Kasbah Resources Limited Annual Report 2018

19 Kasbah Resources Limited Annual Report 2018 The Directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as “the Group”) consisting of Kasbah Resources Limited (“Kasbah”or the “Company”) and the entities it controlled for the year ended 30 June 2018. Directors The following persons were Directors of Kasbah Resources Limited during the whole of the financial year and up to the date of this report, unless otherwise stated: –– John Gooding –– Graham Freestone –– Graham Ehm (appointed on 22 January 2018) –– Martyn Buttenshaw (appointed on 22 January 2018, previously Alternate Director to Stephen Gill) –– Stephen Gill (resigned and appointed Alternate Director to Martyn Buttenshaw on 22 January 2018, resigned as Alternate Director on 13 August 2018) –– Hedley Widdup (resigned on 31 July 2018) Principal Activities The principal activity of the Group during the year was the evaluation of its flagship Achmmach Tin Project in Morocco. Dividends – Kasbah Resources Limited There were no dividends paid, recommended or declared during the current or previous financial year. Review of Operations A full review of the operations is set out in the Operations Review on pages 8 – 18. The consolidated loss after income tax for the financial year was $6,343,602 (2017: loss of $5,204,945). Included in the consolidated loss after income tax were exploration and evaluation expenditure of $2,094,817 (2017: $995,462), project financing costs of $177,359 (2017: $8,176), employee benefits expenses of $1,851,105 (2017: $1,999,739) and transaction fees and other associated costs of $55,501 (credit) (2017: $1,246,473). The increase in exploration and evaluation costs is due to the company re-focussing on project evaluation and progressing the 2018 DFS. The Group incurred significant cost in executing the testwork programme developed to address the recommendations of the independent technical review of the 2016 SSO DFS, evaluate opportunities for operating and capital cost reductions and reduce the environmental and social footprint of the project. The 2018 DFS has introduced ore sorting technology, which sorts the crushed rock and separates out the heavier rock containing tin, resulting in up to 35 per cent of the mined crushed material not needing to be processed. In addition, the Group has also introduced High Pressure Grinding Rolls (HPGR) which facilitates a two-stage crushing circuit (rather than three-stage) and significantly reduces power consumption over previous alternatives considered. Parallel to the test work programme, the Group also commenced financing activities during the year, including the engagement of financial advisers, technical experts, tax and other consultants, resulting in an increase in project financing costs compared to the previous year. Employee benefits expense were higher compared to the previous year, after adjusting for non-recurring termination benefits, as a result of the Company employing a more experienced management team to advance the Achmmach Tin Project towards construction. Employee share-based payments were higher following the approval of the Non-Executive Director Share Rights Plan and the Long-Term Incentive Plan at the 2017 Annual General Meeting. The introduction of the Non-Executive Director Share Rights Plan enabled the Company to partly or wholly remunerate non-executive directors in shares at the individual’s election. The introduction of the Long-Term Incentive Plan facilitated the attraction and retention of capable executives and aligns management interest with those of shareholders. In calculating the value of these share-based payments, the Group has assumed that all vesting conditions will be met. Transaction and other associated costs are expenses related to the failed Scheme of Arrangement during the prior year. The credit in the current year represents the reversal of an over-accrual recognised at 30 June 2017. Non-recoverable Moroccan TVA expense was higher due to the increased project expenditure in Morocco. Interest and borrowing costs were higher due to the increase in debt principal from $1,000,000 to $3,000,000 during the year. The cash position of the Group as at 30 June 2018 was $3,016,898 (2017: $1,720,844). The Group incurred net operating cash outflows of $6,416,240 (2017: $4,578,818). Total net cash inflow from financing activities were $7,804,249 (2017: $5,134,083). During the year, the Group received $4,984,171 from the 2017 non-renounceable rights issue, offset by share issue costs of $387,655. In addition, the Group received $2,000,000 from the increase of the Pala Loan facility and paid borrowing costs of $30,000. The contribution of the non-controlling interest’s portion of project costs was $1,237,733. On 17 July 2017, the Company completed the appointment of Mr Keith Pollocks as the new Chief Financial Officer, who also assumed responsibilities as Company Secretary on 11 September 2017. On 6 September 2017, Mr Richard Hedstrom resigned as Chief Executive Officer. In the interim period, Chairman, Mr John Gooding assumed executive duties whilst a search was undertaken for a new Chief Executive Officer. Mr Russell Clark was appointed as Chief Executive Officer on 16 October 2017. The appointment of Mr Clark completed the restructure of the management team, who has since produced the very positive 2018 DFS and is underway with project development and financing. The Company expects to close financing and commence construction in the first half of 2019. Directors’ Report