Minco Exploration plc Publishes Annual Report and Accounts 2020

30 June 2021 | Minco Exploration plc (“Minco Exploration”, “Minco” or the “Company”) announces the publication of its Annual Report and Accounts for the year ended 31 December 2020.

Click here to download Minco’s Annual Report and Accounts 2020. (PDF)

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Minco Exploration PLC

(“Minco Exploration”, “Minco” or the “Company”)

Annual Report and Accounts 2020

Chairman’s Letter to Shareholders

As we reflect and report on 2020, which saw the re-launch of Minco Exploration plc in mineral exploration in Ireland, we see a year dominated worldwide by the COVID-19 pandemic, with unprecedented challenges to health, the economy and normal living but, paradoxically and perhaps coincidentally, a period of strong demand for metals and minerals leading to a very positive outlook for metal prices.

In Minco Exploration, COVID-19 slowed us down, causing postponement in the listing of our shares on a stock exchange, and travel and movement restrictions delayed our planned drilling programs. Nevertheless, steady, if slow, progress was made in advancing our various exploration projects in Ireland.

The economic impacts of the COVID-19 pandemic initially had a negative effect on demand for metals and on metal prices during the first half of 2020. However, the downturn had been significantly reversed by the end of September and we subsequently saw growing strength in the commodities markets, with increasing demand for minerals.

The bright spot, and it is very bright, is in the positive outlook for most minerals, including the base metals zinc, lead and copper for which Minco Exploration is exploring in Ireland, and the increasing recognition of the importance of minerals in today’s modern society.

Although the COVID-19 pandemic brought great volatility to financial and commodity markets, metal prices experienced notable growth over the past year, initially on the back of strong demand from China, and more recently other large economies, supplemented by some significant supply disruptions. As the world recovers from the pandemic, trillions of dollars are being invested to rebuild infrastructure and to transition to a green economy. Governments around the world are launching stimulus programs focused on infrastructure and environmental components. The United States stimulus programs of almost $4 trillion, and other government stimulus and recovery programs around the world including in Europe, are focusing on clean energy as part of decarbonization strategies and driving demand for clean energy metals.

Minerals are the Key to a Sustainable Future

This positive outlook for metals has resulted in some market participants suggesting it represents the start of a new commodities super cycle. Perhaps the principal reason is the awaking recognition that metals and minerals are essential for addressing climate change and adapting to a green economy.

The European Union, recognising the strategic issue that most metals used in Europe are imported from other places and that the EU is largely dependent on raw materials from countries with lower environmental and social standards, has established the Raw Material Alliance to strengthen the EU’s ability to meet increasing demand, especially for critical minerals, in connection with electric vehicles, energy transmission and storage and renewable energy. Sustainable supply of raw materials is a strategic security question for Europe to deliver the ambitious goals outlined in the EU Green Deal.

“Mineral resources are the lifeblood of our modern society and the key to a more sustainable future. Today, we are in the middle of disruptive innovation in emerging green energy, e-mobility and clean technology, triggered by pressing societal challenges. The growing need for carbon-neutral technology creates a strong demand for minerals, metals and advanced materials.   The estimated demand for critical raw materials vital for a green and digital transition in Europe will dramatically multiply in the coming years.” The European Association of Mining Industries, Metal Ores & Industrial Minerals, the recognised representative of the European metals and minerals mining industry.

In September 2020, the European Commission presented an Action Plan on Critical Raw Materials to develop resilient value chains for EU industrial ecosystems and to secure Europe´s green and digital transition. It aims to reduce dependency on third countries by strengthening domestic sourcing as well as improving resource efficiency and circularity while promoting responsible sourcing worldwide. Action Plan on Critical Raw Materials: Critical Raw Materials Resilience, European Commission Communication, 3 Sept. 2020.

In its May 2021 report, The Role of Critical Minerals in Clean Energy Transitions, the International Energy Agency (IEA) states that the rapid deployment of clean energy technologies as part of energy transitions implies a significant increase in demand for minerals. The IEA report suggests that an energy system powered by clean energy technologies differs profoundly from one fuelled by traditional hydrocarbon resources. It concludes that solar photovoltaic plants, wind farms, and EVs generally require more minerals to build than their fossil fuel-based counterparts. According to the IEA, a typical electric car requires six times the mineral inputs of a conventional car and an onshore wind plant requires nine times more mineral resources than a gas-fired plant.

“I believe that the reasons to explore sustainable mining in the EU are not only of economic and geopolitical nature. We also have a moral obligation. If we do not have an open debate about sustainable mining in Europe, without taboos, we will continue in a situation where we import raw materials from mines far away from our homes and conveniently close our eyes on how they were sourced.  It is high time that we are honest and take more responsibility ourselves. We need to work together and develop a European approach (to mining) with high environmental and social standards which is backed by stakeholders.”  European Commissioner for Internal Market, Thierry Breton, 17th June, 2021.

Focus on exploration

Recognizing the projected strong demand for minerals to fight climate change and transition to a green economy, Minco Exploration’s mission is the discovery of world class mineral deposits to create value for shareholders and the development of mines in an environmentally, socially, and ethically responsible manner for the benefit of all stakeholders.

Minco Exploration, through its subsidiary Minco Ireland Limited, is actively exploring for zinc and lead in the Irish Midlands Orefield and holds interests in Prospecting Licences in Counties Meath, Westmeath, and Galway.

Minco Exploration’s planned 2020 exploration programs included drill testing high priority targets, up-grading existing targets, and continuing to develop new targets through field work and data interpretation. The schedule and timelines for these programs were delayed because of the COVID-19 pandemic and associated restrictions. In compliance with Government guidelines to help limit the spread of the virus, Minco suspended all field activities, but has undertaken limited assessment activities and continued to aggressively advance desk-top studies designed to generate a portfolio of opportunities and identify and develop additional targets for exploration for new orebodies in Ireland.

Minco Exploration holds some of the most prospective ground in Ireland, in joint venture with Boliden Tara Mines, immediately adjacent to Boliden’s world class Tara Mine at Navan, County Meath. Despite the operational challenges posed by COVID-19, two deep holes were drilled on these licences, one on PL 1440R, which started in late 2020 and continued through the first months of 2021, and another on PL 3373 in the spring of 2021.

Minco is also in a joint venture with Boliden Tara Mines on a large package of prospecting licences in the Slieve Dart area of County Galway. In late 2019, a 2D seismic acquisition program was undertaken over 21 kilometres, supported in part by the Geological Survey of Ireland, the results of which were studied and interpreted throughout 2020. Drilling to validate the interpretation of the seismic survey and to test selected structural – stratigraphic targets is planned, subject to permit approval, in the second half of 2021 or the first half of 2022.  Further details on these exploration activities will be found in the Review of Operation section of this Annual Report.

