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Consolidated financial statements for the years ended December 31, 2017 and 2016
Alphamin Resources Corp.
Continued in the Republic of Mauritius
Date of incorporation: 12 August 1981
Corporation number: C125884 C1/GBL
TSX-V share code: AFM
JSE share code: APH
ISIN: MU0456S00006
(“Alphamin” or the “Company”)
CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN US DOLLARS)
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
C/o ADANSONIA MANAGEMENT SERVICES LIMITED, Suite 1, PERRIERI
OFFICE SUITES, C2-302, Level 3, Office Block C, La Croisette, Grand Baie 30517,
Mauritius
Phone: +230 269 4166
www.alphaminresources.com
TABLE OF CONTENTS
Management’s responsibility for financial reporting 3
Independent Auditors’ report 4
Consolidated statement of financial position 10
Consolidated statement of loss and comprehensive loss 11
Consolidated statement of cash flows 12
Consolidated statement of changes in stockholders’ equity 13
Notes to the financial statements 14
MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING
The accompanying annual consolidated financial statements of the “Company” were prepared by
management in accordance with International Financial Reporting Standards. Management
acknowledges responsibility for the preparation and presentation of the audited annual consolidated
financial statements, including responsibility for significant accounting judgments and estimates and
the choice of accounting principles and methods that are appropriate to the Company’s circumstances.
Management has established systems of internal control over the financial reporting process, which are
designed to provide reasonable assurance that relevant and reliable financial information is produced.
The Board of Directors of the Company is responsible for ensuring that management fulfills its financial
reporting responsibilities and for reviewing and approving the annual audited consolidated financial
statements together with other financial information. An Audit Committee, whose members are not
officers of the Company, assists the Board of Directors in fulfilling this responsibility. The Audit
Committee, on behalf of the Board of Directors, meets with management to review the internal controls
over the financial reporting process, the annual audited consolidated financial statements together with
other financial information of the Company, and the auditor’s report. The Audit Committee reports its
findings to the Board of Directors for its consideration in approving the annual consolidated financial
statements for issuance to the shareholders. Management recognizes its responsibility for conducting
the Company’s affairs in compliance with established financial standards and applicable laws and
regulations, and for maintaining proper standards of conduct for its activities.
(signed) (signed)
Boris Kamstra Eoin O’Driscoll
Chief Executive Officer Chief Financial Officer
April 30, 2018
Independent auditor’s report
To the Shareholders of Alphamin Resources Corp.
Our opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the
consolidated position of Alphamin Resources Corp. (the Company) and its subsidiaries (together the
Group) as at December 31, 2017 and December 31, 2016, and its consolidated performance and its
consolidated cash flows for the year then ended in accordance with International Financial Reporting
Standards.
What we have audited
Alphamin Resources Corp.’s consolidated financial statements set out on pages 10 to 35 comprise:
- the consolidated statements of financial position as at December 31, 2017 and December 31, 2016;
- the consolidated statements of loss and comprehensive loss for the years then ended;
- the consolidated statements of changes in stockholders’ equity for the years then ended;
- the consolidated statements of cash flows for the years then ended; and
- the notes to the consolidated financial statements, which include a summary of significant
accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the
audit of the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Independence
We are independent of the Group in accordance with the Code of Ethics for Professional Accountants
issued by the International Ethics Standards Board (IESBA Code). We have fulfilled our other ethical
responsibilities in accordance with the IESBA Code.
Material uncertainty related to going concern
We draw attention to Note 1 to the consolidated financial statements which describes events and
conditions that indicate a material uncertainty exists that may cast significant doubt about Group’s
ability to continue as a going concern. Our opinion is not modified in respect of this matter.
Our audit approach
Overview
Overall group materiality
- Overall group materiality in respect of our audit of the consolidated
financial statements for the year ended December 31, 2017: USD 1 235
800, which represents 1% of the Group’s total consolidated assets as at
December 31, 2017.
Group audit scope
- The Group comprises of 2 operating components both of which are
required to report on full scope audit procedures.
Key audit matters
The following key audit matters have been determined in respect of our audit
of the consolidated financial statements for the year ended December 31,
2017:
- Material uncertainty related to going concern; and
- Assessment of impairment of Exploration and Evaluation Asset
reclassified to Mine under construction (Alphamin Bisie Mining Tin
Project).
As part of designing our audit, we determined materiality and assessed the risks of material
misstatement in the consolidated financial statements. In particular, we considered where
management made subjective judgements; for example, in respect of significant accounting estimates
that involved making assumptions and considering future events that are inherently uncertain. As in
all of our audits, we also addressed the risk of management override of internal controls, including
among other matters consideration of whether there was evidence of bias that represented a risk of
material misstatement due to fraud.
Materiality
The scope of our audit was influenced by our application of materiality. An audit is designed to obtain
reasonable assurance whether the consolidated financial statements are free from material
misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the consolidated financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality,
including the overall group materiality for the consolidated financial statements as a whole as set out
in the table below. These, together with qualitative considerations, helped us to determine the scope of
our group audit and the nature, timing and extent of our audit procedures and to evaluate the effect of
misstatements, both individually and in aggregate on the consolidated financial statements as a
whole.
Overall group materiality In respect of our audit of the consolidated financial statements
for the year ended December 31, 2017: USD 1 235 800
How we determined it 1% of the Group’s total consolidated assets as at December 31,
2017
Rationale for the We chose total consolidated assets as the benchmark because, in
materiality benchmark our view, it is the benchmark against which the performance of
applied the Group is most commonly measured by users whilst the
Group is in its Development phase, and is a generally accepted
benchmark. We chose 1% which is consistent with quantitative
materiality thresholds used for similar companies in this sector.
How we tailored our group audit scope
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an
opinion on the consolidated financial statements as a whole, taking into account the structure of the
Group, the accounting processes and controls, and the industry in which the Group operates.
The Group consists of 2 operating components (consisting of the corporate head office in Mauritius
and the mine development project in the Democratic Republic of Congo (“DRC”)), both of which were
included for full scope audit requirements.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the consolidated financial statements for the year ended December 31, 2017. These
matters were addressed in the context of our audit of the consolidated financial statements for the
year ended December 31, 2017 as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters. In addition to the matter described in the Material uncertainty
related to going concern section above, we have determined the matter described below to be the key
audit matter to be communicated in our report.
Key audit matter for the year ended December How our audit addressed the key audit matter
31, 2017
Assessment of impairment of Exploration and
Evaluation Asset reclassified to Mine under
construction (Alphamin Bisie Mining Tin
Project).
At December 31, 2017 the Group was in the Through our discussions with management and
process of developing its Tin Project in the DRC inspection of underlying calculations, we gained
(referred to as the Alphamin Bisie Mining Tin an understanding of the methodology and models
Project). used by management for impairment assessment
purposes, which consisted of a discounted cash
Costs related to acquisition, exploration,
flow model.
evaluation and development of this project
have been capitalised and, to date, amount to We evaluated management’s impairment
USD 99.5 million. assessment, considering the factors per Note 7 to
the consolidated financial statements, by
In performing their impairment assessment of
performing the following procedures:
the carrying value of the Alphamin Bisie
Mining Tin Project at the time of (a) We obtained the discounted cash flow model
reclassification from Exploration and prepared by management which underlies
Evaluation Assets to Mine under construction, the impairment assessment;
management considered a number of factors as (b) We made use of our internal valuation
set out in Note 7 to the consolidated financial expertise to assess the integrity of the
statements.
discounted cash flow model by performing an
By its nature, there are numerous uncertainties independent recalculation and comparing the
inherent in estimating qualities and quantities results of our calculation with management’s
of mineral reserves and estimated costs to calculations. We noted no significant areas of
develop and mine it. Due to the high level of concern;
judgement and estimation involved in (c) We also made use of our internal valuation
determining the recoverable value and the expertise to evaluate the appropriateness of
material impact that an impairment could have
the forecasted average long term real tin
on the Mine under construction asset, we
considered this a matter of most significance to price used by management in the discounted
our audit of the consolidated financial cash flow model, which we compared to a
statements for the year ended December 31, range of independent analysts.
2017. Management’s forecast average long term
real tin price as used in their base case
discounted cash flow model was above our
internal consensus range. Refer (e) below;
(d) Applying our internal valuation expertise, we
re-performed the calculation of the real
discount rate used by management in the
discounted cash flow model, using standard
market related calculation methodologies
and applying additional sensitivity analyses
within our acceptable ranges. Management’s
real discount rate used in their base case
discounted cash flow model fell below our
internal consensus range. Refer (e) below;
(e) We obtained the sensitivity analysis prepared
by management as part of their impairment
assessment, where the average long term real
tin price and the real discount rates used in
management’s base case discounted cash
flow model were adjusted, individually and in
aggregate, to determine whether this would
result in the need for an impairment
provision. The average long term real tin
price and range of real discount rates used by
management in performing their sensitivity
analysis fell within our internal consensus
ranges.
(f) Forecast development capital expenditure
and operational cash flow projections used by
management in the discounted cash flow
model were compared to the latest feasibility
studies and underlying analyses prepared by
external experts utilized by management;
(g) The life of mine projection was assessed
against the latest feasibility studies and
reserve and resource statements as signed off
by competent persons; and
(h) We assessed the independence and
competency of the external experts utilized
by management by obtaining independence
confirmations from the experts, as well as
evidence relating to their qualifications and
professional memberships. We discussed
and corroborated certain of the key
assumptions used by the external experts to
relevant documentation.
