Independent and sustainable
www.pensana.co.uk
2022
ANNUAL
REPORT
for the financial year ended 30 June
Corporate highlights IFC
Operational highlights 1
FY2022 results 1
Pensana at a glance 2
Chairman’s review 4
Chief executive officer’s review 6
Board of directors 8
Five-year performance 11
Review of operations and strategic report 12
Geology and Mineral Resource 26
Principal risks and uncertainties 32
Corporate governance report 39
Environmental, social and governance report 45
Sustainable value chain 56
Remuneration report 58
Annual remuneration report 60
ANNUAL FINANCIAL STATEMENTS
Directors’ responsibility statement 74
Directors’ report 75
Audit and risk committee report 77
Independent auditor’s report 79
Consolidated statement of comprehensive
income 86
Consolidated statement of financial position 87
Consolidated statement of changes in equity 88
Consolidated statement of cash flows 90
Notes to the financial statements 91
Company statement of financial position 120
Company statement of cash flows 121
Company statement of changes in equity 122
Notes to the company financial statements 124
Abbreviations 127
Corporate directory 129
CONTENTS
• Financing well advanced, including support from
the United Kingdom (UK) government’s UK Export
Finance and the Automotive Transformation Fund
• Successful institutional equity placing of £10 million
with M&G, one of the UK’s largest and long-
standing fund managers
• Increasing engagement with UK and United States
(US) generalist institutional investors following
M&G’s 5% direct investment
• Approaches received from major European and US
electric vehicle and wind turbine original equipment
manufacturers (OEMs) to secure magnet metal
supply chain
• Appointment of highly experienced natural
resources financier, Mr Steven Sharpe, and post
period-end, appointment of industry leading expert
MsAlison Saxby as non-executive directors of the
company
Post-period-end:
• Groundbreaking at the Saltend rare earth processing
hub, with attendance by the then Secretary of
State for Business, Energy and Industrial Strategy,
Rt Hon Kwasi Kwarteng MP, where he also launched
the UK government’s Critical Minerals Strategy
• Partnering with Polestar on its Polestar 0 Project
with the goal of creating the first climate neutral car
by 2030
• Signing of a memorandum of understanding with
a large non-Chinese magnet manufacturer for
an offtake of 25% of Pensana’s rare earth oxide
production
• Received green bond certification from CICERO, the
leading independent provider of assessments on
green bond frameworks
• Successful equity placing of US$10.0 million with
Fundo Soberano de Angola, the Angolan Sovereign
Wealth Fund, specifically designated towards the
Longonjo Project’s early works programme which is
now underway
CORPORATE
HIGHLIGHTS
OPERATIONAL
HIGHLIGHTS
•
Front-end engineering design (FEED) studies and value
engineering for both Saltend and Longonjo completed
• Very encouraging results reported from the Coola
carbonatite and the recently identified Sulima West
• Progress on decarbonising operations with agreements
with Yorkshire Energy Park and Rede Nacional de
Transporte to explore renewable energy and engineering
successes including designing plant to displace diesel
powered equipment with low-carbon electricity powered
equipment
TOTAL COMPREHENSIVE
LOSS FOR THE PERIOD
US$10,190,145
(2021: US$6,915,185)
TOTAL LOSS AFTER
TAX FOR THE PERIOD
US$10,382,469
(2021: US$9,370,862)
PROJECT DEVELOPMENT
EXPENDITURE OF
US$20,846,747
(2021: US$6,705,801)
CASH AND CASH EQUIVALENTS
US$2,930,162
(2021: US$16,787,591)
FY2022
RESULTS
3D rendering of the planned Saltend rare earth processing hub
The directors of Pensana Plc (the company) submit
herewith the annual financial report of Pensana Plc
(consolidated entity) for the year ended 30 June 2022.
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PENSANA PLC
2022 ANNUAL REPORT
PENSANA
AT A GLANCE
Feedstock from Longonjo,
South America and Europe
Offtake initially from South East
Asia, UK and US and later
Europe
TOTAL RARE EARTH OXIDE
(TREO) PRODUCTION
TONNES PER YEAR
circa 12,500t
BY 2025
ONE OF THE
world’s largest
RARE EARTH DEPOSITS;
INITIAL 20-YEAR MINE LIFE
30Mt
OF PROVEN AND PROBABLE RESERVES
NEAR-SURFACE
mining
1.6mtpa
FLOTATION CONCENTRATOR
CALCINING AND PRECIPITATION
CIRCUITS WILL PRODUCE
±40,000tpa
OF HIGH-VALUE MIXED RARE EARTH
DOUBLE SULPHATE (MREDS) FOR
EXPORT TO SALTEND
CREATE
+/-1,000 jobs
DURING CONSTRUCTION AND
+/-650
DURING OPERATIONS
NEODYMIUM AND
PRASEODYMIUM (NDPR)
PRODUCTION TONNES
PER YEAR
4,500t to
5,000t
BY 2025
CREATE
>500 jobs
DURING CONSTRUCTION
PROVIDE HIGH-VALUE
FULL-TIME JOBS TO
125 employees
SALTEND RARE EARTH
PROCESSING HUB
is an
attractive alternative for mining
companies who may otherwise
be limited to selling their
products to China.
SALTEND RARE EARTH
PROCESSING HUB
LONGONJO OPERATIONS
benefit from being located close to major
existing infrastructure in the form of the Benguela railway, linking the project
to the Atlantic Port of Lobito, road and hydro power infrastructure.
Pensana is looking to
establish a world-class,
independent and sustainable
supply chain of rare earth
metals vital for electric
vehicle, wind turbine and
other strategic industries
NDPR DEMAND
GROWTH
Globally strategic
product with strong
market dynamics, with
total magnet rare earth
demand forecast to
grow by a compound
annual growth rate of
8.3% to circa 250,000t
by 2035, mainly driven
by growing demand for
electric vehicles and
offshore wind turbines
STRATEGIC
LOCATION
Located in a UK
maritime freeport,
the Saltend rare
earth processing hub
leverages off significant
existing infrastructure
MANAGEMENT
TEAMS
Experienced
construction
and operations
management teams
COLLABORATION
AND PARTNERSHIPS
with globally
recognised OEMs,
electric vehicle
and wind turbine
manufacturers
LONGONJO OPERATIONS
32
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Pensana is at the forefront of tackling these challenges.
Byestablishing an independent and sustainable supply chain to
the highest international standards, we will be able to provide
our customers with the assurances they need in terms of
supply chain resilience and transparency in terms of ESG.
An example of this was the recent announcement that Pensana
has been selected by Polestar to join its collaboration to
produce the world’s first climate-neutral car. The Polestar
0Project is aiming to develop a climate-neutral supply chain for
all its raw materials.
During the year, we received green bond accreditation from
CICERO, Norway’s foremost institute for climate research,
recognised as a leading provider of independent reviews of
green bond and sustainability financing frameworks. CICERO
rated the planned operations as light green with a governance
score of good.
We recently launched our blueprint for sustainable rare earths,
which outlines our aim to produce the lowest embedded
carbon products in the rare earth industry, as well as a deep
and meaningful carbon reduction with the company’s goal
of achieving net zero across the value chain by no later than
2040. The blueprint is an important document as it clearly sets
out our commitment to all stakeholders and importantly to our
customers that we put the highest ESG standards at the heart
of our operations. Sustainability is always going to be a work
in progress, however, the blueprint provides a clear pathway
to embedding ESG into every decision, at every stage, using
independent experts to monitor our progress.
At Saltend, we have signed a letter of intent securing private
wire connection to Yorkshire Energy Park for 4MW rising to
10MW of low-carbon electricity for 10 years. The 200MW
offshore wind-connected battery will provide low-carbon power
for the separation facility and will later power the conversion of
NdPr oxides into magnet metal.
We are partnering with Equinor on the Hyrdogen2Humber
Saltend Project studying the use of low-carbon hydrogen to
recycle the 7t of permanent magnets in each of the 260m-high
offshore wind turbines being installed at the 3.6GW Dogger
Bank wind farm.
At Longonjo, we have signed a 10-year contract for low-cost,
low-carbon hydroelectric power and the process team, led by
chief operations officer, Mr Rocky Smith, has developed an
innovative process route to recycle chemicals.
CHAIRMAN’S
REVIEW
In July, we were delighted to
welcome the then Secretary of State
at the Department of Business,
Energy and Industrial Strategy, the
RtHonKwasiKwarteng MP, to the
Saltend groundbreaking ceremony and
we were particularly honoured that he
chose to launch the UK’s Critical Minerals
Strategy at the event.
It was with great pleasure that we were
able to support the UK Department of
International Trade with the first-ever
Mining Trade Mission to Angola with
over 40 attendees including delegates
from the Department of International
Trade, foreign dignitaries including
the Ambassador of Norway and the
Ambassador of the UK, miners Rio Tinto
and Anglo American and representatives
of the Angolan Ministry of Mineral
Resources and Petroleum.
With all relevant approvals in place and
the delivery of the FEED studies for
both projects in record time, in August
we announced the appointment of
a highly experienced project delivery
team led by Mr Hamish Westwater
for Saltend and Mr Kevin Botha for
Longonjo who, together, are leading 134
specialist engineers in the execution and
commissioning of both projects signifying
the transition from the study phase to the
commencement of construction.
individually Mr Rob Kaplan, finance
director, Mr Rocky Smith, chief operating
officer and MrWilliamIzod, chief
commercial officer, for their important
contributions to the huge progress that
has been made over the past year.
I would like to welcome industry-leading
expert Ms Alison Saxby to the board.
MsSaxby was previously managing
director at Roskill and brings over 35
years of experience in industrial minerals
and metals to the board.
Finally, I would like to thank my
fellow directors for their very valuable
contributions during the year. A note of
thanks to Baroness Lindsay Northover
for her leadership in the development of
the ESG strategy, Mr Steve Sharpe for
his invaluable insights on financing and
Dr Jeremy Beeton for his guidance on
the challenges ahead as we move into
the construction phase.
We very much look forward to reporting
to you on the progress of your company
over the forthcoming 12 months.
Paul Atherley
Chairman
27 October 2022
It is with great pleasure that I am
able to report to shareholders on a
year of considerable progress for
the company in its development of
the world’s rst independent and
sustainable magnet metal rare
earth processing hub at Saltend
Chemicals Park in the UK.
The electrification of motive power is forecast to become
the biggest energy transition in history. Two of the biggest
components of this transition are the phasing out of internal
combustion engines in favour of electric vehicles and the rapid
growth of offshore wind, both of which are heavily dependent
on powerful rare earth permanent magnets.
Currently, China supplies over 90% of these magnets and has
made it clear that it is going to need all its production for its
US$11 trillion 2060 carbon-neutral plan and that it feels under
no obligation to supply the rest ofthe world.
An additional concern for European and US OEMs is that the
current supply from Chinamay not meet their environmental,
social and governance (ESG) standards. Global Witness
recently reported that over 16,000 Chinese miners have
crossed the border into neighbouring Myanmar and are
using highly toxic methods to extract rare earths, devastating
ecosystems, endangering livelihoods and restricting access to
safe drinking water.
We are seeing increased levels of interest
from automotive and offshore wind
OEMs and are in advanced discussions
with a number of parties seeking offtake
arrangements.
We are also in early discussions with new
and existing major magnet manufacturers
about becoming part of a realignment of
international magnet metal supply chains
and have recently signed a memorandum
of understanding with a large non-
Chinese magnet manufacturer for an
offtake of 25% of Pensana’s rare earth
oxide production post year-end.
At the time of writing, we are in the final
stages of financing and, despite the
current turbulence in the world’s financial
markets, we are receiving strong interest
and aiming to complete the main financing
by the end of Q4 calendar year 2022.
I would like to take this opportunity to
thank our major shareholders and, in
particular, President Carlos Lopez and
the board of Fundo Soberano de Angola
for their ongoing support which is very
much appreciated.
Despite the challenges presented
by COVID-19, it has been a year of
considerable achievement and I would
like to take this opportunity to thank the
executive team led by chief executive
officer (CEO), Mr Tim George, and
Mr Paul Atherley (Pensana chairman) and Rt Hon Kwasi Kwarteng MP (then Secretary of State at the
Department of Business, Energy and Industrial Strategy) at the Saltend groundbreaking ceremony
5
PENSANA PLC
2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT4
footprint electrically powered, socially engaged and
low-impact waste-responsible operations focused on
reagent recycling on both sides of the Atlantic Ocean;
•
optimisation of the construction works programme
execution alongside a selected long lead equipment
procurement focus that allows Pensana to meet the
inflection point of the NdPrO supply/demand cycle
anticipated in the next two years and in time for the demand
uplift remaining for the next decade;
•
growing recognition of Pensana’s emergence as evidenced
by engagement with significant industry players towards
securing product entry points into a rapidly evolving market
driven by provenance as well as price; and
•
completion of value engineering and optimisation which
assisted in mitigating the financial impact of supply chain
challenges and inflation.
Pensana has taken its project status from exploration to
development stage within a five-year period. The addition
of the Reedmere site as the separation facility at Saltend
to complement the Longonjo resource and operations has
positioned the company for accelerated growth in:
•
spare capacity (as a consequence of scalability and flexibility
of feedstock sourcing) to process additional light rare earth
oxides at Saltend;
•
expansion to heavy rare earth oxides (HREOs) being at
scoping study stage within the footprint at Reedmere;
•
future magnet metal/alloy production;
•
recycling as a natural progression of activities and part of the
growing circular economy ambitions;
•
participation in livelihood restoration/enhancement
opportunities at Longonjo and net zero ambitions at Humber
alongside the local non-governmental organisations (NGOs);
and
•
expanding full shape and form towards creating Pensana’s
independent rare earth supply chain into the user market
and providing a future destination for separation opportunity.
This has been achieved against of background of uncertain
global dynamics and is evidence of the tenacity of the project
team and the individuals concerned. Myparticular appreciation
goes to the following:
•
Ongoing belief in the project by Mirempet and their support
in providing the legislative, regulatory and investment-friendly
environment towards diversification of the Angolan Mineral
Resource base alongside the Fundo Soberano de Angola
professional team responsible for motivating ongoing
CHIEF
EXECUTIVE
OFFICER’S
REVIEW
This past year has demonstrated
the cross-disciplinary experience
and collective resilience of the
Pensana team and its associates.
An aspirational concept has been
transformed into a multi-faceted
development project now ready
for construction at both sites,
at a pace rarely seen elsewhere
intheindustry.
Maintaining persistent and routine dynamic feedback loops
throughout the year between the key technical, finance, ESG
and legal work streams has resulted in:
•
fully permitted, operationally robust and fit-for-purpose
technical solutions for both the Angolan and UK operations,
with the value engineering exercise undertaken in 2022
maintaining the overall project feasibility within tight capital
constraints despite logistics, emerging inflationary pressure
and other post-COVID-19-related factors;
•
a manageable, financeable project with healthy and timeous
returns on investment against a background of (more) stable
NdPr pricing and a de-risked chemical process;
•
sustainable cost competitiveness of operational costs versus
the existing dominant Asian production;
•
ESG credentials built into the DNA of the design process
now being translated into the effective roll-out of low-carbon
investment decisions. Where else
in Africa do you have such internal
investment support from a sovereign
wealth fund?
•
Healthy support from the East Riding
Council recognising the importance
of establishing a processing hub at
Saltend with expansion potential
in absorbing the change from the
Abadan to the Reedmere site within
the Saltend Chemicals Park;
•
Support from Ambassador
RogerStringer and the Angola/UK
Department of International Trade
team, led by Mr Eden Clayton in
Luanda, and their ongoing efforts to
improve the growing UK/Angola trade
and investment dynamics/volumes;
•
Wood Group in the Perth,
Johannesburg, Reading and other
offices for persevering in dealing
with the ambitions of a nimble-
minded management team in the
production of the final design, which
is now agreed upon and frozen for
construction to proceed;
•
Various on-site technical teams
including SRK, Snowden Optiro,
MrMark Sonter, Earth Environmental
and Geotechnical, Professional
Cost Consultants and various
vendors participating in the piloting
and design review process who
have pragmatically supported the
project concepts and translated their
experience from art into the possible;
Code for Reporting of Mineral Resources
and Ore Reserves) Longonjo Ore
Reserve was reported, is an example
of the results of the combined team’s
efforts to present an overall project
opportunity to the market at a time when
there is the opportunity of becoming
a leading company in realising the
drive towards energy transition and
diversification of energy dependency.
Against the recent completion of
peaceful Angolan elections, the ongoing
surrounding infrastructure activities
supporting the choice of Saltend as
the preferred location as a separation
and development hub for the future
completion of key technical, ESG and
legal workstreams and initiation of
strategic partnerships, we have now
placed ourselves in a strong position to
be able to finance both projects and the
team will be focusing all their attention
on completing this key workstream in a
challenging economic environment.
I look forward to being able to report
on the completion of financing and
construction progress in the near future.
Tim George
Chief executive officer
27 October 2022
•
A special thanks to the Nagrom
laboratory team in Perth, under
MrRoyGordon, and in virtual
isolation, who have successfully
piloted the entire Pensana process
design through various permutations
over the past year despite the
COVID-19 lockdown. This has
been particularly important in the
conclusion of the process required to
produce a deleterious-free mixed rare
earth concentrate from the Longonjo
refinery to meet Saltend’s stringent
feedstock requirements;
•
Without the co-operation in the
design process of the likes of
HCVAfrica, Ivy House, Grupo
Simples, Development Workshop
and Holistocos on the environmental
and social front, we would have
fallen short of our overall ambition to
integrate the ESG requirements into
the project delivery process; and
•
In preparation for the main
construction programmes in
2023, logistics and procurement
optimisation support from Deugro has
served to defray some of the market
uncertainties emerging over the past
12 months alongside the work done
by the team in ensuring operational
readiness preparation has been given
proper and timeous attention.
The recent Reserve Statement, where a
30Mt JORC-compliant (2012 Australian
3D renderings of Saltend SX refinery and Longonjo concentrator and MREDS refinery
7
PENSANA PLC
2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT6
Mr Kaplan is a chartered accountant with over 20 years’ operating experience in the African
mining sector. His addition to the Pensana team brings a broad skill set in both UK and
sub-Saharan corporate finance together with experience in mining operations in Angola,
SouthAfrica Tanzania.
Mr Kaplan joined Pensana from London Stock Exchange (LSE)-listed Petra Diamonds
Limited where, in his role as finance manager corporate and head of treasury, he was
involved in a number of mine financings including two US dollar bond issues totalling
US$1billion, a number of African lender facilities totalling over US$750 million and, most
recently, an equity rights issue of US$178million on the LSE. Prior to this, he was financial
director
of Xceldiam, an Angola-focused AIM-listed diamond exploration company.
Other current directorships of listed companies:
•
None
Former directorships of listed companies in the past three years:
•
None
Mr Sharpe is a highly experienced natural resources financier and has been involved with
financing of some US$6 billion over his 37-year career. He is an executive board member of
EIT Raw Materials. He was formerly the chair of AME Group, president and CEO of Euromax
Resources Limited, senior vice president of European Goldfields Limited, managing director
at Canaccord Genuity, managing director at Endeavour Financial, assistant general manager
at Standard Bank London Limited and assistant director of N M Rothschild & Sons Limited.
Other current directorships of listed companies:
•
None
Former directorships of listed companies in the past three years:
•
None
DIRECTORS AND DIRECTORS’ DETAILS
ROBERT
KAPLAN
Executive director/finance
director
Appointed: 31 March 2022
STEVEN
LAWRENCE
SHARPE
Non-executive director
Appointed: 29 September 2021
Dr Beeton has extensive international experience in project management over complex
multi-site, multiple project operations’ portfolios for national and regional government,
as well as public and private companies.
He was director-general of the London 2012 Olympic and Paralympic Games from 2007
until 2012, and chairman of WYG Plc and Merseylink Limited. Dr Beeton was also a principal
vice president with Bechtel, an advisory board member of PricewaterhouseCoopers until
October 2018, and an independent non-executive director of SSE Plc until July 2018. He
served as an independent non-executive director of John Laing Group Plc for six years and
was a member of the governing Court of Strathclyde University for nine years.
With a BSc CEng from the University of Strathclyde, Dr Beeton is a Fellow of the Institution
of Civil Engineers FICE, and received UK honours including the Order of the Bath CB and an
Honorary Doctorate in Engineering from Napier University.
Other current directorships of listed companies:
•
None
Former directorships of listed companies in the past three years:
•
OPG Power Ventures Plc (2016 to 2020)
•
WYG Plc (2017 to 2019)
•
John Laing Plc (2015 to 2021)
DR JEREMY
JOHN
BEETON
Non-executive director
Appointed: 2 March 2021
BOARD OF
DIRECTORS
Mr George is a minerals engineer with over 30 years of experience in the mining and
engineering sectors, with broad experience in mining project development throughout
sub-Saharan Africa.
He holds an Honours Degree in Minerals Engineering from Leeds University and spent over a
decade in production management at several Anglo American operations in Africa along with
plant design and feasibility studies in various base and precious metal projects.
His history in Angola started in 1998 in the construction and engineering sector, migrating
to chairman and CEO of Xceldiam, an Angola-focused AIM-listed diamond exploration
company and subsequently, as non-executive director of a Scandinavian dual-listed
resources entity with assets in sub-Saharan Africa including Angola.
Other current directorships of listed companies:
•
None
Former directorships of listed companies in the past three years:
•
None
TIM
GEORGE
Executive director/
chief executive officer
Appointed: 22 April 2019
Mr Atherley is the founding director of Pensana Plc. He has pioneered the establishment
of an independent and sustainable rare earth processing hub in the UK and value-added
mineral processing in Angola. He is a highly experienced senior resources executive with
wide-ranging international and capital markets experience. He graduated as a mining
engineer from Imperial College London and has held a number of mine management, senior
executive and board positions during his career.
He served as executive director of the investment banking arm of HSBC Australia where he
undertook a range of advisory roles in the resources sector. He has completed a number of
acquisitions and financings of resource projects in Europe, China, Australia and Asia.
Mr Atherley is a strong supporter of Women in science, technology, engineering and
mathematics (STEM) and has established a scholarship which provides funding for young
women to further their education in science and engineering.
Other current directorships of listed companies:
•
Alkemy Capital Investments Plc (January 2021 to present)
•
Co-founder of the Arch Sustainable Resources Fund
Former directorships of listed companies in the past three years:
•
Berkeley Energia Limited (Australian Securities Exchange (ASX)/Alternative Investment
Market (AIM))
•
Leyshon Resources Limited (May 2004 to May 2019)
PAUL
ATHERLEY
Executive chairman
Appointed: 13 May 2018
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2022 ANNUAL REPORT
BOARD OF DIRECTORS
continued
Baroness Northover is a Member of the House of Lords and is a Member of the House
of Lords Select Committee on the Environment and Climate Change. She was the Prime
Minister’s trade envoy to Angola (2016 to 2020) and Zambia (2017 to 2020) and a Minister
in the Department for International Development from 2011 to 2015, including serving as
Parliamentary Under Secretary and Africa Minister from 2014 to 2015. She is a member of
the board of AgDevCo Holdings and a Member of Council of the Royal African Society.
She has been at the core of the recent successful development of the UK/Angola bilateral
relationship which has seen significant progress in recent years. She is an Honorary
Associate Professor at the Institute of Global Health Innovation, Imperial College, London;
a trustee on the British International Investment’s MedAccess Trust board (formerly
CDC), a former Member of the Advisory Council, Wilton Park; and a former trustee of the
MalariaConsortium and UNICEF UK.
Other current directorships of listed companies:
•
None
Former directorships of listed companies in the past three years:
•
None
Ms Saxby is an industry-leading expert with over 35 years of experience in industrial
minerals and metals. Her expertise includes pricing, deep market knowledge, research, and
communications, gained through consultancy projects, minerals trading and commercial
reports. She was previously a managing director at metals consultancy Roskill, where she led
the strategic direction of the company’s research and products through a period of growth,
with a focus on critical minerals. Prior to that she held roles at Fastmarkets as an independent
consultant. Ms Saxby was recently a member of the UK government’s Critical Materials Global
Expert Mission to both Canada and the United States of America for Innovate UK-KTN, and is
working with Edumine to provide educational courses on critical materials. She is the author
of numerous publications on critical and other minerals and originally trained as a mineral
engineer.
Other current directorships of listed companies:
•
None
Former directorships of listed companies in the past three years:
•
Roskill
RT HON BARONESS
LINDSAY PATRICIA
NORTHOVER
Non-executive director
Appointed: 2 November 2020
ALISON SAXBY
Non-executive director
Appointed: 17 August 2022
The table below sets out summary information about the consolidated entity’s earnings and movements in shareholder equity for the
five years to 30 June 2022.
Pensana Plc Pensana Metals Limited
Description
30 June
2022
US$
30 June
2021
US$
30 June
2020
US$
30 June
2019
US$
30 June
2018
US$
30 June
2017
US$
Statement of
comprehensive income
Finance and other income 3,268 327,705 1,773 2,349
28
342Net loss before tax (4,076,220) (4,172,383) (1,414,399) (6,928,372)
(11,712,022)
(9,583,772)Net loss after tax (4,076,220) (4,172,383) (1,414,399) (6,928,372)
(10,382,469)
(9,370,862)Weighted average number of
ordinary shares
1
(number) 155,723,451 152,573,315 152,573,315 152,573,315
229,019,699
199,554,645Basic (loss) per share
(US$ cents per share) (2.62) (2.73) (0.93) (4.53)
(4.53)
(4.70)Diluted (loss) per share
(US$ cents per share) (2.62) (2.73) (0.93) (4.53)
(4.53)
(4.70)Statement of financial
position
Property, plant and equipment – – – –
37,770,292
18,507,768Exploration and evaluation
expenditure 9,642,118 6,445,573 4,194,912 6,648,150
181,206
132,040Net current assets 5,219,069 5,426,125 3,809,052 1,256,069
1,683,787
17,528,826Total equity attributable to
equity shareholders 14,861,184 11,871,698 8,003,964 7,904,219
39,635,285
36,168,634Share price history
Share price at the start of the
year (US$ cents) 16.2 12.7 21.2 20.6
150.5
18.6Share price at the end of the
year (US$ cents) 18.6 16.2 12.7 21.2
72.0
150.5Market capitalisation
(US$ million) 31.9 23.5 10.1 15.6
169.0
325.71
and do not reflect the actual shares in issue by Pensana Metals Limited in the prior periods.
FIVE-YEAR
PERFORMANCE
1110
PENSANA PLC
2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT
REVIEW OF OPERATIONS
AND STRATEGIC REPORT
The board is pleased to present its
review of Pensana Plc, the rare earth
exploration and development group,
whose flagship assets are the
Saltend rare earth processing hub
in the UK and the Longonjo NdPr
Project in Angola.
Pensana plans to establish Saltend as an independent,
sustainable supplier of key magnet metal oxides to a market
which is currently dominated by China, with initial feedstock to
be shipped as clean, high-purity MREDS from the company’s
Longonjo low-impact mine in Angola.
PRINCIPAL ACTIVITIES
The year saw significant progress with a series of technical
programmes successfully completed including process
piloting covering the entire process in terms of final equipment
selection and the conclusion of geotechnical drilling and
trenching at both the Saltend and Longonjo sites ahead of main
construction activities. The year also saw significant project
progress with FEED and value engineering for both Saltend
andLongonjo being completed.
Post year-end, during July 2022, Pensana broke ground
at Saltend, with attendance from the then Secretary
of State for Business, Energy and Industrial Strategy,
RtHonKwasiKwartengMP. During September 2022, Pensana
issued its first Mineral Reserve estimate, in line with JORC
requirements, confirmed by work done by SnowdenOptiro.
Post year-end, during September 2022, final planning approval
of the company’s expanded site at Saltend was obtained. The
expanded site is large enough to cater for future downstream
expansion opportunities, e.g. heavy rare earth separation and
metal conversion.
The company also completed the environment and social
impact assessment (ESIA) process for Longonjo, and, as part
of the environmental permitting requirements at Saltend, the
company has undertaken a number of risk and environmental
assessments, illustrating that the facility will not adversely
With project activity increasing over the year, the group
experienced a 112% increase in net cash outflows from
operating and investing activities of US$28,794,950
(US$13,578,321). Net cash outflows from operating activities
of US$7,948,231 increased from
US$6,872,862 due to
an increase in operating losses. Investing cash flows of
US$20,846,719 (2021: US$6,705,459) primarily related to
expenditure on the Longonjo Project (US$14,614,045) and
workperformed at Saltend (US$6,158,982).
Proceeds from the issuance of equity before share issue costs
for an amount of US$17,449,674 (US$27,876,399) was the
source of financing to facilitate the site development and
exploration spend over the period.
The directors have prepared a cash flow forecast for the period
ended 31 March 2024. The forecast indicates that while the
group has sufficient funding to meet its corporate and general
operating costs, the group will require additional funding
over the next 12 months to meet its committed and planned
development expenditure and operating costs related to the
Saltend, Longonjo and Coola Projects.
The group is currently in the process of raising financing for
both the Saltend and Longonjo Projects which may include
issuing a green bond which, together with further issues of
equity and debt financing, is expected to raise sufficient funding
for the ongoing development of the Saltend and Longonjo
Projects and further exploration at Coola.
The ability of the company and group to continue as a going
concern is dependent on securing such additional funding
given the forecast expenditure above. The company is well
advanced in its main financing workstreams and despite
the current turbulence in the world’s financial markets, the
company is receiving strong interest and is aiming to complete
the main financing by the end of Q4 calendar year 2022.
Conditions with regards to financing and cash flow mentioned
above indicate a material uncertainty which may cast significant
doubt as to the company’s and group’s ability to continue as
a going concern and therefore they may be unable to realise
their assets and discharge their liabilities in the normal course
ofbusiness.
Refer to note 3 to the financial statements for more detail on
the going concern statement.
KEY PERFORMANCE INDICATORS
Given that the group is in the development stage for the Saltend
and Longonjo Projects, and mineral exploration stage at the
Coola Project, and has no turnover, the board considers usual
financial key performance indicators (KPIs) as inappropriate
in the measurement of value creation of the group. The board
considers the carrying value of the development assets and the
cash balance to be the most applicable KPIs at this stage of the
group’s development, further details of which have been given
above. In addition to this, the directors consider that the
detailed
information in the operational review is the best guide to the
group’s progress and performance during the year.
Further details are provided in the chairman’s review and CEO’s
review and in the technical development programme update as
highlighted on
page
17
.BREXIT
During the
year
, the board regularly considered the potential
impact of the UK leaving the European Union and its potential
impact on the company and the industry. At this point, the board
is comfortable that its positioning and the product it is looking to
bring to market have not been negatively impacted by Brexit.
WAR IN UKRAINE
During the year, the board regularly considered the impact of
the war in Ukraine and its potential impact on the company
and the industry. The board is continuously monitoring supply
chains, labour availability and future energy supply and is
strategically positioning the group to mitigate any potential
negative impact of the war in Ukraine.
PENSANA’S STRATEGY
Pensana plans to establish its Saltend refinery as an
independent, sustainable supplier of key magnet metal oxides
to a growing market which is currently dominated by China. The
Saltend facility is being designed to produce circa 12,500t per
annum of rare earth oxides, of which 4,500t to 5,000t will be
NdPr, representing around 5% of the world market in 2025.
The Saltend facility is located within the world-class Saltend
Chemicals Park, a cluster of leading chemicals and renewable
energy businesses at the heart of the UK’s energy estuary and
is host to a range of companies including BP Petrochemicals
technology, INEOS, Air Products, Triton Power, Nippon Gohsei
impact the environment. Refer to the environmental, social and
governance report on
page 45
for more details.OPERATING AND FINANCIAL REVIEW
During the year ended 30 June 2022, the consolidated entity
incurred an increased year-on-year comprehensive loss of
US$10,190,145 (2021: US$6,915,185), comprising:
•
Administration and corporate expenses increased by 67%
to US$8,787,109 (2021: US$5,248,154) mainly due to
the increased employee costs associated with the group’s
increased operational activity;
•
Net foreign currency exchange loss of US$2,063,147
(2021:US$619,972 gain), comprising:
– Loss on foreign exchange movements recorded
in the income statement of US$2,255,471 (2021:
US$1,835,705) on monetary balances and inter-company
funding which are considered repayable in theforeseeable
future; and
– Gain on exchange movements on retranslation of
non-US dollar functional currency entities into the
group’s USdollar presentational currency and currency
movements on inter-company balances considered
permanent as equity and recorded in the statement of
changes in equity of US$192,324 (2021:US$2,455,677).
Group net assets increased in the year by 10% to
US$39,635,285 from US$36,168,634. This was primarily
driven by additions to Longonjo’s development asset of
US$12,825,233 (2021: re-classification of $18,400,076).
This was partially offset by a decrease in cash and cash
equivalents.
Of the other debtors as at 30 June 2022, US$630,097 (2021:
US$4,888,745) relates to payment pending as part of the
equity raise completed on 25 June 2021. During the year,
US$3,589,178 was received from debtors relating to this equity
raise. Management has reassessed the carrying value of long-
outstanding debtors as at 30 June 2022 and has provided for
an expected credit loss of US$669,470 against this receivable.
The group’s movement in share capital for the year comprised
the share capital issued by the company on equity placings.
Year-on-year, the cash and cash equivalents balance decreased
by 83% to US$2,930,162 (2021: US$16,787,591) at year-end
on the back of increased capital expenditure at both Longonjo
(US$14,614,045) and Saltend (US$6,158,982).
GROUP NET ASSETS
INCREASED IN THE YEAR BY
10%
TO
US$39,635,285
FROM US$36,168,634
THE SALTEND FACILITY IS
DESIGNED TO PRODUCE
circa 12,500
t
PER ANNUM
OF RARE EARTH OXIDE
4,500
t
TO
5,000
t
OF NDPR, BEING 5% OF THE
WORLD MARKET
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2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT
Saltend, Humber Port
REVIEW OF OPERATIONS AND STRATEGIC REPORT
continued
FACILITATING A GREEN ENERGY REVOLUTION
From wind turbines to electric vehicles, bikes and trains to trucks, drones, industrial tools, automation, robotics and air conditioners,
the electric motor is the driving force behind a cleaner energy future. As most industries prepare to make the shift tozero-emission
solutions, demand for super-strong permanent magnets essential in these motors and generators is increasing.
LONGONJO MINE
Longonjo is differentiated from other rare earth developments by the combination of low-cost mining of the ‘free dig’ high-grade
surface-weathered zone mineralisation of the deposit, the favourable location of the project adjacent to modern infrastructure
andthecompany’s strategy to process on site and ship a low-volume, high-grade MREDS, thus reducing logistics costs.
