

Share based payment reserve

Represents the reserve account which is used for the corresponding entry to the share based payment charge through profit and loss (note 14).

 

Other reserves

Represents the reserve arising from a share for share exchange as part of a group reorganisation in 2011.

 

Company statement of changes in equity for the year ended 31 December 2016

 

 

 

 

Share Capital US$ Share Premium US$ Other Reserve US$ Share Based Payment Reserve US$ Retained Deficit US$ Total Equity US$
Comprehensive income
At 1 January 2015 8,194,45353q 14,117,154 2,425,281 1,351,176 (5,630,559) 20,457,505
Comprehensive income
Loss for the year and total
comprehensive income (11,741,814) (11,741,814)
Transactions with owners
Issue of share capital 36,411 327,695 364,106
Share based payment 17,654 17,654
Total transactions
with owners 36,411 327,695 17,654 381,760
At 31 December 2015 8,230,864 14,444,849 2,425,281 1,368,830 (17,372,373) 9,097,451
Comprehensive income
Loss for the year and
total comprehensive
incomeTransactions (7,985,195) (7,985,195)
with owners
Issue of share capital 86,332 914,567 1,000,899
Share based payment 45,084 45,084
Total transactions
with owners 86,332 914,567 45,084 1,045,983
At 31 December 2016 8,317,196 15,359,416 2,425,281 1,413,914 (25,357,568) 2,158,239

 

 

Share capital

Represents the par value of shares in issue.

 

Share premium

Represents amounts subscribed for share capital in excess of nominal value, net of directly attributable issue costs.

 

Share based payment reserve

Represents the reserve account which is used for the corresponding entry to the share based payment charge through profit and loss (note 14).

 

Other reserves

Represents the reserve arising from a share for share exchange as part of a group reorganisation in 2011.

 

 

Consolidated statement of cash flows for the year ended 31 December 2016

 

 

  2016US$ 2015US$
Cash flow from operating activities
Total comprehensive expense for the year before tax (8,198,001) (10,173,377)
Adjustments to reconcile net loss before income tax to cash flow from operating activities:
Impairment of intangible assets 7,837,782 9,114,064
Share based payments 45,084 17,654
Currency adjustments (21,918) 66,505
Movement in operating assets/liabilities
–        Other debtors 18,042 (18,042)
–        Other liabilities (104,351) (155,768)
Net cash flow from operating activities (423,362) (1,148,964)
     
Cash flow from investing activities
Exploration expenditure (436,727) (1,363,328)
Net cash generated from investing activities (436,727) (1,363,328)
     
Cash flow from financing activities
Proceeds from issuance of ordinary shares 1,000,899 364,106
Net cash generated from financing activities 1,000,899 364,106
     
Net increase/(decrease) in cash and cash equivalents 140,810 (2,148,186)
Cash and cash equivalents at the beginning of the year 299,183 2,513,874
Effect of foreign exchange rates changes 21,918 (66,505)
Cash and cash equivalents at the end of the year 461,911 299,183

 

Company statement of cash flows for the year ended 31 December 2016

 

 

  2016US$ 2015US$
Cash flow from operating activities
Total comprehensive expense for the year before tax (7,985,195) (11,741,814)
Adjustments to reconcile net loss before income tax to cash flow from operating activities:
Impairment of investments 2,444,109 2,444,109
Impairment of intangible assets 1,332,522 1,768,631
Share based payments 45,084 17,654
Currency adjustments (21,918) 66,505
Net increase in operating assets
–        Other receivables 3,500,964 5,637,412
Net (decrease)/increase in operating liabilities
–        Other liabilities (107,873) (155,767)
Net cash flow from operating activities (792,307) (1,963,270)
     
Cash flow from investing activities
Exploration expenditure 63,890 369,126
Net cash generated from investing activities (63,890) (369,126)
     
Cash flow from financing activities
Proceeds from issuance of ordinary shares 1,000,899 364,106
Net cash generated from financing activities 1,000,899 364,106
     
Net increase/(decrease) in cash and cash equivalents 144,702 (1,968,290)
Cash and cash equivalents at the beginning of the year 286,897 2,321,692
Effect of foreign exchange rates changes 21,918 (66,505)
Cash and cash equivalents at the end of the year 453,517 286,897

 

Notes to the financial statements

 

 

1     Group and principal activities

For the purposes of these financial statements, the term “PM plc Group” is defined as the companies Papua

Mining plc (the “Company”), Papua Mining Limited, Aries Mining Limited and Sagittarius Mining Limited.