A Positive Outlook

Amidst the ongoing COVID 19 pandemic, Minco Exploration is continuing to operate in a socially responsible manner, ensuring the safety of all our personnel, stakeholders, and community. The Directors recognise the importance of environmental, social and governance responsibilities. Further details of these initiatives will be found in the Corporate Governance and Social Responsibility section of this Annual Report.

Notwithstanding the challenges and the initial negative impact associated with the global pandemic, I believe we have maintained focus on our objectives for the discovery of new mines in Ireland. I believe this approach will generate the best long-term returns for shareholders. We are still looking towards the future and believe that the medium to long-term demand for metals is growing, particularly in the non-carbon electric economy, and the fundamental outlook for all base metals remains very strong. We remain very positive about the future prospects for Minco Exploration and its exploration targets.

In closing, I want to thank our small team of Directors, geologists, support staff, as well as our consultants and advisors, in Minco for their work and contribution throughout 2020 and to date, and thank all Minco Exploration shareholders for their continued support.

John F. Kearney
Chairman of the Board
30 June 2021

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Review of Operations

 

Minco Exploration plc (“Minco Exploration”, “Minco”, or the “Company”) holds, indirectly through its subsidiaries, interests in Prospecting Licences (“PLs”) in Ireland that are prospective for zinc-lead mineralization. Minco explores these licences, either alone or in joint venture with Boliden Tara Mines Limited (“Boliden”).

In addition, Minco has applications, either on its own behalf or in conjunction with Boliden, over a number of other prospecting licences in Ireland.

The licences held by Minco are considered prospective exploration areas for “Irish Type” carbonate hosted zinc-lead mineralization and quality target areas have been identified through field work, reinterpretation of historical exploration data and application of geological concepts. “The Lower Carboniferous carbonate rocks of the Irish Midlands host one of the great orefields of the world. Since 1960, 14 significant (resource >1Mt) zinc-lead deposits have been discovered, including the world class orebody at Navan (>100Mt).” Minerals Ireland – Exploration and Mining Division- Department of Communications, Climate Action and Environment -www.minerals.ie.

During 2020, travel and access restrictions resulting from the COVID pandemic seriously disrupted field programs. However, notwithstanding the lock downs, drilling was conducted on two of the projects – Tatestown and Kells, during time windows when restrictions were eased, including during the first half of 2021.

Joint Venture with Boliden on PL 1440R (Tatestown) Navan, County Meath

Minco, through its wholly owned subsidiary Westland Exploration, holds a 20% interest in PL 1440R (Tatestown), which is being explored under a Joint Venture with Boliden (80%). The licence hosts part of the Tatestown–Scallanstown zinc-lead deposit.  PL 1440R is located immediately adjacent to Boliden’s Tara underground zinc-lead mine at Navan, County Meath.

In 2020 Boliden’s Tara Mine produced 2.3 million tonnes of zinc-lead ore and is the biggest zinc mine in Europe and one of the largest globally. Exploration by Boliden has continued to extend the life-of-mine through the delineation of new resources proximal to the existing workings and at the Tara Deep zone to the south-east. Boliden reported that exploration at the Tara Deep mineralization continued during 2020 with drilling from the surface, while drifting is underway toward Tara Deep at a depth of around 1000 meters. Boliden reported that drilling from the surface has been successful, and Tara Deep is now estimated to include 26 million tonnes of inferred Mineral Resources, compared with 22 million tonnes in 2019, which has also contributed to an increase in Tara’s total Mineral Resource of 4.7 million tonnes (16%).

Historic exploration within PL 1440R has confirmed that the footprint of the Tara Mine mineralizing system extends into this area. A historical resource of 2.4 million tonnes averaging 7.31% zinc plus lead has been estimated for the Tatestown–Scallanstown deposit. This satellite deposit is situated 1.5 km to the north-west of the Tara Mine and is located along the east-west trending Tatestown Fault.

Several other similar, but untested, structural – stratigraphic settings are known within the licence. It is intended that these targets be systematically drill tested. Given the proximity to the Tara Mine operations and infrastructure the economic threshold for discovery is significantly less than in a greenfield setting.

In 2020, one of these targets in the Donaghpatrick area was tested. In this area the target stratigraphy is located within a faulted terrace in the footwall of the N1 Fault. The drill hole NO2562 intersected the fault zone earlier than anticipated from the seismic interpretation. It is now interpreted that the fault is down-throwing the prospective Pale Beds to an estimated 1,400 metres and fragmenting the target into a number of discontinuous slices. It is considered that these individual slices do not having economic tonnage potential.

The northern portion of PL 1440R remains essentially unexplored, with four, widely spaced intercepts of pervasive low-grade zinc – lead mineralization.  A second east-west fault, parallel to the Tatestown Fault, is indicated by this drilling suggesting potential for higher grades and widths similar to those adjacent to the Tatestown Fault.

Minco will continue to contribute to the systematic drill testing of targets in this area to maintain its 20% interest in this licence.

Joint Venture with Boliden on PL 3373 (Kells) County Meath

Minco, through its wholly owned subsidiary Minco Ireland Limited, has entered into a joint venture with Boliden on PL 3373, contiguous to the west of PL 1440R. The licence, located approximately 10 km northwest of the Tara Mine, covers an area of approximately 30 km² and constitutes the north-western quadrant of a contiguous block of ground currently being explored by Boliden alone.

Under terms of this agreement, Minco can earn a 75% interest through expenditure of €250,000, in staged programmes, by March 1, 2024. At December 31, 2020 Minco had incurred cumulative expenditure of €120,000 and earned a 25% joint venture interest in the licence. Boliden has the right of off-take to purchase or toll-process all ore that may be produced from the licence area.

Historic exploration on PL 3373 has focused on the search for zinc-lead mineralization within the same rocks that host the ore at the Tara Mine. Four structurally defined untested drill targets have been identified.  The four drill target areas are located eight to fifteen kilometres west of the Tara Mine, at estimated depths of 550 to 800 m below surface.

The Kilmainham target area, which is situated in the eastern part of the licence, closest to the Tara Mine, is defined by the intersection of the prospective strata, at 600 – 650 m depth, with a major east-west trending fault bounding the southern margin of the Longford-Down Massif, and by an off-setting north-easterly trending fault structure. The drill test of this target was delayed until 2021 due to COVID restrictions and was completed in the second quarter of 2021. The hole intersected the prospective Pale Beds at 540 m and went through a fault contact into Lower Palaeozoic rocks at 590 m. This hole is a 1,300m north-west step-out from DDH 1498 which intersected 6.1m @ 1.37% Zn, 0.05% Pb at depth of 842.3m, within a wider, lower-grade interval from 836.3 – 866.5m. The results confirmed the structural – stratigraphic interpretation but did not intersect mineralisation of interest. Minor moderate coarse-grained galena in calcite veining was noted within ABL at 373 – 374m. The Micrite Unit is well developed, but not mineralised.

It is anticipated that as a result of this program Minco’s interest in the licence will increase to 50%.