Electric motors and wind turbines will be at the core of our
clean energy future. NdPr are the irreplaceable raw materials
used to manufacture the permanent magnet components of
these technologies. Experts predict a supply shortfall will hit
the market around 2023 and if additional independent primary
magnet metal sources are not brought into production, the
monopoly over NdPr will persist, with over 90% of the world’s
production of NdPr being currently controlled by China
and Tricoya. Pensana’s plug-and-play facility will create over
500 jobs during construction and over 100 direct jobs once in
production. It will further be the first major rare earth separation
facility to be established in over a decade and will become one of
only three major producers located outsideChina.
Initial feedstock will be shipped as clean, high-purity MREDS
from the company’s Longonjo low environmental-impact mine
in Angola. The open-cast mine, state-of-the-art concentrator
and proprietary MREDS processing plant are being designed by
Wood Group to the highest international standards and will be
powered by minimal carbon hydroelectric power and connected
to the Port of Lobito by the recently upgraded Benguela railway
line.
Pensana is of the view that provenance of critical rare earth
materials supply, life cycle analysis and greenhouse gas (GHG)
scope 1, 2 and 3 emissions will all become significant factors in
supply chains for major customers. The company intends to offer
customers an independently and sustainably sourced supply of
rare earth metal oxides and carbonates of increasing importance
to a range of applications central to the energy transition,
industrial, medical, military and communications sectors.
SUSTAINABILITY
Pensana continues to progress on its ambition to provide
an independent and sustainable source of rare earths. The
business has successfully gained third-party recognition
confirming the alignment of its Saltend Project with the CICERO
shades of green rating for sustainable finance. The innovative
methodology used by CICERO is aligned to the International
Capital Market Association’s (ICMA) Green Bond Principles and
issuance of an opinion provides robust independent verification
that Pensana’s Saltend Project is aligned to best practice in
the climate financing sector. Additionally, this year the business
has voluntarily provided its first Task Force on Climate-related
Financial Disclosures (TCFD) one year ahead of the requirement
to do so. The TCFD disclosures include a summary of the steps
taken by the business to mitigate risks and adapt the business
model to be more resilient to the threats from climate change.
Post year-end, Pensana successfully achieved planning
consent for the larger Reedmere site at Saltend and as part
of this undertook a number of environmental and social
assessments. Assessments undertaken, among others,
included pollution assessments, airemissions modelling,
biodiversity surveys and cultural heritage assessments.
Pensana voluntarily committed to engage in a programme
of planting trees to bolster the established habitat on the
Saltendsite.
Port of Lobito Benguela railwayMREDS refinery Concentrator Mine
Longonjo is located adjacent to the Chinese-built US$1.8 billion Benguela rail line linking the project with the
Atlantic Port of Lobito. The recently installed hydropower-supplied transmission line is only 40km from the project
INFRASTRUCTURE ADVANTAGES
The company has a globally significant NdPr Project at Longonjo in terms of its size and grade, and an enviable location compared
to many NdPr development projects. Longonjo is located close to modern road and rail links to a new Atlantic port development and
recently commissioned hydropower scheme in an infrastructure-rich part of Angola.
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2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT
REVIEW OF OPERATIONS AND STRATEGIC REPORT
continued
TECHNICAL DEVELOPMENT AND
METALLURGICAL TESTWORK PROGRAMMES
Several metallurgical pilot testwork programmes continued
during the year, confirming the final design criteria for the
concentrator, MREDS plant and the Saltend refinery. The
on-site concentrator plant scenario is modelled around an
open pit free-dig orebody with an additional refinery to be built
alongside producing a high-grade NdPr-rich MREDS. This two-
stage process will see a clean, high-purity product exported
through the Port of Lobito for further processing at our planned
Saltend rare earth separation refinery, adding further value
in-country and allowing access to a wider market for the
separated rare earth products.
100t of large-diameter drill core was collected in 2021 from
Longonjo and processed in a continuous flotation pilot plant
during the year to produce a high-grade mineral concentrate
for further testing. This concentrate, in addition to concentrate
produced from trench material extracted in 2020, formed the
feedstock for MREDS plant piloting and downstream Saltend
testwork currently in progress.
All process flow sheets are now frozen per the overviews in
figures 1, 2 and 3.
Port of Lobito infrastructure directly
connectstotheBenguela rail line
The Longonjo Project lies just 4km from the sealed national
highway and rail line that run from the Atlantic Port of Lobito
under 300kmto the west and to the provincial capital of
Huambo 60km to the east. The national grid power transmission
line from the massive 2GW Laúca hydropower scheme in the
north of Angola has been operational for the past year and
currently extends to Caala, 45km to the east of the project.
The refurbished national highway EN260 connects Angola’s
second-largest city of Huambo through the municipality of
Longonjo to the Atlantic Port of Lobito.
The Benguela railway was reconstructed between 2006 and
2014 by the China Railway Construction Corporation at a cost
of US$1.83 billion employing 100,000 Angolans. The railway
extends from the border of the Democratic Republic of the
Congo and services the ports of Benguela and Lobito on the
Atlantic coast of Angola. In 1975, some 3.3Mt of freight was
recorded on the line which is now seeing activity again for the
first time in 44 years. The railway is Cape gauge, 1,067mm
(3ft6in), which is used by most mainline railways in southern
Africa. The maximum design speed is 90km per hour. The
design capacity is 20Mt of cargo and 4 million passengers
peryear.
The Angolan government invested approximately US$2 billion
for the refurbishment and upgrade of the Port of Lobito and
associated infrastructure. The new rail system links directly into
the dry port, container and ore terminals at the Port of Lobito.
The container terminal is 414m long, the ore terminal has a
310m jetty and the dry dock has an area of 90,000m
2
.
The new Laúca hydropower plant is in the north of the country
in the middle part of the Kwanza River. The project consists of
a main powerhouse with six units and an eco-powerhouse with
one unit. Total capacity of HPP Laúca will be 2,070MW with a
head of about 200m. It supplies renewable energy to meet the
rapidly growing demand of the capital, Luanda, and feeds into
the national grid to the south, to the city of Huambo and to within
45km of Pensana’s Longonjo Project. The Longonjo Project will
shortly be tapping into this grid, post a final investment decision.
With the exception of the variability testwork, all concentrator
testwork was completed at the ALS Perth facility in continuation
of piloting activities completed last year. The variability testwork
programme was completed at Auralia Metallurgy in Perth
in order to expedite the programme concurrently with other
activities. The main areas of investigation are outlined below:
•
Completion of a concentrator variability programme to
understand and define feed blend requirements;
•
Flotation testing of site water and impacts of any seasonal
changes on the process; and
•
Optimisation of process water recycled and the impact of
the build-up of flotation reagents and inorganic and organic
dewatering reagents.
Longonjo is favourably located close to existing infrastructure that includes a sealed national
highway and rail linking the project to the deepwater sea port at Lobito under 300km to the
west and the provincial capital of Huambo 60km to the east
Figure 1: Longonjo concentrator process flow diagram
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PENSANA PLC
2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT
REVIEW OF OPERATIONS AND STRATEGIC REPORT
continued
Figure 2: Longonjo MREDS refinery process flow diagram
Figure 3: Saltend SX refinery process flow diagram
Pilot plant leach extraction circuit in operation
Carbonate product precipitation circuit setup
Impurity removal circuit during operation
Acid-mixed material once the acid mixing parameters
were optimised
Impurity removal circuit during operation
The testwork for the MREDS plant design was undertaken by
Nagrom at their facility in Perth, with vendors brought in as
required. The following MREDS testwork was completed during
the reporting period, with several items continuing:
•
Continuous piloting of the acid mixing and baking circuits
to produce representative feed for downstream processing,
including exposure of corrosion coupons to process conditions
to assist in the selection of appropriate materials of
construction;
•
Optimisation of the leach extraction process to reduce costs
while still producing quality MREDS product;
•
Piloting of the leach extraction and impurity removal
processes, the latter of which is continuing, and will culminate
in the piloting of the MREDS precipitation circuit; and
•
Vendors of key equipment were invited to view their respective
areas of the process, taking samples where required for
equipment sizing.
Lastly, confirmatory testwork was undertaken on Saltend
refinery processes to provide samples for vendor testwork and
equipment sizing, including:
•
front-end caustification, oxidation and redissolution of
theLongonjo MREDS;
•
solvent extraction (SX) isotherm development;
•
impurity removal by ion exchange; and
•
final product precipitation for equipment sizing.
The images show examples of testwork stages that were
undertaken.
The images show examples of testwork stages that were undertaken.
19
PENSANA PLC
2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT18
REVIEW OF OPERATIONS AND STRATEGIC REPORT
continued
Longonjo rail station
Loading samples into a container for
transportation to the Port of Lobito
ENVIRONMENTAL AND SOCIAL IMPACT –
LONGONJO
During the reporting year, the revised ESIA was completed
for the revised life of mine. This report was completed
independently by HCV Africa and Grupo Simples. The
business has now moved into the implementation phase and
is implementing the mitigations recommended by the report.
The report included studies on biodiversity, soils, hydrology,
hydrogeology, air quality, noise levels, visual effects and socio-
economic aspects.
In parallel, the business has completed a comprehensive
planning assessment for the resettlement action plan. This
process has involved mapping out current land ownership and
usage to ensure all those affected by the project can be suitably
compensated. To ensure human rights were protected through
this process, Development Workshop, a Huambo-based NGO
specialising in Angolan land rights, led the process of identifying
land ownership. The business is currently developing a
compensation and eligibility matrix which will provide structure
to ensure all project-affected persons receive fair and equitable
compensation.
Additionally, the business is developing a livelihoods restoration
plan. Through close collaboration between Pensana’s
local subsidiary, Ozango, Development Workshop and the
Municipality of Longonjo, various land options have been
studied for the livelihoods restoration plan to resettle the
subsistence farming lands affected by the mine footprint
within the mining licence area and to ensure food security for
the people affected by the reduction of land and agricultural
production. To ensure a more prosperous future for local
populations, this project includes a component of sustainable
agricultural development, including the development of
demonstration plots to review effective agricultural practices for
the area. Furthermore, partnerships have been developed with
local universities and businesses including fertiliser producers
and retailers to review the most effective package to support
livelihoods restoration.
A systematic radiation monitoring programme on naturally
occurring radioactive material continues to provide baseline
data ahead of future development activities and has been
implemented in accordance with independent oversight
from Mr Mark Sonter of internationally respected Radiation
Advice&Solutions.
OPERATIONAL READINESS
Recruitment for key positions in human resources, logistics,
environment and safety commenced in 2022. Recruitment
will continue into 2023 to support the early works programme
and the start of construction. Angolan nationals have been
prioritised for these positions. Engagement with local
communities closest to the Longonjo Mine area has started to
identify potential candidates for Paterson A-band and B-band
positions.
Consultations continued with the relevant authorities in respect
of preparation for the mine construction and operations
activities including:
•
Port of Lobito – in respect of the arrangements for the
import of project containers and equipment during the
construction period. Engagements also included discussions
on the operational requirements for the importation of the
reagents for the operational phase with particular focus on
the bulk reagent imports;
•
Caminho de Ferro de Benguela – in respect of the
arrangements for both the movement of goods for the
project and operational phase as well as the proposed new
rail spur to the mine;
•
Rede Nacional de Transporte/Empresa Nacional de
Electricidade de Angola – in respect of the bulk power
requirements and connection to the hydroelectric power
supply from the Huambo area; and
•
Administração Geral Tributária – in respect of tax
requirements for the project.
Additional operational readiness activities for the period
included:
•
Review and update of the operational manpower plan based
on the information from the developing engineering and
study work;
•
Review and update of construction and operational vehicle
requirements based on the information from the developing
engineering and study work;
Overview of the Longonjo Mine development highlighting the
concentrator in the foreground and the MREDS plant in the rear
Longonjo licence granted to cover areas needed for mining
infrastructure and the prospective carbonatite geology
2120
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2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT
REVIEW OF OPERATIONS AND STRATEGIC REPORT
continued
CORPORATE ACTIVITIES
Equity placings
July
2020
August
2020
August
2020
September
2020
January
2021
June
and July
2021
January
2022
Post
period-end
On 1 July 2020, the
company issued 16,508,633
fully paid ordinary shares
to the Angolan Sovereign
Wealth Fund. This was the
balance of the shares to
be allotted out of a total
of 25,808,633 fully paid
ordinary shares that formed
part of their second equity
placing in the company of
US$5 million as announced
on 11 June 2020.
On 11 August 2020, the
company announced the
conversion of 500,000 zero-
cost performance rights into
fully paid ordinary shares on
listing on the LSE.
On 11 August 2020,
the company issued
821,157fully paid ordinary
shares to third-party service
providers at a price of
AUD0.33 per share, for
atotal of US$0.2 million.
On 25 September 2020, the
group raised an additional
US$8.6 million (net of share
issuance costs) via the
placing of 13,500,000 fully
paid ordinary shares with the
Angolan Sovereign Wealth
Fund.
On 4 January 2021,
the company issued
550,000fully paid
ordinary shares (of which
250,000were related
to share options, and
300,000to third-party
service providers) at a price
of £0.50 per share, for a
total of US$0.2 million.
On 25 June 2021, the group
raised circa US$21.1million
(net of share issuance
costs) via the placing of
12,500,000 fully paid
ordinary shares to long-term
shareholders, the Angolan
Sovereign Wealth Fund and
chairman, Mr Paul Atherley.
On 6 July 2021,
7,108,037shares related
toshare awards were issued
to executive management.
On 6 January 2022,
M&G invested £10.0 million
in the company by way of
a placement of 12,345,680
new ordinary shares.
Post period-end, the group
raised US$10.0million
via the placing of
12,331,334shares with
Fundo Soberano de Angola,
the Angolan Sovereign
Wealth Fund.
•
Ongoing review of the reagent requirements and
identification of alternative sourcing options;
•
Development and review of group-level policies and
procedures;
•
Development of over 80 documents for the Longonjo Project
consisting of policies, procedures, standards and checklists
for use in both the project and operational phase;
•
Engagement with various service providers on solutions for
health, safety and the environment (HSE), procurement and
maintenance management; and
•
Setup of logistics infrastructure and processes with Deugro
South Africa to manage the project logistics.
PARTNERSHIPS AND COLLABORATION
Post year-end, during September 2022, the company
announced it will be partnering with Polestar on its goal of
creating the first climate-neutral car by 2030. The scope of the
Polestar 0 Project is to identify and eliminate all GHG from the
extraction of raw materials to when the car is delivered to the
customer and onwards to the end of vehiclelife.
PROJECT DELIVERY TEAM
Following the groundbreaking ceremony at the Saltend rare
earths processing hub, the company announced details of
the highly experienced project delivery team which will be
responsible for the delivery of the Saltend and Longonjo
Projects.
The eight-person project delivery team is leading a team of
134 specialist engineers from various disciplines, many of
them experts in their field, dedicated to the execution and
commissioning of both projects.
Key appointments to the project delivery team include:
•
Mr Hamish Westwater as project director for Saltend.
Mr Westwater has over 30 years’ experience delivering
complex projects in the chemical engineering sector for both
contractors and clients. He specialises in fast-track delivery
and leading all project phases from FEED studies through to
final commissioning and start-up;
•
Mr Kevin Botha as project director for Longonjo. Mr Botha
is a qualified electrical engineer and project management
professional with over 45 years’ experience in the global
mining industry. He has worked for blue-chip international
companies and as a director and owner of companies
providing engineering and project management services to
the sector. Mr Botha’s global experience includes multi-
billion dollar projects and related portfolios in Africa including
Angola, Namibia, Botswana and South Africa; and
•
Mr Jeremy Clarke as project sponsor for Longonjo. Having
worked at executive technical level with Anglo American,
Mr Clarke has over 35 years of experience in gold, uranium,
copper, and diamonds. He was previously consulting
metallurgist for De Beers where he was responsible for
metallurgical excellence at their plants globally.
BOARD APPOINTMENTS
On 31 March 2022, Mr Robert Kaplan was appointed as
financedirector. Mr Kaplan is a chartered accountant with over
20years’ operating experience in the African mining sector.
Hisaddition to the Pensana team brings a broad skill set in
both UK and sub-Saharan Africa corporate finance together
with experience in mining operations in Angola, South Africa
and Tanzania. Mr Kaplan previously held the position of
chieffinancial officer (CFO) at Pensana from 1 January 2020 to
30March 2022.
Post year-end, Ms Alison Saxby was appointed as an
independent non-executive director with effect from
17August2022. Ms Saxby is an industry-leading expert
with over 35 years of experience in industrial minerals and
metals. She was previously a managing director at metals
consultancyRoskill.
FUTURE DEVELOPMENTS
The directors intend to continue to explore and develop
the company’s key existing projects with key focus on the
exploration project at Coola as well as further expansion into
separation of HREOs and further downstream expansion into
magnet metal/alloy production and magnet recycling.
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REVIEW OF OPERATIONS AND STRATEGIC REPORT
continued
Key collaborations with Polestar and Equinor, the signing of
a letter of intent securing private wire connection to Yorkshire
Energy Park, green bond accreditation from CICERO, the
launching of our blueprint for sustainable rare earths and the
signing of an memorandum of understanding with a major
non-Chinese industry player to supply rare earth oxides from
Saltend further added to our long-term ambitions of creating a
truly sustainable independent rare earth processing hub with
net zero carbon ambitions.
The company views its relationship with local communities
as vital to its social licence to operate. There are two sides
to this aspect: firstly, the company needs to consider, and
therefore minimise, the potential negative or disruptive impacts
of exploration and mining operations locally; and secondly,
the company needs to communicate the benefits of such
operations to the local economy. As part of the development
of the ESIA on Longonjo any potential impacts on the local
communities have been comprehensively assessed and
suitable mitigation measures established. This has included
the development of a stakeholder engagement plan including
national government, provincial government, local authorities,
traditional leaders and local communities living in the vicinity
to the project. Both Ozango and Pensana have maintained
regular dialogue with all stakeholders. As part of the mine and
MREDS development, the business is required to undertake a
programme of economic displacement. A resettlement action
plan has been authored and filed with the Angolan authorities
and a livelihoods restoration plan has been developed. Both of
these were authored independently by reputable third parties,
HCV Africa and Development Workshop, the latter an NGO
specialising in land rights based in the Huambo province in
Angola, with specialist agricultural support from VUNA AGRI.
The business will move into the implementation stage of the
programme prior to construction commencing and will ensure
all affected are supported in ensuring food security and are
offered opportunities for economic development. To deliver
the livelihoods restoration plan, the business has appointed
VUNA AGRI to provide expert agronomy support.
Engagement with the governments of Angola and the UK
is another critical aspect of the company’s strategy, and
management has devoted considerable time to ensuring both
governments have been supportive of the company. Much
of this interaction has been through the Ministry of Mineral
Resources, Oil and Gas, as well as other key departments,
through written communication and meetings in Angola and
with local council, and the Automotive Transportation Fund
in the UK.
The relationship the company has with its key suppliers is
vital, including those providing process engineering, mineral
processing services, laboratory and analysis, as well as local
suppliers and advisers. The company has taken great care
in the selection of its suppliers in order to ensure a positive,
mutually beneficial long-term relationship can be put in place,
which maximises the quality of the services and goods
received, while remaining cost competitive.
The company’s workforce remained relatively small during
2021 and 2022, however, this is growing steadily as the
company progresses towards project development roll-out and
production and, as the company continues to rely on its staff
and workers, increased emphasis is being placed on the health,
safety and well-being of the workforce, as well as ensuring
employment terms are competitive and attractive.
The company is aware of the challenges that extractive
industries face with regard to maintaining ethical standards
at all levels, particularly in developing countries. Several
national and international initiatives and regulations exist in
this regard, but the board does not view this area as a matter
of compliance, but rather one of competitive advantage. The
company intends to bring its assets into profitable operation
while always acting with the highest integrity and, in so doing,
will play a part in developing a culture of responsible operations
that can be replicated by other operators and industries in
Angola and beyond. This is a critical aspect of the company’s
strategy and has been communicated to the government and
local communities.
These wider relationships and challenges are considered by the
board to be key elements of the group’s strategy and critical to
delivering long-term value to its members. The Pensana board
has strong relationships with all of its shareholders, all of whom
are treated with integrity and fairness.
Tim George
Chief executive officer
27 October 2022
DIRECTORS’ SECTION 172 STATEMENT
The long-term strategy of the company is to establish Saltend
as an independent, sustainable supplier of key magnet metal
oxides with feedstock sourced initially from its low-impact mine
in Angola. Leveraging years of industry experience, coupled
with our targeting a guarantee for reliability and sustainability
of supply, we aim to introduce innovative NdPr solutions to
power magnets, wind turbines, hybrid motor vehicles and more
all while creating value for our shareholders. The company
has a number of stakeholders and partners, and the board
recognises that managing these relationships is critical to the
success of the company, and that the success of the company
will be to the benefit of all of its stakeholders.
During 2021 and 2022, the company’s key focus was
the finalisation of the FEED studies, value engineering
and optimisation in preparation for initiation of early-stage
construction at both the Saltend and Longonjo. Increased
flexibility was further built into the business plan with the
securing of the larger Reedmere site at Saltend catering for
future scalability and flexibility on feedstock sourcing, expansion
into HREOs, future magnet metal/alloy production and recycling
as a natural progression of activities and part of our growing
circular economy ambitions.
Alongside these technical and engineering workstreams,
key ESG requirements were further inserted into the design
process in co-operation with HCVA Africa, Ivy House and
Grupo Simples and, in preparation for the main construction
programmes in 2023, logistics and procurement optimisation
support from Deugro served to defray some of the market
uncertainties emerging over the past 12 months alongside
the work done by the team in ensuring operational readiness
preparation was given proper and timeous attention.
Completion of the 8,000m drilling programme on the Longonjo
Project in the prior period, which supported the revised Mineral
Resource estimate and highlighted the large resource that
could be readily developed, was further enhanced during the
year with the issuance of an updated Reserve Statement,
evidencing both Proved and Probable Reserves.
On the corporate front, additional equity placings in
January2022 and September 2022, supported by the Angolan
Sovereign Wealth Fund and long-term shareholders, provided
ongoing project development momentum; a critical step in
ensuring the group continued working towards an operational
readiness state and the subsequent consideration of a final
investment decision and associated main financing.
Paul Atherley (Pensana chairman) and Hans Pehrson (Polestar Head of
R&D and Electric Propulsion Strategy) at the Polestar 0 launch
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GEOLOGY
The Longonjo carbonatite is located within the north-east-
oriented Lucapa Lineament of central Angola, as shown
in Figure1. Longonjo is a Cretaceous-age, sub-circular
carbonatite diatreme, approximately 2.5km in diameter,
which is intruded into Neoproterozoic granitic rocks.
Rare earth elements (REE) including NdPr (neodymium
and praseodymium) mineralisation is widespread across
thecarbonatite.
A horseshoe-shaped ring of hills surrounds much of the
carbonatite and consists of more resistant potassic and sodic
altered granitic country rocks (fenite) and carbonatite ring dykes.
High-level explosion breccias of mixed carbonatite and fenite
clasts form the bulk of the carbonatite body, with sub-vertical ring
dykes and carbonate plugs cutting and intruding the northern
and southern margins of the carbonatite and surrounding fenite.
A simplified geological interpretation of the carbonatite is shown
in Figure 2. The fenite ring surrounding the carbonatite proper
as illustrated also contains additional fenite bands and fenite-
dominated breccias. The map in Figure 2 also shows the drilling
completed to September 2020 on which the Mineral Resource
estimate described in this report isbased.
GEOLOGY AND
MINERAL RESOURCE
Figure 3: Plan view of the Mineral Resource block model for the weathered zone coloured by average
NdPr grade over simplified geology of the Longonjocarbonatite. Resource categories highlighted
Figure 4: Schematic geological cross-section looking north across the Longonjo carbonatite
showing styles and typical grades of NdPr mineralisation. Note vertical exaggeration
Figure 1: Simplified geological map
of Angola showing theLucapa Belt
Figure 2: Simplified geological map of Longonjo with alldrillholecollars as of September 2020
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GEOLOGY AND MINERAL RESOURCE
continued
MINERAL RESOURCES
A 195 hole, 7,987m reverse circulation infill and extension
drilling programme completed during 2020 was done in
support of the geological studies. A series of high-grade
intersections from this drilling were reported during 2020.
COVID-19 restrictions delayed the transport of some
samples, and the final batch of assay results was received in
August2020. The drilling programme confirmed the continuity
of high-grade mineralisation in the weathered zone, proved
some extensions to the deposit and provided a first test of
thefresh rock potential of the project.
The company appointed international mining industry
consultants, SRK Consulting, to complete a revised Mineral
Resource estimate for Longonjo to incorporate the new
drilling and on 14 September 2020 announced an upgraded
Measured, Indicated and Inferred Mineral Resource estimate of
313Mt at 1.43% REO including 0.32% NdPr* for 4,470,000t of
REO including 990,000t ofNdPrO.
* NdPr = neodymium + praseodymium oxide. REO = total rare earth
oxides. A 0.1% NdPr cut is applied. Table 1 provides a summary of
resource categories for Total Resources.
Refer to the LSE announcement of 14 September 2020 for
Mineral Resource estimate details. All material assumptions and
technical parameters underpinning the estimates continue to
apply and have not materially changed.
The upgraded estimate is summarised in the table below:
•
Contains more than 2.3 times the previous estimate of the
Measured and Indicated Resources used in the preliminary
feasibility study
1
(announced ASX: 15 November 2019);
•
Has increased the proportion of the resources reported in
the Measured and Indicated categories from 31% to 68%
2
;
and
•
Has increased the overall contained NdPrO by 35%
2
.
¹ Comparison of contained NdPr within the weathered zone Measured
and Indicated categories at a 0.2% NdPr cut-off, November 2019,
and new Mineral Resource estimates.
2
total Longonjo Mineral Resource estimates at a 0.1% NdPr cut-off
(Measured + Indicated + Inferred categories).
Longonjo Mineral Resource estimate, Total, at 0.1% NdPrO cut-off grade
Mineral Resource estimate category
Tonnes
(million)
REO
grade
(%)
NdPr
grade
(%)
Contained
REO
(tonnes)
Contained
NdPr
(tonnes)
Measured 26 2.58 0.55 664,000 141,000
Indicated 165 1.51 0.33 2,490,000 536,000
Inferred 123 1.08 0.25 1,320,000 313,000
Total
313 1.43 0.32 4,470,000 990,000
REO includes NdPr. Figures may not sum due to rounding.
MINING ORE RESERVES
Post period-end, during September 2022, the competent person’s statement for Longonjo’s Ore Reserves was completed by
Snowden Optiro and can be found on the Pensana website at:
https://pensana.co.uk/Company-Reports/
. The Longonjo OreReserves are classified using the guidelines of the 2012 Australasian Code for Reporting of Mineral Resources and
Ore Reserves(JORC).
In-pit Measured and Indicated Mineral Resources were used as the basis for deriving the Proved and Probable Ore Reserve estimates
and were converted to an Ore Reserve using Whittle software which generated optimised pit shells based on various modifying
factors, geotechnical domains and forecast operational costs and sales pricing.
Approximately 13Mt Measured Mineral Resources were converted to a Proved Ore Reserve (about 45% of the total Ore Reserve)
and 17Mt of the Indicated Resources were converted to Probable Ore Reserves. This classification assessment of Proved was based
on the latest pilot plant and other testwork results, which relate to samples representative of the first seven years of production;
completed metallurgical evaluation; and due consideration of the modifying factors taken into account and referred to in the Ore
Reserve Statement.
The Ore Reserve estimate is summarised in the table below.
Longonjo Proved and Probable Ore Reserve September 2022 reported using a 0.3% NdPrO (approximate) cut-off
Classification
NdPrO cut-off
(%)
Tonnes
(Mt)
NdPrO
(%)
TREO
(%)
NdPrO
(t)
TREO
(t)
Proved 0.3 – 0.4 13.3 0.67 3.19 89,300 424,000
Probable 0.3 – 0.4 16.8 0.46 2.05 77,000 323,000
Total
0.3 – 0.4 30.1 0.55 2.55 166,000 767,000
Notes:
• Million tonnes are dry and rounded to one decimal place. Grades are rounded to three significant figures.
• No fixed cut-off is applied to the rare earths NdPrO; the cut-off varies between 0.3% NdPrO and 0.4% NdPrO.
• The variable NdPrO cut-off reflects the block cash flow positive method used to determine the economically viable portion of the resource.
• NdPrO tonnes and grade is inclusive of the TREO and not additional to it.
Mr Frank Blanchfield (competent person, Snowden Optiro), Mr Grant Hayward
(Pensana head of geology) and other Pensana team members on site at Longonjo
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GEOLOGY AND MINERAL RESOURCE
continued
COOLA EXPLORATION PROJECT
The company has made considerable progress on a variety
of targets on the 7,500km
2
Coola Project. On 4 April 2022,
the company reported significant high-grade TREO values
from reconnaissance sampling at Sulima West and further
highly anomalous TREO, scandium and fluorite values from an
extensive rock chip and soil sampling programme completed at
the Coola carbonatite. Subsequently, additional work has been
completed on both the Sulima West and Coola carbonatite
and in addition, exploration activities on two further targets
have commenced: the Benga Nova magnetic anomaly and the
Sulima ring structure/radiometric anomaly.
Sulima West is a 4.2km diameter ring structure with a
corresponding radiometric anomaly. Inspection of the satellite
imagery of this ring structure identified 10 large trenches
located in the western segment of the structure. No information
on these trenches was available from the Geological Institute
of Angola but local anecdotal information reports that the
trenches were excavated between 1960 and 1961 by the
Companhia Minerais do Lubito. The trenches extend over an
area of 40ha, are up to 90m in length and up to 5m deep. Over
15 pits have been located in the area with depths of up to 10m
and evidence of at least three historical drill sites. Thetrenches
and pits are excavated in an iron/manganese-rich laterite of
Figure 5: Longonjo mining stage designs
unknown thickness and are roughly 160ha in extent. The
precursor lithology of the laterite is unknown but most
likely represents a deeply weathered carbonatite, the
laterite here being very similar to the laterite developed
over the REE-enriched Longonjo carbonatite. The laterite
is surrounded by fenite, as is the case at Longonjo. Initial
sampling of the laterite within the trenches returned
values of up to 10.6% TREO. The REE distribution is
light REE-enriched and is suspected to be monazite
as the highest TREO values correspond to the most
anomalous phosphorous values. Recently, one of the
historical trenches crossing the laterite was cleaned and
channel sampled over 70m, and a historical pit was also
channel sampled to 5m below surface. Soilsampling,
rock chip sampling and radiometric surveys have also
been completed to ascertain the extent of the laterite and
associated REE mineralisation. Results from this sampling
are expected in October 2022.
Systematic exploration of the Coola carbonatite target
has led to the discovery of highly anomalous rare earth,
scandium and fluorite mineralisation. This area has been
geologically mapped and extensively sampled (soils,
rock chip and auger). Rock chip sampling of the banded
carbonatite returned values of up to 4.9% TREO and soil
sampling over areas of soil-covered banded carbonatite
returned values of up to 13.2% TREO. Preliminary
mineralogical investigation indicates that the rare earth
mineral is bastnaesite which occurs predominantly in the
fresh-banded ferroan carbonatites as coarse aggregates
of up to 2mm. The scandium-bearing mineral is yet to be
identified; soil samples returned values of 30 to 220ppm
scandium. The fluorite mineralisation occurs as late-stage
hydrothermal veins in the fenites to the south-west of
the ring structure, but soil sampling indicates that it is of
limited surface extent. The central soil covered diatreme
has not shown encouraging results from the auger drilling
and pitting, however, these sampling methods could
only attain a maximum depth of 5m and this central
soil-covered area will be further investigated by drilling.
Recently, samples of the banded carbonatite have been
submitted for mineral liberation analysis testwork, and
should these results indicate favourable REE liberation
characteristics, resource drilling of the Coola carbonatite
will commence in2023.
Benga Nova target is a large and prominent circular
magnetic anomaly to the north of Sulima West. Outcrop
in the area is scarce except for a prominent massif
(Benga Nova). The massif comprises a very coarse-
grained syenite with up to 5%disseminated magnetite.
The syenite is cut by 0.5to 2m wide irregular veins of
aphanitic mafic rock (phonolite) which show high magnetic
response. The entire massif is homogeneous with minor
variation in grain size or texture. Thehigh magnetite
content of this syenite and the mafic dykes are the
causative bodies for the magnetic anomaly. Samples have
been extracted for mineralogical studies andanalysis.
Ms Geraldine Tchimbali – Site services
manager on site at Longonjo
MINING
As part of the work performed relating to the Ore Reserve Statement, an updated pit optimisation was run confirming the
20-year potential life of mine. Figure 5 indicates the mining stages over 18 years, plus two more years of processing material in
the concentrator and MREDS plant from stockpiles.
Sulima is a prominent ring structure of 6km in diameter. The
ring itself comprises a 20- to 60m-wide quartz-monzanite
ring dyke. The central complex comprises two main plugs of
syenite and nepheline syenite surrounded by avariety alkali-
volcanic rocks. The geology within the ring dyke is complex
with 15 distinct rock types collected during mapping for
x-ray diffraction/whole rock/petrography and REE analysis.
Within Sulima, an occurrence of REE+U+Th is recorded on
the mineral occurrences map of Angola, but no radiometric
response was detected across the area. Furtherfieldwork is
scheduled for thisyear.
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PRINCIPAL RISKS
AND UNCERTAINTIES
The group is exposed to a number of risks and uncertainties which could have a material impact on its performance and long-term
viability. The effective identification, management and mitigation of these risks and uncertainties is a core focus of the group, as they
are key to the company’s strategy and objectives being achieved. Central to Pensana’s approach to risk management is having the
right board and senior management team in place, with such members combining extensive experience of the specialist worlds of
rare earth mining, sales, health and safety, human resources, skills development, diversity and transformation, finance, corporate
governance and risk management, as well as in-depth knowledge of the local operating conditions in Angola and the UK and the
regulatory environments of all of the countries in which Pensana operates or has a corporate presence. The board supported by the
audit and risk committee oversees overall risk management. The executive committee is responsible for risk management processes
and systems and drives a culture of individual employee accountability in implementing these.
PRINCIPAL RISKS
A summary of the risks identified as the group’s principal external, operating and strategic risks (in no order of priority) is listed below.
Risk
Risk
appetite
Risk
rating
Change
year-on-year Nature of risk and management of risk
External risks
Commodity
price
Medium Medium
If the group is able to develop the Longonjo and Saltend
Projects and/or the Coola Project for production and the
market price of rare earth oxide decreases significantly
for an extended period of time, the ability for the group
to attract finance and ultimately generate profits could be
adversely affected.
Managing the risk
The group will primarily look to focus on managing its underlying production costs to mitigate price volatility.
Ifappropriate, the group may also consider entering into offtake agreements with the goal of preserving
future revenue streams. The group has, to date, not entered into any such contracts. If appropriate, the
group will enter into binding offtake agreements with the goal of preserving future revenue streams. Post
year-end, a memorandum of undertaking with a major player outside of China has already been concluded
with this in mind.
Demand risk
Medium Low
NEW
Risk that forecast product demand may be lower than
expected.