 

Papua Mining plc is a public limited company, quoted on AIM, and is incorporated and domiciled in England and Wales.

 

The PM plc Group’s main activity is the exploration for gold and copper resources in Papua New Guinea, as set out in the Strategic Report and the Directors’ Report.

 

2     Adoption of new and revised standards

The statements, standards and interpretations, effective for reporting periods beginning on or before

1 January 2014 have been applied, being those standards that will be applied to PM plc Group’s financial statements for the year ending 31 December 2016.

 

Standards affecting presentation and disclosure

The following standards and interpretations became effective for the 2016 financial statements but these were either not relevant to or did not have a material impact on the Group’s financial statements:

 

–     IAS 19 (amendment) – Defined benefit plans: Employee Contributions;

 

–     Annual improvements to IFRSs 2010 – 2012 Cycle – various standards;

 

–     Annual improvements to IFRSs 2011 – 2013 Cycle – various standards.

 

The Group has not applied the following standards and interpretations which have been issued and become effective for accounting periods beginning after the commencement of the Group’s next financial year but either have no impact or are not expected to have a material impact on the Group’s financial statements:

 

–     IFRS 9 – Financial Instruments;

 

–     IFRS 10, IFRS 12, IAS 28 (amendment) – Investment Entities: Applying the Consolidation Exception;

 

–     IFRS 10, IAS 28 (amendment) – Sale or Contribution of Assets between an Investor and its Associate or

Joint Venture;

 

–     IFRS 11 (amendment) – Accounting for Acquisitions of Interests in Joint Operations;

 

–     IFRS 14 – Regulatory Deferral Accounts;

 

–     IFRS 15 – Revenue from contracts with customers;

 

–     IAS 1 (amendment) – Disclosure Initiative;

 

–          IAS 16/38 (amendment) – Property, Plant and Equipment/Intangible Assets; Clarification of acceptable methods of depreciation and amortisation;

 

–     IAS 16/41 (amendment) – Agriculture: Bearer Plants;

 

–     IAS 27 (amendment) – Equity Method in Separate Financial Statements;

 

The standards and interpretations addressed above will be applied for the purposes of the Group financial statements with effect from the date they become effective.

 

3     Basis of preparation and significant accounting policies

  1. a)  Basis of preparation

These consolidated financial statements have been prepared in accordance with applicable International Financial Reporting Standards (IFRSs), International Accounting Standards (IASs) and International Financial Reporting Interpretations Committee (IFRIC) interpretations (collectively IFRSs) as adopted for use in the European Union, and with the Companies Act 2006.

The financial statements are prepared on the historical cost basis. The principal accounting policies adopted are set out below.

The financial statements are presented in US Dollar ($).

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies

 

  1. b)   Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and subsidiaries controlled by the Company as at 31 December 2016.

Subsidiaries are entities controlled by the Company. Control exists when the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued, contingent consideration and liabilities incurred or assumed at the date of exchange. Costs directly attributable to the acquisition are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are initially measured at fair value at the acquisition date.

When necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used in line with those of the Group.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

 

  1. c)   Going concern

The group will seek to raise capital through the issuance of equity to continue their exploration activities in the short term and for general working capital purposes. The Directors have prepared a cash flow forecast up to 30 June 2018 which supports the Directors’ reasonable expectation that Papua Mining plc has adequate resources to continue in operational existence throughout this period. This cash flow forecast assumes that the exploration programmes will only continue with additional equity funding secured by the Group. The financial statements have been prepared assuming the Group will continue as a going concern. Under the going concern assumption, an entity is ordinarily viewed as continuing in business for the foreseeable future with neither the intention nor the necessity of liquidation, ceasing trading or seeking protection from creditors pursuant to laws or regulations. In assessing whether the going concern assumption is appropriate, management has considered the group’s existing working capital position and the necessity to seek future fund raising. Management are of the opinion that subject to an additional fund raising the group has adequate resources to continue as a going concern. If alternative funding is not available then the group would be unlikely to be able to continue as a going concern. These circumstances indicate the existence of a material uncertainty which may cast significant doubt about the group’s ability to continue as a going concern and, therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business.