Other information
Management is responsible for the other information. The other information comprises information
included in the Alphamin Resources Corp. Consolidated Financial Statements (Expressed in US
Dollars) for the years ended December 31, 2017 and 2016, and the Management Discussion and
Analysis Report. Other information does not include the consolidated financial statements and our
auditor’s report thereon.
Our opinion on the consolidated financial statements does not cover the other information and we do
not express an audit opinion or any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the
other information identified above and, in doing so, consider whether the other information is
materially inconsistent with the consolidated financial statements or our knowledge obtained in the
audit, or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of management and those charged with governance for the consolidated financial
statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with International Financial Reporting Standards, and for such internal
control as the management determines is necessary to enable the preparation of consolidated
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the management is responsible for assessing the
Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the management either intend to
liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and to issue
an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance with ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain
professional scepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk
of not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
- Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
- Conclude on the appropriateness of management’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Group’s ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw attention in our
auditor’s report to the related disclosures in the consolidated financial statements or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s report. However, future events or conditions may
cause the Group to cease to continue as a going concern.
- Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the
underlying transactions and events in a manner that achieves fair presentation.
- Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the group audit.
We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards.
From the matters communicated with those charged with governance, we determine those matters
that were of most significance in the audit of the consolidated financial statements for the year ended
December 31, 2017 and are therefore the key audit matters. We describe these matters in our auditor’s
report unless law or regulation precludes public disclosure about the matter or when, in extremely
rare circumstances, we determine that a matter should not be communicated in our report because
the adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Jean-Pierre van
Staden.
(signed) PricewaterhouseCoopers Inc.
PricewaterhouseCoopers Inc.
Chartered Accountants (South Africa)
Johannesburg - South Africa
April 30, 2018
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENTS OF DECEMBER 31 DECEMBER 31
FINANCIAL POSITION AS AT 2017 2016
USD USD
Assets
Current assets
Consumable stores (Note 4) 1 155 564 393 685
Prepaids and other receivables (Note 3) 8 952 444 602 858
Cash and cash equivalents 7 236 425 8 648 895
Total current assets 17 344 433 9 645 438
Non-current assets
Plant and equipment (Note 5) 4 067 827 1 046 044
Prepaids and other receivables (Note 3) 463 739 444 868
Mine under construction (Note 6) 99 504 474 -
Exploration and evaluation assets (Note 7) 2 201 450 70 968 191
Total non-current assets 106 237 490 72 459 103
Total assets 123 581 923 82 104 541
Liabilities and stockholders’ equity
Current liabilities
Accounts payable and accrued liabilities (Note 8) 5 965 815 996 315
Accounts payable and accrued liabilities - related
parties (Note 10) 304 468 190 833
Warrants (Note 11) 3 476 167 -
Total current liabilities 9 746 450 1 187 148
Non-current liabilities
Provision for closure and reclamation (Note 12) 1 974 894 -
Long term debt (Note 13) 6 920 731 -
Long term debt – related parties (Note 13) 3 150 071 -
Total non-current liabilities 12 045 696 -
Stockholders’ equity
Capital stock (Note 9) 122 298 092 104 277 696
Reserves (Note 9) 9 200 050 8 956 258
Foreign currency translation reserve (1 511 737) (1 511 737)
Accumulated deficit (46 166 910) (41 808 168)
Stockholders’ equity 83 819 495 69 914 049
Non-controlling interest 17 970 282 11 003 344
Total equity 101 789 777 80 917 393
Total liabilities and equity 123 581 923 82 104 541
Approved and authorised by the Board of Directors on April 30, 2018.
(Signed) (Signed)
__________________________
BORIS KAMSTRA, DIRECTOR EOIN O’DRISCOLL, DIRECTOR
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF LOSS AND COMPREHENSIVE
LOSS
CONSOLIDATED STATEMENTS OF LOSS
AND COMPREHENSIVE LOSS FOR THE DECEMBER 31 DECEMBER 31
YEARS ENDED: 2017 2016
USD USD
Operating expenses (income):
Accounting, audit and legal 579 104 541 237
Administrative 313 706 271 495
Bank charges and interest 300 195 158 611
Consulting fees 151 562 115 260
Directors’ fees 197 426 264 426
Depreciation (Note 5) 287 573 111 769
Foreign exchange (gain)/loss (478 354) 6 504
Corporate fees and salaries 3 424 002 2 957 708
Property examination and maintenance - 14 555
Investor relations, filing and transfer fees 144 955 145 187
Insurance 40 304 34 211
Share-based payments (Note 9) 243 792 153 184
Warrants (Note 11) (2 288 153) (319 704)
Telecommunication costs 102 238 154 347
Travel and accommodation 649 127 351 533
Loss on disposal of assets 1 479 482
Withholding taxes 336 000 390 698
Loss before finance costs/(income) 4 004 956 5 351 503
Finance costs - -
Finance income - (23)
Net loss and total comprehensive loss for the period 4 004 956 5 351 480
Loss and total comprehensive loss attributed to:
Equity holders 2 742 787 4 327 531
Non-controlling interests 1 262 169 1 023 949
4 004 956 5 351 480
Net loss per share – basic and diluted** (0.01) (0.01)
**Weighted average number of shares used in the
calculation of net loss per share 467 411 388 391 064 245
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
CONSOLIDATED STATEMENTS CASH DECEMBER 31 DECEMBER 31
FLOWS FOR THE YEARS ENDED 2017 2016
Expressed in US dollars USD USD
Cash flows from operating activities
Net loss before finance income for the period (4 004 956) (5 351 503)
Adjustment for items not involving cash
Share-based payments 243 792 153 184
Warrants (2 288 153) (319 704)
Loss on disposal of assets 1 479 482
Depreciation 287 573 111 769
Change in working capital items:
Prepaids and other receivables – current (8 302 136) (620 799)
Consumable stores (761 879) (393 685)
Accounts payable and accrued liabilities 4 969 500 196 302
Due to related parties 113 635 153 333
Cash used in operations (9 741 145) (6 070 621)
Interest income - 23
Net cash used in operating activities (9 741 145) (6 070 598)
Cash flow from investing activities
Purchase of plant and equipment (3 312 335) (760 535)
Disposal of plant and equipment 1 500 12 500
Investing in exploration and evaluation assets (28 692 037) (7 462 449)
Prepaids and other receivables – non-current (66 321) (195 072)
Net cash used in investing activities (32 069 193) (8 405 556)
Cash flows from financing activities
Issue of shares by subsidiary company (Note 9) 6 613 152 3 000 000
Increase in long term debt 10 000 000
Proceeds from issue of common stock and
warrants 23 784 716 11 057 342
Net cash provided by financing activities 40 397 868 14 057 342
Increase/(Decrease) in cash and cash equivalents (1 412 470) (418 812)
Cash and cash equivalents at the beginning of
period 8 648 895 9 067 707
Cash and cash equivalents at the end of period 7 236 425 8 648 895
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
Capital stock Reserves
CONSOLIDATED STATEMENT OF Share- Foreign
CHANGES IN STOCKHOLDERS’ based currency Total Non-
EQUITY payment translation stockholders’ controlling
Shares Amount reserve reserve Deficit equity interests Total equity
# USD USD USD USD USD USD USD
Balance, January 1, 2016 379 519 237 92 885 725 8 803 074 (1 511 737) (37 681 668) 62 495 394 9 228 324 71 723 718
Loss for the year - - - - (4 327 531) (4 327 531) (1 023 949) (5 351 480)
Issue of shares by subsidiary company - - - - 201 031 201 031 2 798 969 3 000 000
Issue of shares in private placement 36 683 329 8 498 040 - - - 8 498 040 - 8 498 040
Exercise of stock options 2 749 999 467 939 - - - 467 939 - 467 939
Exercise of warrants 10 833 332 2 425 992 - - - 2 425 992 - 2 425 992
Share based payments - - 153 184 - - 153 184 - 153 184
Balance, December 31, 2016 429 785 897 104 277 696 8 956 258 (1 511 737) (41 808 168) 69 914 049 11 003 344 80 917 393
Loss for the year - - - - (2 742 787) (2 742 787) (1 262 169) (4 004 956)
Issue of shares by subsidiary company - - - - (1 615 955) (1 615 955) 8 229 107 6 613 152
Issue of shares in private placement on July
19, 2017 82 514 134 16 294 644 - - - 16 294 644 - 16 294 644
Issue of shares in private placement on
December 15, 2017 9 951 178 1 725 752 - - - 1 725 752 - 1 725 752
Share based payments - - 243 792 - - 243 792 - 243 792
Balance, December 31, 2017 522 251 209 122 298 092 9 200 050 (1 511 737) (46 166 910) 83 819 495 17 970 282 101 789 777
The accompanying notes are an integral part of these consolidated financial statements.
NOTES TO THE FINANCIAL STATEMENTS
1. NATURE AND CONTINUANCE OF OPERATIONS
Alphamin Resources Corp. (the “Company”) is governed by the laws of Mauritius. The Company is
in the business of locating, acquiring, exploring, evaluating and, if warranted, developing mineral
properties. The registered office is located at C/o ADANSONIA MANAGEMENT SERVICES
LIMITED, Suite 1, PERRIERI OFFICE SUITES, C2-302, Level 3, Office Block C, La Croisette, Grand
Baie 30517, Mauritius. The Company was previously incorporated under the laws of British
Colombia, Canada, however it was continued in Mauritius effective on September 30, 2014. The
Company’s shares are listed on the Toronto Stock Exchange’s TSX Venture Exchange (primary
listing) and the Johannesburg Stock Exchange’s Alternative Exchange (Alt.X) (secondary listing).