Managing the risk
The group actively monitors market demand, customer needs and potential new entrants into the rare
earth industry.
Risk
Risk
appetite
Risk
rating
Change
year-on-year Nature of risk and management of risk
External risks
continued
Foreign
exchange risk
Medium Medium
NEW
The group operates across multiple jurisdictions and is
exposed to several currencies outside of its reporting
currency, including the Angolan kwanza, Australian dollar,
Euro and British pound.
Managing the risk
The group to date has raised finance in US dollars and British pound to align to input costs in the various
jurisdictions it operates in. On completion of main financing, consideration will be given to foreign currency
hedging.
Market/
customer
concentration
Medium High
Currently, China produces circa 98% of the world’s rare
earth magnets. China could manipulate market prices of
rare earth oxides to control the number of new entrants
into the market.
Managing the risk
The group may consider entering into non-Chinese offtake agreements with the goal of preserving future
revenue streams. The group has, to date, not entered into any such contracts.
Country and
political
Medium Medium
There are substantial risks associated with investments
in emerging markets, such as Angola, where civil unrest,
nationalist movements, political violence and economic
crises are possible. Any changes in the political, fiscal
and legal systems or conditions, or civil unrest in these
countries, may affect the ownership or operation of the
group’s interests, in particular the Longonjo Project which
could have a material adverse effect on the group’s
business, financial condition, results of operations and
prospects.
There is a risk that Angolan bank payments to service
providers are not being made timeously causing a risk
to the project in the form of lack of confidence in doing
business in Angola.
Managing the risk
The group looks to always maintain strong local and national government relations in Angola and vigorous
compliance with local regulations.
The group will continue to engage with Angolan banks and regulatory bodies on a regular basis.
Facilities that allow for payments outside of Angola within current regulatory frameworks have been established.
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PRINCIPAL RISKS AND UNCERTAINTIES
continued
Risk
Risk
appetite
Risk
rating
Change
year-on-year Nature of risk and management of risk
Operating risks
continued
Development
of the Longonjo
and Saltend
Projects
Low Medium
The group’s operations are at an early stage of
construction development and future success will depend
on the group’s ability to manage the Longonjo and Saltend
Projects (the projects) and the production of NdPr-rich
MREDS for export to the Saltend refinery and further
processing into a rare earth oxide. In particular, the group’s
success is dependent upon the directors’ ability to develop
the projects by commencing and maintaining production
at the sites and there is no certainty that funding will be
available. Development of the projects could be delayed
or could experience interruptions or increased costs as a
result of supply chain or inflationary pressures or may not
be completed at all due to a number of factors, including
but not limited to:
•
the group’s ability to raise finance for the development
of the projects;
•
changes in the regulatory environment;
•
non-performance by third-party contractors;
•
inability to attract, train (as required) and retain a
sufficient number of workers;
•
changes in environmental compliance requirements;
•
unfavourable weather conditions or catastrophic events;
•
unforeseen escalation in anticipated costs of
development, or delays in construction, or adverse
currency movements resulting in insufficient funds being
available to complete planned development;
•
increases in extraction costs including energy, material
and labour costs;
•
lack of availability of mining equipment and other
exploration services; and
•
shortages or delays in obtaining critical mining and
processing equipment.
There can therefore be no assurance that the group will
complete the various stages of development necessary
to begin generating revenue for the group at both the
Longonjo and Saltend Projects and any of these factors
may have a material adverse effect on the group’s
business, results of operations and activities, financial
condition and prospects.
Managing the risk
Through the engagement of independent industry experts in the geological, metallurgical, engineering,
financial and environmental fields, as appropriate, alongside the in-house skill set which has significant
mine development experience, the board seeks to mitigate the project development risk upfront through
systematically addressing perceived risks. Funding models have incorporated contingencies for project
development and logistical delays as well as the current high inflation environment. The group has recruited an
owners team to ensure active contract management to enforce any penalty clauses for project delays due to
contractor delay.
Risk
Risk
appetite
Risk
rating
Change
year-on-year Nature of risk and management of risk
External risks
continued
COVID-19
and any further
pandemics
Low Low
The COVID-19 pandemic has had an impact on the
group’s businesses. The government lockdown conditions
in Angola delayed early works at the Longonjo and Coola
Projects, which have subsequently resumed.
There is a risk of the resurgence of COVID-19 or another
pandemic, and associated government-regulated
restrictions in Angola and the UK, which will delay the
group in carrying out its business activities at the Longonjo
and Coola Projects and site development at Saltend and
will ultimately delay the group’s ability to reach production
and start to generate cash and could have a material
adverse impact on the group’s operations and financial
results.
Managing the risk
The board proactively monitors global and national trends and reviews management’s contingency plans
to manage operations under restrictions as a result of COVID-19 and potential restrictions due to future
pandemics.
Operating risks
Attracting
skilled
employees
Low Medium
The group’s ability to compete in the competitive natural
resources and specialist rare earth chemical processing
sectors depends upon its ability to retain and attract highly
qualified management, geological and technical personnel.
The loss of key management and/or technical personnel
could delay the development of the Longonjo Project,
exploration at the Longonjo Project and the Coola Project
and development and commissioning of the Saltend
refinery thereby negatively impacting on the ability of
the group to compete in the resources and chemical
processing sectors.
In addition, the group will need to recruit key personnel to
develop its business as and when it moves to construction
and ultimately operation of a mine, each of which requires
additional skills.
Managing the risk
The board seeks to incentivise and retain key employees through an appropriate blend of short- and long-term
incentivisation packages and share schemes that are appropriately aligned to the environment and conditions
under which key management are operating.
A project development team has been established for the construction phase at both Saltend and Longonjo
and key operating personnel are currently being recruited to ensure a smooth transition from construction and
commissioning to sustainable operations.
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PRINCIPAL RISKS AND UNCERTAINTIES
continued
Risk
Risk
appetite
Risk
rating
Change
year-on-year Nature of risk and management of risk
Operating risks
continued
Logistics
challenges
and delays
Medium Medium
Global supply chain challenges could result in logistical
risks for equipment and material both for the project and
operations phase.
Managing the risk
Management have put in place contingency plans in respect of potential logistics risks for equipment and
materials.
This may include bulk movement of consumables by road.
The group further continues to work with Angolan government entities to ensure that key logistics and
infrastructural networks are in place for Longonjo. In addition, the group continues to support group projects
for renewable energy supply to Saltend as well as exploring independent options for Pensana.
Strategic risks
Financing
Low High
The company is of the opinion that the group does not
have sufficient funding to meet expected liabilities and
commitments as they fall due based on its committed
and planned development expenditure and operating
costs related to the Longonjo and Saltend Projects and
exploration costs at Coola for at least the next 12 months.
The group is in pre-production phase and therefore has
no revenues from operations currently. The group needs
to complete its main financing to ensure adequate funding
of main construction at its Longonjo and Saltend Projects.
There is a risk that funding may not be available and/or the
cost of financing may be higher than expected.
Managing the risk
The board continuously monitors the liquidity position of the group and benchmarks key targeted milestones
against funding requirements to ensure adequate resources will be available. Furthermore, management and
the board engage continuously with potential financiers, investors, sovereign wealth funds and lenders across
the UK, Europe and Africa thereby keeping them abreast of project developments and the timing of potential
fund raising. The group is currently in the process of raising financing for both operations which may include
issuing a green bond which, together with further issues of equity and debt financing is expected to raise
sufficient funding for the ongoing development of both the Longonjo and Saltend Projects.
Licence
to operate
Low Low
To the extent approvals, community consent, licences
and permits are not obtained, the group may be curtailed
or prohibited from proceeding with planned exploitation,
development and operations of the Longonjo and Saltend
Projects and the exploration and potential exploitation of
the Coola Project.
Managing the risk
The group continuously endeavours to foster strong relations with the Angolan and UK governments at a
local and national level and ensures ongoing interaction with key stakeholders, including communities local to
our sites and compliance with mandated licensing terms and requirements. The group has furthermore built
in a holistic approach to its mine development plans at Longonjo in order for it to address the key areas of
safety, social, environmental and local community obligations and thereby ensure opportunity for true long-
term sustainability.
Risk
Risk
appetite
Risk
rating
Change
year-on-year Nature of risk and management of risk
Strategic risks
continued
Dependence on
the Longonjo
Project for
feedstock
and revenue
generation
Medium
Medium
to low
The group’s primary source of feedstock into the Saltend
refinery is currently focused on the exploration and
development of the Longonjo Project. While the group
does have an additional interest in the Coola Project, this
is in very early stages of exploration and the viability of
the licence area for commercial production is currently
unknown. Therefore, any material adverse development
affecting the progress of the Longonjo Project would have
a material adverse effect on the group’s business, financial
performance, results of operations and prospects.
Managing the risk
With the group having expanded its scope to include the development of the Saltend refinery, the group has
introduced an additional potential revenue-generating unit to its portfolio alongside the Longonjo Project as
the Saltend refinery will have the capacity of processing third-party feedstock thereby reducing the reliance on
Longonjo feedstock. The group is currently in discussions with various third-party feedstock providers that can
reduce or supplement the Longonjo feedstock.
Environmental risks
Climate change
– physical
(> 10 years)
Physical risks
resulting from
climate change
can be event-
driven (acute)
or longer-term
shifts (chronic)
in climate
patterns
Medium High
NEW
The rapid pace of climate change is a risk for all
businesses. Pensana has identified its exposure to climate
change for a period beyond 10 years as principal risk. This
risk is a combined risk of all physical climate risks to the
business.
Internally reviewed risks which are grouped into the
principal risk are: operational and physical asset risk to
Pensana operational sites; exposure to the upstream
supply chain for raw materials not adequately adapting to
changes as a result of climate; and the effects of physical
climate change on global availability of raw materials which
may cause shortages, short term price volatilities and loss
of supply routes.
Managing the risk
The group is developing and will maintain comprehensive supply chain maps and will undertake regular
climate assessments of supply routes focused on a risk basis.
The group has appointed a climate change consultant to investigate future water availability, including flooding
and drought, under climate change scenarios for Longonjo.
Saltend physical risks have been assessed in accordance with all relevant English statutes and regulations.
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PRINCIPAL RISKS AND UNCERTAINTIES
continued
Risk
Risk
appetite
Risk
rating
Change
year-on-year Nature of risk and management of risk
Environmental risks
continued
Climate change
– physical
(> 10 years)
Transitioning to
a lower-carbon
economy may
entail extensive
policy, legal,
technology and
market changes
to address
mitigation and
adaptation
requirements
related to
climate change
Medium High
NEW
Pensana could be exposed to transitional climate risks
over 10 years into the future. This could include exposure
with potential impacts on pricing, tax and public/customer
perception.
Public climate policy may increase taxation or costs and
leave the business unable to compete on price with China
and other new plants.
Managing the risk
The group will continue to work with partners (including governments, NGOs and commercial partners) to
explore carbon reduction, including sourcing renewable energy and exploring innovative partnerships such as
that with Equinor for the future use of hydrogen.
3D rendering of the planned Saltend rare earth processing hub
CORPORATE
GOVERNANCE
REPORT
Dear shareholder,
I am pleased to introduce Pensana’s governance statement
under my tenure as chairman. Pensana is committed to
upholding the highest standards of corporate governance
and ethical business underpinned by a strong and effective
governance system, which has been continually enhanced
during this period in order to ensure the long-term success
ofthecompany.
The governance highlights during this period include the following:
BOARD EVOLUTION AND
SUCCESSION PLANNING
The Pensana board has continued to evolve over the past
year thus ensuring the most appropriate balance of skills and
expertise at board level for the company’s current and future
stages of development. The following board appointments were
made during the reporting period, which have further enhanced
the considerably high level and diversity of skills and expertise
on the board:
•
The CFO, Mr Robert Kaplan, was appointed as finance
director on 31 March 2022; and
•
Ms Alison Saxby was appointed as an independent
non-executive director on 17 August 2022. Ms Saxby
is an industry-leading expert with over 35 years of
experience in industrial minerals and metals. Her expertise
includes pricing, deep market knowledge, research and
communications.
BOARD STRATEGY, PROCESS
AND PERFORMANCE
The company announced in May 2022 that it had completed a
FEED and value engineering study for the rare earth separation
hub at Saltend Chemicals Park and the Longonjo operations.
The FEED study is an important component of the company
strategy of establishing an independent and sustainable rare
earth processing hub in the UK. Saltend is targeting production
of 12,500t of separated rare earths including 4,500t to 5,000t
of NdPr oxides, representing around 5% of the projected world
demand in 2025.
The board will continue to ensure that sufficient financial
and other resources are in place to ensure the successful
implementation of this strategy.
CULTURE
As the company rapidly evolves and expands, the ongoing
evaluation of our company culture is a necessary objective that
the board will continue to focus on as one of its key criteria
as we look to expand our world-class management team and
develop the projects in Angola and the UK. This will include a
non-negotiable commitment to health and safety and a ‘can-
do’ attitude that has seen the company create the opportunity
to build the world’s first rare earth processing facility in over a
decade and develop the world’s first sustainable magnet metal
supply chain to meet the burgeoning demand from electric
vehicles and offshore wind turbines.
DIVERSITY
We remain committed to improving diversity levels throughout
the workforce, management team and board, and key hires will
be targeted in the coming year to ensure our focus on diversity
with Women in STEM initiatives and women in key managerial
positions being key focus areas.
STAKEHOLDER ENGAGEMENT
AND FEEDBACK
Positive relationships with our stakeholders continue to be
essential to the long-term success of our business and we are
continually looking to improve and strengthen our stakeholder
engagement processes. Significant engagement with the
Angolan government, the Angolan Sovereign Wealth Fund,
local and national agencies in the UK, local communities and
leaders, continues on a regular basis, and is seen as a key
driver to our building of sustainable, long-term projects that
willcreate a wider benefit for all involved.
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2022 ANNUAL REPORT
CORPORATE GOVERNANCE REPORT
continued
The board of directors of Pensana
is responsible for establishing the
corporate governance framework
ofthe group.
Principle 1
Establish a strategy and
business model which
promote long-term value for
shareholders
Application Disclosure
The board must be able to express
a shared view of the company’s
purpose, business model and
strategy.
The company’s annual report as read with the annual
financial statements set out the company’s business model
and strategy including how the company intends to deliver
shareholder value in the medium to long term.
In summary, Pensana intends to build the world’s first
sustainable magnet metal supply chain to meet the burgeoning
demand from electric vehicles and offshore wind turbines. In
this regard, Pensana aims to establish a rare earths processing
hub at Saltend bringing back high-value manufacturing
to the UK and to construct a mine in Angola (Longonjo)
producing ethically sourced rare earths. Key challenges include
construction and financing risks in relation to both Saltend and
Longonjo. Pensana is in advanced discussions with a range
of funders to put in place the necessary development funding
and has also appointed a team of skilled and experienced
executives, employees and contractors to ensure construction
is timeously and properly completed.
Principle 2
The company should seek
to understand and meet
shareholder needs and
expectations
Application Disclosure
Directors must develop a good
understanding of the needs and
expectations of all elements of the
company’s shareholder base.
The board ensures that the shareholders are informed
of all major developments affecting the company via the
investor relations section of the company’s website and
through the release of regular media and Regulatory News
Service announcements, all of which are accessible via the
company’s website. The following additional information is
available to shareholders via the company’s website:
•
Information briefings to media and analysts;
•
Notices of all shareholder meetings and explanatory notes
and documentation; and
•
Annual and interim reports.
The company encourages shareholders to attend all general
meetings of the company.
Principle 3
The company should take
into account wider stakeholder
and social responsibilities and
their implications for long-term
success
Application Disclosure
The board needs to identify the
company’s stakeholders and
understand their needs, interests
and expectations.
Where matters that relate to the
company’s impact on society,
the communities within which it
operates or the environment have
the potential to affect the company’s
ability to deliver shareholder value
over the medium to long term, then
those matters must be integrated
into the company’s strategy and
business model.
Feedback is an essential part of all
control mechanisms. Systems need
to be in place to solicit, consider
and act on feedback from all
stakeholder groups.
The board has identified all material stakeholder groups in
the areas in which it operates in both the UK and Angola,
and management has created forums and mechanisms to
communicate with stakeholders and to obtain feedback from
stakeholders.
The ESG board sub-committee monitors key stakeholder
engagement for the company as well as ensuring that the
company fulfils its social responsibilities as identified by
management and the board.
GOVERNANCE POLICIES
Publicly disclosed policies as well as the company’s code of
conduct cover the business’ approach to anti-bribery and
corruption, whistle-blowing and diversity.
GOVERNANCE UPDATES
The company has fully adopted the provisions as set out in the
UK’s Quoted Companies Alliance (QCA) Corporate Governance
Code, which are deemed appropriate to our size and current
scale. The development of our governance framework will
continue to evolve and strengthen in line with, and in support
of, the dynamic growth and development of the company.
Paul Atherley
Chairman
27 October 2022
• code of conduct;
• securities trading policy;
• health, safety and environment policy;
• shareholder communications and continuous disclosure
strategy;
• risk management policy;
• board charter;
• diversity policy; and
• whistle-blowing policy and procedures.
The company is committed to implementing the best standards
of corporate governance appropriate for the company’s size
and scale.
The company’s corporate governance statement has been
approved by the board and can be located on the company’s
website at
www.pensana.co.uk
.This statement outlines the main corporate governance
practices in place for the period ended 30 June2022, which
comply with the application of the corporate governance
principles as set out in the QCA Corporate Governance Code,
unless otherwise stated.
INTRODUCTION
The company has adopted systems of control and
accountability as the basis for the administration of corporate
governance.
Additional information about the company’s corporate
governance policies and practices is set out on the company’s
website at
www.pensana.co.uk
, including the:QCA CORPORATE GOVERNANCE CODE
PRINCIPLES AND RECOMMENDATIONS
The company hereby discloses how the provisions of the QCA
Corporate Governance Code has been followed during the
financial year.
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2022 ANNUAL REPORT
Principle 4
Embed effective risk
management, considering
both opportunities and threats,
throughout the organisation
Application Disclosure
The board needs to ensure that
the company’s risk management
framework identifies and addresses
all relevant risks in order to execute
and deliver strategy. Companies
need to consider their extended
business, including the company’s
supply chain, from key suppliers to
the end-customer.
Setting strategy includes
determining the extent of exposure
to the identified risks that the
company is able to bear and willing
to take (risk tolerance and risk
appetite).
The board is responsible for the oversight of the group’s
risk management and control framework. Responsibility
for control and risk management is delegated to the
appropriate level of management within the company with
the CEO having ultimate responsibility to the board for the
risk management and control framework. In addition, the
board audit and risk committee reviews the company’s risk
register on at least an annual basis prior to the risk register’s
presentation to the board. The primary objectives of the
risk management system at the company are to ensure: all
major sources of potential opportunity for and harm to the
company (both existing and potential) are identified, analysed
and treated appropriately; business decisions throughout the
company appropriately balance the risk and reward trade-off;
regulatory compliance and integrity in reporting is achieved;
and senior management, the board and investors understand
the risk profile of the company.
In line with these objectives, the risk management system
covers:
•
operations risk;
•
financial reporting;
•
compliance/regulations;
•
system/information technology process risk; and
•
the degree of risk tolerance and risk appetite in respect
ofeach identified risk.
The key risks, as identified, are disclosed annually in the
company’s annual report.
Principle 5
Maintain the board as a well-
functioning, balanced team led
by the chair
Application Disclosure
The board members have a
collective responsibility and legal
obligation to promote the interests
of the company and are collectively
responsible for defining corporate
governance arrangements.
The board is chaired by an executive director and comprises
a balance of independent non-executive directors and
executive directors, details of whom are disclosed on the
company’s website and in the annual report.
Non-executive directors are expected to make sufficient
time available to fully engage with the activities of the board
and relevant committees. This includes time preparing
for meetings and reviewing relevant papers, the meetings
themselves and subsequent follow-ups. Refer to
page 76
for details of the number of meetings.
Executive directors are required to make sufficient time
available to discharge their duties in executive office.
The board has formed and is supported by the following
committees, each of which is chaired by an independent
non-executive director:
•
Audit and risk committee;
•
Remuneration committee;
•
ESG committee; and
•
Board nomination committee.
The committees’ terms of reference are disclosed on the
company’s website.
The number of board and committee meetings attended
by each director is recorded annually in the company’s
annualreport on
page 76
.Principle 6
Ensure that between them the
directors have the necessary
up-to-date experience, skills
and capabilities
Application Disclosure
The board must have an
appropriate balance of sector,
financial and public markets skills
and experience, as well as an
appropriate balance of personal
qualities and capabilities.
As companies evolve, the mix of
skills and experience required on
the board will change, and the
board composition will need to
evolve to reflect this change.
The composition of the board has changed during the year
in order to ensure that combined skills, experience and
personal qualities of the board match the requirements of the
company in its current stage of development. The board is
assisted by a lead independent director who chairs the audit
and risk committee as well as the remuneration committee.
In addition, a senior independent director chairs the ESG
committee and serves on the remuneration committee.
The company secretary is in attendance at all board and
committee meetings and provides independent advice to the
board and board committees on all governance matters.
The profiles of each director are disclosed on the company’s
website and are published in the annual report on
pages 8
to
10
.Principle 7
Evaluate board performance
based on clear and relevant
objectives, seeking continuous
improvement
Application Disclosure
The board should regularly review
the effectiveness of its performance
as a unit, as well as that of its
committees and the individual
directors.
The board performance review may
be carried out internally or, ideally,
externally facilitated from time to
time.
Following additional board appointments during the year,
an internal evaluation of the board will be managed by the
company secretary at the end of the reconstituted board’s
first year of its term of office.
The board nomination committee monitors on a continual
basis succession plans for each director and the board as a
whole.
No formal board performance evaluation has been
undertaken in the period.
Principle 8
Promote a corporate culture
that is based on ethical values
and behaviours
Application Disclosure
The board should embody and
promote a corporate culture that
is based on sound ethical values
and behaviours and use it as an
asset and a source of competitive
advantage.
The board is committed to creating a corporate culture which
is underpinned by the highest ethical values and the following
by every director and employee of sound ethical behaviours.
The board ensures that ethical corporate values guide the
objectives and strategy of the company.
The company has a code of conduct that sets out the
principles and standards which the board, management
and employees of the company are encouraged to strive to
abide by when dealing with each other, shareholders and
thebroader community.
The board endeavours to ensure that the sound ethical
corporate culture of the company is recognisable throughout
the disclosures in the annual report, website and any other
statements issued by the company.
Post year-end, during September 2022, a formal whistle-
blowing policy together with the associated procedures have
been implemented. No matters have been reported to date.
CORPORATE GOVERNANCE REPORT
continued
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Principle 9
Maintain governance
structures and processes that
are fit for purpose and support
good decision-making by the
board
Application Disclosure
The company should maintain
governance structures and
processes in line with its corporate
culture and appropriate to its size
and complexity.
The board is of the opinion that its governance structures and
processes are suitable for the current size and complexity
of the company and applicable for its present stage of
development.
The board is committed to ensuring that the governance
structures as reported on in the annual report will evolve
over time in parallel with its objectives, strategy and business
model to reflect the development of the company.
Principle 10
Communicate how the
company is governed and is
performing by maintaining a
dialogue with shareholders and
other relevant stakeholders
Application Disclosure
A healthy dialogue should exist
between the board and all
of its stakeholders, including
shareholders, to enable all
interested parties to come to
informed decisions about the
company.
The annual report includes details of the key reportable
activities of all board committees during the year.
A principle risks and uncertainties report as well as a
section172 statement are included in the company’s
annual report on
pages 24
and 32
respectively.The results of all voting at a shareholders’ meeting will be
disclosed on the company’s website.
Pensana chairman, Mr Paul Atherley at the Saltend
processing hub groundbreaking ceremony
CORPORATE GOVERNANCE REPORT
continued
Pensana made continued progress on its ESG performance. During the
reporting period, the business was successful in gaining third-party
recognition conrming the alignment of its Saltend Project with the
CICERO shades of green rating for sustainable nance.
ENVIRONMENTAL,
SOCIAL AND
GOVERNANCE REPORT
ESG risk identification is incorporated into the company risk
process with ESG risks embedded within the company’s
primary risk matrix, which, in turn, is reviewed by the audit and
risk committee. The general effectiveness of the approach is
reviewed by the ESG committee, including the management of
health, safety and environmental risks. Risks specific to climate
change beyond a period of 10 years are disclosed in the
principal risks and uncertainties section (refer to
page 37
).The business remains committed to its membership of the
United Nations Global Compact, the TCFD and Oh Yes! Net
Zero, the latter a partnership between businesses in the
Humber region committed to working together to deliver
net zero for the region. The business further emphasises its
commitment to aligning its work to the Equator Principles and
the International Finance Corporation Performance Standards.
Progress continues towards developing a traceable supply chain
and, over the reporting period, Pensana has identified its material
data points for internal and external reporting. While not all of
these are yet applicable, data deemed applicable for external
reporting for the FY2022 by the business, based on the current
levels of operations, is published on
pages
53
to 55
.
Through the integrated risk assessment processes for
climate change, the company has identified long-term climate
change as a principal risk to the company. This risk covers
climate change more than 10 years into the future. Pensana
has already completed modelling of the physical risk to the
Saltend site as part of the UK statutory requirements for the
planning process and has undertaken a high-level desk-based
review of climate risk in Angola. To enable the company to
further understand the physical climate risk at the Longonjo
Mine site, an expert team from consultancy HCV Africa has
commenced a detailed study of physical climate risk for the life
of mine, which will model the areas of, among others, drought,
flooding, rainfall and heat. The detail of this and the scenarios
The innovative methodology used by CICERO is aligned to
the ICMA’s Green Bond Principles and issuance of an opinion
provides robust independent verification that Pensana’s Saltend
Project is aligned to best practice in the climate financing
sector.
Pensana takes its responsibility towards addressing ESG
very seriously. To support the desire to build the world’s first
sustainable magnet metal supply chain to meet the burgeoning
demand from electric vehicles and offshore wind, a full-time
sustainability manager remains in post as a member of the
business’ executive committee and reports directly to the CEO.
The CEO has responsibility for the delivery of ESG at Pensana
and the board oversee ESG through a mandated board
sub-committee chaired by non-executive director Baroness
Lindsay Northover, with the remainder of the membership
being non-executive director Mr Steve Sharpe and CEO
MrTimGeorge. In April 2022, the board attended a training
session on ESG delivered by Dr Sarah Gordon from respected
ESG consultancy, Sartarla. The session covered all aspects of
ESG and both current and emerging trends.
Post period-end, Pensana launched its ambitious blueprint for
sustainable rare earths. This ESG strategy document provides
a mapped-out plan of how Pensana intends to achieve 11
sustainability ambitions from across the ESG suite over the
short, medium and long term. These ambitions include, among
others, an aim to be net zero no later than 2040, an aim to
produce the lowest-carbon rare earth products and a plan
to protect and enhance nature. The strategy also includes a
commitment to embed ESG at the core of every decision the
business makes. Pensana will demonstrate its commitment
to the highest ESG standards and will do so by using external
assurance throughout its ESG programmes. This will be
used to provide confidence to investors and customers that
the business’ claims are reliable and meet the most rigorous
standards required by stakeholders.
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ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT
continued
COLLEAGUES AND
COMMUNITY
Health and safety
In the reporting period, Pensana has continued its record of
not yet having any lost time or recordable health and safety
incidents across the group. The business has completed a full
review of its health and safety governance and management
system at group level and has updated its structure to adapt
to the growing business. The review has included reviewing
and updating documented processes, performance indicators
and reporting procedures to ensure senior management can
effectively oversee the health and safety implementation at each
of the subsidiaries. Each subsidiary leads and is responsible for
its own health and safety performance. The group CEO remains
responsible for overseeing health and safety performance
across the group with the group’s audit and risk committee
responsible for board oversight. The business continues to
work towards ISO45001 certification for each of its subsidiaries.
While currently all staff are encouraged to engage in health and
safety procedures and the business has developed practices
for monitoring and mitigating risks where they exist in current
operations, as part of the evolution of the management system,
project areas are in place to further develop the business’
approach to occupational health, hazard and incident reporting,
incident investigation, auditing, worker consultation, specialist
work areas and training.
Communities
Pensana takes the social implications of its business impacts
seriously and is aware of both the potential challenges and
the positive impacts we can have on an area.
Longonjo, Angola
As part of the development of the ESIA on Longonjo, any
potential impacts on the local communities have been
comprehensively assessed and suitable mitigation measures
have been established. This has included the development of
a stakeholder engagement plan including national government,
provincial government, local authorities, traditional leaders
and local communities living in the vicinity of the project. Both
Ozango and Pensana have maintained regular dialogue with all
stakeholders.
As part of the mine, concentrator and MREDS development,
the business is required to undertake a programme of economic
displacement. A resettlement action plan has been authored
and filed with the Angolan authorities and a livelihoods
restoration plan has been developed. Both of these were
authored independently by reputable third parties HCV Africa
and Development Workshop, the latter an NGO specialising
in land rights based in Huambo province in Angola, with
specialist agricultural support from VUNA AGRI. The business
will move into the implementation stage of the programme prior
to construction commencing and will ensure all affected are
supported in ensuring food security and are offered opportunities
and climate change models used can be seen in the TCFD
disclosure starting on
page 48
. The company has developed qualitative risk and opportunity assessments from transitional
risk using internal expertise. Quantitative financial impact
modelling will be developed by the company going forward
as part of the company’s progressive approach to managing
climate change-related risks.
CLIMATE AND CARBON
The extraction and processing of NdPr rare earths is crucial
to global decarbonisation efforts, as they are an essential
component of wind turbines and electric vehicles. These products
will displace fossil carbon emissions and are forecast to be in high
demand. The International Energy Agency has forecast that
there could be a sevenfold increase by 2040 in demand for rare
earth elements for use in clean energy technologies
1
.
As part of its commitment to being climate aware, Pensana has
voluntarily become a partner of the TCFD. Therefore, Pensana
will report fully against the recommendations of the task force
one year ahead of the requirement to do so by the Financial
Conduct Authority. The voluntary disclosure starts on
page 48
.
To ensure Pensana supports the demand from customers
and investors to develop not only products to support climate
change, but products which themselves have a low carbon
footprint, the business has instructed Route2, a leading
consultancy in developing carbon footprinting, to develop a
product life cycle carbon emissions analysis aligned to the
GHG Protocol Product Life Cycle and Reporting Standard. This
will allow Pensana to demonstrate its full value chain carbon
credentials and support the business to explore further targeted
carbon-reduction opportunities to facilitate further reductions
aligned to a 1.5°C reduction pathway.
ENVIRONMENT AND ECOLOGY
Longonjo
In this period, the business completed the ESIA process.
This included completing and making available the bankable
version, and the Portuguese language version was submitted to
the Angolan Ministry of Culture, Tourism and Environment.
While the project was structured to identify risk areas early in
the process, and therefore embedded multiple risk mitigations
in the previous reporting period, the business remains
committed to embedding the environment within its decision-
making and is working towards ISO14001. This includes the
previously highlighted commitment to reduce the area of the
mining plan to avoid an area of high-conservation value, home
to species of conservation concern including the endemic
Angolan Cave Chat (Xenocopsychus ansorgei). Additionally, all
staff will be trained on ecological challenges and there will be
competent staff available to safely and ethically deal with any
ad hoc wildlife sightings.
Environmental compliance and ensuring no harm is high priority
throughout the operations. All operations will be compliant
with environmental legislation and International Finance
Corporation Performance Standards. Applying high operating
standards has included ensuring the planned construction of
the tailings storage facility (TSF) meets the requirements of the
Global Industry Standard on Tailings Management and that
comprehensive monitoring and reporting plans are designed
and integrated early to advise if any risks emerge. A post
mining plan has been developed and will be continually evolved
throughout the life of the mine. To assist with the delivery of
the environmental programme, a job role has been advertised
for a specialist health, safety and environment manager to
co-ordinate Ozango’s environmental and health and safety
management systems.
Saltend
The business was successful in achieving planning permission
for the Saltend site. This process involved engaging with
regulators and statutory consultees including the Environment
Agency and Natural England. As part of the process, Pensana
has built in engineering amendments to ensure the site is
mitigated against fluvial flooding for a 5%, 1% and 1% with
climate change and a 0.1% annual exceedance probability
design storm events. This evaluation process utilised both
public Environment Agency climate models, and also a
separately commissioned hydraulic modelling assessment,
to provide more granular and up-to-date data to allow the
business to plan for flood risk mitigation. While the planning
process identified the operational area not affecting or being
within any land classifications, Pensana has voluntarily
committed to habitat enhancement through the allocation of
grasslands and the planting of trees to bolster the surrounding
habitat.
Furthermore, as part of the environmental permitting
requirements, the business has undertaken a number of risk
and environmental assessments. These assessments show that
the facility will not adversely impact on local air quality, cause
any ground water pollution and will not impact the habitats or
residential/industrial/commercial receptors surrounding the site
with regard to noise, odour, dust, accidents, fires, surface water
discharges or flooding. The facility will be operated utilising the
best available techniques for this sector so as to comply with
the Environmental Permitting Regulations 2016 and all relevant
Environment Agency guidance.
for economic development. To deliver the life likelihood
resettlement programme, the business has appointed VUNA
AGRI to provide expert agronomy support. VUNA AGRI’s track
record of delivering successful agricultural programmes across
Africa will aid the business in developing a long-term economic
benefit for the Longonjo area.
As Ozango grows its employee base in the Longonjo area, the
business is aiming to, as far as is safe and feasible, recruit local
staff for the operation of our sites to ensure we are providing
opportunities for the communities local to our operations.
Saltend, UK
Pensana has developed strong relationships with stakeholders
across the spectrum. As part of the successful planning
application, the business liaised with local elected officials and
with local residents to answer questions and concerns raised
as part of the planning. The business is developing strategic
partnerships with local educational institutions including the
Universities of Leeds and Lincoln to review prospects for
research collaboration and development opportunities.
Pensana is actively seeking bright and aspirational women with
STEM backgrounds, particularly those who come from diverse
and/or disadvantaged backgrounds and want to be part of
creating solutions for a sustainable future. In this regard, the
company is engaging with engineering centres of excellence,
the University of Hull, local authorities and engagement experts
to progress women in STEM across operations from the very
outset of hiring and development.
ETHICAL BUSINESS AND
CORPORATE GOVERNANCE
Pensana aims to uphold the highest standards of ethical
business. Publicly disclosed policies cover the business’
approach to anti-bribery, corruption and diversity alongside
the detail within the company’s code of conduct. Furthermore,
the business has set up a working group, led by the company
secretary team, to review and develop governance structures,
policies and procedures. Full details of the implementation of
corporate governance policies are contained in the corporate
governance report, which forms part of this annual report.
In the reporting period, Pensana published its first modern
slavery report aligned to the requirement under section 54 of the
Modern Slavery Act 2015. This demonstrated the business’
approach to the issue including the organisational structure,
risk identification, policies, due diligence and the effectiveness
of the approach.