 

  1. d)   Intangible assets – exploration and evaluation costs

Exploration and evaluation expenditure costs comprise costs associated with the acquisition of mineral rights and mineral exploration and are capitalised as intangible assets pending the feasibility of the project. They also include certain administrative costs that are allocated to the extent that those costs can be related directly to operational activities.

 

If an exploration project is deemed successful based on feasibility studies, the related expenditures are transferred to development and production assets and amortised over the estimated useful life of the ore reserves on a unit of production basis. Where a project is abandoned or considered to be no longer economically viable, the related costs are written off to profit or loss.

 

To date the PM plc Group has not progressed to the development and production stage in any areas of operation.

 

  1. e)   Impairment of non financial assets

The PM plc Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the PM plc Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used.

 

Impairment losses of continuing operations are recognised in profit or loss in those expense categories consistent with the function of the impaired asset. For assets, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the PM plc Group makes an estimate of recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years.

 

  1. f)   Financial instruments

Financial assets

The PM plc Group classifies its financial assets into one of the categories discussed below, depending on the purpose for which the asset was acquired.

 

Other receivables: These are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of goods and services but also incorporate other types of contractual monetary assets. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.

 

Cash and cash equivalents: These include cash in hand, deposits held at call with banks and bank overdrafts.

 

Investments in subsidiaries: These are included in these financial statements at the cost of the ordinary share capital acquired. Adjustments to this value are only made when, in the opinion of the Directors, a permanent diminution in value has taken place and where there is no prospect of an improvement in the foreseeable future.

 

Financial liabilities

The PM plc Group classifies its financial liabilities as:

 

Trade and other payables: These are initially recognised at fair-value and then carried at amortised cost. They arise principally from the receipt of goods and services.

 

Equity instruments: These are recorded at fair value on initial recognition net of transaction costs.

 

  1. g)   Provisions

A provision is recognised in the balance sheet when the PM plc Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market assessment of the time value of money and, where appropriate, the risks specific to the liability.

 

  1. h)   Current and deferred tax

The tax expense represents the sum of the current tax expense and deferred tax expense.

 

Tax payable is based on taxable profit for the year. Taxable profit differs from accounting profit as reported in the Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and further excludes items that are never taxable or deductible. The Group’s liability for current tax is measured using tax rates that have been enacted or substantively enacted by the reporting date.

 

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available, against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or if from the initial liabilities in a transaction that affect either the taxable profit or the accounting profit.

 

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient future taxable profits will be available to allow all or part of the asset to be recovered.

 

Deferred tax is calculated at the rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in profit and loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

 

  1. I)   Pensions

Pension costs charged in the financial statements represent the contributions payable by the group during the year into defined contribution pension schemes. Defined contribution plans are recognised as an expense in the period in which they are incurred.

 

  1. j)   Foreign currency

Functional and presentation currency

The consolidated financial statements are presented in US Dollars which is also the functional currency of the parent company.

 

Foreign currency transactions and balances

Foreign currency transactions are translated into the functional currency of the respective PM plc Group entity, using the exchange rate prevailing on the date of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the re-measurement of monetary items denominated in foreign currency at year-end exchange rates are recognised in profit or loss. Non-monetary items are not retranslated at year-end and are measured at historical cost (translated using the exchange rates at the transaction date), except for non-monetary items measured at fair value which are translated using the exchange rates at the date when fair value was determined.

 

Foreign operations

In the PM plc Group’s financial statements, all assets, liabilities and transactions of PM plc Group entities with a functional currency other than the US Dollar are translated into US Dollar upon consolidation. The functional currency of the entities in the PM plc Group has remained unchanged during the reporting period. On consolidation, assets and liabilities have been translated into US Dollars at the closing rate at the reporting date. Income and expenses have been translated into US Dollars at the average rate over the reporting period. Exchange differences are charged/credited to other comprehensive income and recognised in the currency translation reserve in equity. On disposal of a foreign operation, the related cumulative translation differences recognised in equity are reclassified to profit or loss and are recognised as part of the gain or loss on disposal.