These audited consolidated financial statements have been prepared on the basis of accounting
principles applicable to a going concern, which assumes the realisation of assets and satisfaction of
liabilities in the normal course of business. From 2015, the Company has focussed exclusively on its
principal project in the Democratic Republic of Congo (DRC). During 2017 the Company concluded
an updated feasibility study on its principal exploration and evaluation asset. Although positive, the
success of the Company’s future activities is influenced by significant financial risks, legal and
political risks and commodity prices.
As at December 31, 2017, the Company has no source of operating cash flows, has not yet achieved
profitable operations, has accumulated losses of USD46 166 910, stockholders’ equity of USD83
819 495 and working capital of USD7 597 983 and expects to incur further losses and cash outflows
in the development of its business.
The Company’s going concern risk profile has improved during the year ended December 31, 2017,
as well as post year end through the successful raising of over USD73 million in equity and securing
a debt facility in the amount of USD80 million. The Company’s ability to continue as a going concern
is dependent upon the Company obtaining additional equity and completion of certain conditions
precedent in the loan facility agreements in order to allow access to draw on the balance of the long-
term debt facility. Failure to obtain future financing could result in the delay or postponement of further
development of the Company’s properties and may result in the Company not meeting any of its
operational and capital requirements. In addition to the aforementioned funding requirements,
additional risks to completing the mine construction project on budget, on time and subsequently
ramping up to commercial levels of production relate mainly to project logistics and contractor
management in a challenging environment (including difficult road conditions). In combination, these
events and conditions give rise to a material uncertainty that may cast significant doubt on the
Group’s ability to continue as a going concern, and therefore, that it may be unable to realize its
assets and discharge it liabilities in the normal course of business.
These consolidated financial statements do not give effect to adjustments that would be necessary
to the carrying value and classification of assets and liabilities, should the Company be unable to
continue as a going concern. Such adjustments could be material.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. BASIS OF PREPARATION
These audited consolidated financial statements, including comparatives, have been prepared using
accounting policies consistent with International Financial Reporting Standards (IFRS) as issued by
the International Accounting Standards Board (IASB) and Interpretations issued by the International
Financial Reporting Interpretations Committee (IFRIC).These consolidated financial statements have
been prepared on a historical cost basis except for share-based payments and financial instruments
classified at fair value through profit or loss, which have been measured at fair value. In addition, the
financial statements have been prepared using the accrual basis of accounting, except for cash flow
information.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
B. BASIS OF CONSOLIDATION
These consolidated financial statements incorporate the financial statements of the Company and its
controlled subsidiaries. Control exists when an investor (the Company) has power over an investee
(the Subsidiaries) that give it the current ability to direct the relevant activities, i.e. the activities that
significantly affect the investee’s returns. The consolidated financial statements include the accounts
of the Company and its controlled subsidiaries, as follows:
NAME OF SUBSIDIARY COUNTRY OF INCORPORATION PRINCIPAL ACTIVITY
Alphamin Bisie Mining SA Democratic Republic of the Congo Mineral exploration (80.75%
(formerly called Mining and owned by Alphamin
Processing, Congo, SARL) Resources (BVI) Ltd)
Alphamin South Africa (Pty) South Africa Holding Company (100%
Limited wholly owned by Parent)
Alphamin Holdings (BVI) Ltd* British Virgin Islands Holding Company (100%
wholly owned by Parent)
Alphamin Resources (BVI) British Virgin Islands Holding Company (100%
Ltd* wholly owned by Alphamin
Holdings (BVI) Ltd)
*These subsidiaries were incorporated as part of the acquisition of Alphamin Bisie Mining SA (formerly called Mining and
Processing Congo, SARL).
All intercompany transactions and balances have been eliminated.
Following the receipt of mining license number PE13155 and in line with Article 71 of the Mining
Code 2002, 5% of the Class B shares of Alphamin Bisie Mining SA, were issued to the Government
of the Democratic Republic of the Congo.
On December 31, 2015 Alphamin Bisie Mining SA received the first two tranches of the proposed
USD10 million investment by the Industrial Development Corporation of South Africa Limited (IDC)
in the amount of USD7 million, resulting in 10.45% ownership in ABM. The final tranche of USD3
million was received in the quarter ended June 30, 2016, which brought the IDC’s ownership of ABM
to 14.25%. The Government of the Democratic Republic of the Congo owns a non-diluting 5%
resulting in a Group ownership of 80.75%.
C. MEASUREMENT UNCERTAINTY AND CRITICAL JUDGEMENTS
The preparation of financial statements in accordance with IFRS as issued by the International
Accounting Standards Board (IASB) and interpretations of the International Financial Reporting
Interpretations Committee (IFRIC) requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during
the reporting period. Such estimates and assumptions, which by their nature are uncertain, affect the
carrying value of assets, impact decisions as to when exploration and evaluation costs should be
capitalised or expensed and affects estimates for rehabilitation provisions. Other significant
estimates made by the Company, include factors affecting valuations of share-based compensation
and income tax accounts. The Company regularly reviews its estimates and assumptions, however
actual results could differ from these estimates and these differences could be material. Significant
assumptions about the future and other sources of estimation uncertainty that management has
made at the end of the reporting period, that could result in a material adjustment to the carrying
amounts of assets and liabilities in the event that actual results differ from assumptions made, relate
to, but are not limited to, the following:
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROVISION FOR CLOSURE AND RECLAMATION
The Company’s operations are subject to environmental regulations in the Congo. Upon
establishment of commercial viability of a site and subsequent commencement of production, the
Company estimates the cost to restore the site following the completion of commercial activities and
depletion of reserves. These future obligations are estimated by taking into consideration closure
plans, known environmental impacts, and internal and external studies, which estimate the activities
and costs that will be carried out to meet the decommissioning and environmental rehabilitation
obligations. The Company records a liability and a corresponding asset for the present value of the
estimated costs of legal and constructive obligations for future mine rehabilitation. During the mine
rehabilitation process, there will be a probable outflow of resources required to settle the obligation
and a reliable estimate can be made of those obligations. The present value is determined based on
current market assessments using the risk-free rate of borrowing which is approximated by the yield
of government bonds with a maturity similar to that of the mine life. The discounted liability is adjusted
at the end of each period with the passage of time. The provision represents management’s best
estimate of the present value of the future mine rehabilitation costs, which may not be incurred for
several years or decades, and, as such, actual expenditures may vary from the amount currently
estimated. The decommissioning and environmental rehabilitation cost estimates could change due
to amendments in laws and regulations in the Congo. Additionally, actual estimated costs may differ
from those projected as a result of a change over time of actual remediation costs, a change in the
timing for utilization of reserves and the potential for increasingly stringent environmental regulatory
requirements.
Exploration and Evaluation Assets and Mine under construction
During the year the Company continued with its process of exploring and evaluating its Exploration
and Evaluation Assets. During December 2017, the Company assessed the technical feasibility and
commercial viability of its Bisie Project, together with the availability of project funding and formally
approved the commencement of full scale development activities, resulting in the reclassification of
the Exploration and Evaluation Asset to Mine under construction. The recoverability of the amounts
shown for Exploration and Evaluation Assets and/or Mine under construction are dependent upon
the successful future development of the project, the ability of the Company to obtain necessary
financing to complete the development of the project and upon future production or proceeds from
the disposition thereof.
Assumptions are used in estimating the Group’s reserves and resources that might be extracted from
the Group’s properties. Judgement is applied in determining when an Exploration and Evaluation
Asset demonstrates technical feasibility and commercial viability and transitions to the development
stage, requiring reclassification to mine under construction within non-current assets.
Share-based payments
The share-based payments expense is estimated using the Black-Scholes options-pricing model as
measured on the grant date to estimate the fair value of stock options, which requires inputs in
calculating the fair value for share-based payments expense, included in profit or loss and share-
based issuance costs, included in shareholders’ equity. This model involves the input of highly
subjective assumptions, including the expected price volatility of the Company’s common shares and
the expected life of the options. The value of the share-based payment expense for the year along
with the assumptions and model used for estimating fair value for share-based compensation are
disclosed in Note 9.
Income taxes
The estimation of income taxes, includes evaluating the recognition of deferred tax assets based on
an assessment of the Company’s ability to utilise the underlying future tax deductions against future
taxable income, prior to expiry of those deductions. Management assesses whether it is probable
that some, or all of the recognised or unrecognised deferred income tax assets will not be realised.
The ultimate realisation of deferred tax assets is dependent upon the generation of future taxable
income, which in turn is dependent upon the successful discovery, extraction, development and
commercialisation of mineral reserves. To the extent that management’s assessment of the
Company’s ability to utilise future tax deductions changes, the Company would be required to
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
recognise more or fewer deferred tax assets, and deferred income tax provisions or recoveries could
be affected. No deferred tax assets have been recognised by the Group at this stage.
Impairment
Assets, including property, plant and equipment, exploration and evaluation and mine under
construction, are reviewed for impairment whenever events or changes in circumstances indicate
that their carrying amounts exceed their recoverable amounts, which is the higher of fair value less
cost of disposal (“FVLCD”) and value in use. The assessment of the recoverable amounts often
requires estimates and assumptions such as discount rates, exchange rates, commodity prices,
rehabilitation and restoration costs, future capital requirements and future operating performance.
Changes in such estimates could impact recoverable values of these assets. Estimates are reviewed
regularly by management.
Going concern
The preparation of these financial statements requires management to make judgments regarding
the going concern of the Company as disclosed in Note 1. As at December 31, 2017 the Company
had working capital of USD7 597 983. Additional financing will be required for the Company to
continue as a going concern.
D. CASH AND CASH EQUIVALENTS
Cash consists of cash on hand and of deposits in banks.
E. FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS
The functional currency of an entity is the currency of the primary economic environment in which
the entity operates. Following the change in functional currency outlined above, the functional
currency of all group entities is the United States dollar.
Transactions and balances in currencies other than the United States dollar are recorded at
exchange rates prevailing on the dates of the transactions. At the end of each reporting period,
monetary assets and liabilities denominated in foreign currencies are translated at the period-end
exchange rate, while non-monetary assets and liabilities are translated at historical rates. Revenues
and expenses are translated at the exchange rates approximating those in effect on the date of the
transactions. Exchange gains and losses arising on translation are included in the statement of loss
and comprehensive loss.
Prior to the change in functional currency of the parent entity, the financial results and position of
foreign operations, whose functional currency was different from the reporting currency were
translated as follows:
I. assets and liabilities were translated at period-end exchange rates prevailing at that reporting
date;
II. income and expenses were translated at average exchange rates for the period; and
III. equity items were translated at historical rates.
Exchange gains and losses were included as part of the foreign currency translation reserve on the
statement of financial position.
F. EXPLORATION AND EVALUATION ASSETS
Recognition and measurement
Exploration and Evaluation Costs are those costs required to find a mineral property and determine
technical feasibility and commercial viability. Exploration and Evaluation Costs include costs to
establish an initial mineral resource and determine whether inferred mineral resources can be
upgraded to measured and indicated mineral resources and whether measured and indicated
mineral resources are commercially viable. Costs incurred before the Company has obtained the
legal right to explore an area are recognised in the consolidated statement of loss and
comprehensive loss.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Exploration and Evaluation Costs relating to the acquisition of, exploration for and development of
mineral properties are capitalised and include, but are not restricted to: drilling, trenching, sampling,
surveying and gathering exploration data; tunnelling and development, calculation and definition of
mineral resource; test work on geology, metallurgy, mining, geotechnical and geophysical; and
conducting geological, geophysical, engineering, environmental, marketing and financial studies.
Administration costs that do not relate directly to specific exploration and evaluation activity for
capitalised projects are expensed as incurred.
Impairment
All capitalised Exploration and Evaluation Expenditures are monitored for indications of impairment.
Indicators of impairment include, but are not limited to:
I. the period for which the right to explore is less than one year;
II. further exploration expenditures are not anticipated;
III. a decision to discontinue activities in a specific area; and
IV. the existence of sufficient data indicating that the carrying amount of an Exploration and
Evaluation Asset is unlikely to be recovered from the development or sale of the asset.
Where a potential impairment is indicated, assessments are performed for each area of interest. To
the extent that Exploration and Evaluation Assets are not expected to be recovered, they are charged
to the consolidated statement of loss and comprehensive loss.
Reclassification to Mine under construction
Capitalised Exploration and Evaluation Costs for a project are classified as such until the project
demonstrates technical feasibility and commercial viability. Upon demonstrating technical feasibility
and commercial viability, and subject to an impairment analysis, capitalised exploration costs are
transferred/reclassified to Mine under construction within non-current assets. Demonstration of
technical feasibility and commercial viability generally coincide with a board decision and approval to
commence development and construction of a mine. This assessment also includes an assessment
of initial development funding required, as well as the availability of such funds. In addition, the
assessment includes the estimation of projected future operating cash flows based on a detailed
mine design plan supporting the extraction and production of established proven and probable
reserves and an estimate of mineral resources expected to be converted into reserves in the future
and includes initial construction and sustaining capital expenditures. However, this determination
may also be impacted by management’s assessment of certain modifying factors including legal,
environmental, social and governmental factors. All subsequent expenditures on the development,
construction, installation or completion of infrastructure facilities are capitalised as part of Mine under
construction within non-current assets.
G. PLANT AND EQUIPMENT
Plant and equipment is carried at cost, less accumulated depreciation and accumulated impairment
losses. Depreciation is recognised using the straight-line method at the following annual rates:
Motor vehicle 3-5 years
Computer equipment 2 years
Plant and machinery 5-10 years
Land not depreciated
H. SHARE-BASED PAYMENTS
The stock option plan allows Company employees and consultants to acquire shares of the
Company. The fair value of options granted is recognised as a share-based payment expense with
a corresponding increase in equity. An individual is classified as an employee when the individual is
an employee for legal or tax purposes (direct employee) or provides services similar to those
performed by a direct employee. Consideration paid on the exercise of stock options is credited to
capital stock.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The fair value is measured at grant date and each tranche is recognised over the period during which
the options vest. The fair value of the options granted is measured using the Black-Scholes option
pricing model, taking into account the terms and conditions upon which the options were granted.
At each financial position reporting date, the amount recognised as an expense is adjusted to reflect
the number of stock options that are expected to vest. Where equity instruments are granted to
employees, they are recorded at the fair value of the equity instrument granted at the grant date. The
grant date fair value is recognised in the statement of loss over the vesting period, described as the
period during which all the vesting conditions are to be satisfied. Where equity instruments are
granted to non-employees, they are recorded at the fair value of the goods or services received in
the statement of loss. Amounts related to the issuance of shares are recorded as a reduction of
capital stock. When the value of goods or services received in exchange for the share-based
payment cannot be reliably estimated, the fair value of the shares or equity instruments issued is
used.
I. INCOME TAXES
Deferred tax is recorded using the liability method, providing for temporary differences, between the
carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for
taxation purposes. Temporary differences are not provided for relating to goodwill not deductible for
tax purposes, the initial recognition of assets or liabilities that affect neither accounting or taxable
loss, and differences relating to investments in subsidiaries to the extent that they will probably not
reverse in the foreseeable future. The amount of deferred tax provided is based on the expected
manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates
enacted or substantively enacted at the reporting date. A deferred tax asset is recognised only to the
extent that it is probable that future taxable profits will be available against which the asset can be
utilised.
J. BASIC AND DILUTED EARNINGS (LOSS) PER SHARE
The basic earnings (loss) per share is computed by dividing the net earnings (loss) attributable to
ordinary shareholders of the parent company by the weighted average number of common shares
outstanding during the year. Diluted earnings per share reflects the potential dilution of common
share equivalents, such as outstanding stock options and share purchase warrants, in the weighted
average number of common shares outstanding during the period, if dilutive. For this purpose, the
“treasury stock method” is used for the assumed proceeds upon the exercise of stock options and
warrants that are used to purchase common shares at the average market price during the period.
K. PROVISION FOR ENVIRONMENTAL REHABILITATION
The Company recognises liabilities for legal or constructive obligations associated with the retirement
of Exploration and Evaluation Assets and plant and equipment. The net present value of future
rehabilitation costs is capitalised to the related asset along with a corresponding increase in the
rehabilitation provision in the period incurred. Discount rates using a pre-tax rate that reflects the
time value of money, are used to calculate the net present value. The Company’s estimates of
reclamation costs could change as a result of changes in regulatory requirements, discount rates
and assumptions regarding the amount and timing of the future expenditures. These changes are
recorded directly to the related assets with a corresponding entry to the rehabilitation provision.
L. CAPITAL STOCK
Common shares are classified as equity. Incremental costs directly attributable to the issue of
common shares and stock options are recognised as a deduction from equity. Common shares
issued for consideration other than cash, are valued based on their market value at the date the
shares are issued. The Company has adopted a residual value method with respect to the
measurement of shares and warrants issued as private placement units. The Company first values
the warrants at their fair value using option pricing methodologies. The balance is allocated to the
common shares.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
M. MINE UNDER CONSTRUCTION
Upon completion of a technical feasibility study determining the commercial viability of extracting a
mineral resource, as well as a board decision to mine and project finance being substantially in place,
exploration and development expenditures are transferred to Mine under construction. All
subsequent expenditures on the construction, installation or completion of infrastructure facilities are
capitalized to mine under construction until the commencement of commercial production.
Development expenditures are net of proceeds from sale of ore extracted during the development
phase. After commercial production starts, all assets included in Mine under construction are
transferred to Property, Plant and Equipment. Capitalized development expenditures are not
depreciated until the assets are ready for their intended use. Upon completion of construction, mining
assets are amortized on a unit of production basis which is measured by the portion of the mine’s
economically recoverable ore reserves produced during the period.
The Company assesses the stage of each mine under construction to determine when a mine has
moved into the commercial production phase. Capitalization of costs, including certain mine
development and construction costs, ceases when the related mining property has reached a pre-
determined level of operating capacity intended by management. Costs incurred prior to this point,
including depreciation of related plant and equipment, are capitalized and proceeds from sales during
this period are offset against capitalized costs.
N. FINANCIAL INSTRUMENTS
Financial assets
The Company classifies its financial assets into one of the following categories:
Loans and receivables – these assets are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. They are carried at amortised cost using the
effective interest method less any provision for impairment.
Held-to-maturity investments – these assets are non-derivative financial assets with fixed or
determinable payments and fixed maturities that the Company's management has the positive
intention and ability to hold to maturity. These assets are measured at amortised cost using the
effective interest method less any provision for impairment.
Financial liabilities
The Company classifies its financial liabilities into one of the following categories:
Fair value through profit or loss – this category comprises derivatives and financial liabilities incurred
principally for the purpose of selling or repurchasing in the near term. They are carried at fair value
with changes in fair value recognised in profit or loss.
Other financial liabilities – this category consists of liabilities carried at amortised cost using the
effective interest method.