To further demonstrate Pensana’s commitment to sustainability,
the business remains a signatory to the United Nations Global
Compact, is a partner of the TCFD and has joined the newly
formed Oh Yes! Net Zero coalition, which is a collaboration of
small and large businesses based in the Humber area who,
through exploring partnerships, share the goal to help the
region decarbonise.
1
The Role of Critical Minerals in Clean Energy Transitions
https://www.iea.org/reports/the-role-of-critical-minerals-in-clean-energy-transitions/executive-summary
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2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT
1a
Describe the board’s oversight of climate-related
risks and opportunities
Disclosure
The board has responsibility for group risk and
opportunity through the audit and risk committee.
Climate risks are integrated and therefore reported and
managed via the same channels as other risks across the
business.
The group ESG committee has oversight of the climate
and carbon workstream and reviews the effectiveness
of the business’ approach to all ESG areas, including
climate.
Progress during 2021/2022
Terms of reference for the ESG committee have been
defined and approved.
The ESG committee’s role is to oversee the carbon
and climate workstream with day-to-day operations
integrated within business operations and risks managed
via the audit and risk committee.
2a
Describe the climate-related risks and opportunities the organisation
has identified over the short, medium and long term
Disclosure
Pensana has identified its primary strategy as a significant climate-related opportunity.
Pensana has identified the potential physical and transitional risk of climate change over a period beyond 10 years (long term) as a
principal risk to the business (refer to
page
). One of the challenges in assessing these risks is the lack of reliable data on both rare 37
earth production and on climate change in Angola. While Pensana has endeavoured to use the most current and relevant information
available, further information is still needed and Pensana is taking additional steps to instruct expert contractors to model the risks
directly associated with the projects. This will allow for more accurate risk assessments once this work is completed.
Pensana remains on a journey towards fully embedding climate change within its corporate governance and more details on this
can be found in the Pensana blueprint for sustainable rare earths which has been published post year end and can be found on the
Pensana website at
https://pensana.co.uk/sustainability/
The specific risks contributing to the principal risk rating are:
Transitional
•
Public climate policy increases taxation or costs and leaves the business unable to compete on price with China and other new
plants, including carbon leakage;
•
Carbon-intensive value chain activity does not decarbonise and becomes exposed to carbon pricing and taxation regimes thus
increasing price (including transportation and supply); and
•
Remaining presence of hard-to-abate CO
2
emissions in operations effecting ‘net zero’, carbon costs and corporate ambition.
Physical
•
Upstream supply chain not adapted for climate change, from both physical asset risk and availability of resources causing
increased availability shortages, short-term price volatilities and loss of supply routes;
•
Physical climate risk to transportation of material through the value chain either by ship, air, road or rail including both
transportation phase and associated loading, unloading and storage logistics; and
•
Physical climate impacts from drought and flooding for operations, power supply and wider community use in Angola.
Quantitative financial impact modelling will be developed by the business going forward as part of the company’s progressive
approach to managing climate change-related risks.
Progress during 2021/2022
During the reporting year, Pensana has commenced mitigation work focused primarily on developing a robust understanding of the
scale of the risk to the business. In order to gain a more detailed and bespoke understanding of the climate risks to the business,
more than 10 years into the future, Pensana has:
•
instructed an independent organisation (Route2) to complete full GHG product analysis (aligned to the GHG Protocol Product
Standard) to identify the areas exposed to carbon risk and to identify opportunities to continually reduce the emissions of our
product aligned to a 1.5°C pathway; and
•
commissioned an advanced physical climate risk assessment of the Longonjo site and the power supply, which will use data
from the University of Cape Town’s Climate Systems Analysis Group. This project will use a multi-scenario approach to create a
detailed risk factor for Longonjo including the risk from drought and flood.
Additionally, design work through the optimisation process has identified further de-risking opportunities including:
•
identifying water savings, water recycling opportunities and increased water consumption efficiency to reduce reliance on
requirements for water abstraction; and
•
working with supply chain partners to identify their climate risk profile to enable further development of Pensana’s understanding
of its supply chain risk.
1b
Describe management’s role in assessing and
managing climate-related risks and opportunities
Disclosure
Senior management oversee risk across the business in
each of their respective areas, including climate risk. As
climate risks are integrated, where technical support is
required, it is provided by internal expertise and, where
relevant, external experts are appointed.
Progress during 2021/2022
The business-wide climate risk and opportunity review
has been completed and new risk categories have been
added to the group risk register.
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES
As part of Pensana’s voluntary commitment as a partner of the TCFD, we have voluntarily disclosed against the recommendations
publicly. This section is our first TCFD submission and is one year ahead of our statutory requirement to do so. This disclosure covers
the reporting period from 1 July 2021 to 30 June 2022.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT
continued
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2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT
2b
Describe the impact of climate-related risks and
opportunities on the organisation’s business,
strategy and financial planning
3c
Describe how processes for identifying, assessing
and managing climate-related risks are integrated
into the organisation’s overall risk management
2c
Describe the resilience of the organisation’s
strategy, taking into consideration different climate-
related scenarios, including a 2°C or lower scenario
Disclosure
Climate change has had a significant influence on the
business as the core strategy and development plan
are focused on a market opportunity to sell a product
identified as being essential for reaching global net zero.
The business has taken a number of decisions to
address the risks and opportunities from climate change.
This has included studies into constructing and financing
a new power line to connect the Longonjo site to the
Angolan grid, sourcing renewable power and optimising
electrification in the processes across the business.
Progress during 2021/2022
Continued progression to develop a sustainable supply
of rare earth materials is essential in addressing the green
energy transition.
Disclosure
Pensana’s approach to climate risk is wholly integrated
with the business’ approach to risk with only a slight
adjustment to assess risks over three time horizons.
Each business area is responsible for their own risk and
opportunity assessments. Technical support is provided
on climate expertise by in-house experts or through
appointment of specialist external consultants.
Progress during 2021/2022
Climate risk has been added as a category to the group
risk register template.
Disclosure
Pensana’s strategy to develop a sustainable supply of rare
earths was tested against two of the International Energy
Agency’s climate scenarios from their World Energy
Model. Using their stated policies scenario and their
sustainable development scenario, the models showed
a threefold and sevenfold increase in demand for rare
earths for clean energy technologies, respectively. The
sustainable development scenario represents a well below
2°C scenario and the stated policies scenario a more
conservative benchmark considering actions put in place
to achieve benchmarks globally. Under both scenarios,
Pensana’s strategy and business plan demonstrated
robust strength in a sector essential to global net zero.
As part of the planning application process for the Saltend
refinery site, the Hedon SFRA L2 Infoworks ICM model
was utilised as a basis for the hydrological modelling
exercise to allow the business to plan for flood risk
mitigation at the site.
As discussed above, quantitative financial impact modelling
will be developed by the company going forward.
Progress during 2021/2022
Pensana has stress-tested its core business strategy
against climate scenarios developed by the International
Energy Agency.
Physical resilience of the Saltend site has been
assessed against Environment Agency and Pensana-
commissioned models and suitable engineering controls
have been put in place.
3a
Describe the organisation’s processes for identifying and assessing
climate risks
Disclosure
Pensana has identified three time horizons over which it identifies climate risk. These are aligned to the business’
development stages and are: less than three years (construction and early operations); three to 10 years (optimisation)
and greater than 10 years (established operations and, where relevant, post operations). Each climate risk is assessed
separately for each of these three time horizons to allow management to understand the risks over the different time
horizons and direct mitigations and capital as is suitable.
Pensana works on an integration philosophy for climate risk. Colleagues in each business area are empowered to include
both physical and transitional climate risks within their own assessments. This is supported by technical expertise from the
in-house ESG team and, where relevant, external consultancies.
Progress during 2021/2022
An amendment was made to the group risk process to include an adapted rating system for climate risks. This is aligned to
the main system but adjusted to cater for three timescales (<3 years; 3 to 10 years; >10 years).
Completion of the maiden transitional risk and opportunity assessment.
The physical risk assessment process of the Saltend site has been completed as part of the planning application, with
suitable design mitigations put in place.
3b
Describe the organisation’s processes for managing
climate-related risks
Disclosure
Climate risk management is integrated within business
processes. Risks are overseen by the group audit and
risk committee which is responsible for the business’
appetite for risk and ensuring suitable mitigations are
in place. Risks are managed throughout the business
hierarchy and climate risks aligned to other areas are
escalated through management as required.
Progress during 2021/2022
Management instructed and ensured completion of a
group-wide climate risk screening including transitional
and physical risk.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT
continued
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2022 ANNUAL REPORT
ESG DATA FOR THE PERIOD ENDED 30 JUNE 2022
CLIMATE AND CARBON
Data point Angola UK* Total Methodology
Scope 1 GHG
emissions
97tCO
2
e – 97tCO
2
e
(FY2021:
For this period,
Pensana consumed
less than 40MWh of
energy within its direct
operations and was
therefore exempt on the
grounds of low usage)
Calculated using the GHG Protocol and based
on a boundary of operational control.
Scope 2 market-based
GHG emissions
– – – Calculated using the GHG Protocol and based
on a boundary of operational control. The
business does not yet import any electricity
into its operations.
Scope 3 emissions n/a n/a n/a
The business has not reported scope 3
emissions as it is not yet feasible with the nature
of the project to do so.
Emissions intensity n/a n/a n/a
In order to meet the requirements of the
Streamlined Energy and Carbon Reporting
Regulation, Pensana is required to report an
emissions intensity. However, as the business
has zero revenue and zero product output a
relevant intensity cannot be calculated.
* Pensana currently has no operations under operational control in the UK.
Where no figure is quoted for a prior reporting period, no disclosure was made.
4a
Disclose the metrics used by the organisation to
assess climate-related risks and opportunities in line
with its strategy
4c
Describe the targets used by the organisation to
manage climate-related risks and opportunities and
performance against targets
Disclosure
Pensana will measure, record and publish its carbon
emissions aligned to the GHG Protocol on an annual
basis from this reporting year; the business will continue
to develop and evolve its methodology for calculating
these emissions. Risks specific to climate change are
disclosed in the principal risks and uncertainties section
(refer to
page 37
).Progress during 2021/2022
Development of an internal basis of reporting to produce
uniform data from across the group.
Disclosure
Pensana has committed to developing a sustainable
supply chain for rare earths and as such, the business
will develop appropriate metrics and targets in due
course. These will include a carbon-reduction target
aligned to scientific reduction pathways.
Progress during 2021/2022
Internal research projects have been undertaken to
review baseline activity and forecast future activity for the
business.
4b
Disclose scope 1, scope 2 and, if appropriate, scope
3 GHG emissions, and the related risks
Disclosure
Refer to the ESG data tables starting on
page 53
.Progress during 2021/2022
We have developed and implemented a basis of
reporting and methodology for calculation of carbon
emissions.
A project has commenced to assess the full value chain
carbon emissions assessment for the NdPr product.
The Saltend Chemicals Park is a cluster of world-class
chemicals and renewable energy businesses including BP
Chemicals technology, Ineos, Nippon Gohsei and Air Products.
It is strategically located on the Humber estuary, a gateway to
Europe and the UK’s busiest ports complex
ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT
continued
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2022 ANNUAL REPORT
COLLEAGUES AND
COMMUNITY
Data point Angola UK* Total Methodology
Total recordable case
frequency rate
– – –
(FY2021: –)
Total recordable cases are the sum of all new
occupational injuries and disease cases that
meet ICMM
1
recording criteria during the
recording period
1
.
Total recordable injury
frequency rate
– – – Total recordable disease cases are the sum of
all new occupational disease cases that meet
recording criteria during the ICMM
1
recording
period in the categories of occupational
respiratory disorders, occupational hearing
loss, musculoskeletal disorders, occupational
cancers and other occupational medical
disorders as described in the definitions for
recordable disease cases
1
.
Total recordable
fatalities
– – – A fatality is defined as the death of a worker
from an occupational injury or disease. A
fatality is recorded when death is a direct result
of an occupational injury or disease
1
.
* Pensana currently has no operations under operational control in the UK.
1
Indicators Guidance published in 2021. As per the guidance, all frequency rates are calculated per 1,000,000 hours worked. The guidance from the
ICMM can be accessed here (accessed September 2022)
https://www.icmm.com/website/publications/pdfs/health-and-safety/2021/guidance_health-and-safety-indicators.pdf
Where no figure is quoted for a prior reporting period, no disclosure was made.
ETHICAL BUSINESS AND
CORPORATE GOVERNANCE
Data point Angola UK* Total Methodology
Breaches upheld
relating to ethical
business
– – – Breaches of ethical conduct upheld by the
business after being raised and investigated.
Breaches raised
via internal whistle-
blowing
– – – Queries raised via internal whistle-blowing
upheld as breaches after investigation.
Gender split on board Male 83%/Female 17% % members of Pensana Plc board broken
down by gender as of 30 June 2022.
Gender split in
workforce
Male 85%/
Female 15%
Male 64%/
Female 36%
Male 80%/
Female 20%
% employees within Pensana Plc and all
subsidiaries under operational control as of
30 June 2022.
* Pensana currently has no operations under operational control in the UK.
Where no figure is quoted for a prior reporting period, no disclosure was made.
ENVIRONMENT AND ECOLOGY
Data point Angola UK* Total Methodology
Permit or compliance
breaches
(environmental)
– – – Upheld breaches of environmental permits
or government-induced conditions such as
planning consents against the business.
Energy consumption
directly from electricity
1,300kWh – 1,300kWh Calculated using the GHG Protocol and based
on a boundary of operational control; note the
business does not yet import any electricity
into its operations.
Energy consumption from electricity reported
for Angola is all self-generated from on-site
solar power. Solar power self-generation
calculated through pro rata method based on
data availability.
Energy consumption
not from electricity
388,300kWh – 388,300kWh Calculated using the GHG Protocol and based
on a boundary of operational control.
Consists solely of diesel oil, with energy factor
taken from ‘Carbon emission factors and
calorific values from the UK Greenhouse Gas
Inventory (2021)’.
Total energy
consumption
389,600kWh – 389,600kWh
Calculated using the GHG Protocol and based
on a boundary of operational control.
Water import – from
ground water
1,500m
3
– 1,500m
3
Water which is being held in, and can be
recovered from, an underground formation (as
defined by CDP
1
).
Water import – from
fresh surface water
– – – Water that is naturally occurring water on
the earth’s surface in ice sheets, ice caps,
glaciers, icebergs, bogs, ponds, lakes, rivers
and streams, and has a low concentration of
dissolved solids (less than 10,000mg/l total
dissolved solids) (as defined by CDP
1
).
No Pensana sites are yet connected to fresh
water supplies.
Water import – from
third party
– – – This includes water provided by municipal
water suppliers, public or private utilities, and
waste water from any other organisation (as
defined by CDP
1
).
No Pensana sites are yet connected to
municipal water supplies.
* Pensana currently has no operations under operational control in the UK.
1
https://www.cdp.net/en/guidance/guidance-for-companies
.Where no figure is quoted for a prior reporting period, no disclosure was made.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT
continued
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2022 ANNUAL REPORT
The state-of-the-art Lobito Port is connected directly to the Benguela
railway line which provides an efficient low-carbon transport mechanism.
Once loaded, it travels to the port in Hull where it is unloaded directly to
the plant with no need for carbon-intensive road travel.
Lobito Port
Pensana has signed a letter of intent securing private wire connection
to battery storage operated by Yorkshire Energy Park under which it
will have access to 4MW rising to 10MW of low-carbon electricity for
10years.
Yorkshire Energy Park
The Saltend plant will operate aligned to
robust English law which sets high standards
for mitigating health, safety and environmental
risks.
The design will include solar panels for
self-generation of renewable energy, and the
business is also exploring future connections
to benefit from the investment in renewable
power from North Sea wind.
Saltend Plant
The NdPr separation process will result in other
products being created. These products might
not necessarily be primary revenue-generators,
but to ensure Pensana minimises its waste
going to landfill, routes to market for by-
products are currently being explored.
By-product production
Purchase and use
opportunity for waste
andby-product
Longonjo Mine will be constructed aligned to best ESG practice. This
has included instructing an independent ESIA during the planning stage,
building a power line to enable use of hydropower as part of operations
and adjusting the mine area to exclude areas of biodiverse and cultural
significance.
Longonjo Mine
Carbon emissions from chemical reagent production (scope 3) will be
considered in procurement decisions to ensure that the impact on the
global climate is minimised.
Reagent manufacture
Pensana has signed a co-operation agreement with Norwegian
company Equinor with respect to potential offtake of hydrogen to
facilitate recycling of used rare earth magnets.
Hydrogen2Humber
The on-site MREDS plant will process ore into a MREDS product
This means more raw material will remain on site and Pensana will be
transporting a product of lower weight and volume, reducing shipping
requirements and carbon emissions.
Longonjo MREDS plant
The Saltend processing plant will be built within the existing Saltend
Chemicals Park which allows Pensana to plug-and-play into utilities,
and existing infrastructure. This means shared expertise and facilities to
manage environmental risk.
Saltend Chemicals Park
The mine TSF will be constructed in line with the Global Industry
Standard on Tailings Management, the leading ESG standard in the
sector. This means the TSF will be built, and monitored and aligned to
the latest leading safety and social standards.
Mine TSF
Saltend Plant
HUMBER FREEPORT, UK
Pensana will develop digital traceability to ensure products can be
traced back to their original place of origin tagged with ESG credentials.
Processing and assembly
AFRICA
END USERS
Pensana’s NdPr will be used in wind turbines and
electric vehicles and are therefore essential for
supporting the drive to global net zero.
Pensana is aiming to support the circular economy by investing in
research and infrastructure to develop a recycling facility for rare earths.
This will reduce the quantity of used magnets going to landfill and
reduce the need for virgin feedstock taken through mining.
Disposal
Separation after use
Hull
Purchase and use opportunity
for waste and by-products
Processing and assembly
Reagent Manufacture
Hydrogen2HumberTriton Power
Saltend Chemicals Park
Saltend Park
Disposal
Separation after use
End users
LUANDA
Lobito Port
Mine TSF
Longonjo Plant
Reagent Manufacture
Saltend, Humber
Freeport UK
ANGOLA
Longonjo Mine
SUSTAINABLE
VALUE CHAIN
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PENSANA PLC
2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT
REMUNERATION
REPORT
STATEMENT OF THE CHAIRMAN OF
THEREMUNERATION COMMITTEE
The remuneration report outlines remuneration awarded to
directors and non-executive directors during the year.
Pensana was admitted to the Official List of the Financial
Conduct Authority (standard segment) and commenced trading
on the LSE’s Main Market for listed securities on 6July2020.
Pensana has since that date looked to develop its remuneration
framework in accordance with Schedule 8 to the Accounting
Regulations.
As part of this process, the remuneration committee completed
a major review of the remuneration policy in 2021. This review
considered the latest governance developments, independent
evaluations of market trends, the evolving views of shareholders
alongside input from the committee’s independent advisers.
Consequently, several recommended changes were proposed
and submitted at the last annual general meeting (AGM)
held on 9 December 2021. Aresolution to approve the
directors’ remuneration report was tabled for consideration
by shareholders. A total of 71,909,111votes were cast with
99.51% of shareholders voting infavour and 0.49% voting
against.
Once again, the shareholders will be asked to approve the
annual remuneration report as an ordinary resolution at the
AGM in December 2022.
OVERVIEW OF THE POLICY AND HOW IT WAS APPLIED FOR FY2022
Fixed remuneration
Salary
Influenced by role
requirements, performance
of the individual, level of
experience and market
positioning.
Increases were awarded to executive directors from 1 July 2022.
With effect from 1 July 2022, executive director base annual salaries, reflected in British pound to align
to their contract terms, were as follows:
•
Mr Paul Atherley – £288,750 (2021: £275,000);
•
Mr Tim George – £315,000 (2021: £300,000); and
•
Mr Rob Kaplan – £220,000 (2021: prior to this date, Mr Kaplan acted as key management).
Benefits
Provision of an appropriate
level of benefits for the relevant
role and local market.
Executive directors do not currently receive any benefits.
With the new remuneration policy in place, the committee
considered the overall performance of the group as well as
that of each director during the year ended 30 June 2022.
Remuneration including short- and long-term incentives
was awarded in line with the performance conditions of the
remuneration policy with additional conditionality in respect
ofthe short-term incentives (STIs).
For the purposes of this report, key management personnel of
the group are identified as those persons having the authority
and responsibility for planning, directing and controlling major
activities of the company and the group, directly or indirectly.
The company’s auditor, BDO LLP, is required by law to audit
certain disclosures and where disclosures have been audited,
they are indicated as such.
Steven Sharpe
Chairman of the remuneration committee
27 October 2022
Variable remuneration
Annual bonus
Linked to key financial,
operational, HSE, socio-
economic development and
strategic goals of the company,
which reflect critical factors of
success.
Maximum opportunity for FY2022 of 150% of salary.
The committee reviewed the annual bonus targets for FY2022 to ensure that they are aligned to our
strategic priorities subject to finalisation of the FEED study and completion of main financing. The bonus
scorecard for FY2022 was linked to:
•
completion of main financing;
•
completion of the FEED study;
•
initiation of construction at Longonjo and Saltend;
•
health and safety objectives; and
•
ESG objectives.
Annual bonuses are subject to a clawback provision, which may apply for up to two years following the
end of the performance period.
Long-term incentive (LTI) plan
Aligned with shareholders and
motivating the delivery of long-
term objectives.
Share awards were issued to executives during the year. These awards are subject to six performance
conditions: absolute total shareholder return (TSR) (market-based), lost time injury frequency rate (LTIFR),
fullfinancing of the Longonjo Project, full financing of the Saltend Project, construction completion of the
rare earth separation facility (RESF) and production of the RESF.
LTI awards are subject to a two-year holding period post vesting to further align executive remuneration to
shareholder interests. The LTI awards are also subject to a clawback provision, which applies for up to two
years following the end of the relevant performance period.
Shareholding guidelines
Aligned with shareholders. Shareholding guidelines of 200% of salary.
Clarity
Remuneration arrangements should be transparent
and promote effective engagement with shareholders
and the workforce.
The committee is mindful of ensuring that our remuneration arrangements
are clear and transparent for both participants and shareholders. When
considering changes to our remuneration policy, the committee engaged
with major shareholders and key proxy bodies and took their comments into
account.
Simplicity
The remuneration structures should be easily
understood, avoid complexity and be easy
tooperate.
Pensana’s remuneration framework is focused on simplicity, consisting of fixed
remuneration, an annual bonus and a single LTIplan.
Remuneration arrangements should ensure
reputational and other risks from excessive rewards,
and behavioural risks that can arise from target-
based incentive plans, are identified and mitigated.
The committee takes risk factors into account when setting and assessing
remuneration arrangements. The performance framework includes a balanced
range of measures which include construction roll-out, future anticipated
production, financial, health and safety and ESG measures. The remuneration
framework provides the committee with discretion to adjust incentive outturns
or to claw back remuneration in certain circumstances.
5958
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2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT
ANNUAL
REMUNERATION REPORT
THE FOLLOWING INFORMATION HAS BEEN AUDITED:
Single total figure of remuneration for the year ended 30 June 2022.
Salaries
and fees
US$
Total
fixed
US$
Bonuses
US$
Benefits
US$
Options
and rights
US$
Total
variable
US$
Total
2022
US$
Non-executive directors
S Sharpe
1
50,183 50,183 – – – – 50,183
J Beeton
66,232 66,232 – – – – 66,232
S Bates
2
16,558 16,558 – – – – 16,558
L Northover
66,232 66,232 – – – – 66,232
Executive directors
T George
364,531 364,531 258,303 – 558,634 816,937 1,181,468
P Atherley
3
364,273 364,273 236,778 – – 236,778 601,051
R Kaplan
4
62,920 62,920 40,898 – 111,726 152,624 215,544
Key management
R Kaplan
188,760 188,760 122,694 – 335,180 457,874 646,634
R Smith
238,640 238,640 163,592 – – 163,592 402,232
¹ Appointed on 29 September 2021.
2
3
4
Pensana employees at Saltend site visit
Single total figure of remuneration for the year ended 30 June 2021.
Salaries
and fees
US$
Total
fixed
US$
Bonuses
US$
Other
1
US$
Benefits
3
US$
Options
and rights
5
US$
Total
variable
US$
Total
2021
US$
Non-executive
directors
P Atherley
2
56,483 56,483 271,114 251,345 – 6,053,262 6,575,721 6,632,204
M Hohnen
6
N Maclachlan
6
62,384 62,384 – – – – – 62,384
S Bates
4
48,983 48,983 – – – – – 48,983
L Northover
4
45,222 45,222 – – – – – 45,222
J Beeton
4
22,410 22,410 – – – – – 22,410
Executive directors
T George 232,327 232,327 305,003 – – 1,961,250 2,266,253 2,498,580
D Hammond
4
177,090 177,090 – – 21,005 1,569,000 1,590,005 1,767,095
Key management
R Kaplan 200,234 200,234 203,335 – – 1,569,000 1,772,335 1,972,569
R Smith 111,816 111,816 135,557 – – – 135,557 247,373
1
2
3
4
D Hammond resigned on 30 December 2020.
5
value at vesting disclosed by way of footnote. The table now reflects the market value at vesting date).
6
6160
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2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT
ANNUAL REMUNERATION REPORT
continued
The charts above have been compiled using the following assumptions:
Fixed remuneration
Salary as at 1 July 2022
Variable remuneration
•
Annual bonus: maximum award of 150% of base salary; and
•
LTI plan: maximum award of 150% of base salary.
PERFORMANCE SCENARIOS
Minimum
Fixed remuneration only
Medium
Fixed remuneration plus variable pay for the purpose of illustration as follows:
•
Annual bonus: assumes a bonus payout of 50% of maximum; and
•
LTI: assumes vesting of 50% of maximum.
Maximum
Fixed remuneration plus variable pay for the purpose of illustration as follows:
•
Annual bonus: assumes a bonus payout of 100% of maximum; and
•
LTI: assumes vesting of 100% of maximum.
ADDITIONAL NOTES TO THE TOTAL REMUNERATION TABLE
For FY2023, the committee has determined that the base salaries (per annum) for the executive directors should be as setout below:
Base salary from
1 July 2021
£
Base salary from
1 July 2022
£
Executive directors
T George
300,000 315,000
P Atherley
1
275,000 288,750
R Kaplan
2
190,000 220,000
1
2
MaximumMidMinimum
25%
1
00
%
57%
60%
43%
£288,750
£505,313
£721,875
Fixed remuneration Annual variable remuneration
Long-term variable remuneration
£315,000
£787,500
£1,260,000
MaximumMidMinimum MaximumMidMinimum
40%
40%
1
00
%
37.5%
30%
37.5%
30%
25%
40%
1
00
%
37.5%
30%
37.5%
30%
25%
£220,000
£550,000
£880,000
ILLUSTRATION OF THE APPLICATION OF THE REMUNERATION POLICY
Mr Tim George Mr Robert KaplanMr Paul Atherley
SHARE-BASED PAYMENTS
Performance rights
2022
During the prior year, no performance rights were issued to directors and key management personnel.
2021
During the prior year, no performance rights were issued to directors and key management personnel.
The use of performance rights was a legacy arrangement under the previous ASX listing of the then parent Pensana Metals Limited.
2021 – amendment to historical performance rights
Director/key
management
personnel
Number
of rights
Fair value
1
per right
Original vesting
conditions
Original
grant date
Original
expiry date
Vesting
status
P Atherley 3,858,037 n/a Completion of the
definitive feasibility
study (DFS) and
commencement
of construction by
13 May 2023
13 May 2018 13 May 2023 Fully vested
D Hammond 1,000,000 n/a Completion of
the DFS and
commencement of
construction by
13 May 2023
17 September 2018 17 September 2023 Fully vested
T George 1,250,000 n/a Commencement of
construction of the
concentrator by end
December 2020
22 April 2019 22 April 2019 Fully vested
T George
1
1,250,000 US$0.014
(£0.0108)
Commencement of
concentrate sales
by end
December 2021
22 April 2019 22 April 2019 Vesting extended.
Vesting subject
to time-weighted
pro rata 1/3 basis
on 31 December
2021/2022/2023
R Kaplan
1
1,000,000 n/a Commencement of
construction ofthe
concentrator by end
December 2020
1 January 2020 31 December 2020 Fully vested
R Kaplan
1
1,000,000 US$0.15
(£0.11)
Commencement of
concentrate sales
by end
December 2021
1 January 2020 31 December 2021 Vesting extended.
Vesting subject
to time-weighted
pro rata 1/3 basis
on 31 December
2021/2022/2023
1
During the prior year, the amended awards were repriced to reflect the extended vesting conditions. The following inputs were used under the
Black-Scholes model:
•
Stock pricing US$0.0956
•
Exercise price US$0.0010
•
Time to maturity Four years
•
Risk-free interest rate 1.6%
•
Annualised volatility 100%
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2022 ANNUAL REPORT
Share-based options
2022
During the year, no options were issued to directors and key management personnel.
2021
During the prior year, no options were issued to directors and key management personnel.
Share-based options holdings of key management personnel as at 30 June 2022
Name
Balance
as at
1 July 2021
Number
Granted
Number
Vested
in shares
Number
Balance
as at
30 June 2022
(beneficial
interest)
Number
T George
1,250,000 – (416,667) 833,333
R Kaplan
1,000,000 – (333,333) 666,667
During the prior year, performance rights awarded to T George and R Kaplan, that were originally subject to the commencement of concentrate sales
by 31December 2021, were restructured to realign to the amended project scopes and the planned addition of an MREDS and solvent extraction (SX)
refinery alongside the concentrator plant. As a result thereof, the timeline for vesting was amended to 31December 2021 to 2023 with vesting to take
place on a one-third time-weighted basis.
Share-based options holdings of key management personnel as at 30 June 2021
Name
Balance
as at
1 July 2020
Number
Granted
Number
(Vested
in shares)
Number
Balance
as at
30 June 2021
(beneficial
interest)
Number
P Atherley 3,858,037 – (3,858,037) –
D Hammond 1,000,000 – (1,000,000) –
M Hohnen – – – –
N Maclachlan – – – –
T George 2,500,000 – (1,250,000) 1,250,000
R Kaplan 2,000,000 – (1,000,000) 1,000,000
LONG-TERM INCENTIVE PLAN SHARE AWARDS
2022
The company recently established an employee incentive plan and share awards were issued to executive directors and key
management personnel during the year.
These awards are subject to six performance conditions, namely:
•
financing of the Longonjo Project (12.5% of award);
•
financing of the Saltend Project (12.5% of award);
•
construction completion of the RESF (12.5% of award);
•
first production at the RESF (12.5% of award);
•
TSR – annual compound share price growth of 20% plus dividends over a three-year period (35% of award); and
•
LTIFR target ratio of zero, subject to industry standard and remuneration committee review.
The vesting period for these shares is three years from 1 July 2021.
Share awards issued to executive directors and key management personnel
Name Grant date
Quantity
of shares
awarded
Vesting period
T George 16 May 2022
708,333
1
Three years ending 30 June 2024
R Kaplan 16 May 2022
487,500
1
Three years ending 30 June 2024
R Smith 16 May 2022
400,000
Three years ending 30 June 20241,595,833
1
Asthe KPIs could not be finalised, management agreed to defer the allotment and have it included in the FY2022 shareaward.
Shareholdings of key management personnel in the company
The interests of key management personnel in the shares of the company, held directly or indirectly, as at 30 June 2022 were as
follows:
Name
Balance
as at
1 July 2021
Number
Received on
vesting of
performance
rights (issued)
Number
Received on
vesting
(not issued)
Number
Purchases
during
the period
Number
Balance
as at
30 June 2022
Number
P Atherley
13,427,898 – – – 13,427,898
J Beeton
– – – – –
L Northover
– – – – –
S Sharpe
– – – – –
A Saxby
– – – – –
T George
1,250,000 – 416,667
1
– 1,250,000
R Kaplan
1,000,000 – 333,333
1
– 1,000,000
1
option holding table on page 64.
1,333,333 respectively.
The interests of key management personnel in the shares of the company, held directly or indirectly, as at 30 June 2021 were
asfollows:
Name
Balance
as at
1 July 2020
Number
Received
on vesting of
performance
rights
Number
Purchases
during the
period
Number
Balance
as at
30 June 2021
Number
P Atherley 9,069,861 3,858,037 500,000 13,427,898
J Beeton – – – –
L Northover – – – –
S Bates – – – –
T George – 1,250,000 – 1,250,000
R Kaplan – 1,000,000 – 1,000,000
Payments to past directors
No payments were made to past directors in the year ended 30 June 2022 (2021: US$nil).
Payments for loss of ofce
No payments for loss of office were made in the year ended 30 June 2022 (2021: US$nil).
ANNUAL REMUNERATION REPORT
continued
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2022 ANNUAL REPORT
THE FOLLOWING SECTION IS UNAUDITED:
Relative importance of spend on pay
The following table sets out the percentage change in payments to shareholders and overall expenditure on pay across thegroup:
2022
US$
2021
US$
Change
%
Payments to shareholders –
–
–Group employment costs 111
5,439,626
2,578,814Pay ratios
During FY2022 and FY2021, the company fell below the 250 UK employee limit. As a result thereof, using the two-year rule, the
company was exempt from reporting pay ratios for this financial year.
Annual percentage change in single-gure remuneration for the year ended 30 June 2022
Year
Salaries
and fees
US$
Bonuses
3
US$
Other
US$
Benefits
US$
Options
and rights
US$
Total
US$
% change
year-on-
year
Non-executive
directors
S Sharpe
2022 50,183 – – – – 50,183 n/a
2021 – – –
–
––
–M Hohnen
1
2022 – – – – – – (100)
2021 62,349 – – – – 62,349 89
N Maclachlan
1
2022 – – – – – – (100)
2021 62,384 – –
–
–62,384
89S Bates
2
2022 16,558 – – – – 16,558 (66)
2021 48,983 – – – – 48,983 –
L Northover
2022 66,232 – – – – 66,232 46
2021 45,222 – – – – 45,222 n/a
J Beeton
2022 66,232 – – – – 66,232 196
2021 22,41 – – – – 22,41 n/a
P Atherley
4
2022 – – – – – – (100)
2021 56,483 271,114 251,345 – 6,053,262 6,632,204 812
Executive directors
P Atherley
4
2022 364,273 236,778 – – – 601,051 n/a
2021 – – – – – – –
T George
2022 364,531 258,303 – – 558,634 1,181,468 (53)
2021 232,327 305,003 – – 1,961,250 2,498,580 16
R Kaplan
5
2022 62,920 40,898 – – 111,726 215,544 n/a
2021 – – – – – – –
D Hammond
2022 – – – – – – (100)
2021 177,090 – – 21,005 1,569,000 1,767,095 n/a
¹ M Hohnen and N Maclachlan resigned on 30 June 2021.
2
3
4
5
The following graph illustrates the company’s performance over the past five years relative to the FTSE Developed Small Cap Index.