 

The principal exchange rates used to the US Dollar in the preparation of the 2016 financial statements are:

 

Annual average Year end
2016 2015 2016 2015
Sterling 1.3429 1.5254 1.2332 1.4763
PNG Kina 0.3182 0.3596 0.3148 0.3326
Australian Dollar 0.7242 0.7544 0.7201 0.8181
Euro 1.1000 1.1031 1.0522 1.0866

 

  1. k)   Segmental Reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Executive & Technical Director. They are the Directors of the PM plc Group that allocate resources to and assess the performance of the segments. The Directors consider there to be only one operating segment, being the exploration licences in Papua New Guinea.

 

  1. l)   Investments (parent company)

Investments held as non-current assets comprise investments in subsidiary undertakings and are stated at cost less any provision for any impairment.

 

  1. m) Equity and reserves

Equity and reserves comprises the following:

 

–     “Share capital” is the nominal value of equity shares.

 

–          “Share premium” represents amounts subscribed for share capital in excess of nominal value, net of directly attributable issue costs.

 

–     “Share based payment reserve” represents a reserve arising on the grant of share options to certain

Directors and key employees.

 

–     “Other reserve” represents a reserve arising from a group reorganisation in 2011.

 

–     “Retained deficit” comprises cumulative profit and loss to date.

 

  1. n) Share based payments

The Group issues equity-settled share-based payments to certain directors and key employees. Equity-settled share-based payments are measured at fair value at the date of grant by reference to the fair value of the equity instruments granted. The fair value determined at the grant date of equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of the number of instruments that will eventually vest with a corresponding adjustment to equity. Fair value is measured by use of a Black Scholes model. The expected life used in the model has been adjusted, based on management’s best estimate, for the effect of non-transferability, exercise restrictions, and behavoural considerations.

 

Non-vesting and market vesting conditions are taken into account when estimating the fair value of the option at grant date. Service and non-market vesting conditions are taken into account by adjusting the number of options expected to vest at each reporting date.

 

  1. o)   Critical accounting estimates and judgements

The PM plc Group makes estimates and assumptions concerning the future. The resulting estimates will by definition, seldom equal the actual results. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Certain amounts included in the financial statements involve the use of judgement and/or estimation. These judgements and estimates are based on management’s best knowledge of the relevant facts and circumstances, but actual results may differ from the amounts included in the financial statements. The Board has considered the critical accounting estimates and assumptions used in the historical financial information and concluded that the area of judgement that has the most significant effect on the amounts recognised in the financial statements concern.

 

Recoverability of deferred exploration costs

All costs associated with gold and copper exploration are capitalised on a project basis, pending a decision on the economic feasibility of the project. This capitalisation of such costs gives rise to an intangible asset in the consolidated statement of financial position. Exploration costs are capitalised where it is considered likely that the amount will be recovered by future exploitation, sale or alternatively where the activities have not reached a stage which permits a reasonable assessment of the existence of reserves. This requires management to make estimates and assumptions as to the future events and circumstances, especially in relation to whether an economically viable extraction operation can be established. Such estimates are subject to change and following initial capitalisation, should it become apparent that recovery of the expenditure is unlikely, the relevant capitalised amount will be impaired and written off to the consolidated statement of comprehensive income on disposal of the net investment.

 

Functional currency of the parent company

Management has concluded that the US dollar is the currency of the primary economic environment in which the group operates and therefore it’s functional currency. The US dollar is the currency in which business risks and exposures are measured and the Company’s assets and liabilities are largely denominated and settled in US dollars.

 

  1. p)   Exceptional items

The PM plc Group has adopted an accounting policy and income statement format that seeks to highlight significant items of income and expense within PM plc Group results for the year. The Directors believe that this presentation provides a more helpful analysis as it highlights one-off items. Such items may include significant restructuring costs, profits or losses on disposal or termination of operations, litigation costs and settlements, profit or loss on disposal of investments, significant impairment of assets and unforeseen gains/losses arising on derivative instruments. The Directors use their judgement in assessing the particular items, which by virtue of their scale and nature are disclosed in the income statement and related notes as exceptional items.

 

  1. q)   Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments maturing within 90 days from the date of acquisition that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.

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