O. IMPAIRMENT OF ASSETS
At the end of each reporting period, the Company’s assets are reviewed to determine whether there
is any indication that those assets may be impaired. If such indication exists, the recoverable amount
of the asset is estimated in order to determine the extent of the impairment, if any. The recoverable
amount is the higher of fair value less costs to sell and value in use. Fair value is determined as the
amount that would be obtained from the sale of the asset in an arm’s length transaction between
knowledgeable and willing parties. 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. If the recoverable amount
of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is
reduced to its recoverable amount and the impairment loss is recognised in profit or loss for the
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
period. For an asset that does not generate largely independent cash flows, the recoverable amount
is determined for the cash-generating unit to which the asset belongs.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-
generating unit) is increased to the revised estimate of its recoverable amount, but to an amount that
does not exceed the carrying amount that would have been determined had no impairment loss been
recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is
recognised immediately in profit or loss.
P. NEW STANDARDS AND INTERPRETATIONS
Standards and interpretations effective and adopted in the current year;
Standard/Interpretation Effective date: Years Expected impact
beginning on or after
Amendments to IAS 7: January 1, 2017 The impact of this standard is
Disclosure initiative not material
Amendments to IAS 12: January 1, 2017 The impact of this standard is
Recognition of Deferred Tax not material
Assets for Unrealised Losses
Standards and interpretations not yet effective and not early adopted
Standard/Interpretation Effective date: Years Expected impact
beginning on or after
Amendments to IFRS 10 and Not Applicable Unlikely there will be a material
IAS 28: Sale or Contribution of impact
Assets between and Investor
and its Associate of Joint
Venture
IFRS 16 Leases January 1, 2019 Unlikely there will be a material
impact
IFRS 9 Financial Instruments January 1, 2018 Unlikely there will be a material
impact
IFRS 15 Revenue from January 1, 2018 Unlikely there will be a material
Contracts with Customers impact
Amendments to IFRS 15: January 1, 2018 Unlikely there will be a material
Clarifications to IFRS 15 impact
Revenue from Contracts with
Customers
Amendments to IFRS 2: January 1, 2018 Unlikely there will be a material
Classification and impact
Measurement of Share-based
Payment Transactions
Amendments to IRS 4: January 1, 2018 Unlikely there will be a material
Applying IFRS 9 Financial impact
Instruments with IFRS 4
Insurance Contracts
3. PREPAIDS AND OTHER RECEIVABLES
December 31 December 31
2017 2016
Item USD USD
Current
Supplier prepayments* 8 545 424 518 747
Tax prepayment** 63 811 62 011
Deposits and other receivables 343 209 22 100
8 952 444 602 858
Non-current
Environmental deposit in DRC*** 242 466 242 466
Tax prepayment** 221 273 202 402
463 739 444 868
* Supplier prepayments relate to contractors and equipment ordered for the mine under construction.
**The tax prepayment relates to costs incurred by the Group’s subsidiary in the DRC on upgrading a public road in the DRC.
It has been agreed that this expenditure can be off-set against future provincial taxes due by the Group’s subsidiary in the
DRC.
***The environmental deposit in the DRC relates to funds deposited with the central bank in the DRC. These funds will be
utilised toward any future environmental rehabilitation activities. The deposit will be returned to the Company in the event that
the funds are not utilised.
4. CONSUMABLE STORES
December 31 December 31
2017 2016
USD USD
Consumables 1 155 564 393 685
Consumable stores consist of inventories of diesel, personal protective equipment and road building
supplies. These items are likely to be capitalised as part of development activities when they are
consumed as part of the mine under construction.
5. PLANT AND EQUIPMENT
Depreciation Computers
and Motor Plant and
equipment Land vehicle machinery Total
USD USD USD USD USD
Cost
Balance, January 1, 2016 64 709 - 199 496 276 516 540 721
Additions 31 669 271 029 212 518 245 320 760 536
Disposals (12 331) - (7 000) - (19 331)
Balance, December 31, 2016 84 047 271 029 405 014 521 836 1 281 926
Additions 36 008 233 103 609 379 2 433 845 3 312 335
Disposals (13 000) (13 000)
Balance, December 31, 2017 120 055 504 132 1 001 393 2 955 681 4 581 261
Accumulated depreciation
Balance, January 1, 2016 (13 866) - (87 253) (29 342) (130 461)
Depreciation during the year (20 202) - (57 696) (33 871) (111 769)
Disposals 4 452 - 1 896 - 6 348
Balance, December 31, 2016 (29 616) - (143 053) (63 213) (235 882)
Depreciation during the period (18 530) - (184 263) (84 780) (287 573)
Disposals 10 021 - 10 021
Balance, December 31, 2017 (48 146) - (317 295) (147 993) (513 434)
Net closing value
Balance, December 31, 2016 54 431 271 029 261 961 458 623 1 046 044
Balance, December 31, 2017 71 909 504 132 684 098 2 807 688 4 067 827
6. MINE UNDER CONSTRUCTION
December 31,
2017
USD
Balance January 1, 2016 and 2017 -
Transfer from Exploration and Evaluation Assets (Note 7) 97 529 580
Rehabilitation and closure asset (Note 12) 1 974 894
99 504 474
Mine under construction relates to the Company’s Bisie Tin Project in the DRC. This asset was
reclassified from Exploration and Evaluation assets during December 2017, after an impairment
assessment had been performed (refer to Note 7 for additional information). Mines under
construction are not depreciated until construction is completed. This is signified when the mining
project has reached a pre-determined level of operating capacity as intended by management.
Revenues realized before commencement of commercial production (“pre-commercial production
revenue”) are recorded as a reduction of the respective mining asset.
7. EXPLORATION AND EVALUATION ASSETS
Exploration and Evaluation Assets consist of:
Bisie
USD
Project acquisition costs
January 1, 2016 33 822 040
Reallocation to mine under construction (Note 6) (33 822 040)
-
Capitalised exploration costs:
January 1, 2016 28 665 260
Costs incurred during the year 7 462 449
Reallocation of tax receivable 1 018 442
December 31, 2016 37 146 151
January 1, 2017 37 146 151
Costs incurred during the year 28 762 839
Reallocation to mine under construction (Note 6) (63 707 540)
December 31, 2017 2 201 450
Total Exploration and Evaluation Assets:
Balance, December 31, 2016 70 968 191
Balance, December 31, 2017 2 201 450
Exploration and evaluation assets remaining on the balance sheet at year end relate to expenses
incurred on the Company’s exploration license and at the Mpama South deposit.
A. BISIE PROJECT
The Company owns an indirect 80.75% interest in Alphamin Bisie Mining SA (formerly MPC SARL),
a company incorporated in the Democratic Republic of the Congo and the holder of five exploration
permits and one mining/exploitation permit constituting the Bisie Tin Project. The mining permit is
valid until 2045. See related parties Note 10 for further information on the ownership of Alphamin
Bisie Mining SA.
B. AGREEMENT TO ACQUIRE ADJOINING BISIE PROJECT MINING LICENSE IN
DEMOCRATIC REPUBLIC OF THE CONGO
During September 2013, the Company entered into an agreement to acquire an exploration license,
which adjoins its Bisie Project in North Kivu Province of the Democratic Republic of the Congo. The
Company has paid USD975 000 to date, including an installment of USD100 000 in June 2017. The
final payment due under the terms of the agreement is USD50 000 by June 30, 2018. The Company
has the right to withdraw at any stage.
C. IMPAIRMENT ASSESSMENT
During the year under review the Company continued with its process of exploring and evaluating its
Exploration and Evaluation Assets. In December 2017, the Company assessed the technical
feasibility and commercial viability of its Bisie Project, together with the availability of project funding,
and formally approved the commencement of full scale development activities, resulting in the
reclassification of the Exploration and Evaluation Asset to Mine under construction within non-current
assets.
Immediately prior to the reclassification to Mine under construction, an impairment assessment of
the carrying value of the Exploration and Evaluation asset was performed. The recoverable amount
of the Exploration and Evaluation Asset was determined under the ‘Income Approach’ using a
Discounted Cash Flow (DCF) model based on the latest feasibility studies as supported by geological
studies and input from independent mining engineers and competent persons.
The following key assumptions were used in the DCF model:
- Life of mine of 12.5 years
- Average long term real tin price of US$ 21,700 per ton
- Real post-tax discount rate of 8%
7. EXPLORATION AND EVALUATION ASSETS (CONTINUED)
Based on the above base case assumptions, no impairment provision was required. In addition, the
following sensitivity analyses were considered:
- A 15% reduction in the assumed average long term real tin price
- Real post-tax discount rates ranging between 10% and 17%
Based on the above sensitivity analyses, no impairment provision was required in any of the above
scenarios, individually and in aggregate.
8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
December 31, December 31,
2017 2016
USD USD
Accounts payable 4 096 766 586 409
Accrued liabilities 1 607 896 36 184
Payroll accruals 50 446 33 500
Payroll and withholding tax liabilities 210 707 340 222
5 965 815 996 315
Accounts payable and accrued liabilities are mainly comprised of amounts outstanding for purchases
relating to exploration, evaluation and development activities and amounts payable for professional
services. The credit term period for purchases typically ranges from 30 to 120 days.
9. CAPITAL STOCK AND RESERVES
A. CAPITAL STOCK
The authorised capital stock of the Company consists of an unlimited number of common shares
without par value, of which 522 251 209 common shares were issued and outstanding at December
31, 2017.