For purposes of comparison, the share price has been retranslated into a British pound equivalent at the daily AUD/GBP exchange
rate for the period that the company was listed on the ASX prior to its listing on the LSE on 6 July 2020. Thedirectors believe this
comparison is appropriate as it compares the company to an index comprising small cap stocks belowthe US$150million free float-
adjusted market cap.
0
200
400
600
800
1,000
1,200
1,400
3 September 2022
PR8 and PRE FTSC
3 July 2017
Consideration by the directors of matters relating to directors’ remuneration
The remuneration committee considered executive directors’ remuneration and the board considered the non-executive directors’
remuneration for the year ended 30 June 2022.
Shareholder voting
At the AGM on 9 December 2021, there was an advisory vote to adopt the remuneration report for the prior period. Of the
71,909,111 proxy votes validly appointed, 71,558,022 (99.51%) voted in favour.
Service contracts
All executive directors and key management personnel have full-time contracts of employment with the company; non-executive
directors have contracts of service. No director has a contract of employment or contract of service with the company or its
associated companies with a fixed notice term which currently exceeds six months. Directors’ notice periods were considered
sufficient during the period to ensure an effective handover of duties should a director leave the company. These will be considered
for review as to their appropriateness during the current financial year.
The termination provisions are as follows:
Description Notice period Payment in lieu of notice
Employer-initiated termination without reason Six months Six months
Termination for serious misconduct None None
Employee-initiated termination Six months Six months
PENSANA VS FTSE SMALL CAP INDEX
(Indexed, July 2017 = 100)
ANNUAL REMUNERATION REPORT
continued
6766
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2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT
Key terms of employment contracts
Contracts for services of key management personnel
and relevant executives
Remuneration and other terms of employment for the directors
and other key management personnel are formalised in service
agreements. The contractual arrangements contain certain
provisions typically found in contracts of this nature. The
termination provisions are as follows:
Mr Paul Atherley – Executive chairman
(effective 1 July 2021)
(previously non-executive chairman – effective 13 May 2018)
Mr Atherley has entered into a letter of appointment with the
company in respect of his appointment as executive director/
chairman.
Base terms:
•
This agreement was effective from 1 July 2021 and has no
set term;
•
Base remuneration which is a monthly salary and will be
reviewed annually (£288,750 per annum); and
•
An STI of up to 150% of base salary which will be reviewed
annually and will be paid on achievement of near-term
milestones (KPIs) in accordance with the bonus scorecard
for the period in question.
Mr Tim George – Chief executive officer
(appointed 22 April 2019)
Base terms:
•
Base remuneration which is a monthly salary and will be
reviewed annually (£315,000 per annum).
Incentive package:
•
An STI of up to 150% of base salary which will be reviewed
annually and will be paid on achievement of near-term
milestones (KPIs) in accordance with the bonus scorecard
for the period in question; and
•
LTI share awards based on a maximum of 150% of base
salary with vesting over a three-year period linked to six
performance conditions: absolute TSR (market-based), the
LTIFR, full financing of the Longonjo Project, full financing of
the Saltend Project, construction completion of the RESF
and production of the RESF.
Mr Robert Kaplan – Financial director
(effective 31 March 2022)
(previously CFO, appointed 1 January 2020)
Base terms:
•
Base remuneration which is a monthly salary and will be
reviewed annually (£220,000 per annum).
Incentive package:
•
An STI of up to 150% of base salary which will be reviewed
annually and will be paid on achievement of near-term
milestones (KPIs) in accordance with the bonus scorecard
for the period in question; and
•
LTI share awards based on a maximum of 150% of base
salary with vesting over a three-year period linked to six
performance conditions: absolute TSR (market-based), the
LTIFR, full financing of the Longonjo Project, full financing of
the Saltend Project, construction completion of the RESF
and production of the RESF.
Mr Rocky Smith – Chief operating officer
(appointed 8 March 2021)
Base terms:
•
Base remuneration which is a monthly salary and will be
reviewed annually (US$262,500 per annum).
Incentive package:
•
An STI of 150% of base salary which will be reviewed
annually and will be paid on achievement of near-term
milestones (KPIs) in accordance with the bonus scorecard
for the period in question; and
•
LTI share awards based on a maximum of 150% of base
salary with vesting over a three-year period linked to six
performance conditions: absolute TSR (market-based), the
LTIFR, full financing of the Longonjo Project, full financing of
the Saltend Project, construction completion of the RESF
and production of the RESF.
Non-executive directors
The company’s Constitution provides that the directors may
be paid out of company funds, as remuneration for their
services, a sum determined from time to time by the company’s
shareholders in general meeting, with that sum to be divided
among the directors in such manner as they agree.
Directors’ remuneration for their services as directors is
by a fixed sum and not a commission on a percentage of
profits or operating revenue. The maximum sum of directors’
remuneration may not be increased except at a general
meeting in which particulars of the proposed increase
have been provided in the notice convening the meeting to
shareholders. There is provision for directors who devote
special attention to the business of the company or who
perform services which are regarded as being outside the
scope of their ordinary duties as directors, or who at the
request of the board engage in any journey on company
business, to be paid extra remuneration determined by the
board. Directors are also entitled to reimbursement for their
reasonable travel, accommodation and other expenses
incurred in attending company or board meetings, or meetings
of any committee engaged in the company’s business.
Payments to past directors
No payments were made to past directors in the year ended
30June 2022 (2021: nil).
Directors’ remuneration policy report
The following section sets out the group’s remuneration policy
(the policy report). It is intended that this policy report will be
put forward to shareholders for approval at the 2022 AGM and
will thereafter come into immediate effect following theAGM.
Remuneration principles
Pensana’s culture is performance-driven within a high-growth
environment requiring significant time, effort and commitment. We
have a management team that is highly experienced within the
specialist world of rare earth mining and chemical engineering,
which therefore requires unique skill sets to be brought to bear.
Against this background, our approach to remuneration is guided
by the following overarching principles:
•
The employment terms for executive directors and senior
management are designed to attract, motivate and retain
high-calibre individuals who will drive the performance of the
business. The group competes for talent in the niche rare
earth sector and we aim for packages to be competitive in this
market;
•
Remuneration packages should be weighted towards
performance-related pay;
•
Performance measures should be tailored to Pensana’s
strategic goals, and targets should be demanding;
•
Share-based rewards should be meaningful – the committee
believes long-term share awards provide alignment with the
long-term interests of shareholders andthe company; and
•
Remuneration structures should take into account best practice
developments, but these should be applied in a manner that is
appropriate for Pensana’s industry and specific circumstances.
Review process and changes to the
policy report
The committee completed a major review of the remuneration
policy in 2021, culminating in its approval at the AGM in
December 2021. This review considered the latest governance
developments, independent evaluations of market trends and
the evolving views of shareholders alongside input from the
committee’s independent advisers. Input was also received
from the company’s management, while ensuring that any
conflicts of interest were suitably mitigated. Notable new
features of the remuneration structure that were introduced
were:
•
A post-vesting holding period under the LTI plan will now
form part of the policy report;
•
Post-employment shareholding requirements have been
introduced; and
•
LTIs will be extended to a standard three-year measurement
term and will be subject to malus and clawback.
Humber bridge, Hull, UK
ANNUAL REMUNERATION REPORT
continued
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2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT
Operation
•
Awards of conditional shares (or equivalent) which would normally vest based on
performance over a period of three years.
•
Awards granted from FY2021 will be subject to a post-vesting holding period.
•
Awards may accrue dividend equivalents.
•
Awards will be subject to malus and clawback provisions.
Maximum opportunity
Maximum award of up to 200% of salary and a normal award of 150% of salary.
Performance measures
•
Vesting is normally based on performance against financial, operational and strategic
measures.
•
The committee determines targets each year to ensure that targets are stretching and
represent value creation for shareholders, while remaining motivational for management.
•
The committee retains the discretion to amend the formulaic outcome if considered
appropriate and to ensure fairness to both shareholders and participants.
•
The committee has additional discretion to make downward adjustments in the event
that a significant increase in the share price leads to potentially excessive rewards.
Shareholding guidelines
It is the company’s policy that each of the executive directors holds a meaningful number of
Pensana shares. The guideline is to build and maintain a minimum of two years’ basic salary
for the applicable director. Newly appointed executive directors will normally have five years
from the date of appointment to reach this guideline.
Malus and clawback provisions
In line with best practice, the vesting of LTI awards is subject to malus and clawback
provisions. The malus provision enables the committee to exercise discretion to reduce,
cancel or impose further conditions on an award prior to vesting or exercise (as the case
may be). The clawback provision enables the committee to require participants to return
some or all of an award after payment or vesting. Both provisions may be applied in
circumstances including:
•
a serious misstatement of the company’s audited results;
•
gross misconduct;
•
payments based on erroneous data; or
•
a serious failure of risk management.
For and on behalf of the board:
Steven Sharpe
Chairman of the remuneration committee
27 October 2022
Having established the newly approved remuneration policy at the December 2021 AGM, the committee recognised that this should not be a
static process and, as such, during the current period, continued to follow the latest governance developments and market trends, so as to
ensure that the remuneration policy remained fully fit for purpose.
Salary
Purpose and link to strategy
•
To attract and retain executive directors of the calibre required by the business.
•
This is a core element of the remuneration package.
Operation
•
The base salaries for executive directors are determined by the committee taking into
account a range of factors including:
– the scope of the role;
– the individual’s performance and experience; and
– positioning against comparable roles in other mining companies of similar size and
complexity.
•
Base salaries are normally reviewed annually with changes effective from the start of the
financial year on 1 July.
Maximum opportunity
•
In determining salary increases, the committee is mindful of general economic conditions
and salary increases for the broader company employee population.
•
More significant increases may be made at the discretion of the committee in certain
circumstances, including (but not limited to):
– where an individual’s scope of responsibilities has increased;
– where, in the case of a new executive director who is positioned initially on a lower
starting salary, an individual has gained appropriate experience in the role; and
– where the positioning is out of step with salaries for comparable roles in themarket.
Benefits
Purpose and link to strategy
To provide market-competitive benefits.
Operation
•
The benefit policy is to provide an appropriate level of benefit for the role taking into
account relevant market practice.
•
Under the current arrangements, executive directors do not receive any benefits,
however, consideration is being given to:
– a benefits allowance of 10% of salary in respect of both benefits and pension; and
– group life, disability and critical illness insurance.
•
The committee retains the discretion to provide reasonable additional benefits based on
individual circumstances (e.g., travel allowance and relocation expenses for new hires or
pension arrangements).
Maximum opportunity
The benefit provision will be set at an appropriate level taking into account the cost to the
company and the individual’s circumstances.
Annual bonus
Purpose and link to strategy
To motivate and reward performance measured against annual key financial and operational
strategic goals of the company, which reflect critical factors of success.
Operation
Short-term annual incentive based on performance during the financial year. Awards will be
subject to malus and clawback provisions.
Maximum opportunity
Maximum award of up to 150% of base salary.
Performance measures
•
The amount of bonus earned is based on performance against financial, operational,
strategic and personal measures.
•
The committee reviews the performance measures annually and sets targets to ensure
that they are linked to corporate priorities and are appropriately stretching in the context
of the business plan.
•
Prior to determining bonus outcomes, the committee considers performance in the
round to ensure that actual bonuses are appropriate. The committee retains the
discretion to amend the formulaic outcome if considered appropriate and to ensure
fairness to both shareholders and participants.
LTI plan
Purpose and link to strategy
•
To motivate and reward for the delivery of long-term objectives in line with the business
strategy.
•
To create alignment with the shareholder experience and motivate long-term objectives.
ANNUAL REMUNERATION REPORT
continued
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2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT
ANNUAL
FINANCIAL
STATEMENTS
Directors’ responsibility statement 74
Directors’ report 75
Audit and risk committee report 77
Independent auditor’s report 79
Consolidated statement of comprehensive income 86
Consolidated statement of financial position 87
Consolidated statement of changes in equity 88
Consolidated statement of cash flows 90
Notes to the financial statements 91
Company statement of financial position 120
Company statement of cash flows 121
Company statement of changes in equity 122
Notes to the company financial statements 124
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2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT
The directors are responsible for preparing the annual report
and the financial statements in accordance with United
Kingdom (UK) adopted international accounting standards and
applicable law and regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law, the directors
are required to prepare the group financial statements and
have elected to prepare the company financialstatements
in accordance with UK-adopted international accounting
standards. Under company law, the directors must not approve
the financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the group and
company and of the profit or loss for the group for that period.
In preparing the financial statements, the directors are required
to:
•
select suitable accounting policies and then apply them
consistently;
•
make judgements and accounting estimates that are
reasonable and prudent;
•
state whether they have been prepared in accordance with
UK-adopted international accounting standards, subject
to any material departures disclosed and explained in the
financial statements;
•
prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the group and the
company will continue in business; and
•
prepare a directors’ report, a strategic report and a
directors’ remuneration report which comply with the
requirements of the Companies Act 2006.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the company’s
transactions and disclose with reasonable accuracy at any time
the financial position of the company and for ensuring that the
financial statements comply with the Companies Act 2006.
They are also responsible for safeguarding the assets of
the company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The directors are responsible for ensuring that the annual
report and accounts, taken as a whole, are fair, balanced and
understandable and provide the information necessary for
shareholders to assess the group’s performance, business
model and strategy.
WEBSITE PUBLICATION
The directors are responsible for ensuring the annual report
and the financial statements are made available on a website.
Financial statements are published on the company’s website in
accordance with legislation in the UK governing the preparation
and dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity
of the company’s website is the responsibility of the directors.
The directors’ responsibility also extends to the ongoing
integrity of the financial statements contained therein.
DIRECTORS’ RESPONSIBILITIES PURSUANT
TODISCLOSURE GUIDANCE AND
TRANSPARENCY RULES REQUIREMENTS 4
The directors confirm to the best of their knowledge:
•
the financial statements have been prepared in accordance
with the UK adopted international accounting standards,
give a true and fair view of the assets, liabilities, financial
position and profit or loss of the group; and
•
the annual report includes a fair review of the development
and performance of the business and the financial position
of the group and company, together with a description of
the principal risks and uncertainties that they face.
This responsibility statement and the directors’ report were
approved by the board of directors on 27 October 2022 and
are signed on its behalf by:
Paul Atherley
Chairman
DIRECTORS’
RESPONSIBILITY
STATEMENT
DIRECTORS’
REPORT
The directors of Pensana Plc (the company) submit herewith
the annual financial report of Pensana Plc (consolidated entity)
for the year ended 30 June 2022.
DIRECTORS AND DIRECTORS’ DETAILS
The names and particulars of the directors of the company
during or since the end of the financial year are stipulated on
pages 8
to
10.
DIVIDENDS
No dividends have been paid or proposed since the start of
the financial year, and the directors do not recommend the
payment of a dividend in respect of the financial year.
FINANCIAL INSTRUMENTS
Note 21 to the financial statements sets out the risks in respect
of financial instruments. The board reviews and agrees overall
treasury policies, delegating appropriate authority to the finance
director. Treasury operations are reported at each board
meeting and are subject to weekly internal reporting.
POLITICAL CONTRIBUTIONS AND
CHARITABLEDONATIONS
During the current and previous years, the group did not make
any political contributions and charitable donations.
EMPLOYEE ENGAGEMENT
Details of how the directors have engaged with employees and
how the directors have had regard to employee interests and
the effect of that regard, including on the principal decisions
taken by the company during the financial year, are included in
the section 172 statement contained within the strategic report.
BUSINESS RELATIONSHIPS
Details of how the directors have had regard to the need to
foster the company’s business relationships with suppliers,
customers and others and the effect of that regard, including
on the principal decisions taken by the company during the
financial year, are included in the section 172 statement
contained within the strategic report.
FUTURE DEVELOPMENTS
In addition to the mine development at its Longonjo Project
and the development of the Saltend refinery in the UK, the
directors intend to continue to explore and develop the
company’s existing projects with key focus on the exploration
project at Coola and ongoing consideration of moving further
downstream into metal production.
BOARD APPOINTMENTS
On 31 March 2022, Mr Robert Kaplan was appointed to the
board of the company as executive finance director. Previously,
Mr Kaplan held the position of chief financial officer (CFO) at
Pensana from1January2020 to 30 March 2022.
Post year-end, Ms Alison Saxby was appointed as an
independent non-executive director with effect from
17August2022. Ms Saxby is an industry-leading expert with
over 35 years of experience in industrial minerals and metals.
She was previously managing director at metals consultancy
Roskill.
SUBSEQUENT EVENTS
Events after the year-end:
•
Received green bond certification from CICERO, the leading
independent provider of assessments on green bond
frameworks;
•
Successful equity placing of US$10.0 million with Fundo
Soberano de Angola, the Angolan Sovereign Wealth Fund,
specifically designated towards the Longonjo Project’s early
works programme which is now underway; and
•
Signed a memorandum of understanding with a large
non-Chinese magnet manufacturer for an offtake of 25% of
Pensana’s rare earth oxide production.
HEALTH AND SAFETY POLICY
The company is committed to developing a culture which
supports the health and safety of all employees, contractors,
customers and communities associated with its business and
operations.
ENVIRONMENT POLICY
The company is committed to protecting and ensuring it does
no harm to the natural environment around the sites on which
it operates. Refer to the environmental, social and governance
report on
page 45
for further details on the company’s environmental initiatives and reporting.
ANTI-SLAVERY AND HUMAN TRAFFICKING
The group is committed to upholding high ethical standards
throughout all aspects of its business, as well as respecting
and safeguarding the human rights of all its stakeholders. This
commitment is based on the belief that business should be
conducted honestly, fairly and legally. We expect all employees,
suppliers, contractors and other stakeholders to share our
commitment to high moral, ethical and legal standards. As the
group looks to develop its mine at Longonjo, actions are being
taken to prevent occurrences of slavery or human trafficking in
our business and supply chain for the current financial year and
beyond.
7574
PENSANA PLC
2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT74
DIRECTORS’ REPORT
continued
ANNUAL GENERAL MEETING
This report and the financial statements will be presented
to shareholders for their approval at the next annual general
meeting (AGM). The notice of the AGM will be distributed to
shareholders during the month of November.
AUDITOR
BDO LLP became the company’s auditor with effect from
21February 2020. A resolution for BDO LLP’s reappointment
will be proposed at the forthcoming AGM.
STATEMENT OF DISCLOSURE OF
INFORMATION TOTHE AUDITOR
As at the date of this report, the serving directors confirm that:
•
so far as each director is aware, there is no relevant audit
information of which the company’s auditor is unaware; and
•
they have taken all the steps that they ought to have
taken as directors in order to make themselves aware of
any relevant audit information and to establish that the
company’s auditor is aware of that information.
SHARES UNDER OPTION OR ISSUED ON
EXERCISE OF OPTIONS
As at the date of this report, there are 1,500,000 unissued
shares or interests under option (30 June 2021: 2,750,000).
INDEMNIFICATION OF DIRECTORS AND
OFFICERS
During the financial year, the company paid a premium of
US$80,101 in respect of a contract insuring the directors of the
company, the company secretary and all executive officers of
the company and any related body corporate against a liability
incurred by such a director, secretary or executive officer. The
company has not otherwise, during or since the end of the
financial year, except to the extent permitted by law, indemnified
or agreed to indemnify an officer of the company or of any
related body corporate against a liability incurred by an officer.
DIRECTORS’ MEETINGS
The following table sets out the number of directors’ meetings and committee meetings held during the financial year:
Board meetings
Audit and risk
committee
Remuneration and
nomination committees
Environmental, social and
governance committee
Number
eligible
to attend Attended
Number
eligible
to attend Attended
Number
eligible
to attend Attended
Number
eligible
to attend Attended
P Atherley
6 6 3 3 3 3 – –
T George
6 6 – – – – 4 4
J Beeton
6 6 3 3 3 3 – –
L Northover
6 6 3 3 3 3 4 4
S Sharpe
1
4 4 3 3 3 3 4 4
R Kaplan
2
1 1 – – – – – –
S Bates
3
2 2 – – – – – –
1
² Appointed on 31 March 2022.
3
DIRECTORS’ INTERESTS IN THE COMPANY
The following table sets out each director’s relevant interest in fully paid ordinary shares, performance rights and options in the
company at the date of this report:
Directors
Fully paid
ordinary
shares
Share
plan
awards
1
Share
option
awards
P Atherley
13,427,898 – –
T George
1,250,000 708,333 1,250,000
J Beeton
– – –
L Northover
– – –
A Saxby
– – –
S Sharpe
– – –
R Kaplan
1,000,000 487,500 1,000,000
1
Please refer to the share awards issued table and to the shareholdings table on
page 65
for more details.Dear shareholder,
As the chairman of the committee, I am pleased to have this
opportunity to summarise some of the key developments
during the year, as well as our ongoing responsibilities and
objectives.
The audit and risk committee plays a vital role at Pensana
by ensuring that the group has effective and appropriate risk
management and internal control systems, backed up by
comprehensive financial, governance and reporting functions
and, as we look to make a further stepped change in the
group’s history, with the imminent move towards the main
financing and project developments in the UK and Angola,
I will ensure that the audit and risk committee provides
the appropriate guidance, governance and oversight to
management in order to help facilitate the effective delivery of
the projects.
FINANCIAL REPORTING
As part of its role, the audit and risk committee assessed the
audit findings that were considered most significant to the
financial statements including those areas requiring significant
judgement and/or estimation. The key areas of consideration
during the year were as follows:
GOING CONCERN
In line with the board’s strategy to maintain momentum on both
the Longonjo and Saltend Projects, regular meetings were held
by the committee with management throughout the period
so as to assess the technical teams’ progress past front-end
engineering design into optimisation and the associated need
for financing, in preparation of early-stage project development.
The two most recent equity raises in January 2022 and
August2022 ensured ongoing project momentum and the
unhindered continuation and completion of key workstreams.
While the group has sufficient funding to meet its corporate
and general operating costs, the group will require additional
funding over the next 12 months to meet its committed and
planned development expenditure and operating costs related
to the Saltend, Longonjo and Coola Projects. As disclosed
in note 3 to the financial statements, a material uncertainty
in respect of going concern is considered to exist and the
committee evaluated this conclusion and disclosures.
The committee reviewed the cashflow forecasts prepared
by management, including the assumptions made. Having
considered the cashflow forecast, risks and sensitivity analysis,
the committee was satisfied with management’s forecast
and judgement that the going concern basis of preparation
remained appropriate.
In addition, the committee assessed the disclosures in respect
of going concern and concluded that they were appropriate.
CARRYING VALUE OF DEVELOPMENT ASSETS
AND THE RISK THAT AN IMPAIRMENT IS
REQUIRED
During the prior year, the group transferred its flagship
Angolan exploration project, Longonjo, from an exploration
and evaluation asset into a development asset. Under
International Accounting Standards (IAS) 36, the carrying value
of development assets requires assessment for indicators of
impairment at each reporting period and, where indicators were
identified by management, these are tested for impairment.
Based on management’s assessment, we are satisfied that
no indicators existed. As the committee, we reviewed and
evaluated both the internal and external factors, considered
the broader rare earth market and the disclosures in the
financial statements and ensured that the critical judgements
associated with the impairment indicator assessment, required
under International Financial Reporting Standards (IFRS), were
incorporated.
CAPITALISATION OF COSTS AND THE
CARRYING VALUE OF THE SALTEND PROJECT
In April 2021, the group successfully obtained planning
permission in respect of the Saltend magnet metals separation
facility. In accordance with IAS 16, when planning permission
has been obtained and future economic benefits associated
with the project are probable, costs in relation to the
development of the asset should be capitalised. Determination
of costs eligible for capitalisation requires an element of
judgement, particularly around any internal costs capitalised.
Consideration was given by the committee as to the nature
of the costs proposed for capitalisation. Furthermore,
consideration was given to management’s impairment indicator
assessment of the Saltend Project against IFRS requirements,
and the committee satisfied itself that no indications of
impairment were present.
AUDIT AND RISK
COMMITTEE REPORT
7776
PENSANA PLC
2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT
OPINION ON THE FINANCIAL STATEMENTS
In our opinion:
•
the financial statements give a true and fair view of the
state of the group’s and of the parent company’s affairs
asat 30June 2022 and of the group’s loss for the year
thenended;
•
the group financial statements have been properly prepared
in accordance with UK adopted international accounting
standards;
•
the parent company financial statements have been properly
prepared in accordance with UK adopted international
accounting standards and as applied in accordance with the
provisions of the Companies Act 2006; and
•
the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
We have audited the financial statements of Pensana Plc
(the‘parent company’) and its subsidiaries (the ‘group’) for the
year ended 30 June 2022 which comprise the consolidated
statement of comprehensive income, the consolidated
statement of financial position, the consolidated statement of
changes in equity, the consolidated statement of cash flows,
the company statement of financial position, the company
statement of changes in equity, the company statement of
cash flows and notes to the financial statements, including
a summary of significant accounting policies. The financial
reporting framework that has been applied in their preparation
is applicable law and UK adopted international accounting
standards and as regards the parent company financial
statements, as applied in accordance with the provisions of
theCompanies Act 2006.
BASIS FOR OPINION
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Ourresponsibilities under those standards are further described
in the Auditor’s responsibilities for the audit of the 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. Our audit opinion is consistent
with the additional report to the audit and risk committee.
Independence
Following the recommendation of the audit and risk committee,
we were appointed by the directors on 21February 2020
to audit the financial statements for the year ended 30June
2020 and subsequent financial periods. Theperiod of
total uninterrupted engagement including retenders and
reappointments is 3 years, covering the years ended
30June 2020 to 30 June 2022. We remain independent
of the group and the parent company in accordance with
the ethical requirements that are relevant to our audit of the
financial statements in the UK, including the FRC’s Ethical
Standard as applied to listed public interest entities, and we
have fulfilled our other ethical responsibilities in accordance
with these requirements. The non-audit services prohibited
by that standard were not provided to the group or the
parentcompany.
MATERIAL UNCERTAINTY RELATED
TO GOING CONCERN
We draw attention to note 3 to the financial statements
concerning the group and parent company’s ability to continue
as a going concern. The matters explained in note 3 indicate
that the group and parent company will require additional
funding to meet its liabilities as they fall due for a period of at
least the next 12 months from date of approval of the financial
statements, that the required funding has not been secured at
the date of this report and the availability of such funding is not
guaranteed. As stated in note 3, these events or conditions
indicate the existence of a material uncertainty which may cast
significant doubt over the group and parent company’s ability
to continue as a going concern. Our opinion is not modified in
respect of this matter.
We have highlighted going concern as a key audit matter as a
result of the matter disclosed above, judgements made by the
directors, the significance of this area and the resulting effect on
our audit strategy.
In auditing the financial statements, we have concluded that
the directors’ use of the going concern basis of accounting
in the preparation of the financial statements is appropriate.
Our evaluation of the directors’ assessment of the group and
the parent company’s ability to continue to adopt the going
concern basis of accounting and in response to the key audit
matter included:
•
Obtaining the directors’ cash flow forecasts and challenging
the key underlying assumptions, including forecast levels
of operating expenditure and development costs. In doing
so, we considered factors such as the consistency of the
forecast expenditure with the group’s strategic plans, actual
expenditure compared to budget and third party contracted
commitments.
•
Obtaining and reviewing draft term sheets for potential
financing.
•
Making inquiries of the directors regarding potential funding
options, inspecting correspondence with potential investors
and proposals, and obtaining written representation
regarding discussions held with potential investors and the
board’s conclusion that funds can be accessed to meet
the group’s liquidity requirements under the forecasts and
reasonable sensitivity scenarios.
INDEPENDENT
AUDITOR’S REPORT
to the members of Pensana Plc
TERMS OF REFERENCE
The committee’s terms of reference have been approved by
the board and follow published guidelines which are available
from the company secretary. The audit and risk committee
currently comprises of three directors Mr StevenSharpe
(chairman)(senior independent non-executive director),
BaronessLindsayNorthover (senior independent non-executive
director) and Mr PaulAtherley (board chairman).
The audit and risk committee’s prime tasks are to:
•
review the scope of the external audit, to receive regular
reports from the auditor and to review the half-yearly and
annual accounts before they are presented to the board,
focusing in particular on accounting policies and areas of
management judgement and estimation;
•
monitor the controls which are in force to ensure the integrity
of the information reported to the shareholders;
•
assess key risks and to act as a forum for discussion of
risk issues and contribute to the board’s review of the
effectiveness of the group’s risk management control and
processes;
•
act as a forum for discussion of internal control issues and
contribute to the board’s review of the effectiveness of the
group’s internal control and risk management systems and
processes;
•
consider each year the need for an internal audit function;
•
advise the board on the appointment of the external auditor
and rotation of the audit partner every five years, and on
their remuneration for both audit and non-audit work, and
discuss the nature and scope of their audit work;
•
participate in the selection of a new external audit partner
and agree the appointment when required;
•
undertake a formal assessment of the auditor’s
independence each year which includes:
– a review of non-audit services provided to the group and
related fees;
– discussion with the auditor of a written report detailing
all relationships with the company and any other parties
that could affect independence or the perception of
independence;
– a review of the auditor’s own procedures for ensuring
the independence of the audit firm and partners and
staff involved in the audit, including the regular rotation
oftheaudit partner; and
– obtaining written confirmation from the auditor that, in
their professional judgement, they are independent.
MEETINGS
The committee meets prior to the annual audit with the
external auditor to discuss the audit plan and again prior to the
publication of the annual results. These meetings are attended
by the external audit partner, chairman, CFO and company
secretary. Additional formal meetings are held as necessary.
During the past year, the committee:
•
met with the external auditor and discussed their reports to
the audit and risk committee;
•
approved the publication of the annual and half-year
financial results;
•
considered the going concern of the group and company
and the planned equity placings and financing requirements;
•
considered and approved the annual review of internal
controls;
•
considered control environment improvement
recommendations by auditors;
•
decided that due to the size and nature of the operation,
there was not a current need for an internal audit function;
and
•
agreed the independence of the auditor and approved their
fees for audit-related services.
EXTERNAL AUDITOR
BDO LLP held office throughout the year and acts as the
external auditor for the group.
Steven Sharpe
Chairman of the audit and risk committee
27 October 2022
AUDIT AND RISK COMMITTEE REPORT
continued
for the financial year ended 30 June 2022
79
PENSANA PLC
2022 ANNUAL REPORT78
PENSANA PLC
2022 ANNUAL REPORT
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) that we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the
audit, and directing the efforts of the engagement team. In addition to the key audit matter related to going concern set out in the
Material uncertainty related to going concern section of our report, the following were considered to be the key audit matters to be
communicated in our report. These matters were addressed in the context of our audit of the financial statements as a whole, and
informing our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter How the scope of our audit addressed the key audit matter
Carrying value of the
Longonjo development
asset
At 30 June 2022, the group held a
development asset on the statement of
financial position as detailed in note11,
totalling $31.2 million relating to the
Longonjo Project.
As detailed in note 4, there are
judgements and inherent uncertainties
around the recoverability of
development assets. Management
and the board are required to assess
whether there are any potential
impairment indicators which would
indicate that the carrying value of the
asset at 30 June 2022 may not be
recoverable. Management are required
to include appropriate disclosure in
the financial statements, specifically
in relation to key estimates and
judgements.
Given the materiality of the development
asset in the context of the group’s
statement of financial position and the
judgements involved by management
in making the assessment of whether
any indicators of impairment exist we
considered this to be a focus area for
our audit and a key audit matter.
We evaluated management’s impairment indicator assessment
against the requirements of IAS 36
Impairment of Assets
and performed our own assessment to determine whether there
were any indicators of impairment. In doing so, we:
•
Reviewed the licence to confirm the group held legal title to
the Longonjo Project.
•
Reviewed reports in respect of exploration and development
activity in the year and public announcements regarding
future development proposals to assess whether there was
any evidence from activity to date which would indicate a
potential impairment.
•
Obtained approved budgets and minutes of board meetings
to confirm that further development expenditure was
planned for the assets.
•
Obtained and reviewed the Life of Mine plan, including
evaluation of key assumptions – being pricing, operating
costs and capital expenditure, to evaluate the level of
headroom demonstrated by the financial model for the
Longonjo Project to confirm it represented a premium to
the carrying value. We evaluated sensitivity analysis for key
assumptions, including pricing, operating costs and capital
expenditure to identify potential indicators of potential
impairment.
•
Obtained and reviewed the Ore Reserve Estimate
prepared by an external Competent Person and confirmed
its consistency with the Life of Mine plan in respect of
applicable inputs. We held discussions with management’s
external expert and evaluated the independence and
competence of management’s external expert.
•
Considered the market capitalisation of the parent company
to confirm it represented a premium to net asset value and
evaluated the implied value on the Longonjo Project by
recent equity raises.
We assessed the appropriateness of the disclosures included
in the financial statements with regards to the requirements of
relevant accounting standards.
Key observations
We found management’s conclusion that there are no
impairment indicators at 30 June 2022 relating to the
development asset to be acceptable and appropriately
disclosed.
•
Discussing any potential risks to going concern with the
directors and the audit and risk committee including their
assessment of risks and uncertainties associated with the
development of the operations in both Angola and the UK.
We formed our own assessment of risks and uncertainties
based on our understanding of the business and the
miningsector.
•
Reviewing the financial statement disclosures regarding
going concern to satisfy ourselves that the disclosures are
appropriate and consistent with the directors’ going concern
assessment.
Our responsibilities and the responsibilities of the directors with
respect to going concern are described in the relevant sections
of this report.
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
Our group audit was scoped by obtaining an understanding
of the group and its environment, including the group’s
system of internal control, and assessing the risks of material
misstatement in the financial statements. We also addressed
the risk of management override of internal controls, including
assessing whether there was evidence of bias by the directors
that may have represented a risk of material misstatement.
Pensana Plc is a company registered in the UK and listed on
the Standard Segment of the London Stock Exchange in the
UK. The group’s principal operations are located in Angola and
the UK. In approaching the audit we considered how the group
is organised and managed. We assessed the business as being
principally two projects comprising of the Angolan subsidiaries
that hold the Longonjo exploration project and the Saltend
development project that is held in the UK parent company.
Our group audit scope focused on the group’s significant
components which comprised the Angolan operating
subsidiary, the Australian operating subsidiary and the
UKparent company. The significant components were subject
to full scope audits conducted by BDO LLP using a team
with experience of auditing in the mining industry, in Africa
and with publicly listed entities. The remaining non-significant
components were principally subject to analytical review
procedures, performed by the group engagement team,
withspecific procedures performed on any significant balances
impacting the group results.
OVERVIEW
Coverage
98% (2021: 91%) of group loss before tax
89% (2021: 90%) of group total assets
Key audit matters
2022
2021
Carrying value of the Longonjo development asset
Yes
Yes
Carrying value of the Saltend asset under construction
Yes
No
Going concern
Yes
Yes
Carrying value and classification of the Tanzania asset
No
Yes
The carrying value and classification of the Tanzania asset is no longer considered to be a key audit matter as
the asset was fully impaired to nil in the prior year.