The other three targets, located further to the west within the licence, will now be reassessed in the light of this new data and a drilling program will be designed to continue with the systematic exploration of the area during the 2022 – 2024 licence renewal period.

Joint Venture with Boliden on Slieve Dart Licences, County Galway

Minco, through its wholly owned subsidiary Minco Ireland Limited, is participating in a joint venture agreement with Boliden on ten prospecting licences in the Slieve Dart area of County Galway. Minco Ireland can earn a 50% interest through expenditure of €385,000 in staged programmes, by 31 July 2022. As of December 31, 2020, Minco has incurred cumulative expenditures of €270,939 (2019 – €230,939) with respect to the licences and earned an undivided 40% joint venture interest in the licences. Boliden has the right of off-take to purchase or toll-process on all ore that may be produced from the licence area.

In late 2019 a 2D seismic acquisition program was undertaken over a length of 21 kilometres, supported in part by the Geological Survey of Ireland. Processing and interpretation of the results was undertaken during 2020. This refined the understanding of the potential of the licences and allowed two licences to be surrendered. In addition, a review of the geophysics was completed with a view to better modelling of the depth to granite in the area.

Historic exploration has detected widespread, significant, mineralization at shallow depth in the northern part of the block. This mineralization is interpreted to represent distal mineralization related to a much larger mineralizing system controlled by major basement structures known to be present in the southern part of the block.

These structures have been interpreted from the results of the 2019 2D seismic traverse and reprocessing of a TELLUS regional airborne survey data. It is interpreted that these faults acted as the main conduits for mineralizing hydrothermal fluids transporting metal to sites of deposition within rocks similar to those hosting the zinc-lead ore at the Tara and Tynagh mines.

Drilling to validate the interpretation of the seismic survey and to test selected structural – stratigraphic targets is planned, subject to permit approval, in the second half of 2021 or the first half of 2022.

Exploration at Moate, County Westmeath

Minco has interest in two licences, PLs 1228 and 1229, that cover a surface area of 65.67 km², at Moate in County Westmeath. These are centred on a specific geological target identified by Minco, with potential for zinc-lead mineralization of Tynagh Mine type.

Minco’s Moate licences are located along the “Tynagh-Ballinalack Trend” approximately mid-way between the former Tynagh Mine, located 50 km to the southwest, and the similar styled Ballinalack deposit, situated 35 km to the northeast. The Tynagh Mine operated successfully from 1965 to 1981 producing 9 million tonnes of ore, from open pit and underground, at average grades of approximately 7% lead, 5.5% zinc, 0.5% copper and 2.6 ounces of silver per tonne.

Minco’s studies of previous drilling have outlined a geological setting believed to mirror that of the former Tynagh Mine and the smaller Ballinalack deposit.

A target has been defined east of Athlone, at a depth of 450 metres below surface. Testing of this target has been delayed due to COVID restrictions. However, with the easing of those restrictions, it is now intended to make application for a drilling permit with implementation, subject to approval, during the second half of 2021.

Metal Prices

Over the second half of 2020 and the first half of 2021, base metal prices posted strong gains, driven by infrastructure demand, supply disruptions and inventory depletion. The COVID-19 pandemic led initially to a decrease in metal demand in China during the first quarter, but demand rebounded strongly in the second half of 2020 as incentive measures in the country kick-started industrial activity. Steel production rose, and the demand for zinc metal increased from the end of the first quarter of 2020 through the rest of the year.  Because China accounts for more than half of global base metal demand and a significant share of global metal supply, economic developments in China will continue to be the major factor in metal markets and prices over the long term.

The copper price more than doubled from its COVID-19 low point in March 2020, zinc by 58% and lead by 30%. Zinc prices on the London Metals Exchange (LME) averaged US$1.03 per pound for 2020 (US$2,246 per tonne), but ended the year at US$1.24 per pound, while a build-up in inventories has held the price in check through the first half of 2021. Base metals are needed for electrification and adaptation to climate change, copper for power generation, transmission and energy storage; lead for energy storage, and zinc for extending the lifespan of products. It is expected that the post-pandemic global stimulus plans, and the objective to achieve climate neutrality by 2050, will provide long term demand for critical and strategic minerals and support for metal prices, including, importantly for Minco, lead and zinc.

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Share capital
The share capital is comprised of share capital issued for cash and non-cash considerations.

Owner’s investment
For the year ended 31 December 2018, Buchans’ net investment in Minco Exploration is shown as owner’s net investment in these financial statements as Minco Exploration was not a separate legal entity for the period presented.

Retained deficit
Retained deficit comprise accumulated profit and loss in the current and prior years. Retained deficit also includes the value of expired and terminated share-based payments.

 

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MINCO EXPLORATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2020, 2019 AND 2018
Expressed in Euros, unless noted and per share amounts

 

1. BASIS OF PRESENTATION AND COMPLIANCE

Minco Exploration plc (“Minco Exploration”, “Minco”, or the “Company”)  was incorporated in Ireland on 28 May 2019 as a wholly owned subsidiary of Buchans Resources Limited (“Buchans”) to acquire the shares and receivables in subsidiaries from Buchans, its parent company.  See Note 2. Minco was re-registered under the Companies Act 2014 as PLC-Public Limited Company on 27 April 2020.

Minco Exploration and its subsidiaries, (Norsub Limited, Minco Ireland Limited, Minco Mining Limited and Westland Exploration Limited (the “Minco Subsidiaries” and collectively with Minco Exploration the “Group”) has interests in exploration and evaluation properties located in Ireland and the United Kingdom. The Minco Subsidiaries had been subsidiaries of Minco plc prior to August 30, 2017 (See Note 2) and have been carrying on the business of exploring and evaluation of mineral properties in Ireland since 1995. Substantially all of the Group’s efforts are devoted to financing and exploring its mineral properties.

The Company’s head office is located at Coolfore Road, Ardbraccan, Navan, Co. Meath, Ireland and the address of its registered office is 17 Pembroke Street Upper, Dublin 2, Ireland D02 AT22.

In 2019, in a group reorganization of Buchans, the Company acquired the shares and receivables in subsidiaries from its parent company, Buchans, in consideration for the issue of 59,868,716 ordinary shares of €0.01 each at a deemed value of €2,625,000.

These consolidated financial statements at 31 December 2019 and 2018 reflect the financial position, statement of loss and comprehensive loss, equity and cash flows related to assets and liabilities of Minco Exploration (the “Minco Exploration Net Assets”) which were transferred by its parent company Buchans in 2019.  See Note 2.

As Minco Exploration had not historically prepared financial statements for the Minco Exploration Net Assets, and Minco Exploration did not exist as a legal entity prior to 28 May 2019, the financial statements for the period prior to 30 May 2019 have been prepared from the financial records of Buchans on a carve-out basis.  The Statements of Financial Position at 31 December 2019 and 2018 include all of the Minco Exploration Net Assets.  The Statements of Loss and Comprehensive Loss for the years ended 31 December 2019 and 2018 reflect all expenses and other income directly attributable to the Minco Exploration Net Assets, and an allocation of Buchans and Minco Exploration’s general and administrative expenses incurred presented as management fees, as these expenditures were shared by the Minco Exploration Net Assets. In some instances, certain expenses were not allocated as they would have related directly to Buchans or Minco Exploration.  All inter-entity balances and transactions have been eliminated.