B. CHANGES IN ISSUED CAPITAL STOCK AND RESERVES DURING THE YEAR ENDED
DECEMBER 31, 2017
I. During the quarter ended March 31, 2017, 750 000 stock options expired.
II. On July 19, 2017, the Company raised gross proceeds of CAD$28,879,947
(USD$22,324,136) via a private placement of 82,514,134 units (the “Units”) at a price of
CAD$0.35 per Unit. Each Unit consisted of one common share and one?half of one common
share purchase warrant (each whole warrant, a “Warrant”). Each Warrant entitles the holder
to purchase one additional common share of the Company at a price of CAD$0.4375 until
July 18, 2020. Accordingly, a total of 41,257,065 warrants were issued in the private
placement. All securities sold in the offering were subject to a hold period which expired on
November 19, 2017. The expiry date of the Warrants may be accelerated by the Company
at any time following the 12 month anniversary of the closing date of the Offering if the
volume-weighted average trading price of the Common Shares is greater than C$0.73 for
any 15 consecutive trading days, at which time the Company may accelerate the expiry date
of the Warrants by issuing a press release announcing the reduced warrant term whereupon
the Warrants will expire on the 15th calendar day after the date of such press release. Share
issue costs of $717 402 were incurred and offset against Capital Stock.
III. On July 25, 2017 the Company issued 4,984,800 stock options.
IV. On December 15, 2017 the Company raised gross proceeds of US$2,538,736 via a private
placement of 9 951 178 units (the “Units”) at a price of ZAR3.40 per share, following a
secondary inward listing on the Johannesburg Stock Exchange Alt.X board. Each Unit
consisted of one common share and one half common share purchase warrant (each whole
9. CAPITAL STOCK AND RESERVES (CONTINUED)
warrant, a “Warrant”). Each Warrant entitles the holder to purchase one additional common
share of the Company. The exercise price of the Warrant will be the ZAR equivalent of
CAD$0.40 on the day before the Warrant is exercised. Share issue costs of $360 754 were
incurred and offset against Capital Stock.
C. CHANGES IN ISSUED CAPITAL STOCK AND RESERVES DURING THE YEAR ENDED
DECEMBER 31, 2016 WERE AS FOLLOWS:
V. During the quarter ended March 31, 2016 1,000,000 stock options were forfeited.
VI. During the quarters ended June 30, 2016 and December 31, 2016 5,420,001 stock options
expired.
VII. During the quarters ended September 30, 2016 and December 31, 2016 2,749,999 stock
options were exercised.
VIII. During the quarter ended December 31, 2016 1,149,839 stock options were issued.
IX. During the quarter ended September 30, 2016 10,833,332 warrants were exercised.
X. During the quarters ended September 30, 2016 and December 31, 2016 36,683,329 shares
were issued for a total consideration of $8,498,040 USD at a price of CAD$0.30 per share,
pursuant to the private placement announced on September 8, 2016.
D. STOCK OPTIONS
A summary of the stock option plan and principal terms is set out below.
The Plan provides that the number of common shares that may be purchased under the Plan is a
rolling maximum which shall not exceed 10% of the issued and outstanding shares of the Company
at any time, with appropriate substitutions and/or adjustments in accordance with regulatory policies
if there is a change in the number of issued and outstanding shares resulting from a share split,
consolidation, or other capital or corporate reorganisation. Per TSX Venture Exchange (TSX-V)
policies, the total amount of shares reserved for issuance to any one optionee within a period of 12
months shall not exceed 5% of the outstanding common shares at the time of grant, the total amount
of shares reserved for issuance to any one Consultant (as defined by the Plan) within a period of 12
months shall not exceed 2% of the outstanding common shares at the time of grant, and the total
amount of shares reserved for all persons conducting Investor Relations Activities (as defined by the
Plan) within a period of 12 months shall not exceed 2% of the outstanding common shares at the
time of the grant.
The Plan provides that it is solely within the discretion of the Board of Directors (the “Board”) to
determine which directors, employees and other service providers may be awarded options under
the Plan, and under what terms they will be granted, as well as any amendments or variations to
these terms in the event of an Accelerated Vesting Event (as defined by the Plan). Options granted
under the Plan will be for a term not exceeding ten years from the day the option is granted, as in
line with TSX-V policies. Subject to such other terms or conditions that may be attached to the
particular option granted, an option shall only be exercisable so long as the optionee shall continue
to hold office or provide services to the Company and shall, unless terminated earlier, or extended
by the Board, terminate immediately if said optionee is terminated for cause, terminate at the close
of business on the date which is no later than 90 calendar days after cessation of office or
employment, or in the case of the optionee’s death, terminate at the close of business on the date
which is no later than one year after the date of death, as the case may be. Subject to a minimum
price of CAD$0.10, the options will be exercisable at a price which is not less than the Market Price
(as defined in the policies of the TSX-V) of the Company’s shares at the time the options are granted.
The options are non-assignable. Shares will not be issued pursuant to options granted under the
Plan until they have been fully paid for. The Company will not provide financial assistance to option
holders to assist them in exercising their options. A summary of stock option activity and information
concerning currently outstanding and exercisable options as at December 31, 2017 are as follows
9. CAPITAL STOCK AND RESERVES (CONTINUED)
Options outstanding
Number of Weighted
options average
exercise price
# CAD$
Balance, December 31, 2015 12 197 115 0.30
Options granted during the year 1 149 839 0.23
Options exercised during the year (2 749 999) 0.22
Options expired during the year (5 420 001) 0.34
Options forfeited during the year (1 000 000) 0.25
Balance, December 31, 2016 4 176 954 0.29
Options expired during the year (750 000) 0.65
Options issued during the year 4 984 800 0.35
Balance, December 31, 2017 8 411 754 0.29
The following table summarises information concerning outstanding and exercisable options at
December 31, 2017:
Options outstanding and exercisable
Number Number Expiry date Weighted Remaining
outstanding exercisable average life
# # exercise (years)
price
CAD$
1 518 077 759 039 Aug 15, 2020 0.20 2.62
759 038 379 519 Oct 19, 2020 0.20 2.80
759 038 113 856 Apr 15, 2021 0.20 3.29
390 801 58 620 Oct 15, 2021 0.30 3.79
4 984 800 - July 25, 2022 0.35 4.57
8 411 754 887 550 0.29
All options vest over a three-year period (15% after one year, 35% after two years and 50% after
three years). Options expire five years after the date of issue.
The Company recorded a share-based payment expense to the statement of loss and
comprehensive loss of USD243 792 for the year ended December 31, 2017 (USD153 184 for the
year ended December 31, 2016).
The share-based payments expense related to options granted was determined using the Black-
Scholes option pricing model and the following weighted average assumptions:
July October April
2017 2016 2016
Forfeiture rate - - -
Risk free interest rate 1.38% 0.67% 0.58%
Expected life of options in years 3.00 3.00 3.00
Volatility* 114.20% 137.61% 138.50%
Dividend rate 0.00% 0.00% 0.00%
*Calculated as standard deviation of the Company’s historical share price
9. CAPITAL STOCK AND RESERVES (CONTINUED)
E. SHARE PURCHASE WARRANTS
A summary of warrants activity and information concerning outstanding warrants as at December
31, 2017 are as follows:
Warrants outstanding
Number of Weighted
warrants average
exercise price
# CAD$
Balance, December 31, 2015 10 883 332 0.25
Warrants issued - -
Warrants exercised (10,833,332) 0.25
Balance, December 31, 2016 - -
Warrants issued on July 19, 2017 41 257 065 0.4375
Warrants issued on December 15, 2017 4 975 589 0.4000
Balance, December 31, 2017 46 232 654 0.4335
The 41 257 065 warrants attached to the units issued in the July 19, 2017 and the 4 975 589 warrants
attached to the units in the December 15, 2017 private placements were accounted for as a financial
liability. See Note 11 for further details.
F. TRANSACTION WITH NON-CONTROLLING INTEREST
The issue of shares in Alphamin Bisie Mining SA (ABM) to the Industrial Development Corporation
of South Africa (IDC) for USD7 000 000 during the year ended December 31, 2015 was accounted
for as a shareholder transaction resulting in an increase of the non-controlling interest of USD6 996
951. The balancing USD3 049 was taken to equity in line with IFRS 10. The receipt of the third
tranche from the IDC in the amount of USD3 000 000 in May 2016 resulted in an additional increase
in the non-controlling interest of USD2 798 969. The balancing USD201 031 was taken to equity in
line with IFRS 10. See Note 10 for additional information. The IDC invested an additional USD6 613
152 in ABM in December 2017. The transaction was accounted for as a shareholder transaction
resulting in an increase of the non-controlling interest of USD8 229 107. The balancing USD1 615
955 was taken to equity in line with IFRS 10. Alphamin, the IDC and the DRC government maintained
their 80.75%, 14.25% and 5% interests in ABM following the 2017 transaction.
10. RELATED PARTY TRANSACTIONS
KEY MANAGEMENT PERSONNEL
Key management personnel include those persons having authority and responsibility for planning,
directing and controlling the activities of the Company as a whole. The Company has determined
that key management personnel consist of executive and non-executive members of the Company’s
Board of Directors and corporate officers. Remuneration attributed to key management personnel
can be summarised as follows:
December 31 December 31
2017 2016
Item Relationship USD USD
Director and Officer fees Directors, officers 875 815 999 568
Secretarial and administrative fees Corporate Secretary 36 000 53 500
Share based payments Directors, officers 154 003 153 184
Total current amounts due to related parties of USD304 468 (December 31, 2016 – USD190 833)
are due or accrued to officers and directors.
10. RELATED PARTY TRANSACTIONS (CONTINUED)
Non-current amounts due to related parties of USD3 150 071 (December 31, 2016 – Nil) are due to
Tremont Master Holdings. The amount includes long term debt of US3 125 000 and capitalized
interest due of USD25 071. See Note 13 for further details.