Materiality
Group financial statements as a whole
$430,000 (2021: $410,000) based on 1% (2021: 1%) of total assets
INDEPENDENT AUDITOR’S REPORT
continued
to the members of Pensana Plc
8180
PENSANA PLC
2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT
Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality
as follows:
Group financial statements
Parent company financial
statements
2022
US$
2021
US$
2022
US$
2021
US$
Materiality
US$430,000 US$410,000 US$320,000 US$230,000
Basis for determining materiality
1% of total
assets
1% of total
assets
0.5% of total
assets
0.4% of total
assets
Rationale for the benchmark applied
The group and parent company is in the development phase with a
significant asset base such that total assets is considered to be the most
important metric to users of the financial statements.
Performance materiality
US$280,000 US$280,000 US$208,000 US$160,000
Basis for determining performance materiality
65% of
materiality
considering
factors such
as the nature
of activities and
historic audit
adjustments.
70% of
materiality
considering
factors such
as the nature
of activities and
historic audit
adjustments.
65% of
materiality
considering
factors such
as the nature
of activities and
historic audit
adjustments.
70% of
materiality
considering
factors such
as the nature
of activities and
historic audit
adjustments.
Component materiality
We set materiality for each significant component of the
group, apart from the parent company whose materiality
is set out above, based on a percentage of between 30%
and 55% of group materiality dependent on the size and
our assessment of the risk of material misstatement of that
component. Component materiality ranged from US$132,000
to US$240,000. Inthe audit of each component, we
further applied performance materiality levels of 65% of the
component materiality to our testing to ensure that the risk
of errors exceeding component materiality was appropriately
mitigated.
Reporting threshold
We agreed with the audit committee that we would report to
them all individual audit differences in excess of US$7,200
(2021:US$8,000). We also agreed to report differences
below thisthreshold that, in our view, warranted reporting on
qualitative grounds.
OTHER INFORMATION
The directors are responsible for the other information.
Theother information comprises the information included in
the annual report other than the financial statements and our
auditor’s report thereon. Our opinion on the financial statements
does not cover the other information and, except to the extent
otherwise explicitly stated in our report, we do not express any
form of assurance conclusion thereon. Our responsibility is to
read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the
audit, or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material
misstatements, we are required to determine whether this
gives rise to a material misstatement in the financial statements
themselves. 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.
Key audit matter How the scope of our audit addressed the key audit matter
Carrying value of the
Saltend asset under
construction
At 30 June 2022, the group held
an asset under construction on the
statement of financial position as
detailed in note 11, totalling $6.5 million
relating to the Saltend Project.
As detailed in note 4, there are
judgements and inherent uncertainties
around the recoverability of assets
under construction. Management
and the board are required to assess
whether there are any potential
impairment indicators which would
indicate that the carrying value of the
asset at 30 June 2022 may not be
recoverable. Management are required
to include appropriate disclosure in
the financial statements, specifically
in relation to key estimates and
judgements.
Given the materiality of the asset under
construction in the context of the
group’s statement of financial position
and the judgements involved by
management in making the assessment
of whether any indicators of impairment
exist we considered this to be a focus
area for our audit and a key audit
matter.
We evaluated management’s impairment indicator assessment
against the requirements of IAS 36
Impairment of Assets
and performed our own assessment to determine whether there
were any indicators of impairment. In doing so, we:
•
Reviewed the planning permission to confirm the group
heldpermission to develop the Saltend site.
•
Obtained and reviewed management’s strategic financial
model, including evaluation of key assumptions – being
pricing, operating costs and capital expenditure, and
evaluated the headroom indicated by the forecasts. We also
evaluated sensitivity analysis for key assumptions, including
pricing, operating costs and capital expenditure, toidentify
potential indicators of potential impairment.
•
Obtained approved budgets and minutes of board meetings
to confirm that further expenditure was planned for the
Saltend site.
•
Considered the market capitalisation of the parent company
to confirm it represented a premium to net asset value and
evaluated the implied value on the Saltend Project by recent
equity raises.
We assessed the appropriateness of the disclosures included
in the financial statements with regards to the requirements of
relevant accounting standards.
Key observations
We found Management’s conclusion that there are no
impairment indicators at 30 June 2022 relating to the asset
under construction to be acceptable and appropriately
disclosed.
OUR APPLICATION OF MATERIALITY
We apply the concept of materiality both in planning
and performing our audit, and in evaluating the effect of
misstatements. Weconsider materiality to be the magnitude by
which misstatements, including omissions, could influence the
economic decisions ofreasonable users that are taken on the
basis of the financial statements.
In order to reduce to an appropriately low level the probability
that any misstatements exceed materiality, we use a lower
materiality level, performance materiality, to determine the
extent of testing needed. Importantly, misstatements below
these levels will not necessarily be evaluated as immaterial as
we also take account of the nature of identified misstatements,
and the particular circumstances of their occurrence, when
evaluating their effect on the financial statements as a whole.
INDEPENDENT AUDITOR’S REPORT
continued
to the members of Pensana Plc
8382
PENSANA PLC
2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT
A further description of our responsibilities is available on
theFinancial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
USE OF OUR REPORT
This report is made solely to the parent company’s members,
as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so
that we might state to the parent company’s members those
matters we are required to state to them in an auditor’s report
and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than
the parent company and the parent company’s members as a
body, for our audit work, for this report, or for the opinions we
have formed.
Ryan Ferguson
Senior Statutory Auditor
For and on behalf of BDO LLP, Statutory Auditor
London, United Kingdom
27 October 2022
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
•
We obtained an understanding of the controls that the group
has established to address risks identified, or that otherwise
seek to prevent, deter or detect fraud;
•
We addressed the risk of management override of controls,
including testing a risk-based selections of journals
and evaluating whether there was evidence of bias in
Management’s estimates and judgements that represented
a risk of material misstatement due to fraud. Specifically:
– We tested the appropriateness of journal entries made
throughout the year by applying specific criteria to detect
possible irregularities and fraud and reviewing the related
supporting documentation for the journal;
– We performed a detailed review of the group’s year-end
adjusting entries and investigated any that appeared
unusual as to nature or amount and agreed to supporting
documentation;
– For significant and unusual transactions, particularly
those occurring at or near year-end, we obtained
evidence for the rationale of these transactions and
the sources of financial resources supporting the
transactions;
– We assessed whether the judgements made in
accounting estimates were indicative of a potential bias
(Refer to ‘key audit matters’ above);
•
We reviewed minutes from board meetings of those charged
with governance to identify any instances of fraud or non-
compliance with laws and regulations;
•
We agreed the financial statement disclosures to underlying
supporting documentation, and reviewed correspondence
with regulators and legal advisers; and
•
We also communicated relevant identified laws and
regulations and potential fraud risks to all engagement team
members, and remained alert to any indications of fraud
or non-compliance with laws and regulations throughout
theaudit.
Our audit procedures were designed to respond to risks of
material misstatement in the financial statements, recognising
that the risk of not detecting a material misstatement due
to fraud is higher than the risk of not detecting one resulting
from error, as fraud may involve deliberate concealment by, for
example, forgery, misrepresentations or through collusion. There
are inherent limitations in the audit procedures performed and
the further removed non-compliance with laws and regulations
is from the events and transactions reflected in the financial
statements, the less likely we are to become aware of it.
RESPONSIBILITIES OF DIRECTORS
As explained more fully in the directors’ responsibilities
statement, the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a
true and fair view, and for such internal control as the directors
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether
due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the group’s and the parent
company’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 directors either
intend to liquidate the group or the parent company or to cease
operations, or have no realistic alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT
OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about
whether the 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 (UK)
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
ofusers taken on the basis of these financial statements.
Extent to which the audit was capable of
detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line
with our responsibilities, outlined above, to detect material
misstatements in respect of irregularities, including fraud.
The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below.
We gained an understanding of the legal and regulatory
framework applicable to the group and the industry in which
it operates, through discussion with Management and the
auditand risk committee and our knowledge of the industry.
We considered the significant laws and regulations of Angola
and the UK to be those relating to the mining industry, financial
reporting framework, tax legislation and the Listing Rules.
We assessed the susceptibility of the group’s financial
statements to material misstatement, including how fraud might
occur by and considered the significant fraud risk areas to be
inrelation to management override of controls.
We performed the following procedures:
•
We held discussions with Management and the audit
and risk committee to consider any known or suspected
instances of non-compliance with laws and regulations or
fraud identified by them;
•
We involved our specialist forensics audit support team
to support the engagement team in the assessment of
potential fraud risks;
OTHER COMPANIES ACT 2006 REPORTING
Based on the responsibilities described below and our work performed during the course of the audit, we are required by the
Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below.
Strategic report and
directors’ report
In our opinion, based on the work undertaken in the course of the audit:
•
the information given in the strategic report and the directors’ report for the financial year for which the
financial statements are prepared is consistent with the financial statements; and
•
the strategic report and the directors’ report have been prepared in accordance with applicable legal
requirements.
In the light of the knowledge and understanding of the group and parent company and its environment
obtained in the course of the audit, we have not identified material misstatements in the strategic report
orthe directors’ report.
Directors’ remuneration
In our opinion, the part of the directors’ remuneration report to be audited has been properly prepared in
accordance with the Companies Act 2006.
Matters on which we
are required to report
by exception
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
•
adequate accounting records have not been kept by the parent company, or returns adequate for our
audit have not been received from branches not visited by us; or
•
the parent company financial statements and the part of the directors’ remuneration report to be
audited are not in agreement with the accounting records and returns; or
•
certain disclosures of directors’ remuneration specified by law are not made; or
•
we have not received all the information and explanations we require for our audit.
INDEPENDENT AUDITOR’S REPORT
continued
to the members of Pensana Plc
8584
PENSANA PLC
2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
for the financial year ended 30 June 2022
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
as at 30 June 2022
Note
30 June 2022
US$
30 June 2021
US$
Administration expenses 6 5,248,154 )
(8,787,109 )
(Impairment of non-financial assets 10 – (2,500,000 )
Impairment of financial assets 9 –
(669,470 )
Foreign currency exchange loss 6 1,835,705 )
(2,255,471 )
(Loss from operations
(11,712,050 )
(9,583,859 )
Finance income 28 342
Finance costs – (255 )
Loss before income tax
(11,712,022 )
(9,583,772 )
Income tax credit 7 1,329,553 212,910
Total loss for the year
(10,382,469 )
(9,370,862 )
Other comprehensive loss
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
1
Total comprehensive loss for the year
(10,190,145 )
(6,915,185 )
Net loss for the period is attributable to:
Owners of Pensana Plc 9,370,862 )
(10,382,469 )
(Total comprehensive loss is attributable to:
Owners of Pensana Plc 6,915,185 )
(10,190,145 )
(Loss per share attributable to owners of Pensana Plc
Basic (cents per share) 15 4.70 )
(4.53 )
(Diluted (cents per share) 15 4.70 )
(4.53 )
(1
Notes to the financial statements are included on
pages 91
to 119
.Note
30 June 2022
US$
30 June 2021
US$
ASSETS
Non-current assets
Property, plant and equipment 11 37,770,292 18,507,768
Exploration and evaluation expenditure 10 181,206 132,040
Total non-current assets 37,951,498 18,639,808
Current assets
Cash and cash equivalents 8 2,930,162 16,787,591
Trade and other receivables 9 2,400,011 5,370,007
Total current assets 5,330,173 22,157,598
Total assets 43,281,671 40,797,406
LIABILITIES
Current liabilities
Trade and other payables 12 3,646,386 4,628,772
Total current liabilities 3,646,386 4,628,772
Total liabilities 3,646,386 4,628,772
Net assets 39,635,285 36,168,634
Equity
Issued capital 13 295,425 279,398
Share premium 14 47,043,782 34,195,957
Reserves 14 47,608,198 51,534,520
Accumulated losses 14 49,841,241 )
(55,312,120 )
(Total equity 39,635,285 36,168,634
The notes on
pages 91
to 119
form part of these financial statements.The financial statements were approved by the board of directors and authorised for issue on 27 October 2022 and are signed on its
behalf by:
Steven Sharpe
Chairman of the audit and risk committee
8786
PENSANA PLC
2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
for the financial year ended 30 June 2022
Fully paid
ordinary
shares
US$
Share
premium
US$
Shares to
be issued
reserve
US$
Accumulated
losses
US$
Merger
reserve
US$
Foreign
currency
reserve
US$
Share-based
payments
reserve
US$
Equity
reserve
US$
Total
US$
Balance as at 1 July 2020 221,945 3,116,850 3,300,560 (40,470,379 ) 45,748,045 (2,032,999 ) 5,477,162 (500,000 ) 14,861,184
Loss for the year – – – (9,370,862 ) – – – – (9,370,862 )
Other comprehensive income – – – – – 2,455,677 – – 2,455,677
Total comprehensive loss for the year – – – (9,370,862 ) – 2,455,677 – – (6,915,185 )
Issue of shares (note 13) 56,799 32,702,223 (3,300,560 ) – – – – – 29,458,462
Capital raising costs – (1,686,037 ) – – – – – – (1,686,037 )
Issue of shares – conversion of performance rights (note 13) 654 62,921 – – – – (63,575 ) – –
Share-based payments – – – – – – 450,210 – 450,210
Balance as at 30 June 2021 279,398 34,195,957 – (49,841,241 ) 45,748,045 422,678 5,863,797 (500,000 ) 36,168,634
Balance as at 1 July 2021 279,398 34,195,957 – (49,841,241 ) 45,748,045 422,678 5,863,797 (500,000 ) 36,168,634
Loss for the year – – – (10,382,469 ) – – – – (10,382,469 )
Other comprehensive income – – – – – 192,324 – – 192,324
Total comprehensive loss for the year – – – (10,382,469 ) – 192,324 – – (10,190,145 )
Vesting and lapses of historical performance rights and options – – – 4,911,590 – – (4,911,590 ) – –
Issue of shares (note 13) 15,012 13,176,014 – – – – – – 13,191,026
Capital raising costs – (410,887 ) – – – – – – (410,887 )
Issue of shares – conversion of performance rights (note 13) 1,015 82,698 – – – – (83,713 ) – –
Share-based payments – – – – – – 876,657 – 876,657
Balance as at 30 June 2022 295,425 47,043,782 – (55,312,120 ) 45,748,045 615,002 1,745,151 (500,000 ) 39,635,285
Notes to the financial statements are included on
pages 91
to 119
.8988
PENSANA PLC
2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT
CONSOLIDATED STATEMENT
OF CASH FLOWS
for the financial year ended 30 June 2022
NOTES TO THE
FINANCIAL STATEMENTS
for the financial year ended 30 June 2022
Note
30 June 2022
US$
30 June 2021
US$
Cash flows from operating activities
Operating cash flows 20 6,872,862 )
(7,948,231 )
(Net cash used in operating activities
(7,948,231 )
(6,872,862 )
Cash flows from investing activities
Interest received 28 342
Payments for property, plant and equipment 6,705,801 )
(20,846,747 )
(Net cash used in investing activities
(20,846,719 )
(6,705,459 )
Cash flows from financing activities
Interest paid – (255 )
Proceeds from issues of equity securities 16,780,204 27,876,399
Share issue costs 1,686,037 )
(410,887 )
(Net cash provided by financing activities 16,369,317 26,190,107
Net (decrease)/increase in cash and cash equivalents 12,611,786
(12,425,633 )
Cash and cash equivalents at the beginning of the year 16,787,591 4,106,321
Effects of exchange rate changes on the balance of cash held in foreign currencies 69,484
(1,431,796 )
Cash and cash equivalents at the end of the year 2,930,162 16,787,591
8
The proceeds from equity issues do not agree through to the statement of changes in equity due to the timing of cash receipts and
outstanding debtors as detailed in note 9.
1. GENERAL INFORMATION
The consolidated financial statements present the financial information of Pensana Plc and its subsidiaries (collectively, the
group) for the year ended 30 June 2022 in United States dollars (US$). Pensana Plc public
The company is focused on the establishment of an integrated rare earth processing facility in the UK with a view to creating
the world’s first sustainable magnet metal supply chain. Initial feedstock will be shipped as a clean, high-purity mixed rare earth
sulphate from the company’s Longonjo low-impact mine in Angola.
In early 2020, Pensana Metals Limited redomiciled the group to the UK pursuant to a scheme of arrangement in which
PensanaMetals Limited became a wholly owned subsidiary of Pensana. Prior to the transaction, the company was
incorporated on 13September 2019 and was a wholly owned subsidiary of Pensana Metals Limited.
The board of Pensana resolved to restructure the group to remove redundant holding companies and streamline the
groupstructure. As part of this restructuring process, the shares in the wholly owned subsidiaries, Sable Minerals GmbH and
Sable Rare Earths GmbH, were acquired directly by Pensana Rare Earths Plc and it is anticipated that additional dormant
entities in Tanzania and Australia will be liquidated in due course.
2. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS
From 1 July 2021, the group has adopted the following standards and interpretations, mandatory for annual periods beginning
on 1 July 2021:
Standard Description Effective date
Amendments to IFRS 16 Amendments to IFRS 16: COVID-19-related rent
concessions
1 April 2021
Amendments to IFRS 4 Amendments to IFRS 4
Insurance Contracts
: Deferral ofIFRS 9
1 January 2021
Improvements to IFRSs Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4
andIFRS 16: Interest Rate Benchmark Reform
–Phase2
1 January 2021
The application of these standards has not had a material impact on the financial statements.
9190
PENSANA PLC
2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
continued
for the financial year ended 30 June 2022
2. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS
continued
The group has elected not to early adopt the following revised and amended standards:
Standard Description Effective date
IFRS 17 IFRS 17
Insurance Contracts
1 January 2023Amendment to IFRS 17 Amendment to IFRS 17: Initial application 1 January 2023
IAS 37 Amendments to IAS 37
Provisions, Contingent Liabilities
and Contingent Assets
1 January 2022
IFRS 3 Amendments to IFRS 3
Business Combinations
1 January 2022Improvements to IFRSs Improvements to IFRS 1, IFRS 9, IFRS 16 and IAS41 1 June 2022
Amendments to IAS 8 Amendments to IAS 8: Definition of accounting
estimates
1 January 2023
Amendments to IAS 1 and
IFRSPractice Statement 2
Amendments to IAS 1 and IFRS Practice Statement 2:
Disclosure of accounting policies
1 January 2023
Amendments to IAS 12 Amendments to IAS 12: Deferred tax related to assets
and liabilities from a single transaction
1 January 2023
Amendments to IAS 1 Amendments to IAS 1: Classification of liabilities
ascurrent or non-current
1 January 2023
Management has reviewed and considered these new standards and interpretations and none of these are expected to have a
material effect on the reported results or financial position of the group.
The following amendments are relevant to the group’s activities. The group has decided not to early adopt these.
Standard Description Effective date
IAS 16 Amendments to IAS 16
Property, Plant and Equipment
1 January 2022
The amendments to IAS 16 prohibit a company deducting from the cost of an item of property, plant and equipment any
proceeds from selling items produced while making that item of property, plant and equipment available for its intended
use, for example during a necessary testing or commissioning period. Management is currently assessing the impact of the
amendments which may be relevant as the group moves into production.
the company has always been the holding company for
the group, and the group has elected to apply merger
accounting principles. Under this policy, the company
and its subsidiaries are treated as if they had always
been a group.
The results are included from the date the subsidiaries
joined the group and the comparatives reflect the
results of the company and its subsidiaries. No fair value
adjustments occur as a result of the transaction, and the
assets and liabilities are incorporated at their predecessor
carrying values.
The principal accounting policies adopted by the group
in the preparation of the financial statements are set out
below.
The policies have been consistently applied to all the
years presented, unless otherwise stated.
The consolidated financial statements are presented in
United States dollars (US$) rounded to the nearest dollar.
The consolidated financial statements have been
prepared on the basis of historical cost, adjusted for the
treatment of certain financial instruments, as explained
in the accounting policies below. Historical cost is
generally based on the fair values of the consideration
given in exchange for goods and services. Fair value is
the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between
market participants at the measurement date, regardless
of whether that price is directly observable or estimated
using another valuation technique. In estimating the
fair value of an asset or a liability, the group takes into
account the characteristics of the asset or liability if
market participants would take those characteristics
into account when pricing the asset or liability at the
measurement date.
In addition, for financial reporting purposes, fair value
measurements are categorised into Level 1, 2 or 3
based on the degree to which the inputs to the fair value
measurements are observable and the significance of the
inputs to the fair value measurement in its entirety, which
are described as follows:
•
Level 1 inputs are quoted prices (unadjusted) in active
markets for identical assets or liabilities that the entity
can access at the measurement date;
•
Level 2 inputs are inputs, other than quoted prices
included within Level 1, that are observable for the
asset or liability, either directly or indirectly; and
•
Level 3 inputs are unobservable inputs for the asset
or liability.
3. SIGNIFICANT ACCOUNTING POLICIES
AND GOING CONCERN
The consolidated financial statements of the company
are prepared in accordance with UK-adopted
international accounting standards. The parent company
financial statements have been properly prepared in
accordance with UK adopted international accounting
standards and as applied in accordance with the
provisions of the Companies Act 2006.
The company was incorporated on 13 September2019
as a wholly owned subsidiary of Pensana Metals
Limited. The company subsequently acquired 100%
of the share capital of Pensana Metals Limited and
its subsidiary companies for the effective issuance of
152,973,315shares to the shareholders of Pensana
Metals Limited further to the scheme of arrangement
approved on 22January 2020 and completed on
5February 2020.
The shares issued to the former shareholders of
PensanaMetals Limited comprised 50,000,000shares
with a nominal value of £0.001 per share subscribed for
incorporation of the company by Pensana Metals Limited
which were transferred to CHESS Depositary Nominees
Proprietary Limited (a subsidiary of the Australian
Securities Exchange (ASX)) for use in the scheme of
arrangement and 102,973,314 shares with a nominal
value of £0.001 per share additionally issued by the
company to CHESS Depositary Nominees Proprietary
Limited for use in the scheme of arrangement. CHESS
Depositary Nominees Proprietary Limited subsequently
issued CHESS Depositary Instruments in proportion
to the interests the former shareholders of Pensana
Metals held in that company for trading on the ASX
with 152,973,315CHESS Depositary Instruments
issued for trading. The transaction represented a group
reconstruction and common control transaction.
The accounting for common control transactions is
scoped out of IFRS 3 and, accordingly, the group
has developed an accounting policy with reference
to methods applied in alternative generally accepted
accounting principles (GAAPs). Consequently, the
consolidated financial statements are presented as if
The consolidated financial statements have been
prepared on a going concern basis with the directors of
the opinion that the group can meet its obligations as
and when they fall due.
As at 30 June 2022, the group has a net asset position
of US$39,635,285 (30 June 2021: US$36,168,634), had
incurred a net loss after income tax of US$10,382,469
(30June 2021: US$9,370,862) and experienced
cumulative net cash outflows from operating and
investing activities of US$28,794,950 (30 June 2021:
US$13,578,321). Cash and cash equivalents totalled
US$2,930,162 (30June 2021: US$16,787,591) at
period-end.
The directors have prepared a cash flow forecast for the
period ended 31 March 2024. The forecast indicates
that while the group has sufficient funding to meet its
corporate and general operating costs, the group will
require additional funding over the next 12 months
to meet its committed and planned development
expenditure and operating costs related to the Saltend,
Longonjo and Coola Projects. In assessing the going
concern basis of preparation, the directors have given
consideration to supply chain challenges, inflation, the
ongoing impact of COVID-19, (specifically lockdowns
in Asia), theavailability of funding and its impact on the
progression of the Longonjo NdPr Project in Angola and
the Saltend Project in the UK. Similarly, the directors have
also considered the impact of the Russia-Ukraine war as
it relates to costs and the potential volatility in debt and
equity markets. Conversely, the demand for clean energy
rises at such times, sparking increases in prices of rare
earth metals.
The directors have resolved to undertake certain
mitigating actions including actively engaging with
institutional investors and financing institutions in
the UK and Europe to discuss opportunities around
potential future financing in anticipation of a final
investment decision being taken to initiate main project
development. Such additional funding will be required to
meet the group’s committed and planned development
expenditure across the forthcoming year. The ability of
the company and group to continue as a going concern
is dependent on securing such additional funding given
the forecast expenditure above. The company is well
advanced in its main financing workstreams and despite
the current turbulence in the world’s financial markets,
the company is receiving strong interest and is aiming to
complete the main financing by the end of Q4 calendar
year 2022.
9392
PENSANA PLC
2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
continued
for the financial year ended 30 June 2022
3. SIGNIFICANT ACCOUNTING POLICIES
AND GOING CONCERN
continued
Despite the ongoing engagements, the directors note
that the required capital has not been secured at the date
of this report and the availability of such funding is not
guaranteed. These circumstances indicate the existence
of a material uncertainty which may cast significant doubt
about the group’s ability to continue as a going concern
and therefore it may be unable to realise its assets and
discharge its liabilities in the normal course of business.
The financial statements do not include the adjustments
that would result if the group was unable to continue as a
going concern.
The consolidated financial information comprises the
financial statements of Pensana Plc and its subsidiaries
as at 30 June 2022.
Subsidiaries are all those entities controlled by the
company. Control is achieved when the group is
exposed, or has rights, to variable returns from its
involvement with the investee and has the ability to affect
those returns through its power over the investee. A list
of controlled entities is shown in note 19. Specifically, the
group controls an investee if and only if the group has:
•
power over the investee (i.e., existing rights that give it
the current ability to direct the relevant activities of the
investee);
•
exposure, or rights, to variable returns from its
involvement with the investee; and
•
the ability to use its power over the investee to affect
its returns.
When the group has less than a majority of the voting
or similar rights of an investee, the group considers all
relevant facts and circumstances in assessing whether it
has power over an investee, including:
•
the contractual arrangement with the other vote
holders of the investee;
•
rights arising from other contractual arrangements;
and
•
the group’s voting rights and potential voting rights.
The group reassesses whether or not it controls an
investee if facts and circumstances indicate that there are
changes to one or more of the three elements of control.
Consolidation of a subsidiary begins when the group
obtains control over the subsidiary and ceases when the
group loses control of the subsidiary. Assets, liabilities,
income and expenses of a subsidiary acquired or
disposed of during the year are included in the statement
of comprehensive income from the date the group gains
control until the date the group ceases to control the
subsidiary.
accounting principles. Under this policy, the company
and its subsidiaries are treated as if they had always
been a group. The results are included from the date
the subsidiaries joined the group and the comparatives
reflect the results of the company and its subsidiaries. No
fair value adjustments occur as a result of the transaction
and the assets and liabilities are incorporated at their
predecessor carrying values.
Under the Companies Act 2006, the transaction was
considered to meet the qualifying criteria for merger
relief. Accordingly, shares issued by the company as part
of the scheme of arrangement are recorded at nominal
value. The difference between the share capital and the
investment is recorded in a merger reserve.
Under IAS 27, the investment is measured at cost at the
carrying amount of its share of the equity items shown in
the separate financial statements of the original parent at
the date of the scheme of arrangement i.e., the net asset
value of the company acquired as part of the common
control transaction. Accordingly, the investment was
initially recorded at US$11,756,018.
Business combinations are accounted for using the
acquisition method. The consideration transferred in a
business combination shall be measured at fair value,
which shall be calculated as the sum of the acquisition
date fair values of the assets transferred by the acquirer,
the liabilities incurred by the acquirer to former owners
of the acquiree and the equity issued by the acquirer,
and the amount of any non-controlling interest in the
acquiree. For each business combination, the acquirer
measures the non-controlling interest in the acquiree
either at fair value or at the proportionate share of the
acquiree’s identifiable net assets. Acquisition-related
costs are expensed as incurred and included in
administrative expenses.
When the group acquires a business, it assesses the
financial assets and liabilities assumed for appropriate
classification and designation in accordance with the
contractual terms, economic conditions, the group’s
operating or accounting policies and other pertinent
conditions as at the acquisition date. This includes the
separation of embedded derivatives in host contracts by
the acquiree.
Any contingent consideration to be transferred by the
acquirer will be recognised at fair value at the acquisition
date. Contingent consideration classified as an asset or
liability that is a financial instrument and within the scope
of IFRS 9
Financial Instruments
, is measured at fair value with the changes in fair value recognised in the statement
of profit or loss in accordance with IFRS 9.
All inter-company balances and transactions between
entities in the economic entity, including any unrealised
profits or losses, have been eliminated on consolidation.
Accounting policies of subsidiaries have been changed
where necessary to ensure consistency with those
policies applied by the parent entity. All controlled entities
have a June financial year-end.
Non-controlling interests represent the portion of profit
or loss and net assets in subsidiaries not held by the
group and are presented separately in the consolidated
statement of profit or loss and other comprehensive
income and within equity in the consolidated statement
of financial position. For the period under consideration,
no non-controlling interest is applicable and the minorities
have a free-carry on the Longonjo Project up until such
point as main construction starts which is subject to main
financing.
In the company’s financial statements, investments in
subsidiaries are carried at cost less impairments.
Group reconstruction and merger accounting
principles
The company was incorporated on 13 September 2019
as a wholly owned subsidiary of Pensana Metals Limited.
The company subsequently acquired 100% of the share
capital of Pensana Metals and its subsidiary companies
for the effective issuance of 152,973,315 shares to the
shareholders of Pensana Metals Limited further to the
scheme of arrangement approved on 22 January 2020
and completed on 5 February 2020.
The shares issued to the former shareholders of
PensanaMetals Limited comprised 50,000,000shares
with a nominal value of £0.001 per share subscribed for
incorporation of the company by Pensana Metals Limited
which were transferred to CHESS Depositary Nominees
Proprietary Limited (a subsidiary of the ASX) for use in
the scheme of arrangement and 102,973,314 shares
with a nominal value of £0.001 per share additionally
issued by the company to CHESS Depositary Nominees
Proprietary Limited for use in the scheme of arrangement.
CHESS Depositary Nominees Proprietary Limited
subsequently issued CHESS Depositary Instruments in
proportion to the interests the former shareholders of
Pensana Metals held in that company for trading on the
ASX with 152,973,315CHESS Depositary Instruments
issued for trading. The transaction represented a group
reconstruction and common control transaction.
The accounting for common control transactions is
scoped out of IFRS 3 and, accordingly, the group
has developed an accounting policy with reference to
methods applied in alternative GAAPs. Consequently,
the consolidated financial statements are presented as
if the company has always been the holding company
for the group and the group has elected to apply merger
An operating segment is a component of an entity that
engages in business activities from which it may earn
revenues and incur expenses (including revenues and
expenses relating to transactions with other components
of the same entity), whose operating results are regularly
reviewed by the entity’s chief operating decision maker
to make decisions about resources to be allocated
to the segment and assess its performance and for
which discrete financial information is available. This
includes start-up operations which are yet to earn
revenues. Management will also consider other factors in
determining operating segments such as the existence
of a line manager and the level of segment information
presented to the board of directors.
Operating segments have been identified based on the
information provided to the chief operating decision
maker, being the executive management team.
Functional and presentation currency
The functional currency of each of the group’s operations
is measured using the currency of the primary economic
environment in which that entity operates.
The functional currency of the company is British pounds.
The functional currency of its Australian subsidiaries is
Australian dollars. The functional currency of its Angolan
subsidiaries is United States dollars and the functional
currency of the Portuguese entities is Euro.
Transactions and balances
Foreign currency transactions are translated into the
functional currency using the exchange rates prevailing
at the date of the transaction. Foreign currency monetary
assets and liabilities are translated at the year-end
exchange rate. Non-monetary items measured at
historical cost continue to be carried at the exchange
rate at the date of the transaction. Non-monetary items
measured at fair value are reported at the exchange rate
at the date when fair values were determined. Exchange
differences arising on the translation of monetary items
are recognised in the statement of comprehensive
income. The gain or loss arising from translation of non-
monetary items measured at fair value is treated in line
with the recognition of the gain or loss on the change in
fair value of the item (i.e., translation differences on items
whose fair value gain or loss is recognised in equity or
profit or loss are also recognised in equity or profit or
loss, respectively).
9594
PENSANA PLC
2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS
continued
for the financial year ended 30 June 2022
3. SIGNIFICANT ACCOUNTING POLICIES
AND GOING CONCERN
continued
Foreign currency translation
continued
Transactions and balances
continued
The financial results and position of foreign subsidiaries
whose functional currency are different from the group’s
presentation currency is translated as follows:
•
Assets and liabilities are translated at year-end
exchange rates prevailing at that reporting date;
•
Income and expenses are translated at average
exchange rates for the period; and
•
All resulting exchange differences shall be recognised
in other comprehensive income.
Exchange differences arising on translation of foreign
operations are transferred directly to the group’s
foreign currency translation reserve in the statement of
financial position. These differences are recognised in
the statement of comprehensive income in the period in
which the operation is disposed.
Unrealised gains and losses arising on the translation
of loans to subsidiaries into the currency in which they
are denominated and that are not expected to be
repaid in the foreseeable future are treated as part of
the net investment in foreign operations. The unrealised
foreign exchange gains and losses attributable to
foreign operations are taken directly to the consolidated
statement of other comprehensive income and
reflected in the foreign currency translation reserve.
Such unrealised gains and losses are recycled through
the consolidated income statement on disposal of the
group’s shares in the entity. Unrealised gains and losses
arising on the translation of loans to subsidiaries into
the currency in which they are denominated and that
are expected to be repaid in the foreseeable future are
recognised in the consolidated income statement.
Cash and cash equivalents
Cash and cash equivalents include cash on hand,
deposits held at call with banks and other short-term
highly liquid investments with original maturities of less
than three months.
Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, and
subsequently measured at amortised cost, fair value
through other comprehensive income or fair value
through profit or loss. The classification of financial assets
at initial recognition that are debt instruments depends on
the financial asset’s contractual cash flow characteristics
and the group’s business model for managing them.
The group initially measures a financial asset at its fair
value through profit or loss. ECLs are based on the
difference between the contractual cash flows due in
accordance with the contract and all the cash flows
that the group expects to receive, discounted at an
approximation of the original EIR. The expected cash
flows will include cash flows from the sale of collateral
held or other credit enhancements that are integral to the
contractual terms.
ECLs are recognised in two stages. For credit exposures
for which there has not been a significant increase in
credit risk since initial recognition, ECLs are provided
for credit losses that result from default events that are
possible within the next 12 months (a 12-month ECL).
For those credit exposures for which there has been a
significant increase in credit risk since initial recognition,
a loss allowance is required for credit losses expected
over the remaining life of the exposure, irrespective of the
timing of the default (a lifetime ECL).
The group considers a financial asset in default when
contractual payments are 90 days past due. However,
in certain cases, the group may also consider a
financial asset to be in default when internal or external
information indicates that the group is unlikely to receive
the outstanding contractual amounts in full before taking
into account any credit enhancements held by the
group. A financial asset is written off when there is no
reasonable expectation of recovering the contractual
cash flows and usually occurs when past due for more
than one year and not subject to enforcement activity.