The owner’s net investment in these consolidated financial statements prior to establishment of the Company was recorded as Buchans’ net investment in these assets, as the Company was not a separate legal entity for the entire reporting period presented.  Changes in owner’s net investment include net income/ (loss) and net transfers to and from Buchans at the book values recorded by Buchans.  On acquisition of the assets from Buchans for shares of the Company, the owner’s investment was reclassified as share capital and deficit.

These financial statements have been prepared based upon the historical cost amounts recorded by Buchans and Minco Exploration, with the exception of certain financial instruments measured at fair value.  These financial statements may not be indicative of Minco Exploration financial performance and do not necessarily reflect what its financial position, results of operations, and cash flows would have been for the years ended 31 December 2019 and 2018 had Minco Exploration operated as an independent entity during the entire financial statement reporting periods presented.

The financial statements of Minco Exploration and its subsidiaries have been prepared applying principles in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union, and their interpretations adopted by the International Accounting Standards Board (“IASB”) and comply with Article 4 of the EU IAS Regulation, and in accordance with the Companies Act 2014.

The financial statements were approved by the Board of Directors of Minco Exploration on 30 June 2021.

2. GROUP REORGANIZATIONS

Minco plc was a public company incorporated in Ireland and its shares were traded on the Alternative Investment Market (AIM) of the London Stock Exchange until August 30, 2017.  Buchans was incorporated on May 8, 2015 under the laws of the Province of Ontario, Canada as a wholly-owned subsidiary of Minco plc to hold all of the assets of Minco plc, including the Minco Subsidiaries, but excluding Minco plc’s 2% net smelter return royalty on the Curraghinalt gold deposit in Northern Ireland.

On June 1, 2017, Minco plc and Buchans entered into an agreement with Dalradian Resources Inc. on the terms of the acquisition by Dalradian of Minco plc’s 2% royalty on the Curraghinalt gold deposit (the “Royalty Disposal”), in return for the issue of a total of 15,490,666 new Dalradian Shares valued at $20,000,000. The Royalty Disposal was structured as an offer by Dalradian for the acquisition of the entire issued share capital of Minco plc (the “Offer”). The Offer was implemented by means of a scheme of arrangement, under Section 450 of the Companies Act 2014 of Ireland (the “Scheme”). As part of the Scheme, Minco plc undertook a demerger of Buchans, its wholly owned subsidiary, by way of a transfer in specie of the shares of Buchans to Minco plc Shareholders (the “Demerger”) effective August 30, 2017.

On 28 October 2019, the Company entered into an Arrangement Agreement with Buchans (the Company’s sole shareholder at that time) and Canadian Manganese Company Inc. to effect a Plan of Arrangement involving a group reorganisation whereby Buchans agreed to distribute to its shareholders, pro rata, all of the shares of Canadian Manganese Company Inc. and exchangeable warrants entitling such shareholders to receive shares of the Company or additional shares of Buchans, at their option.

On 31 December 2019, Buchans filed Articles of Arrangement to implement the Plan of Arrangement for the group reorganization and spin-out of subsidiaries, which had been approved by Buchan’s shareholders on 10 December 2019, and by the Ontario Superior Court of Justice on 19 December 2019.

Under the Plan of Arrangement, shareholders retained their existing shares of Buchans, and Buchans distributed to its shareholders, pro rata all of the shares of Canadian Manganese Company Inc. and 59,868,716 exchangeable warrants (“Exchangeable Warrants”) entitling shareholders to receive either one share of Minco Exploration or 0.25 additional shares of Buchans, at the shareholder’s option, for each share of Buchans held.

During the year 2020, 9,079,000 Exchangeable Warrants were exchanged into 2,269,744 Buchans shares, 1,039,844 Warrants were exchanged into Minco Exploration shares and 185,152 warrants were cancelled. On 31 December 2020, the 49,564,720 unexercised Exchangeable Warrants were automatically exchanged into Minco Exploration shares.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

• Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year. Subsidiaries consist of entities over which the Company is exposed to, or has rights to, variable returns as well as the ability to affect those returns through the power to direct the relevant activities of the entity. Subsidiaries are fully consolidated from the date control is transferred to the Company and are deconsolidated from the date control ceases. The financial statements include all the assets, liabilities, revenues, expenses and cash flows of the Company and its subsidiaries after eliminating inter-entity balances and transactions.

The results of subsidiaries acquired or disposed of are included in the group statement of loss from the effective date of acquisition or up to the effective date of disposal, as appropriate. All intra-company transactions, balances, income, and expenses are eliminated on consolidation.

Non-controlling interests in subsidiaries are identified separately from the Company’s equity therein.  The interests of non-controlling shareholders may be initially measured at fair value or at the non-controlling interests’ proportionate share of the fair value of the acquiree’s identifiable net assets. The choice of measurement is made on an acquisition-by-acquisition basis.  Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests’ share of subsequent changes in equity.  Total comprehensive loss is attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Changes in the Company’s interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions.  The carrying amount of the Company’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to the owners of the Company.

When the Company loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of the retained interest and (ii) the previous carrying amount of the assets (including goodwill), less liabilities of the subsidiary and any non-controlling interests. Amounts previously recognized in other comprehensive income/ (loss) in relation to the subsidiary are accounted for (i.e. reclassified to profit or loss or transferred directly to retained earnings) in the same manner as would be required if the relevant assets or liabilities are disposed of.  The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IFRS 9 financial instruments or, when applicable, the costs on initial recognition of an investment in an associate or jointly controlled entity.

• Exploration and evaluation assets

Exploration and evaluation costs are capitalised as an intangible asset until technical feasibility and commercial viability of a mineral deposit, when the capitalised exploration costs are re-classed to property, plant and equipment. Exploration costs include an allocation of administration and salary costs (including share-based payments) as determined by management, where they relate to specific projects. Prior to reclassification to property, plant and equipment, exploration and evaluation assets are assessed for impairment and any impairment loss recognised immediately in the statement of (loss)/income.

• Rehabilitation Provisions

The Company will record a liability for the estimated future costs associated with legal and constructive obligations relating to the reclamation and closure of its exploration assets. This amount is initially recorded at its discounted present value with subsequent annual recognition of an accretion expense on the discounted liability. An equivalent amount is recorded as an increase to exploration assets and amortized over the useful life of these assets. Minco Exploration is currently not aware of any existing significant legal or constructive obligations relating to the reclamation of its interest in exploration assets and therefore no such liability has been recorded at 31 December 2020, 2019 and 2018.

• Impairment of non-financial assets

At the end of each reporting period, non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds its recoverable amount, which is the higher of value in use and fair value less costs to sell, the asset is written down accordingly. Any impairment is recognized in loss.