In line with the DRC mining code, the Company’s subsidiary Alphamin Bisie Mining SA (ABM)
granted 5% of its share capital to the Government of the DRC during the 2015 financial year. To
facilitate this ABM divided their share capital into two classes, “A” shares and “B” shares. The “B”
shares are intended to be held solely by the Government of the DRC and are non-dilutable at 5% of
total share capital (“A” plus “B”) in issue. “B” class shares have normal voting rights on a pro rata
bases and the DRC Government has a right to appoint one director to the ABM board. The 5% is a
free carry under the terms of the DRC mining code, hence the DRC Government is not required to
contribute on granting of their initial holding or further issues to maintain their stake at 5%. The
percentage is fixed under the DRC mining code and management does not anticipate any changes
in this regard in the short to medium term.
In November 2015, the Company entered into an agreement with the Industrial Development
Corporation of South Africa Limited (IDC) pursuant to which the IDC could invest up to USD10 000
000 directly into ABM, in three tranches, subject to the completion of certain milestones. As at the
2016 financial year end the Company had received all tranches, resulting in an ownership in ABM of
14.25% by the IDC. Under the terms of the shareholders’ agreement the IDC were granted an “offtake
option”. Under the offtake option the IDC is entitled, as long as it owns 11% or more of ABM “A” class
shares, to an option to purchase from ABM a portion of the Company’s mineral production. The
percentage of production that the IDC wishes to acquire, cannot exceed their percentage holding in
the “A” class shares of ABM at the date of exercise. The IDC shall only be able to benefit from the
“offtake option” if the relevant percentage of the Company’s production is not already committed to
other buyers in respect to the relevant period. In December 2017 the IDC invested an additional
USD6.6m in ABM as part of a share issuance in which all shareholders maintained their pro rata
share.
The offtake acquired can only be for a minimum of six months and a maximum of twelve months and
must be purchased at the same average price and other terms as ABM is able to, and would
otherwise intend to, sell its product to other third-party purchasers. The “offtake option” is not
transferrable. Under the terms of the shareholders’ agreement, a qualifying “seller”, defined as a
shareholder, or two or more shareholders acting together, holding more than 50% of the “A” class
shares of ABM, has drag along and tag along rights that are normal in transactions of this nature.
The IDC has also granted pre-emption rights to the other “A” class shareholders, entitling them to a
right of first refusal on any partial or full sale of their shares.
The IDC may propose (but is not obliged) at any time during the “Exit Period” that Alphamin
Resources acquire all, but not less than all of its shares in exchange for shares in Alphamin
Resources (the Share Swap), which shall be based on the then fair market value of the “A” class
shares, and on terms to be mutually agreed to by Alphamin Resources and the IDC. The “Exit Period”
refers to the earlier of five years from the date of signature, or one year from the date the Bisie Tin
Project reaches 90% of its intended maximum production, having been fully funded and fully
implemented.
11. WARRANTS
On July 19, 2017 and December 15, 2017, the Company issued 41 257 065 and 4 975 589 warrants
in the respective private placements as outlined in Note 9. The Company assessed the conditions of
these warrants in terms of IAS 32 and IAS 39 and concluded that, as a result of the currency of the
warrants (CAD$) being different to that of the Company’s functional and presentation currency
(USD), coupled with the fact that the warrants were issued as part of a private placement, rather than
a rights issue, that the warrants need to be accounted for as a financial liability with fair value through
11. WARRANTS (CONTINUED)
profit and loss. The warrants were valued on the date of issue and the related fair value of USD5 312
090 and USD452 230 respectively was raised as a liability (the balance of the cash received in the
respective private placements was accounted for in equity as Capital Stock). The Company valued
the warrants using the Black-Scholes pricing model with the assumptions below.
December July 19,
15, 2017
2017
Strike price CAD$0.40 CAD$0.4375
Risk free interest rate 1.24% 1.24%
Expected life of options in years 3.00 3.00
Annualised volatility 70% 70%
Dividend rate 0.00% 0.00%
The warrants were revalued on December 31, 2017 using the same valuation methodology as
described above and, on that date, the fair value of the warrants was calculated at USD3 476 167.
The movement in the warrant liability was credited to the statement of loss and comprehensive loss
(Year ended December 31, 2017: Credit of USD2 288 153). The use of an option pricing model to
determine the fair value of these warrants falls within Level 2 of IFRS 13’s fair value hierarchy: Level
2 – Inputs other than quoted prices that are observable for the asset or liability either directly or
indirectly.
12. PROVISION FOR CLOSURE AND RECLAMATION
The Company recognizes a provision related to its constructive and legal obligations in the Congo
to restore its properties. The cost of this obligation is determined based on the expected future level
of activity and costs related to decommissioning the mines and restoring the properties. The
provision for the Bisie mine is calculated at the net present value of the estimated future
undiscounted cash flows using an interest rate of 3.63% (December 31, 2016 –Nil) a mine life of 14
years and estimated future undiscounted liability of USD6 651 000 (December 31, 2016 - Nil). The
Company recognized a corresponding asset classified as mine under construction.
BISIE
Balance, December 31, 2015 and 2016 -
Additions during the year 1 974 894
Balance, December 31, 2017 1 974 894
13. LONG TERM DEBT
On November 9, 2017 the Company entered into a credit facility of up to US$80 million from a
syndicate of lenders for the construction of the Bisie Tin Mine. The credit facility provided for an
initial advance of US$10 million, which was drawn down in December 2017. The balance of US$70
million will become available following the satisfaction of certain subsequent conditions precedent,
including, inter alia, the Company completing an equity financing of a minimum of US$50 million
net of associated costs (“equity financing”), US$ 41.6 million of which was raised post year end.
The key terms of the credit facility are:
1. US$80 million senior secured, non-revolving term credit facility
2. Available, subject to fulfilment of conditions precedent, for an 18-month period following
the initial advance date
3. Five-year term commencing on the initial advance date
4. Coupon of 14 percent plus the greater of US dollar 3-month LIBOR and 1 percent per
annum
5. Interest to be capitalized until the earlier of achievement of commercial production and 24
months following the initial advance date, repayable monthly thereafter
13. LONG TERM DEBT (CONTINUED)
6. No principal repayments until March 31, 2020, with repayments thereafter in 11 equal
quarterly instalments
7. Cash sweep of 30 percent of excess cash flow with effect from April 30, 2020
8. Work fee of 2.9 percent payable as to 50 percent upon the initial advance and the balance
upon the first subsequent advance
9. Transaction costs of US$1.77 million to be paid upon the later of the initial advance and
completion of the equity financing and US$2.23 million to be paid pro rata on subsequent
advances
10. Termination payment in certain circumstances, not to exceed value of work fee and bonus
shares not previously paid
11. A post year end amendment to the credit facility provides for a First Subsequent drawdown
in the amount of USD25 000 000 following completion of an equity financing for a minimum
of USD43 000 000. The US43m financing was completed on January 22, 2018.
12. A security package typical for a transaction of this nature including a mortgage over the
Company’s shares in each subsidiary, cash balances, moveable assets and the mining
license PE1355 covering the Mpama North Tin Project.
Of the USD$80 million facility, $25 million will be provided by Tremont Master Holdings, a 44%
shareholder in the Company. Tremont will also receive their pro rata share of applicable fees and
accrued interest.
Related Non-related
Long-term debt party debt party debt Total
USD USD USD
Balance, December 31, 2015 and 2016 - - -
Drawdowns during the year 3 125 000 6 875 000 10 000 000
Capitalised interest 25 071 45 731 70 802
Balance, December 31, 2017 3 150 071 6 920 731 10 070 802
14. SEGMENTED INFORMATION
The Company considers its business to consist of one reportable operating segment, being the
acquisition, exploration, evaluation and if warranted, development of mineral deposits. As at reporting
date, substantially all of the Company’s plant and equipment and Exploration and Evaluation Assets
were located in the Democratic Republic of the Congo. In assessing potential operating segments,
the Company has considered the information reviewed by the Chief Operating Decision Maker
(CODM). The Company has identified the Board of Directors as the CODM and is satisfied that the
information as presented in the financial statements is the same as that assessed by the CODM for
management reporting purposes. The Company has one asset, in one commodity in one country.
15. INCOME TAX
In Mauritius, Alphamin Resources Corp. is a Category 1 Global Business License Company for the
purpose of the Financial Services Act 2007. The Company is subject to income tax at 15%. It is,
however, entitled to a tax credit equivalent to the higher of foreign taxes paid and 80% of the Mauritius
tax on its foreign source income, leaving a maximum effective tax rate of 3%. Capital gains of the
Company are exempt from tax in Mauritius. At December 31, 2017, the Company was not liable for
income tax as it had not generated any taxable income to date. The Company does not recognise a
deferred tax asset in respect of tax losses brought forward due to uncertainty around the future
recoverability of such losses.
In the DRC, Alphamin Bisie Mining is exposed to a tax rate for mining companies of 30%. This is the
main operating subsidiary of the group. At December 31, 2017, the Company was not liable for
income tax as it had not generated any taxable income to date. The Company does not recognise a
deferred tax asset in respect of tax losses brought forward due to uncertainty around the future
recoverability of such losses.
16. CAPITAL MANAGEMENT
The Company’s objectives when managing capital are to safeguard the Company’s ability to continue
as a going concern in order to pursue the exploration, evaluation and development of its mining
properties and to maintain a flexible capital structure which optimises the costs of capital at an
acceptable risk. The Company currently depends on shareholder equity and the recently secured
credit facility for up to USD 80 000 000. The capital structure of the Company currently consists of
common shares, stock options, share purchase warrants and long-term debt. Changes in the equity
accounts of the Company are disclosed in Note 9 and changes in long term debt is disclosed in Note
13. The Company manages the capital structure and makes adjustments to it in light of changes in
economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the
capital structure, the Company may attempt to issue new shares, obtain additional 3rd party loan
financing or dispose of assets. In order to facilitate the management of its capital requirements, the
Company prepares annual expenditure budgets, which are approved by the Board of Directors and
updated as necessary depending on various factors, including capital deployment and general
industry conditions. The Company anticipates continuing to access equity markets and 3rd party
financing to fund continued exploration, evaluation and development of its mining properties and the
future growth of the business.
17. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Company’s financial instruments are exposed to a number of financial and market risks,
including credit, liquidity and foreign exchange risks. The Company may, or may not, establish from
time to time active policies to manage these risks. The Company does not currently have in place
any active hedging or derivative trading policies to manage these risks, since the Company’s
management does not believe that the current size, scale and pattern of its operations would warrant
such hedging activities. The Company places its cash with high credit quality financial institutions.
A. CREDIT RISK
Credit risk is the risk that a counterparty to a financial instrument will not discharge its obligations,
resulting in a financial loss to the Company. The Company has procedures in place to minimise its
exposure to credit risk. Company management evaluates credit risk on an ongoing basis, including
evaluation of counterparty credit rating, monitoring activities related to trade and other receivables
and counterparty concentrations measured by amount and percentage. The primary source of credit
risk for the Company arises from the following financial assets: (1) cash and cash equivalents and
(2) other receivables. The Company has not had any credit losses in the past, nor does it expect to
have any credit losses in the future. At December 31, 2017, the Company has no financial assets
that are past due or impaired due to credit risk defaults. As at period end substantially all of the cash
and cash equivalents balance was concentrated with Standard Bank group. Standard Bank’s
average credit rating is BBB+. The Company’s maximum exposure to credit risk at the reporting date
is as follows:
December 31, December 31,
2017 2016
Item USD USD
Cash and cash equivalents 7 236 425 8 648 895
Other receivables – current 343 209 22 100
Other receivables – non-current 242 466 242 466
Total 7 822 100 8 913 461
B. LIQUIDITY RISK
Liquidity risk is the risk that the Company will not be able to meet its obligations with respect to
financial liabilities as they fall due. The Company’s financial liabilities are comprised of long term
debt, accounts payable and accrued liabilities. The Company frequently assesses its liquidity position
by reviewing the timing of amounts due and the Company’s current cash flow position to meet its
obligations.
17. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
The Company manages its liquidity risk by maintaining a sufficient cash balance to meet its
anticipated operational needs. When there are not sufficient funds, the Company has the ability to
reduce or delay its exploration, evaluation, development and corporate spending to preserve
liquidity. The Company’s long-term debt was obtained to facilitate the development of the mining
properties (refer to Note 6). Refer to Note 9 for additional information on repayment terms. The
Company’s accounts payable and accrued liabilities arose as a result of exploration, evaluation,
development and corporate expenses. Payment terms on these liabilities are typically 30 to 120
days from receipt of invoice and do not generally bear interest. The following table summarises
the remaining contractual maturities of the Company’s financial liabilities:
Within After more Within
0 to 120 days than 12 months 0 to 120 days
2017 2017 2016
USD USD USD
Long term debt - 6 920 731 -
Long term debt – related parties - 3 150 071 -
Provision for closure and reclamation - 1 974 894 -
Accounts payable and accrued liabilities 5 755 108 - 656 093
Accounts payable and accrued liabilities – related
parties 304 468 - 190 833
C. MARKET RISK
Market risk is the risk that the fair value for assets or future cash flows will fluctuate, because of
changes in market conditions. The Company evaluates market risk on an ongoing basis and has
established policies and procedures for mitigating its exposure to foreign exchange fluctuations.
Other than the possible impact on the recoverable amount of the Company’s mining properties
carried under non-current assets, the Company’s operating cash flows and financial instruments
are not currently exposed to commodity price risk. The fair value movements accounted for
warrants (refer Note 11) are non-cash in nature.
Foreign Exchange Risk
The Company operates on an international basis and therefore, foreign exchange risk exposures
arise from transactions denominated in foreign currencies. The Company is exposed to foreign
currency risk on fluctuations related to financial instruments that are denominated in Canadian
dollars (CAD$). A 10% fluctuation in the USD against the Canadian dollar would affect the net loss
and foreign currency translation reserve by insignificant amounts.
A significant portion of the Company’s development expenditure is exposed to the South African
Rand (ZAR). A significant fluctuation in the ZAR:US$ exchange rate would have a relatively
material impact on the cost of development.
Interest Rate Risk
As at December 31, 2017 the Company had drawn down US$ 10 000 000 against its long-term
debt facility (refer Note 13). These loans are exposed to variable interest rates. Finance costs are
capitalised to Mine under construction during the development phase of the project. A 1% change
in the variable interest rates would not have had a material impact on the finance cost capitalised
during the 2017 financial year. The Company does not earn significant interest on cash balances.
D. FAIR VALUE MEASUREMENT
At December 31, 2017 and December 31, 2016, the carrying values and the fair values of the
Company’s financial instruments are shown in the following table.
17. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
December December December December
31, 31, 31, 31,
2017 2017 2016 2016
Carrying Fair Carrying Fair
value value value value
USD USD USD USD
Financial assets
Cash and cash equivalents 7 236 425 7 236 425 8 648 895 8 648 895
Other receivables – current 343 209 343 209 22 100 22 100
Other receivables – non-current 242 466 242 466 242 466 242 466
Financial liabilities
Long term debt 6 920 731 6 920 731 - -
Long term debt – related parties 3 150 071 3 150 071 - -
Provision for closure and reclamation 1 974 894 1 974 894 - -
Accounts payable and accrued liabilities 5 755 108 5 755 108 656 093 656 093
Accounts payable and accrued liabilities –
related parties 304 468 304 468 190 833 190 833
Warrants 3 476 167 3 476 167 - -
Financial instruments measured at fair value are classified into one of three levels in the fair value
hierarchy according to the relative reliability of the inputs used to estimate the fair values. The
three levels of the fair value hierarchy are:
• Level 1 – unadjusted quoted prices in active markets for identical assets or liabilities.
• Level 2 – inputs other than quoted prices that are observable for the asset or liability either
directly or indirectly.
• Level 3 – inputs that are not based on observable market data.
The fair value of the Company’s financial assets and financial liabilities approximate their carrying
values (all within Level 3 of the fair value hierarchy).
18. HEADLINE AND DILUTED HEADLINE LOSS PER SHARE
The Company’s shares are also listed on the Johannesburg Stock Exchange Alt.X which
requires the Company to present headline and diluted headline loss per share. Headline
loss per share is calculated by dividing headline loss attributable to equity holders of the
Company by the weighted average number of common shares issued and outstanding
during the year. Diluted headline loss per share is determined by adjusting the weighted
average number of shares for all potential dilutive effects. For the years ended December
31, 2017 and 2016, the Company’s diluted headline loss per share is identical to the
headline loss per share as inclusion of stock options and warrants would be anti-dilutive.
The following table summarises the adjustments to loss attributable to equity shareholders
for the purposes of the calculation.
2017 2016
USD USD
Loss attributable to equity shareholders 2 742 787 4 327 531
Adjusted for;
Loss on disposal of property, plant and equipment 1 479 482
Headline loss attributable to equity shareholders of the company 2 744 266 4 328 013
Weighted average number of shares issued and outstanding 467 411 388 391 064 245
Headline loss and diluted headline loss per share 0.01 0.01
19. SIGNIFICANT OPERATING SUBSIDIARIES WITH NON-CONTROLLING
INTEREST
The table below shows details of the non-wholly owned subsidiary of the Group that had material
non-controlling interests:
Proportion of Profit/(loss) allocated to Accumulated non-
ownership and voting non-controlling controlling interests
rights held by non- interests
controlling interests
Company December December December December December December
31, 2017 31, 2016 31, 2017 31, 2016 31, 2017 31, 2016
USD USD USD USD
Alphamin Bisie
Mining SA 19.25% 19.25% (1 262 169) (1 023 949) 17 970 282 11 003 344
Summarised financial information in respect of the above subsidiaries is set out below.
The summarised financial information below presents amounts before intra-group elimination.
December December
31, 2017 31, 2016
USD USD
Current assets 16 569 426 2 482 086
Non-current assets 57 279 742 26 772 319
Total assets 73 849 168 29 254 405
Current liabilities 4 248 294 8 998 786
Non-current
liabilities 10 072 802 -
Equity 59 530 072 20 255 619
Total liabilities and
equity 73 849 168 29 254 405
Operating expenses (6 515 181) (5 765 574)
Income tax
expenses - -
Net loss for the
year (6 556 722) (5 765 574)
Attributable to
owners of the
Company (5 294 553) (4 741 625)
Attributable to non-
controlling interests (1 262 169) (1 023 949)
20. SUBSEQUENT EVENTS
Subsequent to the year end the Company announced that it had completed brokered and non-
brokered private placements for gross proceeds of USD41 592 299 via an issue of 165 047 306 units.
Each unit comprised one common share and one-half share warrant. Concurrently, the Company
settled debt for shares through the issue of 4 746 091 units. Each unit was priced at CAD$0.32.
On January 22, 2018 the Company entered into an offtake agreement with Gerald Metals group
whereby Gerald Metals shall buy all product produced by the Alphamin Bisie Tin Project for at least
the first five years of production linked to LME selling prices.
30 April 2018
JSE Sponsor
Nedbank Limited (acting through its Corporate and Investment Banking Division)
Date: 30/04/2018 03:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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