At each reporting date, the group assesses whether
financial assets carried at amortised cost are credit-
impaired. A financial asset is credit-impaired when one
or more events that have a detrimental impact on the
estimated future cash flows of the financial asset have
occurred.
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as
financial liabilities at fair value through profit or loss, loans
and borrowings, payables, or as derivatives designated
as hedging instruments in an effective hedge, as
appropriate. All financial liabilities are recognised initially
at fair value and, in the case of loans and borrowings and
payables, net of directly attributable transaction costs.
Loans and borrowings
After initial recognition, interest-bearing loans and
borrowings are subsequently measured at amortised
cost using the EIR method. Gains and losses are
recognised in the statement of profit or loss and
other comprehensive income when the liabilities are
derecognised, as well as through the EIR amortisation
value plus, in the case of a financial asset not at fair value
through profit or loss, transaction costs.
In order for a financial asset to be classified and
measured at amortised cost or fair value through other
comprehensive income, it needs to give rise to cash
flows that are solely payments of principal and interest
solely payments of principal and interest on the principal
amount outstanding. This assessment is referred to as
the solely payments of principal and interest test and is
performed at an instrument level.
The group’s business model for managing financial assets
refers to how it manages its financial assets in order to
generate cash flows. The business model determines
whether cash flows will result from collecting contractual
cash flows, selling the financial assets, or both.
Purchases or sales of financial assets that require delivery
of assets within a time frame established by regulation or
convention in the market place (regular way trades) are
recognised on the trade date i.e., the date that the group
commits to purchase or sell the asset.
Subsequent measurement
For purposes of subsequent measurement, financial
assets are classified into four categories:
•
financial assets at amortised cost (debt instruments);
•
financial assets at fair value through other
comprehensive income with recycling of cumulative
gains and losses (debt instruments);
•
financial assets designated at fair value through
other comprehensive income with no recycling of
cumulative gains and losses upon derecognition
(equity instruments); and
•
financial assets at fair value through profit or loss.
Financial assets at amortised cost (debtinstruments)
The group measures financial assets at amortised cost if
both of the following conditions are met:
•
The financial asset is held within a business model
with the objective to hold financial assets in order to
collect contractual cash flows; and
•
The contractual terms of the financial asset give
rise on specified dates to cash flows that are solely
payments of principal and interest on the principal
amount outstanding.
Financial assets at amortised cost are subsequently
measured using the effective interest rate (EIR) method
and are subject to impairment. Gains and losses
are recognised in profit or loss when the asset is
derecognised, modified or impaired. All of the group’s
financial assets are measured at amortised cost.
Impairment of financial assets
The group recognises an allowance for expected credit
losses (ECLs) for all debt instruments not held at fair
process. Amortised cost is calculated by taking into
account any discount or premium on acquisition and
fees or costs that are an integral part of the EIR. The EIR
amortisation is included as finance costs in the statement
of profit or loss and other comprehensive income.
Trade and other payables
Trade and other payables are carried at amortised cost.
They represent liabilities for goods and services provided
to the group, prior to the end of the period, that are
unpaid and arise when the group becomes obligated
to make future payments in respect of the purchase of
goods and services. The amounts are unsecured and
are usually paid within 30 days of recognition. Payables
to related parties are carried at the principal amount.
Interest, when charged by the lender, is recognised as an
expense on an accrual basis.
Exploration and evaluation expenditure
Exploration and evaluation assets are initially measured
at cost and include the acquisition of sampling and
associated activities and an allocation of depreciation and
amortisation of assets used in exploration and evaluation
activities. Exploration and evaluation expenditure incurred
by or on behalf of the group is accumulated separately
for each area of interest. Such expenditure comprises
net direct costs and an appropriate portion of related
overhead expenditure but does not include general
overheads or administrative expenditure not having a
specific connection with a particular area of interest.
Exploration and evaluation costs in relation to separate
areas of interest for which rights of tenure are current are
brought to account in the year in which they are incurred
and carried forward provided that:
•
the rights to tenure of the area of interest are current;
and
•
such costs are expected to be recouped through
successful development and exploitation of the area,
or alternatively through its sale; or
•
exploration and/or evaluation activities in the area
have not yet reached a stage which permits a
reasonable assessment of the existence or otherwise
of economically recoverable reserves.
Once a development decision has been taken based on
finalisation of a definitive feasibility study or a bankable
feasibility study (or equivalent), all past evaluation
expenditure in respect of the area of interest is reclassified
as capitalised costs of development within property, plant
and equipment. Capitalised development costs have not
been depreciated to date; depreciation will commence
upon commissioning of the assets. Prior to reclassification,
capitalised exploration and evaluation expenditure is not
depreciated but is assessed for impairment yearly.
9796
PENSANA PLC
2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
continued
for the financial year ended 30 June 2022
3. SIGNIFICANT ACCOUNTING POLICIES
AND GOING CONCERN
continued
continued
Impairment
The group assesses at each reporting date whether there
is an indication that an asset has been impaired and,
for exploration and evaluation costs, whether the above
carry forward criteria are met.
Where an indicator of impairment is identified, and an
impairment test is performed, and if the recoverable
amount is lower than the carrying amount, an impairment
is recorded. The recoverable amount of exploration and
evaluation assets is the higher of fair value less costs
to sell and value in use. 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. Impairment exists
when the carrying amount of an asset or cash-generating
unit exceeds its estimated recoverable amount. The
asset or cash-generating unit is then written down to
its recoverable amount. Any impairment losses are
recognised in profit or loss. Where an impairment loss
subsequently reverses, the carrying amount of the asset
is increased to the revised estimate of its recoverable
amount, but only to the extent that the increased carrying
amount does not exceed the carrying amount that would
have been determined had no impairment loss been
recognised for the asset in previous years.
Where a decision is made to proceed with development
in respect of a particular area of interest, the relevant
exploration and evaluation asset is assessed for
impairment and the balance is classified as a
development asset within property, plant and equipment.
Accumulated costs in relation to an abandoned area
are written off in full against profit in the year in which
the decision to abandon the area is made. Costs are
capitalised during construction until commercial levels of
production are achieved after which the relevant costs
are depreciated. The accumulated costs for the relevant
area of interest are amortised over the life of the area
according to the rate of depletion of the economically
recoverable reserves. A regular review is undertaken of
each area of interest to determine the appropriateness of
continuing to carry forward costs in relation to that area
of interest.
Accumulated costs in respect of areas of interest are
written off or a provision made in the statement of
comprehensive income when the above criteria do not
apply or when the directors assess that the carrying
value may exceed the recoverable amount. The costs of
productive areas within property, plant and equipment
are amortised over the life of the area of interest to
which such costs relate on the production output
Share-based payment transactions
Equity-settled transactions
The company provides benefits to certain key
management personnel in the form of share-based
payments and/or options. The group currently has a
Share Incentive Plan, which may be used to provide
benefits to directors and senior executives.
The cost of such equity-settled transactions is measured
by reference to the fair value of the equity instruments at
the date at which they are granted using an appropriate
valuation model. The cost of equity-settled transactions
is recognised, together with a corresponding increase in
equity over the vesting period of the equity instruments.
That cost is recognised in employee benefits expense
or capitalised to exploration or development assets,
together with a corresponding increase in equity, over
the period in which the service and, where applicable,
the performance conditions are fulfilled. The cumulative
expense is recognised, for equity-settled transactions
at each reporting date until the vesting date. It reflects
the extent to which the vesting period has expired
and the group’s best estimate of the number of equity
instruments that will ultimately vest. For awards with
service and non-market performance conditions,
expected vesting dates are based on the expiry date
of the award. When both service and non-market
performance conditions are satisfied prior to the expiry
date of the award, vesting dates are revised and the
vesting expense adjusted accordingly. The expense
or credit in the statement of profit or loss for a period
represents the movement in cumulative expense
recognised as at the beginning and end of that period.
Service and non-market performance conditions are not
considered when determining the grant date fair value
of awards, but the likelihood of the conditions being met
is assessed as part of the group’s best estimate of the
number of equity instruments that will ultimately vest.
Market performance conditions are reflected within the
grant date fair value. Any other conditions attached to an
award, but without an associated service requirement,
are considered to be non-vesting conditions. Non-vesting
conditions are reflected in the fair value of an award and
lead to an immediate expensing of an award unless there
are also service and/or performance conditions.
Contributed equity
Ordinary shares are classified as equity. Incremental
costs directly attributable to the issue of new shares or
options are shown in equity as a deduction, net of tax,
from the proceeds.
Other income
Interest income
Interest income is recognised as interest accrues
using the effective interest method. This is a method of
calculating the amortised cost of a financial asset and
allocating the interest income over the relevant period
basis. Provisions are made where farm-in partners are
sought and there is a possibility that carried forward
expenditures may have to be written off in the future if
a farm-in partner is not found. In the event that farm-in
agreements are reached, or the group undertakes further
exploration in its own right on those properties, the
provisions would be reviewed and, if appropriate, written
back.
Property, plant and equipment
Plant and equipment are stated at historical cost
less accumulated depreciation and any accumulated
impairment losses. The carrying value of the plant and
equipment also includes costs eligible for capitalisation.
Other costs relating to plant and equipment are
expensed when incurred.
Land and buildings are measured at cost, less
accumulated depreciation on buildings.
Development assets and assets under construction are
depreciated once commissioning of the assets occurs.
Depreciation will be charged over the useful life of the
asset.
Depreciation is calculated on a straight-line basis over the
estimated useful life of the assets as follows:
Asset
Asset
Depreciation rate
Depreciation rate
Motor vehicles
Motor vehicles
25%
25%
Office equipment
Office equipment
33.33%
33.33%
Computer equipment
Computer equipment
33.33%
33.33%
Plant and machinery
Plant and machinery
10%
10%
Buildings
Buildings
2%
2%
The assets’ residual values, useful lives and amortisation
methods are reviewed, and adjusted if appropriate, at
each financial year-end.
Disposal
An item of property, plant and equipment is derecognised
upon disposal or when no further future economic benefits
are expected from its use. Any gain or loss arising on
derecognition of the asset (calculated as the difference
between the net disposal proceeds and the carrying
amount of the asset) is included in profit or loss in the year
the asset is derecognised.
Employee benefits
Liabilities for wages and salaries, including non-monetary
benefits, and annual leave expected to be settled within
12 months of the reporting date are recognised in
respect of employees’ services up to the balance sheet
date. Employee benefits expected to be settled within
one year have been measured at the amounts expected
to be paid when the liability is settled. Employee benefits
payable later than one year have been measured at the
present value of the estimated future cash outflows.
using the effective interest rate, which is the rate that
exactly discounts estimated future cash receipts through
the expected life of the financial asset to the net carrying
amount of the asset.
Disposal of assets
Gains from the disposal of assets are recognised when all
conditions precedent to the sale of the asset have been
met and it is probable that any consideration receivable
will be collected.
Income tax
Current tax assets and liabilities for the current and prior
periods are measured at the amount expected to be
recovered from or paid to the taxation authorities based
on the current period’s taxable income. The tax rates and
tax laws used to compute the amount are those that are
enacted or substantively enacted by the reporting date.
Deferred income tax is provided on all temporary
differences at the reporting date between the tax bases
of assets and liabilities and their carrying amounts for
financial reporting purposes.
Deferred income tax liabilities are recognised for all
taxable temporary differences except:
•
when the deferred income tax liability arises from the
initial recognition of goodwill or of an asset or liability
in a transaction that is not a business combination
and that, at the time of the transaction, affects neither
the accounting profit nor taxable profit or loss; or
•
when the taxable temporary difference is associated
with investments in subsidiaries, associates or
interests in joint ventures, and the timing of the
reversal of the temporary difference can be controlled
and it is probable that the temporary difference will not
reverse in the foreseeable future.
Deferred income tax assets are recognised for all
deductible temporary differences, carry forward of
unused tax credits and unused tax losses, to the extent
that it is probable that taxable profit will be available
against which the deductible temporary differences and
the carry forward of unused tax credits and unused tax
losses can be utilised, except:
•
when the deferred income tax asset relating to the
deductible temporary difference arises from the initial
recognition of an asset or liability in a transaction that
is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor
taxable profit or loss; or
•
when the deductible temporary difference is
associated with investments in subsidiaries,
associates or interests in joint ventures, in which
case a deferred tax asset is only recognised to the
extent that it is probable that the temporary difference
will reverse in the foreseeable future and taxable
profit willbe available against which the temporary
difference can be utilised.
9998
PENSANA PLC
2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS
continued
for the financial year ended 30 June 2022
3. SIGNIFICANT ACCOUNTING POLICIES
AND GOING CONCERN
continued
The carrying amount of deferred income tax assets is
reviewed at each reporting date and reduced to the
extent that it is no longer probable that sufficient taxable
profit will be available to allow all or part of the deferred
income tax asset to be utilised. Unrecognised deferred
income tax assets are reassessed at each reporting date
and are recognised to the extent that it has become
probable that future taxable profit will allow the deferred
tax asset to be recovered.
Deferred income tax assets and liabilities are measured
at the tax rates that are expected to apply to the year
when the asset is realised or the liability is settled, based
on tax rates (and tax laws) that have been enacted or
substantively enacted at the reporting date.
Income taxes relating to items recognised directly in
equity are recognised in equity and not in profit or loss.
Deferred tax assets and deferred tax liabilities are offset
only if a legally enforceable right exists to set off current
tax assets against current tax liabilities and the deferred
tax assets and liabilities relate to the same taxable entity
and the same taxation authority.
tax (VAT)
Revenues, expenses and assets are recognised
net of the amount of GST or VAT, except where the
amount of GST or VAT incurred is not recoverable from
the Australian Taxation Office or other government
authorities. In these circumstances, the GST or VAT is
recognised as part of the cost of acquisition of the asset
or as part of an item of the expense.
GST or VAT receivable from, or payable to, either
the Australian Taxation Office or other government
authorities has been accounted for and included as part
of receivables or payables in the statement of financial
position.
Loss per share
Basic loss per share
Basic loss per share is calculated by dividing the loss
attributable to equity holders of the group, excluding
any costs of servicing equity other than shares, by the
weighted average number of shares outstanding during
the financial year, adjusted for any bonus elements in
shares issued during the year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the
determination of basic earnings per share to take into
account the after-income tax effect of interest and other
financing costs associated with dilutive potential shares
and the weighted average number of shares assumed
as held for sale. Assets and liabilities classified as held
for sale are presented separately as current items in the
statement of financial position.
Leases
IFRS 16 was adopted as of 1 July 2019 without
restatement of comparative figures. On transition, neither
the group nor company had any leases in scopeof
IFRS16.
At inception of a contract, the group assesses whether a
contract is, or contains, a lease. A contract is, or contains,
a lease if the contract conveys the right to control the
use of an identified asset for a period in exchange for
consideration. To assess whether a contract conveys the
right to control the use of an identified asset, the group
uses the definition of a lease in IFRS 16.
A right-of-use asset and a lease liability have been
recognised for all leases except leases of low-value
assets, which are considered to be those with a fair value
below US$5,000, and those with a duration of 12 months
or less. The right-of-use asset has been measured at
cost, which is made up of the initial measurement of the
lease liability adjusted for prepaid and accrued lease
payments at the date of transition. As at the reporting
date, there are no right-of-use assets.
Short-term and low-value leases
A practical expedient offered by IFRS 16 has been
applied to not recognise a lease liability and right-of-use
asset for such leases but to recognise payments on a
straight-line basis over the lease term. Such leases are
considered to either have a lease term of no more than
12 months or an underlying asset value of no more than
US$5,000. The group only holds short-term or low-value
leases. As such, lease payments have continued to be
recognised on a straight-line basis over the lease term.
On the statement of financial position, right-of-use assets
have been included as a separate line.
The group has elected not to separate non-lease
components and account for the lease and non-lease
components as a single lease component.
The group will depreciate the right-of-use assets on a
straight-line basis from the lease commencement date to
the earlier of the end of the useful life of the right-of-use
asset or the end of the lease term. Where impairment
indicators exist, the right-of-use asset will be assessed
for impairment.
Lease liability
A lease liability is measured at amortised cost using
the effective interest method. The lease liabilities are
measured at the present value of the lease payments
due to the lessor over the lease term, discounted using
to have been issued for no consideration in relation to
dilutive potential shares.
Provisions
Provisions are recognised when the group has a present
obligation (legal or constructive) as a result of a past
event, it is probable that the group will be required to
settle the obligation, and a reliable estimate can be made
of the amount of the obligation.
A provision for restoration and rehabilitation will be
recognised when there is a present obligation as a result
of exploration and development activities undertaken, it
is probable that an outflow of benefits will be required to
settle the obligation and the provision can be measured
reliably. The estimated future obligations will include the
costs of restoring the affected exploration and evaluation
areas contained in the group’s tenements.
The provision for future restoration will be the best
estimate of the present value of the expenditure required
to settle the restoration obligation at the reporting date.
Future restoration costs will be reviewed annually and
any changes in the estimate reflected in the present value
of the restoration provision at each reporting date. The
initial estimate of restoration and rehabilitation relating
to exploration and evaluation assets will be capitalised
into the cost of the related asset and amortised on the
same basis as the related asset. Changes in the estimate
of the provision for restoration and rehabilitation will be
treated in the same way, except that the unwinding of the
effect of discounting on the provision will be recognised
as a finance cost rather than being capitalised into the
cost of the related asset. As at 30 June 2022, the group
has not recognised any provision for restoration and
rehabilitation. The group does not have any obligation
due to the limited disturbances to date as the group is
still in the early stages of developing the projects.
Non-current assets held for sale
The group classifies non-current assets as held for sale
if their carrying amounts will be recovered principally
through a sale transaction rather than through continuing
use. Non-current assets classified as held for sale are
measured at the lower of their carrying amount and
fair value less costs of disposal. Disposal costs are the
incremental costs directly attributable to the disposal of
an asset (disposal group), excluding finance costs and
income tax expense.
The criteria for held for sale classification are regarded as
met only when the sale is highly probable and the asset
is available for immediate sale in its present condition.
Actions required to complete the sale should indicate
that it is unlikely that significant changes to the sale will
be made or that the decision to sell will be withdrawn.
Management must be committed to the plan to sell the
asset. Property, plant and equipment and intangible
assets are not depreciated or amortised once classified
the incremental discount rate relevant to each lease as
mandated under the modified retrospective approach.
The lease payments include fixed payments, including
in-substance fixed payments, less any lease incentives
receivable, variable lease payments that depend on an
index or a rate, and amounts expected to be paid under
residual value guarantees.
It is remeasured when there is a change in future lease
payments arising from a change in an index or rate, if
there is a change in the group’s estimate of the amount
expected to be payable under a residual value guarantee,
if the group changes its assessment of whether it will
exercise a purchase, extension or termination option or
if there is a revised in-substance fixed lease payment.
When the lease liability is remeasured in this way, a
corresponding adjustment is made to the carrying
amount of the right-of-use asset or is recorded in profit or
loss if the carrying amount of the right-of-use asset has
been reduced to zero.
After initial measurement, any payments made will
reduce the liability and the interest accrued will
increase it. Any reassessment or modification will lead
to a remeasurement of the liability. In such case, the
corresponding adjustment will be reflected in the right-
of-use asset, or profit or loss if the right-of-use asset is
already reduced to zero.
4. CRITICAL ACCOUNTING JUDGEMENTS
AND KEY SOURCES OF ESTIMATION
UNCERTAINTY
In applying the group’s accounting policies, management
continually evaluates judgements, estimates and
assumptions based on experience and other factors,
including expectations of future events that may have
an impact on the group. All judgements, estimates and
assumptions made are believed to be reasonable based
on the most current set of circumstances available
to management. Actual results may differ from the
judgements, estimates and assumptions. Significant
judgements, estimates and assumptions made by
management in the preparation of these financial
statements are outlined below.
Signicant accounting judgements
Impairment indicator assessment of development
assets (note 10 and 11), as well as impairment indicator
assessment of assets under construction (note 10
and11).
The ultimate recovery of the value of the group’s
development assets and assets under construction
as at 30 June 2022 is dependent on the successful
development and commercial exploitation, or
alternatively, the sale of the Longonjo Project, as well as
the successful development and commercial exploitation
of the Saltend facility.
101100
PENSANA PLC
2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
continued
for the financial year ended 30 June 2022
4. CRITICAL ACCOUNTING JUDGEMENTS
AND KEY SOURCES OF ESTIMATION
UNCERTAINTY
continued
continued
30 June 2022
Judgement was exercised in assessing the extent to
which impairment indicators existed as at 30 June2022
in respect of the Longonjo and Saltend Projects and
associated balances. In forming this assessment, internal
and external factors were evaluated, including those
that applied last year. Management determined that no
impairment indicators existed having considered the
company’s market capitalisation relative to the group’s
net asset value, the progression of the Longonjo and
Saltend Projects and the financial life of mine plan,
feasibility study equivalent assessments and the
associated Ore Reserve Statement and the competent
person’s report covering the Longonjo and Saltend
Projects. The underlying financial life of mine plan involves
estimates regarding commodity prices, production and
reserves, operating costs and capital development
together with discount rates and demonstrates significant
headroom.
Impairment of assessment of the company’s
investment in subsidiaries and loans to
subsidiaries
The ultimate recovery of the value of the company’s
investment in subsidiaries and loans to subsidiaries
is dependent on the successful development and
commercial exploitation, or alternatively, the sale of
the Longonjo and/or Saltend Projects, as well as the
successful development and commercial exploitation of
the Saltend facility.
In assessing the potential impairment of investments and
inter-company receivables (applying an ECL approach
for the latter), the directors exercised judgement over the
reasonableness of projections and considered the status
of both the Longonjo and SaltendProjects, together with
the implied economic value of the assets, and concluded
that no impairment provisions were necessary.
5. OPERATING SEGMENTS
The group has identified its operating segments based on the internal reports that are used by the chief operating decision
maker in assessing performance and determining the allocation of resources.
The group has identified that it has two operating segments, related to the activities in Angola and Saltend (UK), on the basis
that the assets in Tanzania are fully impaired as at 30 June 2022 and at 30 June 2021. Unallocated relates to operations in
Australia and Portugal which consist of corporate and head office-related costs.
Angola
US$
UK
US$
Unallocated
US$
Total
US$
2022
Non-current assets – opening balance
18,471,893 162,330 3,585 18,639,808
Non-current assets – additions
13,011,335 6,303,939 (3,585) 19,311,689
Non-current assets – closing balance
31,485,227 6,466,270 – 37,951,498
Current and non-current liabilities
151,250 2,027,511 1,467,626 3,646,386
Operating loss
(2,088,553) (6,777,309) (2,846,188) (11,712,050)
Loss before tax
(2,088,553) (6,777,309) (2,846,160) (11,712,022)
Loss for the year
(2,088,553) (6,777,309) (1,516,607) (10,382,469)
2021
Non-current assets – opening balance 9,642,118 – 7,002 9,649,120
Non-current assets – additions 8,831,775 162,330 (3,417) 8,990,688
Non-current assets – closing balance 18,473,893 162,330 3,585 18,639,808
Current and non-current liabilities 51,980 1,514,687 3,062,105 4,628,772
Operating loss (3,268,401) (5,655,689) (659,769) (9,583,859)
Loss before tax (3,268,401) (5,655,945) (659,426) (9,583,772)
Loss for the year (3,268,401) (5,655,945) (446,516) (9,370,862)
Non-current assets consist mainly of development assets and assets under construction. Additions and depreciation of non-
current assets are disclosed in note 11.
Recoverability of equity receivable (note 9)
Management’s judgement is required to determine
whether the outstanding equity receivable at period-
end is fully recoverable. The recoverability of the equity
receivable has been assessed, taking into account the
period of time since issue, the security in place over
the balance (being the collaterisation over the shares
issued), likely share price volatility and the market value
of the shares in issue. Based on this, an ECL provision
of US$669,470 has been recognised in the income
statement (30 June 2021: Nil).
Refer to note 9 for further details.
Signicant accounting estimates and
assumptions
Share-based payment transactions (note 23)
The group measures the cost of equity-settled
transactions with directors and others by reference to
the fair value of the equity instruments at the date at
which they are granted. The fair value is determined
using a stochastic model to value awards with market-
based conditions and a Black-Scholes valuation
model for awards that are not subject to market-
based performance conditions. These models require
estimates for inputs such as share price volatility and
total shareholder return. The share-based payment
arrangements are expensed on a straight-line basis over
the vesting period, based on the group’s estimate of
shares that will eventually vest. At each reporting date,
vesting assumptions are reviewed to ensure they reflect
current expectations and immediately recognise any
impact of the revision to original estimates. Judgement
is required as to the likelihood of the vesting conditions
being met, such as the progress of financing of various
projects, the lost time injury frequency rate, progress
of construction of the projects, etc. If fully vested
share options are not exercised and expire, then the
accumulated expense in respect of these is reclassified
to accumulated losses.
103102
PENSANA PLC
2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
continued
for the financial year ended 30 June 2022
6. OTHER EXPENSES
CONSOLIDATED
2022
US$
2021
US$
Administration expenses
General administration costs
1,796,217
1,643,907Audit fees
200,481
136,868Consultant fees
699,680
466,679Travel expenses
318,282
9,592Legal fees
210,670
201,593Operating lease rental expenses
Lease payments (short-life leases)
117,307
187,987Depreciation on non-current assets
Property, plant and equipment
24,508
22,713Employee benefits
1
Performance rights and options granted to directors, officers and employees
876,657
450,210Directors’ fees, superannuation and salaries and wages
4,543,307
2,128,605Total administration expenses
8,787,109
5,248,154
1
Key management personnel remuneration, disclosed in note 22, includes amounts in employee benefits disclosed above. Information in
respect of the highest-paid director is provided in the remuneration report.
The foreign currency exchange loss of US$2,255,471 (2021: US$1,835,705) comprises realised foreign exchange movements
on retranslation of monetary balances and unrealised foreign exchange movements on inter-company loans which are
considered repayable in the foreseeable future.
7. INCOME TAXES
CONSOLIDATED
2022
US$
2021
US$
Current taxation
Current tax credit
(1,329,553)
(212,910)No liability to corporation tax arose in the ordinary activities for the year ended 30 June 2022 or 30 June 2021.
The tax assessed for the year utilised the standard rate of tax in the UK of 19% (2021: 19%).
The differences are explained as follows:
CONSOLIDATED
2022
US$
2021
US$
Loss from continuing operations before tax
(11,712,022)
(9,583,772)Loss on continuing activities multiplied by the rate of corporation tax in the UK
of19%(2021: 19%)
(2,225,284)
(1,820,917)Tax effects of:
Different tax rates in overseas jurisdictions
(260,970)
(215,897)Permanent differences
285,949
549,449Deferred tax assets not recognised
1
2,200,305
1,274,455
Adjustment in respect of research and development tax credits
(1,329,553)
–Total tax credit
(1,329,553)
(212,910)
1
Tax loss information is an estimate of available losses.
7. INCOME TAXES
continued
The taxation benefits of tax losses and temporary differences not brought to account will only be obtained if:
•
assessable income is derived of a nature and of an amount sufficient to enable the benefit from the deductions to be realised;
•
conditions for deductibility imposed by the law are complied with; and
•
no changes in tax legislation adversely affect the realisation of the benefit from the deductions.
The company is subject to 19% income tax in the UK. In Australia, Pensana Metals Limited is subject to a corporation tax rate
of 26%. In Tanzania, all subsidiaries are subject to 30% corporation tax. In Angola, Ozango Minerais and Coola Mining are
subject to 25% corporation tax.
No deferred tax asset has been recognised in respect of the tax losses carried forward as the recoverability is dependent on the
future profitability of the individual entities within the group, the timing of which is considered uncertain. The total unrecognised
potential deferred tax asset in respect of losses carried forward is US$14,341,704 (30 June 2021: US$12,140,296).
8. CASH AND CASH EQUIVALENTS
CONSOLIDATED
2022
US$
2021
US$
Cash at bank and on hand
2,930,162
16,787,5912,930,162
16,787,591
9. TRADE AND OTHER RECEIVABLES
CONSOLIDATED
2022
US$
2021
US$
Trade receivables
43,425
–Prepayments
1,585,089
481,262Other receivables
771,497
4,888,7452,400,011
5,370,007
Opening balance
5,370,007
183,061Equity raise June 2021
–
4,888,745Movement in other debtors
1,288,652
298,201Funds received
(3,589,178)
–Provision for impairment
(669,470)
–Closing balance
2,400,011
5,370,007
Of the other debtors as at 30 June 2022, US$1,299,567 (gross) (30 June 2021: US$4,888,745) relates to payment pending
as part of the equity raise completed on 25 June 2021. The net amount included in the closing balance at 30 June 2022
wasUS$630,097 (30 June 2021: US$4,888,745).
The recoverability of the equity receivable has been assessed, taking into account the period of time since issue, the security in
place over the balance (being the collaterisation over the shares issued), likely share price volatility and the market value of the
shares in issue. Based on this, an ECL provision of US$669,470 has been recognised in the income statement (30June 2021:
Nil).
105104
PENSANA PLC
2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
continued
for the financial year ended 30 June 2022
10. EXPLORATION AND EVALUATION EXPENDITURE
CONSOLIDATED
2022
US$
2021
US$
Carrying value
Balance at the beginning of the year
132,040
9,600,234Additions
49,166
8,931,882Transfer from asset held for sale
–
2,500,000Impairment of asset
–
(2,500,000)Transfer to Longonjo development asset
–
(18,400,076)Balance at the end of the year
181,206
132,040
The above amounts represent capitalised costs of exploration incurred at the Coola Project in Angola carried forward as an
asset in accordance with the accounting policy set out in note 3. The ultimate recoupment of the exploration and evaluation
expenditure in respect of the areas of interest carried forward is dependent upon the discovery of commercially viable reserves
and the successful development and exploitation of the respective areas or, alternatively, the sale of the underlying areas of
interest for at least their carrying value.
In the prior year, the Tanzanian assets and liabilities have been reclassified out of non-current assets and non-current liabilities
held for sale to exploration and evaluation assets. The reclassification was done on the basis that the sale did not remain highly
probable within the next 12 months and that the likelihood of finding a buyer without additional spending and resources being
incurred, given that this is not part of the group’s strategic plans, was improbable. Furthermore, the ability to realise any value
from the Tanzanian asset in its current state is improbable. As a result thereof the asset was fully impaired at 30 June 2021. No
factors indicate reversal in 2022.
11. PROPERTY, PLANT, AND EQUIPMENT
Buildings
US$
Plant and
equipment
US$
Develop-
ment
asset
US$
Assets
under
const-
ruction
1
US$
Motor
vehicles
US$
Office
equipment
US$
Computer
equipment
US$
Total
US$
2022
Cost
Balance as at
1July 2021
6,199 10,204 18,400,076 65,728 54,507 6,080 30,611 18,573,405
Additions
22,111 7,471 12,825,233 6,388,079 28,877 1,245 14,017 19,287,033
Disposals
– – – – – – (23,347) (23,347)
Balance as at
30June 2022
28,310 17,675 31,225,309 6,453,807 83,384 7,325 21,281 37,837,091
Depreciation
Balance as at
1July 2021
1,807 1,407 – – 40,653 1,400 20,370 65,637
Charge for
the year
2,021 3,937 – – 8,270 1,190 9,091 24,509
Disposals
– – – – – – (23,347) (23,347)
Balance as at
30June 2022
3,828 5,344 – – 48,923 2,590 6,114 66,799
Net book value
As at
30 June 2021
4,392 8,797 18,400,076 65,728 13,854 4,680 10,241 18,507,768
As at
30 June 2022
24,482 12,331 31,225,309 6,453,807 34,461 4,735 15,167 37,770,292
1
Assets under construction relate to Saltend.
11. PROPERTY, PLANT, AND EQUIPMENT
continued
Buildings
US$
Plant and
equipment
US$
Develop-
ment
asset
US$
Assets
under
const-
ruction
1
US$
Motor
vehicles
US$
Office
equipment
US$
Computer
equipment
US$
Total
US$
2021
Cost
Balance as at
1July 2020
6,199 1,405 – – 54,507 6,080 23,620 91,811
Additions
– 8,799 – 65,728 – – 6,991 81,518
Disposals – – – – – – – –
Reclassification – – 18,400,076
2
– – – – 18,400,076
Balance as at
30June 2021
6,199 10,204 18,400,076 65,728 54,507 6,080 30,611 18,573,405
Depreciation
Balance as at
1July 2020 1,549 1,405 – – 23,221 893 15,857 42,925
Charge for
the year 258 2 – – 17,432 507 4,513 22,712
Disposals – – – – – – – –
Balance as at
30June 2021
1,807 1,407 – – 40,653 1,400 20,370 65,637
Net book value
As at
30 June 2020 4,650 – – – 31,286 5,187 7,763 48,886
As at
30 June 2021 4,392 8,797 18,400,076 65,728 13,854 4,680 10,241 18,507,768
1
Assets under construction relate to Saltend.
2
During the year, exploration and evaluation expenditure in relation to the Longonjo Project was transferred to development asset as of 25June2021.
12. TRADE AND OTHER PAYABLES
CONSOLIDATED
2022
US$
2021
US$
Trade and other payables
1
1,526,310
2,988,864
Accrued expenses
2,120,076
1,639,9083,646,386
4,628,772
1
There has been no interest charged on the trade payables.
107106
PENSANA PLC
2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
continued
for the financial year ended 30 June 2022
13. ISSUED CAPITAL
CONSOLIDATED
2022
Number
2022
US$
2021
Number
2021
US$
Fully paid ordinary shares
Balance at the beginning of the period 221,945
216,145,822 279,398
171,766,032Share placement 20,342
– –
16,508,633Shares issued in lieu of fees 654
– –
550,000Shares issued conversion of performance rights 1,728
7,108,037 1,015
1,321,157Share placement 17,471
12,345,680 15,012
13,500,000Share placement 17,258
– –
12,500,000Balance at the end of the financial year
235,599,539 295,425
216,145,822 279,398
COMPANY
Fully paid ordinary shares
Balance at the beginning of the period/
incorporation 221,945
216,145,822 279,398
171,766,032Share placement 20,342
– –
16,508,633Shares issued in lieu of fees 654
– –
550Shares issued conversion of performance rights 1,728
7,108,037 1,015
1,321,157Share placement 17,471
12,345,680 15,012
13,500,000Share placement 17,258
– –
12,500,000Balance at the end of the financial year
235,599,539 295,425
215,596,372 279,398
On 6 January 2022, the company issued 12,345,680 fully paid ordinary shares to M&G Investment Management at a price of
£0.81 per share and raised US$13.2 million.
On 6 July 2021, 7,108,037 shares related to share awards were issued to executive management.
On 1 July 2020, the company issued 16,508,633 fully paid ordinary shares to the Angolan Sovereign Wealth Fund. Thiswas
the balance of the shares to be allotted out of a total of 25,808,633 fully paid ordinary shares that formed part of their second
equity placing in the company of US$5 million as announced on 11 June 2020.