• Interests in joint arrangements

A joint arrangement involves the use of assets and/or other resources of the Company and other venturers rather than the establishment of a corporation, partnership or other entity. The Company accounts for the assets it controls and the liabilities and expenses it incurs.  As at 31 December 2020, 2019 and 2018, no joint arrangement existed for accounting purposes.

• Cash and cash equivalents

Cash is comprised of cash on hand, deposits in banks and highly liquid investments having original terms to maturity of 90 days or less when acquired.

 Financial instruments

 Financial assets

 Initial recognition and measurement

Non-derivative financial assets within the scope of IFRS 9 are classified and measured as “financial assets at fair value”, as either fair value through profit and loss (“FVPL”) or fair value through other comprehensive income (“FVOCI”), or “financial assets at amortized costs”, as appropriate. The Company determines the classification of financial assets at the time of initial recognition based on the Company’s business model and the contractual terms of the cash flows.

All financial assets are recognized initially at fair value plus, in the case of financial assets not at FVPL, directly attributable transaction costs on the trade date at which the Company becomes a party to the contractual provisions of the instrument.

Cash and trade and other receivable are measured at amortized cost.

Subsequent measurement – financial assets at amortized cost

After initial recognition, financial assets measured at amortized cost are subsequently measured at the end of each reporting period at amortized cost using the Effective Interest Rate (“EIR”) method. Amortized cost is calculated by taking into account any discount or premium on acquisition and any fees or costs that are an integral part of the EIR. The EIR amortization is included in finance income in the group statements of loss.

Subsequent measurement – FVPL

Financial assets measured at FVPL include financial assets management intends to sell in the short term and any derivative financial instrument that is not designated as a hedging instrument in a hedge relationship. Financial assets measured at FVPL are carried at fair value in the group statements of financial position with changes in fair value recognized in other income or expense in the group statements of loss. The Company measures its cash equivalents at FVPL.

Subsequent measurement – FVOCI

Financial assets measured at FVOCI are non-derivative financial assets that are not held for trading and the Company has made an irrevocable election at the time of initial recognition to measure the assets at FVOCI. The Company does not measure any financial assets at FVOCI.

After initial measurement, investments measured at FVOCI are subsequently measured at fair value with unrealized gains or losses recognized in other comprehensive loss in the group statements of comprehensive loss. When the investment is sold, the cumulative gain or loss remains in accumulated other comprehensive loss and is not reclassified to profit or loss.

Dividends from such investments are recognized in other income in the group statements of operations when the right to receive payments is established.

Derecognition

A financial asset is derecognized when the contractual rights to the cash flows from the asset expire, or the Company no longer retains substantially all the risks and rewards of ownership.

Impairment of financial assets

The Company’s only financial assets subject to impairment are amounts receivable, which are measured at amortized cost. The Company has elected to apply the simplified approach to impairment as permitted by IFRS 9, which requires the expected lifetime loss to be recognized at the time of initial recognition of the receivable. To measure estimated credit losses, accounts receivable have been consolidated based on shared credit risk characteristics, including the number of days past due. An impairment loss is reversed in subsequent periods if the amount of the expected loss decreases, and the decrease can be objectively related to an event occurring after the initial impairment was recognized.

Financial liabilities

Initial recognition and measurement

Financial liabilities are measured at amortized cost, unless they are required to be measured at FVPL as is the case for held for trading or derivative instruments, or the Company has opted to measure the financial liability at FVPL. The Company’s financial liabilities include accounts payable and accruals, notes payable and other liability of subsidiary, which are each measured at amortized cost.  All financial liabilities are recognized initially at fair value and in the case of long-term debt, net of directly attributable transaction costs.

Subsequent measurement – financial liabilities at amortized cost

After initial recognition, financial liabilities measured at amortized cost are subsequently measured at the end of each reporting period at amortized cost using the EIR method. Amortized cost is calculated by taking into account any discount or premium on acquisition and any fees or costs that are an integral part of the EIR. The EIR amortization is included in finance cost in the group statements of loss.

Derecognition

A financial liability is derecognized when the obligation under the liability is discharged, cancelled, or expires with any associated gain or loss recognized in other income or expense in the group statements of loss.

• Functional and presentation currencies

The Company’s presentation currency is the Euro (“€”).  The functional currency of the Company and its subsidiaries is the Euro.  In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items denominated in foreign currencies are retranslated at the rates prevailing on the transaction dates. Foreign currency translation differences are recognized in the group statement of loss.

• Critical accounting judgements and key sources of estimation uncertainty

 Preparation of financial statements

The preparation of financial statements requires management to make judgments related to the allocation of assets, liabilities and expenses.  The actual results may differ from the results presented had the Company existed in its reorganised form for the financial statement reporting periods presented. See Note 3.

Critical accounting judgements

In the process of applying the Company’s accounting policies above, management has identified the judgemental areas that have the most significant effect on the amounts recognised in the financial statements (apart from those involving estimations), which are dealt with below.

Key sources of estimation uncertainty

Preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported for assets and liabilities as at the statement of financial position date and the amounts reported for revenues and expenses during the period. The nature of estimation means that actual outcomes could differ from those estimates. Differences between management’s assumptions, including economic assumptions such as metal prices and market conditions, could have a material effect in the future on the Company’s financial position and results of operation.

Exploration and evaluation assets

The assessment of whether general administration costs and salary costs are capitalised or expensed involves judgement. Management considers the nature of each cost incurred and whether it is deemed appropriate to capitalise it within exploration assets. Costs which can be demonstrated as project related are included within exploration assets.

Exploration assets relate to prospecting, exploration, and related expenditure in Ireland.  The business of exploring for minerals involves a high degree of risk and there can be no assurance that current exploration programs will result in profitable mining operations. The recoverability of the carrying value of exploration and evaluation assets and the Company’s continued existence is dependent upon the preservation of its interests in the underlying properties, the discovery of economically recoverable mineral deposits, the achievement of profitable operations, and on the ability of the Company to raise additional financing, if necessary, or alternatively upon the Company’s ability to dispose of its interests on an advantageous basis. The Company’s exploration activities are subject to a number of significant and potential risks including:

• exploration, development, and operating risk
• no assurance of production
• factors beyond the Company’s control
• failure to obtain additional financing
• insurance and uninsured risks
• environmental risks and hazards
• government regulation and permitting delays
• infrastructure availability
• price volatility of publicly traded securities
• fluctuating metal prices

There has been no determination whether the Company’s interests in its exploration and evaluation assets contain mineral resources which are economically recoverable.  The recoverability of these exploration and evaluation assets is dependent on the discovery and successful development of economic mineral deposits, including the ability to raise financing to develop future projects. Major expenditures are required to locate and establish mineral deposits, to develop metallurgical processes and to construct mining and processing facilities. Should this prove unsuccessful, the value exploration and evaluation assets included in the statement of financial position would be written off to operations.

In order for the Company to carry out its exploration and evaluation activities, the Company is required to hold various licences and permits. There is no assurance that the Company’s existing licences will be renewed or that new licences that have been applied for will be granted.   The Group’s exploration operations are subject to government legislation, policies and controls relating to prospecting, development, production, environmental protection, mining taxes and labour standards.

Impairment of exploration and evaluation assets

The assessment of exploration and evaluation assets for any indications of impairment involves judgement. If an indication of impairment exists, a formal estimate of recoverable amount is performed, and an impairment loss recognised to the extent that carrying amount exceeds recoverable amount. Recoverable amount is estimated as the higher of fair value less costs to sell and value in use.  The assessment requires judgement as to the likely future commerciality of the asset and when such commerciality should be determined; future revenues, capital and operating costs and the discount rate to be applied to such revenues and costs.

Estimation of rehabilitation provisions and asset retirement obligations and the timing of expenditure

The estimated future costs associated with legal and constructive obligations relating to the reclamation, rehabilitation and closure of exploration assets are updated annually during the life of a project to reflect known developments, (e.g. revisions to cost estimates and to the estimated lives of operations), and are subject to review at regular intervals.  Decommissioning, restoration, and similar liabilities are estimated based on the Company’s interpretation of current regulatory requirements, constructive obligations and are measured at fair value.  Fair value is estimated based on the net present value of estimated future cash expenditures for the settlement of decommissioning, restoration or similar liabilities that may occur upon decommissioning of the mine.  Such estimates are subject to change based on changes in laws and regulations and negotiations with regulatory authorities.

Income, value added, withholding and other taxes

The Company is subject to income, value added, withholding and other taxes. Significant judgment is required in determining the Company’s provisions for taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Company recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. The determination of the Company’s income, value added, withholding and other tax liabilities requires interpretation of complex laws and regulations. The Company’s interpretation of taxation law as applied to transactions and activities may not coincide with the interpretation of the tax authorities. All tax related filings are subject to government audit and potential reassessment subsequent to the financial statement reporting period. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the tax related accruals and deferred income tax provisions in the period in which such determination is made.

• Taxation

Current tax expense is comprised of current and deferred income tax.  Current and deferred income taxes are recognized in net loss except to the extent that they relate to a business combination, or to items recognized directly in equity or other comprehensive income.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted or substantively enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  Deferred income tax assets also result from unused loss carry forwards, resource related pools and other deductions.  A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

• Changes in Accounting Policies

During the year ended December 31, 2020, the Company adopted a number of new IFRS standards, interpretations, amendments and improvements of existing standards. These included IFRS 3, IFRS 16 and IFRIC 23. These new standards and changes did not have any material impact on the Company’s financial statements.

• New standards and interpretations not yet adopted

Certain pronouncements were issued by the IASB or the IFRIC that are mandatory for accounting periods commencing on or after 1 January 2021. Many are not applicable or do not have a significant impact to the Company and have been excluded. The following have not yet been adopted and are being evaluated to determine their impact on the Company.

IAS 1 – Presentation of Financial Statements (“IAS 1”) was amended in January 2020 to provide a more general approach to the classification of liabilities under IAS 1 based on the contractual arrangements in place at the reporting date. The amendments clarify that the classification of liabilities as current or noncurrent is based solely on a company’s right to defer settlement at the reporting date. The right needs to be unconditional and must have substance. The amendments also clarify that the transfer of a company’s own equity instruments is regarded as settlement of a liability, unless it results from the exercise of a conversion option meeting the definition of an equity instrument. The amendments are effective for annual periods beginning on January 1, 2023.

IAS 37 – Provisions, Contingent Liabilities, and Contingent Assets (“IAS 37”) was amended. The amendments clarify that when assessing if a contract is onerous, the cost of fulfilling the contract includes all costs that relate directly to the contract – i.e. a full-cost approach. Such costs include both the incremental costs of the contract (i.e. costs a company would avoid if it did not have the contract) and an allocation of other direct costs incurred on activities required to fulfill the contract – e.g. contract management and supervision, or depreciation of equipment used in fulfilling the contract. The amendments are effective for annual periods beginning on January 1, 2022.

IFRS 3 – Business Combinations (“IFRS 3”) was amended. The amendments introduce new exceptions to the recognition and measurement principles in IFRS 3 to ensure that the update in references to the revised conceptual framework does not change which assets and liabilities qualify for recognition in a business combination. An acquirer should apply the definition of a liability in IAS 37 – rather than the definition in the Conceptual Framework – to determine whether a present obligation exists at the acquisition date as a result of past events. For a levy in the scope of IFRIC 21, the acquirer should apply the criteria in IFRIC 21 to determine whether the obligating event that gives rise to a liability to pay the levy has occurred by the acquisition date. In addition, the amendments clarify that the acquirer should not recognize a contingent asset at the acquisition date. The amendments are effective for annual periods beginning on January 1, 2022.

IFRS 10 – Consolidated Financial Statements (“IFRS 10”) and IAS 28 – Investments in Associates and Joint Ventures (“IAS 28”) were amended in September 2014 to address a conflict between the requirements of IAS 28 and IFRS 10 and clarify that in a transaction involving an associate or joint venture, the extent of gain or loss recognition depends on whether the assets sold or contributed constitute a business. The effective date of these amendments is yet to be determined; however early adoption is permitted.

IAS 16 – Property, Plant and Equipment (“IAS 16”) was amended. The amendments introduce new guidance, such that the proceeds from selling items before the related property, plant and equipment is available for its intended use can no longer be deducted from the cost. Instead, such proceeds are to be recognized in profit or loss, together with the costs of producing those items. The amendments are effective for annual periods beginning on January 1, 2022.

4. GOING CONCERN

The preparation of financial statements requires an assessment on the validity of the going concern assumption. The validity of the going concern concept is dependent on finance being available for the continuing working capital requirements of the Group and finance for the development of the Group’s projects becoming available. Should the going concern basis not be appropriate, adjustments would have to be made to reduce the value of the assets, in particular the exploration and evaluation assets, to their realisable values.  Such adjustments could be material.

The Company’s continued existence is dependent upon its ability to obtain necessary financing to continue exploration and evaluation of its assets and to complete development and future profitable production or upon proceeds from disposition.  If the Company is unable to obtain adequate additional financing, the Company may be required to discontinue operations and exploration activities.

At December 31, 2020, the Company had a working capital deficiency, had not achieved profitable operations, had an accumulated deficit since inception and expects to incur further losses in the development of its business.  Prior to 31 December 2019, the Company had been dependent on its parent company, Buchans, to provide financing cash flows.  Going forward the Company will have to rely on equity financing to generate additional financial resources to fund its working capital requirements and to fund its planned exploration programs. There are no assurances that the Company will continue to obtain additional financial resources and/or achieve positive cash flows or profitability. Based on the assumptions that such finance will become available, the Directors believe that the going concern basis is appropriate for the group financial statements, which assumes that the Company will be able to meet its obligations and continue its operations for its next fiscal year.  These circumstances represent material uncertainty and cast significant doubt about the ability of Minco Exploration to continue as a going concern.