On 11 August 2020, the company announced the conversion of 500,000 zero-cost performance rights into fully paid ordinary
shares on listing on the LSE.
On 11 August 2020, the company issued 821,157 fully paid ordinary shares to third-party service providers at a price of
AUD0.33per share, for a total of US$0.2 million.
On 25 September 2020, the group raised an additional US$8.6 million (net of share issuance costs) via the placing of
13,500,000 fully paid ordinary shares with the Angolan Sovereign Wealth Fund.
On 4 January 2021, the company issued 550,000 fully paid ordinary shares (of which 250,000 were related to share options),
and 300,000 to third-party service providers at a price of £0.50 per share, for a total of US$0.2 million.
On 25 June 2021, the group raised circa US$21.1 million (net of share issuance costs) via the placing of 12,500,000 ordinary
shares to long-term shareholders, the Angolan Sovereign Wealth Fund and the chairman, Mr Paul Atherley.
There are no performance rights outstanding as at year-end.
14. RESERVES
The following describes the nature and purpose of each reserve within equity:
Reserve Description and purpose
Fully paid ordinary shares
Represents fully paid ordinary shares in the company of £0.001 par value.
Share premium
Represents the difference between the par value of the shares issued and the
subscription or issue price less share issue costs.
Foreign currency reserve
Represents foreign exchange differences arising from the translation of the
financialstatements of entities in the group denominated in a currency other than
United States dollars.
Share-based payments reserve
The reserve includes the grant of share options and performance rights to
executives, senior employees and consultants. Amounts are transferred out of the
reserve and into issued capital when the options, share awards or performance
rights are converted to equity or lapse. Further information about share-based
payments can be found in note 23 to the financial statements.
Equity reserve
This relates to the company’s purchase of an additional 14% equity in its Angolan
subsidiary company, Ozango Minerais SA (Ozango), for US$500,000 from non-
controlling interests in the 2019 financial year. Ozango holds the title to the Longonjo
NdPr Project.
Accumulated losses
Cumulative net losses recognised in the statement of comprehensive income.
Merger reserve
The company issued shares at par value as part of a group reorganisation to
acquire 100% of the share capital of Pensana Metals. The difference arising in the
group at the date of the group reorganisation is recorded in the non-distributable
merger reserve as part of the transaction. The company-level merger reserve
represents the difference between the investment and nominal value of shares
issued in the scheme of arrangement.
Shares to be issued reserve
Represents the proceeds received on the placement of shares during the 2020
financial year where the shares were only legally issued in the 2021 financial year.
15. LOSS PER SHARE
2022
cents per
share
2021
cents per
share
Basic loss per share
From continuing operations
4.53
4.70Total basic loss per share
4.53
4.70
Diluted loss per share
From continuing operations
4.53
4.70Total diluted loss per share
4.53
4.70
Basic loss per share
The net loss and weighted average number of ordinary shares used in the calculation of basic loss per share are as follows:
2022
US$
2021
US$
Net loss
(10,382,469)
(9,370,862)Losses used in the calculation of basic loss per share from continuing operations
(10,382,469)
(9,370,862)Losses used in the calculation of diluted loss per share attributable to
ordinaryshareholders
(10,382,469)
(9,370,862)
109108
PENSANA PLC
2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
continued
for the financial year ended 30 June 2022
15. LOSS PER SHARE
continued
2022
Number
2021
Number
Weighted average number of ordinary shares for the purpose of calculating basic loss
per share
229,019,699
199,554,645Weighted average number of ordinary shares for the purpose of calculating diluted
lossper share
229,019,699
199,554,645The weighted average is calculated by adjusting the number of shares outstanding at the beginning of the period by the
number of shares issued during the period, multiplied by a time-weighting factor to reflect the proportion of the period for which
those shares were outstanding.
As at year-end, there are 1,500,000 share options in issue (2021: 2,750,000).
16. DIVIDENDS
No dividends were paid or proposed during the current or previous financial year.
17. COMMITMENTS FOR EXPENDITURE
The consolidated entity has certain obligations to perform exploration work and expend minimum amounts of money on mineral
exploration tenements.
No provision has been made in the accounts for minimum expenditure requirements in respect of tenements.
No provision has been made in the accounts for the possibility of a native title claim application which is deemed appropriate
due to the stage of development on the Angolan projects and the positive interaction with the local community on the Longonjo
Project as regards the relocation management aspects of the development. Any potential substantial claim may have an effect
on the value of the relevant tenement and may vary from time to time. Furthermore, based on continued interaction with local
communities and the development of a stakeholder engagement plan, the board considers any such potential claim occurring
as less than probable but possible.
The group has entered into leases with Regus Serviced Offices and Avenue HQ in the UK. The leases are currently operating
on a short-term basis. As the group is expanding, lease commitments have been kept to a minimum as it is likely that bigger
premises will be required in the near future, hence the reason for the leases not being extended or are anticipated to be
extended beyond a 12-month period at inception.
There are no restrictions placed upon the lessee by entering into these leases.
CONSOLIDATED
2022
US$
2021
US$
Operating lease expenditure
Less than one year
1
87,575
35,923
Longer than one year and not longer than five years
–
–Longer than five years
–
–87,575
35,923
1
been applied.
17. COMMITMENTS FOR EXPENDITURE
continued
Commitments for payments under exploration permits and mineral leases in existence at the reporting date but not yet
incurred, are as follows:
CONSOLIDATED
2022
US$
2021
US$
Exploration and evaluation expenditure
No longer than one year
11,915
10,985Longer than one year and not longer than five years
15,756
26,670Longer than five years
–
–27,671
37,655
Capital expenditure contracted for at the reporting date but not yet incurred, was as follows:
CONSOLIDATED
2022
US$
2021
US$
Capital expenditure
3,298,647
4,035,772The expenditure relates primarily to the Longonjo Project in Angola, as well as the Saltend Project in the UK.
18. CONTINGENT LIABILITIES AND CONTINGENT ASSETS
The directors are not aware of any other contingent liabilities or contingent assets that are likely to have a material effect on the
results of the group as disclosed in these financial statements.
111110
PENSANA PLC
2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
continued
for the financial year ended 30 June 2022
19. INTERESTS IN CONTROLLED ENTITIES
OWNERSHIP INTEREST
Name of entity
Country of
incorporation
2022
%
2021
%
Parent entity
Pensana Plc
2
United Kingdom
Controlled entities
Saltend Magnet Metals Limited United Kingdom
100
–Pensana Metals Limited Australia
100
100Carlton Resources Proprietary Limited Australia
100
100Carlton Miyabi Tanzania Limited Tanzania
100
100Carlton Kitongo Tanzania Limited Tanzania
100
100Bright Star Tanzania Limited Tanzania
100
100Rift Valley Resources (Africa) Proprietary Limited Australia
100
100Rift Valley Resources Tanzania Limited Tanzania
100
100Tasman Goldfields Australia Operations Proprietary Limited Australia
100
100Sable Minerals Proprietary Limited Australia
100
100Sable Min Unipessoal Lda (previously Sable Minerals GmbH) Portugal
100
100SBLRTHS Unipessoal Lda (previously Sable Rare Earths GmbH) Portugal
100
100Ozango Minerais S.A.
1
Angola
84
84Coola Mining LDA
1
Angola
90
90Mtemi Resources Pte Limited Singapore
100
100Mtemi G Pte Limited Singapore
100
100Mtemi O Pte Limited Singapore
100
100Mtemi U Pte Limited Singapore
100
100Mtemi G (Tanzania) Limited Tanzania
100
100Mtemi O (Tanzania) Limited Tanzania
100
100Mtemi U (Tanzania) Limited Tanzania
100
1001
Pensana Plc is the ultimate holding company as at 30 June 2022. During exploration phase on the projects, the minority shareholders are
entitled to free-carry; as such, no non-controlling interest is currently recognised on the Longonjo or Coola Projects. The parent entity and its
controlled entities are not within a tax-consolidated group.
2
20. NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS
For the purposes of the cash flow statement, cash and cash equivalents include cash on hand and in banks and investments
in money market instruments, net of outstanding bank overdrafts. Cash and cash equivalents at the end of the financial year as
shown in the cash flow statement are reconciled to the related items in the statement of financial position as follows:
CONSOLIDATED
2022
US$
2021
US$
Cash and cash equivalents
2,930,162
16,787,591CONSOLIDATED
2022
US$
2021
US$
Net loss
(10,382,469)
(9,370,862)
Add/less non-cash items
Depreciation
24,508
22,712Share-based payments
876,657
450,210Unrealised foreign exchange losses/(gains)
2,255,471
(1,101,568)Issue of shares in lieu of payment to creditors
–
204,443Impairment of assets
669,470
2,500,000Research and development tax rebate
(1,329,553)
212,910Decrease/(increase) in assets
Trade and other receivables
40,901
(315,092)Other current assets
–
16,900(Decrease)/increase in liabilities
Trade and other payables
(103,216)
507,485Net cash used in operating activities
(7,948,231)
(6,872,862)
113112
PENSANA PLC
2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
continued
for the financial year ended 30 June 2022
21. FINANCIAL INSTRUMENTS
The senior management and board monitor and manage
the financial risk relating to the operations of the group.
The group’s activities include exposure to market price
risk, foreign exchange risk, credit risk, liquidity risk and
cash flow interest rate risk. The overall risk management
programme focuses on managing these risks and
implementing and monitoring controls over the cash
management function. Owing to the unpredictability of
finance markets, the senior management and board
seek to minimise potential adverse effects on financial
performance. There have been no substantive changes
in the group’s exposure to financial instrument risks, its
objectives, polices and processes for managing these
risks or the methods to measure them.
Details of the significant accounting policies and methods
adopted, including the criteria for recognition, the basis
of measurement and the basis on which income and
expenses are recognised, in respect of each class of
financial asset, financial liability and equity instrument are
disclosed in notes 3 and 4 to the financial statements.
The group manages its capital to ensure that it will
be able to continue as a going concern. The capital
structure of the group includes cash and cash
equivalents and equity attributable to equity holders
of the parent, comprising issued capital, reserves and
accumulated losses as disclosed in notes 13 and 14,
respectively. The group undertakes its exploration and
evaluation and development activities through its wholly
owned subsidiaries. None of the group’s entities are
subject to externally imposed capital requirements. The
group intends to use a variety of capital market issues
to meet anticipated funding requirements. The group
currently has no short- or long-term borrowings.
The group is involved in the exploration and development
of mining tenements for rare earths. Revenue from any
future mining associated with metal sales, the acquisition
and disposal consideration for mining tenements and
the ability to raise funds through equity and debt will
be largely dependent on the commodity price for
resources at the time of the transaction. The group
actively monitors factors that could impact market prices
including market demand, customer needs and potential
new entrants into the rare earth industry.
21. FINANCIAL INSTRUMENTS
continued
Foreign currency risk
The group is exposed to fluctuations in foreign currencies arising from the purchase of goods and services and the holding of
assets and liabilities in currencies other than the group’s measurement currency.
As at 30 June 2022, the group had exposure to other foreign currencies; primarily the following exposure to Australian dollar
(AUD), British pound (GBP) and the Angolan kwanza that is not designated in cash flow hedges:
CONSOLIDATED
2022
US$
2021
US$
Financial assets
Cash and cash equivalents
Australian dollar
15,580
71,993British pound
2,539,160
12,551,701Angolan kwanza
269,454
91,769South African rand
–
6,998Tanzanian shilling
566
–Euro
64,493
1,559Net exposure
2,889,254
12,724,020
A 5% change in the Australian dollar/British pound exchange rate will increase or decrease net loss and accumulated losses by
US$144,463 (2021: US$636,201).
Ultimate responsibility for liquidity risk management rests with the board of directors, who have built an appropriate liquidity risk
management framework for the management of the group’s short-, medium- and long-term funding and liquidity management
requirements. The group manages liquidity risk by maintaining adequate reserves, and by continuously monitoring forecast and
actual cash flows and matching the maturity profiles of financial assets, expenditure commitments and liabilities.
Maturity profile of financial instruments
The following table details the group’s remaining contractual maturity for its non-derivative financial assets and liabilities.
The table has been drawn up based on undiscounted cash flows and details the group’s exposure to interest rate risk as at
30 June 2022 and 30 June 2021.
Less than 1
month
US$
1 to 3 months
US$
3 months
to 1 year
US$
1 to 5 years
US$
5+ years
US$ Total
2022
Financial assets
Non-interest-
bearing
– – – – – –
Variable interest
rate instrument
5,330,173 – – – – 5,330,173
Fixed interest rate
instruments
– – – – – –
5,330,173 – – – – 5,330,173
Financial liabilities
Non-interest-
bearing
3,646,386 – – – – 3,646,386
1,683,787 – – – – 1,683,787
The group’s cash flow interest rate risk for assets
primarily arises from cash at bank and deposits which
are subject to market bank rates. There is no interest
receivable or payable on the group’s trade and other
receivables or payables.
A 1% change in interest rates on interest-bearing assets
will increase or decrease net loss and accumulated
losses by US$29,302 (2021: US$167,876).
Credit risk is the risk that a counterparty will not meet
its obligations under a financial instrument or customer
contract, leading to financial loss. The maximum
exposure to credit risk, excluding the value of any
collateral or other security, at balance sheet date, to
recognised financial assets is the carrying amount of
those assets, net of any provisions for estimated credit
losses, as disclosed in the statement of financial position
and notes to the financial statements. The group does
not have any material credit risk exposure to any single
debtor or group of debtors under financial instruments or
customer contracts entered into by the group, other than
cash deposits and the outstanding proceeds due from
the June 2021 equity placing as disclosed in note 9. The
group’s internal policy requires deposits to be held with
financial institutions holding a benchmark credit rating. At
the balance sheet date, the majority of cash and deposits
was held with Barclays Bank which has a Fitch rating of
A+ as at period-end.
Financial instruments and cash deposits
Credit risk balances with banks and financial institutions
are managed by senior management and the board in
accordance with the group’s internal policy. The group’s
maximum exposure to credit risk for the components of
the statement of financial position as at 30 June 2022
and 2021 are the carrying amounts as per the statement
of financial position.
Trade and other receivables
As at 30 June 2022, the group had trade and other
receivables of US$2,400,011 (2021:US$5,370,007);
refer to note 9. An impairment analysis is performed
at each reporting date by senior management on all
trade and other receivable balances. The maximum
exposure to credit risk for trade and other receivables at
the reporting date is the carrying value of each class of
financial asset. In respect of other receivables that were
past due by more than 90 days, an estimated credit loss
allowance has been recognised based on the estimated
lifetime credit loss.
115114
PENSANA PLC
2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
continued
for the financial year ended 30 June 2022
21. FINANCIAL INSTRUMENTS
continued
Liquidity risk
continued
Maturity profile of financial instruments
continued
Less than 1
month
US$
1 to 3 months
US$
3 months
to 1 year
US$
1 to 5 years
US$
5+ years
US$ Total
2021
Financial assets
Non-interest-
bearing – – – – – –
Variable interest
rate instrument 17,268,853 2,777,780 2,110,965 – – 22,157,598
Fixed interest rate
instruments – – – – – –
17,268,853 2,777,780 2,110,965 – – 22,157,598
Financial liabilities
Non-interest-
bearing 4,625,862 – – – – 4,625,862
12,642,991 2,777,780 2,110,965 – – 17,531,736
22. KEY MANAGEMENT PERSONNEL COMPENSATION
CONSOLIDATED
2022
US$
2021
US$
Short-term employee benefits
2,240,592
2,123,730Post-employment benefits
–
21,005Share-based payment
605,388
450,2102,845,980
2,594,945
This includes compensation for three executives (2021: 1), four non-executive directors (2021: 6) and one executive personnel
(2021: 2). Further details of the key management personnel compensation can be found in the remuneration report section of
the directors’ report.
23. SHARE-BASED PAYMENTS
2022
During the year, no performance rights were issued to directors and key management personnel.
2021
During the year, no performance rights were issued to directors and key management personnel.
The use of performance rights was a legacy arrangement under the previous ASX listing of the then parent Pensana MetalsLimited.
2021 – amendment to historical performance rights
Director/key
management
personnel
Number
of rights
Fair
value
1
per right
Original
vesting
conditions
Original
grant
date
Original
expiry
date Vesting status
P Atherley
3,858,037 n/a
Completion of the
definitive feasibility study (DFS)
andcommencement of
construction by 13 May 2023
13 May
2018
13 May
2023
Fully vested
D Hammond
1,000,000 n/a
Completion of the DFS
andcommencement of
construction by 13 May2023
17 September
2018
17 September
2023
Fully vested
T George
1,250,000 n/a
Commencement of construction
ofthe concentrator by end
December 2020
22 April
2019
22 April
2019
Fully vested
T George
1
1,250,000 US$0.014
(£0.0108)
Commencement of
concentrate sales by
end December 2021
22 April
2019
22 April
2019
Vesting extended.
Vesting subject to
time-weighted
pro rata 1/3 basis
on 31December
2021/2022/2023
R Kaplan
1
1,000,000 n/a
Commencement of construction
ofthe concentrator by end
December 2020
1 January
2020
31 December
2020
Fully vested
R Kaplan
1
1,000,000 US$0.15
(£0.11)
Commencement of sales
by endDecember 2021
1 January
2020
31 December
2021
Vesting extended.
Vesting subject to
time-weighted
pro rata 1/3 basis
on 31December
2021/2022/2023
1
During the prior year, the amended awards were repriced to reflect the extended vesting conditions. The following inputs were used under the
Black-Scholes model:
•
Stock pricing US$0.0956
•
Exercise price US$0.0010
•
Time to maturity Four years
•
Risk-free interest rate 1.6%
•
Annualised volatility 100%
Options
2022
During 2022, no share-based options were issued.
2021
During 2021, no share-based options were issued.
117116
PENSANA PLC
2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
continued
for the financial year ended 30 June 2022
23. SHARE-BASED PAYMENTS
continued
The following reconciles outstanding share options provided as share-based payments at the beginning and end of the financial
year:
Number
of options
2022
Weighted
average
exercise
price
2022
Number
of options
2021
Weighted
average
exercise
price
2021
Balance at the beginning of the financial year
2,750,000 –
3,000,000
1
US$0.019
Issued or to be issued during the financial year –
– –
–Vested during the financial year –
(750,000) US$0.103
–Expired during the financial year US$0.226
(500,000) US$0.175
(250,000)Balance at the end of the financial year
1,500,000 US$0.103
2,750,000 -
Exercisable at the end of the financial year –
1,500,000 –
2,750,0001
During the prior year, 2,750,000 legacy performance rights were reclassified as share-based awards with the migration from the ASX to
the LSE. During the prior year performance rights awarded to T George and R Kaplan, that were originally subject to commencement of
concentrate sales by the end of 31 December 2021, were restructured to re-align to the amended project scopes and the planned addition
ofan MREDS and solvent extraction refinery alongside the concentrator plant. As a result, thereof the timeline for vesting was amended to
31December 2021 – 2023 withvesting to take place on a one-third time-weighted basis.
Share awards
2022
During the year, share awards were issued to executive management and to employees.
Share awards were issued to executives during the year. These awards are subject to six performance conditions: absolute
total shareholder return (market-based), lost time injury frequency rate, full financing of the Longonjo Project, full financing of the
Saltend Project, construction completion of the rare earth separation facility (RESF) and production of the RESF. Grant date fair
value was calculated using the market-based measure. No dividends are attributable during the vesting period.
Refer to the remuneration committee report on
pages 58
of this annual report for more detail.The fair value of the share awards issued to executives was calculated using both a stochastic simulation model, as well as a
Black-Scholes pricing model.
The key assumptions used in the models for shares granted during the year ended 30 June 2022 were as follows:
Share awards 16 May 2022
Quantity of shares issued 1,595,833
Fair value of shares issued US$1,57 million
(£1.27 million)
Performance period Three years
Volatility 92.25%
Risk-free interest rate 1.26%
Dividend yield 0%
Weighted average share price on grant and valuation date US$0.98
(£0.80)
23. SHARE-BASED PAYMENTS
continued
Share awards were issued to employees during the year. These awards are subject to two performance conditions:
construction completion of the RESF and first production of the RESF.
The performance period is three years. There are no market -based vesting conditions on the share awards.
The fair value of the share awards is detailed below, and the share-based payment charge is charged to profit evenly between
the grant and vesting dates. No dividends are attributable during the vesting period.
The share awards have an exercise price of nil.
The fair value of the restricted shares issued in 2022 was calculated using the Black-Scholes pricing model. The key
assumptions used in the model for shares granted during the year ended 30 June 2022 were as follows:
Share awards 1 July 2021
Quantity of shares issued 583,786
Fair value of shares issued US$912,340 (£754,000)
Performance period Three years
Volatility 92.25%
Dividend yield 0%
Weighted average share price on grant and valuation date US$1.3 (£1.08)
24. RELATED PARTY TRANSACTIONS
The parent entity of the group is Pensana Plc which is incorporated in the UK.
Details of the percentage of ordinary shares held in subsidiaries are disclosed in note 19 to the financial statements.
The aggregate compensation made to key management personnel is disclosed in note 22 to the financial statements, and
details of the compensation have been provided in the remuneration report which forms part of the directors’ report.
25. REMUNERATION OF THE AUDITOR
CONSOLIDATED
2022
US$
2021
US$
Fee payable to BDO LLP as the company’s external auditor for the audit of the
company’s annual financial statements
156,574
95,393Fee payable to BDO LLP as the company’s external auditor for non-audit
services to the group
1
43,907
41,475
1
interim review.
26. SUBSEQUENT EVENTS
Subsequent to the year end the following events occurred:
•
received green bond certification from CICERO, the leading independent provider of assessments on green bond
frameworks;
•
successful equity placing of US$10.0 million with Fundo Soberano de Angola, the Angolan Sovereign Wealth Fund,
specifically designated towards the Longonjo Project’s early works programme which is now underway; and
•
Signed a memorandum of understanding with a large non-Chinese magnet manufacturer for an offtake of 25%
of Pensana’s rare earth oxide production.
119118
PENSANA PLC
2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT
COMPANY STATEMENT
OF FINANCIAL POSITION
for the financial year ended 30 June 2022
COMPANY STATEMENT
OF CASH FLOWS
for the financial year ended 30 June 2022
Note
30 June 2022
US$
30 June 2021
US$
ASSETS
Non-current assets
Investment in subsidiaries C3
13,362,139
13,362,139Trade and other receivables C2
39,617,189
22,335,068Property, plant and equipment C5
6,556,428
162,330Total non-current assets
59,535,756
35,859,537
Current assets
Cash and cash equivalents C1
2,550,436
16,383,163Trade and other receivables C2
946,840
4,910,721Total current assets
3,497,276
21,293,884
Total assets
63,033,032
57,153,421
LIABILITIES
Current liabilities
Trade and other payables C4
16,753,382
16,240,345Total current liabilities
16,753,382
16,240,345
Total liabilities
16,753,382
16,240,345
Net assets
46,279,650
40,913,076
Equity
Issued capital 13
295,425
279,398Share premium 14
47,043,782
34,195,957Reserves 14
13,551,117
13,528,019Accumulated losses 14
(14,610,674)
(7,090,298)Total equity
46,279,650
40,913,076
The notes to the financial statements, included on
pages 124
to 126
, form an integral part of these financial statements.The company’s loss for the financial year was US$7.5 million (2021: US$5.8 million). The company has taken advantage of the
section 408 exemption in the Companies Act 2006 not to present a separate statement of comprehensive income.
The financial statements were approved by the board of directors and authorised for issue on 27 October 2022 and are signed on its
behalf by:
Steven Sharpe
Chairman of the audit and risk committee
Note
30 June 2022
US$
30 June 2021
US$
Cash flows from operating activities
Operating cash flows C6
(5,278,812)
(5,744,829)Net cash used in operating activities
(5,278,812)
(5,744,829)
Cash flows from investing activities
Funding of group companies
(17,282,121)
(7,238,431)Payments for property, plant and equipment
(6,168,699)
(72,718)Net cash used in investing activities
(23,450,820)
(7,311,149)
Cash flows from financing activities
Interest paid
–
(255)Proceeds from issues of equity securities
16,780,204
27,876,399Share issue costs
(410,887)
(1,686,037)Net cash provided by financing activities
16,369,317
26,190,107
Net (decrease)/increase in cash and cash equivalents
(12,360,315)
13,134,129
Cash and cash equivalents at the beginning of the year
16,383,163
3,249,034Effects of exchange rate changes on the balance of cash held in foreign currencies
(1,472,412)
–Cash and cash equivalents at the end of the year
C1
2,550,436
16,383,163
The notes to the financial statements, included on
pages 124
to 126
, form an integral part of these financial statements.121120
PENSANA PLC
2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT
COMPANY STATEMENT
OF CHANGES IN EQUITY
for the financial year ended 30 June 2022
Issued share
capital
US$
Share
premium
US$
Shares to
be issued
US$
Accumulated
losses
US$
Merger
reserve
US$
Foreign
currency
reserve
US$
Share-based
payments
reserve
US$
Total
US$
Opening balance as at 1 July 2020
221,945 3,116,850 3,300,560 11,557,230 (1,309,987) (35,541) 380,543 17,231,600
Loss for the year – – – (5,780,311) – – – (5,780,311)
Other comprehensive income – – – – – 1,239,152 – 1,239,152
Total comprehensive income for the year – – – (5,780,311) – 1,239,152 – (4,541,159)
Issue of shares (note 13) 56,799 32,702,223 (3,300,560) – – – – 27,772,425
Capital raising costs – (1,686,037) –
Issue of shares – conversion of performance rights 654 62,921 – – – – (63,575) –
Share-based payments – – – – – – 450,210 450,210
Balance as at 30 June 2021
279,398 34,195,957 – (7,090,298) 11,557,230 1,203,611 767,178 40,913,076
Opening balance as at 1 July 2021
279,398 34,195,957 – (7,090,298) 11,557,230 1,203,611 767,178 40,913,076
Loss for the year
– – – (7,520,376) – – – (7,520,376)
Other comprehensive income
– – – – – (816,868) – (816,868)
Total comprehensive income for the year
– (7,520,376) – (816,868) – (8,337,244)
Issue of shares (note 13)
15,012 13,176,014 – – – – – 13,191,026
Capital raising costs
– (410,887) – – – – – (410,887)
Issue of shares – conversion of performance rights
1,015 82,698 – – – – (83,713) –
Share-based payments
– – – – – – 923,679 923,679
Balance as at 30 June 2022
295,425 47,043,782 – (14,610,674) 11,557,230 386,743 1,607,144 46,279,650
The notes to the financial statements, included on
pages 124
to 126
, form an integral part of these financial statements.123122
PENSANA PLC
2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT
NOTES TO THE COMPANY
FINANCIAL STATEMENTS
for the financial year ended 30 June 2022
C1. CASH AND CASH EQUIVALENTS
30 June 2022
US$
30 June 2021
US$
Cash at bank and on hand
2,550,436
16,383,1632,550,436
16,383,163
C2. TRADE AND OTHER RECEIVABLES
Prepayments
US$
Other
debtors
US$
Amounts
owed by
group
undertakings
US$
Total
US$
Current
As at 30 June 2020 42,792 – – 42,792
Movement in the period (20,816) 4,888,745 – 4,867,929
As at 30 June 2021
21,976 4,888,745
1
– 4,910,721
Non-current
As at 30 June 2020 – – 2,310,195 2,310,195
Movement in the period – – 20,024,873 20,024,873
As at 30 June 2021
– – 22,335,068 22,335,068
Prepayments
US$
Other
debtors
US$
Amounts
owed by
group
undertakings
US$
Total
US$
Current
As at 30 June 2021
21,976 4,888,745 – 4,910,921
Movement in the period
282,662 (4,258,648) – –
As at 30 June 2022
304,638 630,097
1
– 946,840
Non-current
As at 30 June 2021
– – 22,335,068 22,335,068
Movement in the period
– – 17,282,121 17,282,121
As at 30 June 2022
– – 39,617,189 39,617,189
1
Balances with subsidiaries at the period-end were:
30 June 2022
US$
30 June 2021
US$
Pensana Metals Limited
15,546,231
3,954,708Ozango Minerais SA
8,912,615
3,091,151Coola Mining Lda
45,018
–Sable Rare Earths GmbH
2,505,168
2,488,407Sable Minerals GmbH
12,608,157
12,800,802Total
39,617,189
22,335,068
Amounts owed by group undertakings are unrestricted and payable on demand, but the directors do not anticipate that they
will be paid within 12 months and therefore have classified them as non-current. The directors have assessed the ECLs, the
viability of the project considered alongside the macro environment reviewed and evidenced no need for adjusting the carrying
value of the group loan receivables.
Pensana Plc is the ultimate holding company as at 30 June 2022. Refer to note 19 to the financial statements.
C3. INVESTMENT IN SUBSIDIARIES
30 June 2022
US$
30 June 2021
US$
Pensana Metals Limited
11,756,018
11,756,018Sable Minerals GmbH
1,606,121
1,606,121Total
13,362,139
13,362,139
Please refer to note 19 for details of interests held in subsidiaries.
C4. TRADE AND OTHER PAYABLES
30 June 2022
US$
30 June 2021
US$
Inter-company loan payable to Pensana Metals
14,725,658
14,725,658Trade payables
530,330
307,619Accrued expense
1,497,394
1,207,068Total
16,753,382
16,240,345
C5. PROPERTY, PLANT AND EQUIPMENT
Development
asset
US$
Assets under
construction
1
US$
Computer
equipment
US$
Total
US$
2022
Cost
Balance as at 1 July 2021
89,945 65,728 6,990 162,663
Additions
– 6,388,079 9,716 6,398,009
Balance as at 30 June 2022
89,945 6,453,808 16,706 6,560,672
Depreciation
Balance as at 1 July 2021
– – 333 333
Charge for the year
– – 3,911 3,911
Balance as at 30 June 2022
– – 4,244 4,244
Net book value
At 30 June 2021
89,945 65,728 6,657 162,330
At 30 June 2022
89,945 6,453,808 12,462 6,556,428
2021
Cost
Balance as at 1 July 2020 – – – –
Additions 89,945 65,728 6,990 162,663
Balance as at 30 June 2021
89,945 65,728 6,990 162,663
Depreciation
Balance as at 1 July 2020 – – – –
Charge for the year – – 333 333
Balance as at 30 June 2021
– – 333 333
Net book value
At 30 June 2020 – – – –
At 30 June 2021
89,945 65,728 6,657 162,330
1
125124
PENSANA PLC
2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT
C6. NOTES TO THE STATEMENT OF CASH FLOWS
30 June 2022
US$
30 June 2021
US$
Net loss before tax
(7,520,376)
(5,780,311)
Add/less non-cash items
Restructuring of inter-company loans
–
(1,606,121)Depreciation
3,911
334Share-based payments
923,679
450,210Impairment of assets
669,470
–Unrealised foreign exchange losses
743,067
288,348Issue of shares in lieu of payment to creditors
–
204,443(Increase)/decrease in assets
Trade and other receivables
(294,767)
20,816Inter-company receivables
–
(15,436,455)Increase in liabilities
Trade and other payables
196,204
16,113,907Net cash used in operating activities
(5,278,812)
(5,744,829)
NOTES TO THE COMPANY FINANCIAL STATEMENTS
continued
for the financial year ended 30 June 2022
ABBREVIATIONS
AGM Annual general meeting
AIM Alternative Investment Market of the London Stock Exchange
ASX Australian Securities Exchange
AUD Australian dollar
°C Degrees Centigrade
CDC Commonwealth development corporation
CEO Chief executive officer
CFO Chief financial officer
CICERO Center for International Climate Research
CO2 Carbon dioxide
COVID-19 Coronavirus disease 2019, an infectious disease caused by severe acute respiratory syndrome coronavirus 2
(SARS-CoV-2)
DFS Definitive feasibility study
ECL Expected credit loss/es
EIR Effective interest rate
ESG Environmental, social and governance
ESIA Environment and social impact assessment
FEED Front-end engineering design
FRC Financial Reporting Council
ft Foot
FTSC FSTE Small cap
FTSE Financial Times Stock Exchange
GAAPs Generally accepted accounting principles
GBP British pound
GHG Greenhouse gas
GST Goods and services tax
GW Gigawatt
ha Hectare
HREOs Heavy rare earth oxides
HSE Health, safety and the environment
IAS International Accounting Standards
ICMA International Capital Market Association
IFRS International Financial Reporting Standards
in Inch
ISAs (UK) International Standards on Auditing (UK)
ISO International Organisation for Standardisation
JORC 2012 Australasian Code for Reporting of Mineral Resources and Ore Reserves
km Kilometre
km
2
Square kilometre
KPI Key performance indicator
kWh Kilowatt hour
LSE London Stock Exchange
LTIFR Lost time injury frequency rate
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PENSANA PLC
2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT
m Metre
m
2
Square metre
mg/l Milligrams per litre
mm Millimetre
MREDS Mixed rare earth double sulphate
Mt Million tonnes
mtpa Million tonnes per annum
MW Megawatt
MWh Megawatt hour
NdPr Neodymium and Praseodymium
NdPrO Neodymium Praseodymium oxide
NGO Non-governmental organisation
OEM Original equipment manufacturer
ppm Parts per million
QCA Quoted Companies Alliance
REE Rare earth element
REO Rare earth oxide
RESF Rare earth separation facility
STEM Science, technology, engineering and mathematics
STI Short-term incentive
SX Solvent extraction
TCFD Task Force on Climate-related Disclosures
tCO
2
e Tonnes (t) of carbon dioxide (CO
2
) equivalent
tpa Tonnes per annum
TREO Total rare earth oxide
TSF Tailings storage facility
TSR Total shareholder return
UK United Kingdom
US United States
US$ United States dollar
VAT
Value added tax
Directors
Mr Paul Atherley – Chairman
Mr Tim George – Executive director/chief executive officer
Mr Robert Kaplan – Finance director
Dr Jeremy Beeton – Non-executive director
Baroness Lindsay Northover – Non-executive director
Mr Steven Sharpe – Non-executive director
Chief executive officer
Mr Tim George
Chief operating officer
Mr Rocky Smith
Company secretary
St James’s Corporate Services Limited
Mr George Zacharias
Registered office
107 Cheapside
Second Floor
London
EC2V 6DN, United Kingdom
Share registry UK
Computershare
The Pavilions, Bridgwater Road
Bristol BS13 8AE, United Kingdom
Auditor
BDO LLP
55 Baker Street
London W1U 7EU
United Kingdom
Lawyers UK
Bryan Cave Leighton Paisner LLP
Governor’s House
5 Laurence Pountney Hill
London
EC4R 0BR, United Kingdom
LSE code
PRE
Website
www.pensana.co.uk
Pensana Plc
Company registration number: 12206525
CORPORATE
DIRECTORY
ABBREVIATIONS
continued
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2022 ANNUAL REPORTPENSANA PLC
2022 ANNUAL REPORT