The Company’s operations have been and are expected to continue to be adversely affected by the effects of the global spread of the contagious coronavirus causing the outbreak of COVID-19 respiratory disease, which was declared a pandemic by the World Health Organization in March 2020. The Company has followed the instructions and advice of government health authorities, as well as industry-wide best practice guidelines, and has limited travel and field activities to help control the spread of COVID-19. The Company cannot accurately predict the impact the COVID-19 pandemic will have on its operations, including uncertainties relating to the duration of the pandemic, the ultimate severity of the disease, the duration of travel and quarantine restrictions imposed by governmental authorities, and the impact on schedules and timelines for planned operations or exploration programs. In addition, this widespread health crisis and related business lockdowns have adversely affected the economies and financial markets of many countries, resulting in an economic downturn that could affect the Company’s ability to finance its planned operations.

5. RELATED PARTY TRANSACTIONS

 Group

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed for the Group but are disclosed below for the Company.

Remuneration of key management personnel

No fees were paid by the Company to directors for their services as directors of the Company in the years ended 31 December 2020, 2019 and 2018.

Amounts are advanced from the Company to subsidiary companies to finance exploration and evaluation costs and other operating expenses.  These amounts are unsecured, non-interest bearing and repayable on demand.

At 31 December 2020, the Company had accrued €88,662 (2019 – €74,042) payable to Buchans covering an allocation of administration costs and services and inter-company advances. See Note 13.

6. INCOME TAX EXPENSE
7. Income Taxes

No charge to corporation tax arises in the current financial year or the prior financial year.

1. Deferred Income Taxes

At the balance sheet date, the Group had unused tax losses of €3,268,310. The deferred tax asset has not been recognised due to the unpredictability of future profits. Losses may be carried forward indefinitely.

The actual charge for the period can be reconciled to the expected credit for the period based on the profit or loss and the standard rate of tax as follows:

7. EARNINGS / (LOSS) PER SHARE

Basic loss per share is computed by dividing the loss after taxation for the period available to ordinary shareholders by the sum of the weighted average number of ordinary shares in issue and ranking for dividend during the period.  Diluted loss per share is computed by dividing the loss after taxation for the period by the weighted average number of ordinary shares in issue, adjusted for the effect of all potential dilutive ordinary shares that were outstanding during the period. Basic and diluted losses per share are the same, as the effect of the outstanding share options is anti-dilutive and is therefore excluded. The computation for basic and diluted loss per share is as follows:

8. AUDITORS’ REMUNERATION

 The analysis of auditors’ remuneration is as follows:

9. EXPLORATION AND EVALUATION ASSETS

The net investment in exploration and evaluation assets in 2017 and 2018 was recorded as Buchans’ historic cost less any applicable impairment provision in these assets, as the Company was not a separate legal entity for the entire reporting period presented.  In June 2019, in a group reorganization, the Company acquired the shares and receivables in subsidiaries which held these assets from its parent company, Buchans, in consideration for the issue of 59,868,716 ordinary shares at a deemed fair value of €2,625,000. The Directors reviewed the exploration and evaluation assets at 31 December 2020 and are satisfied that the exploration projects have potential for the discovery of economic mineral deposits and no impairment provision has been recognised.

The realisation of the exploration and evaluation assets is dependent on the successful discovery and development of economic mineral deposits, including the ability to raise finance to develop the projects. Should this prove unsuccessful the value included in the statements of financial position for exploration and evaluation assets would be written off. The Directors are aware that by its nature there is an inherent uncertainty as to the value of the exploration and evaluation assets.

The Company’s prospecting licences are subject to government licensing requirements, social licensing requirements, and compliance with other regulatory requirements.  The Company’s properties are subject to the negotiation of mining leases, obtaining planning permissions and permits and may also be subject increases in taxes and/or state royalties.

Exploration and evaluation activities are subject to various laws and regulations governing the protection of the environment.  These laws and regulations are continually changing and generally becoming more restrictive.  The Company believe its operations are materially in compliance with all applicable laws and regulations.  The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations.  The Group’s activities are also subject to a number of significant potential risks, see pages 12-19 of the Directors’ Report.

Ireland

The Company, through its wholly owned subsidiary, holds indirectly a 20% interest in Prospecting Licence 1440R (Navan/Tatestown), which is being explored under a Joint Venture agreement with Boliden Tara Mines DAC (80%), and which hosts part of the small Tatestown–Scallanstown zinc-lead mineral deposit, located adjacent to Boliden’s large Tara zinc-lead mine at Navan, County Meath, about 50 km northwest of Dublin. During 2020, the Company incurred expenditures of €40,000 with respect to the licence.

The Company, through its wholly owned subsidiary Minco Ireland Limited, has entered into a joint venture agreement with Boliden Tara Mines on PL 3373, at Kells near Navan, County Meath, contiguous to the west with PL 1440R.  Under the terms of this agreement, the Company can earn a 75% joint venture interest through expenditures of €250,000 in staged programmes, by March 2024. During 2020, the Company incurred expenditures of €10,000 with respect to the licence. As at December 31, 2020, the Company had completed cumulative expenditure of €120,000, and had earned an undivided 25% joint venture interest in the Licence. Boliden has the right of off-take to purchase or toll-process all ore that may be produced from the license area.

The Company, through its wholly owned subsidiary Minco Ireland Limited, has entered into a joint venture agreement with Boliden Tara Mines on twelve licenses at Slieve Dart in County Galway.  Minco can earn a 50% interest through expenditure of €385,000 in staged programmes, by 31 July 2024.  During 2020, the Company incurred expenditures of €40,000 (2019 – €122,704 and 2018 – €108,235) with respect to the licences and earned an undivided 40% joint venture interest in the Licence Area. Boliden has the right of off-take to purchase or toll-process all ore that may be produced from the license area.

The Company, through its wholly owned subsidiary Minco Ireland Limited, holds two Prospecting Licenses, 1228 and 1229, in County Westmeath, Ireland.  Under the terms of these licences, Minco is required to spend a total of €150,000 in staged programmes, by November 2021.

Pennines – UK

The Company, through its wholly owned subsidiary Minco Mining Limited, previously entered into various agreements, licences, and options with certain owners of mineral rights in the North Pennines Orefield located in the counties of Cumbria, Northumberland, and Durham in northern England.

Due to delayed renegotiation of the underlying contracts and agreements, and as no drilling had been carried out since 2015, an impairment charge in the amount of €1,952,100 was recorded at 31 December 2017 in accordance with the Company’s accounting policies. The Company expects to continue with the objective of continuing to evaluate these properties at an appropriate time, subject to the renegotiation and /or renewal of the contracts and agreements.

10. INVESTMENT IN SUBSIDIARIES

The recovery of the investment in subsidiaries is dependent on the successful realisation of exploration and evaluation assets through the development of economic ore reserves, as outlined in Note 4(d). At the balance sheet date, the Company reviewed the carrying amounts of its subsidiary companies to determine whether there was any indication that those assets have suffered an impairment loss.

The subsidiaries of the Company at 31 December 2020 were as follows:

Name of Company	Registered or Head office	Effective Holding	Principal Activity
Norsub Limited	Box 25, Regency Court, Glategny St. Peter Port, Guernsey, GY1 3AP	100%	Holding company
Minco Ireland Limited Westland Exploration Limited Minco Mining Limited	Ardbraccan, Navan, Co. Meath, Ireland Ardbraccan, Navan, Co. Meath, Ireland 8 Little Trinity Lane, London, UK  EC4V 2AN	100% 100% 100%	Exploration Exploration Exploration

 

11. TRADE AND OTHER RECEIVABLES

The carrying value of the receivables approximates to their fair value.  In the opinion of the Directors, the amounts above are considered to be fully recoverable.

12. CASH AND CASH EQUIVALENTS

Cash and cash equivalents comprise cash balances held for the purposes of meeting short-term cash commitments and investments which are readily convertible to a known amount of cash and are subject to an insignificant risk of change in value. Where investments are categorised as cash equivalents, the related balances have a maturity of three months or less from the date of investment. Cash at bank earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods of between one day and three months, depending on the cash requirements of the Company, and earn interest at the respective short-term deposit rates at floating rates.

The currency profile of cash and cash equivalents at the end of the period was as follows:

13. TRADE AND OTHER PAYABLES

It is the Group’s normal practice to agree terms of transactions, including payment terms, with suppliers and provided suppliers perform in accordance with the agreed terms, it is the Group’s policy that payment is made as they fall due. The carrying value of the trade creditors and accruals approximates to their fair value.  The Group has financial risk management policies in place to ensure that all payables are paid within the credit timeframe. The amounts due to related parties are due on demand, unsecured and non-interest bearing.

14. SHARE CAPITAL

During the year, the Company completed a private placement of 11,000,000 new ordinary shares at a price of €0.05 per share, to raise a total of €550,000 to fund its working capital and planned exploration programs.

In June 2019, the Company acquired the shares and receivables in subsidiaries from its parent company, Buchans, in consideration for the issue of 59,868,716 ordinary shares of €0.01 each at a deemed value of €2,625,000. At December 31, 2019, Buchans issued 59,868,716 Exchangeable Warrants entitling holders to receive either one share of the Company or 0.25 additional shares of Buchans, at the shareholder’s option (See Note 2).

During the year ended 31 December 2020, 1,039,844 Exchangeable Warrants were exchanged into Minco Exploration shares, and 185,152 warrants were cancelled. Upon expiry of the warrants on 31 December 2020, the remaining 49,564,720 warrants were automatically exchanged into Minco Exploration shares and the holders automatically became shareholders in the Company. During the year ended 31 December 2020, 9,079,000 Exchangeable Warrants were exercised into Buchans shares. At 31 December 2020, Buchans held 9,264,152 shares of the Company.

15. PARENT COMPANY, MINCO EXPLORATION PLC, STATEMENT OF COMPREHENSIVE INCOME

In accordance with section 304(1) of the Companies’ Act 2014, the Company is availing of the exemption from presenting its individual Statement of Comprehensive Income to the Annual General Meeting and from filing it with the Registrar of Companies. The loss in the parent Company for the year ended 31 December 2020 amounted to €108,388.

16. CAPITAL MANAGEMENT

The primary objective of the capital management of the Group is to ensure that it maintains an adequate capital ratio in order to support its business and enhance shareholder value. The capital structure of the Group consists of issued share capital and reserves. The Group manages its structure and makes adjustments to it, in light of the changes in economic conditions. No changes were made in the objectives, policies or processes during the period ended 31 December 2020.

17. FINANCIAL INSTRUMENTS

The Group’s financial instruments comprise cash balances and various items such as trade receivables and trade payables which arise directly from trading operations. The Group also enters into derivative transactions, primarily warrants and convertible notes.  The main purpose of these financial instruments is to provide working capital to finance Group operations. The Group undertakes certain transactions denominated in foreign currencies, hence, exposures to exchange rate fluctuations arise.  The Group’s cash balances are held in Euro, Sterling and US dollar.

The Group’s strategy for managing cash is to maximise interest income whilst ensuring its availability to match the profile of the Group’s expenditure. This is achieved by regular monitoring of interest rates and a monthly review of expenditure. The Group has a policy of not hedging and therefore takes market rates in respect of foreign exchange risk; however, it does review its currency exposures regularly and may consider the use of currency hedges in the future.

Fair Value Hierarchy

The fair value hierarchy has the following levels: (a) quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1); (b) inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices) (Level 2); and (c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).  At 31 December 2020, the Company’s financial instruments that are carried at fair value, consisting of exchangeable warrants, have been classified as Level 2 within the fair value hierarchy.

Interest rate risk

The Group finances its operations through the issue of equity shares and has no fixed interest rate agreements.  The Group had 298,988 in cash and cash equivalents at 31 December 2020. A one percent change in interest rates will result in a corresponding change in interest income of approximately €2,990 based on cash and cash equivalents balances existing at 31 December 2020.

Liquidity risk

The Group’s liquidity exposure is confined to meeting obligations under short term trade creditor agreements. This exposure is financed from a combination of cash, additional issues of ordinary equity shares and other financing arrangements.

Foreign currency risk

Although the Company is incorporated in Ireland, the Group has operations in UK, and Canada none of which presently generate cash from operations, and holds cash investments in Euros, Sterling or US Dollars. The functional currencies of the majority of the Group’s operations are Euro. However, the expenditure is not considered to be a monetary asset and has been translated to the functional currency at the rates of exchange ruling at the dates of the original transactions. The Group also has transactional currency exposures. Such exposures arise from expenses incurred by the Group in currencies other than the functional currency.

The Group seeks to minimise its exposure to currency risk by closely monitoring exchange rates. The Group does not presently utilise swaps or forward contracts to manage its currency exposures, although such facilities may be used where appropriate in the future.

The impact of foreign currencies has been determined based on the balances of financial assets and liabilities at 31 December 2020.  The sensitivity analysis includes outstanding foreign currency denominated monetary items and largely results from payables and receivables and adjusts their translation at the period end for a 5% change in foreign currency rates. A five percent change in the US Dollar exchange rate could result in a foreign exchange impact to the net income of approximately $100 based on monetary assets and liability balances existing at 31 December 2020.

Credit risk

With respect to credit risk arising from financial assets of the Group, which comprise of cash and cash equivalents, cash deposits give rise to credit risks on the amounts due from counter parties. The Company controls and monitors the distribution of this exposure by ensuring that all financial instruments are held with reputable and financially secure institutions and that exposure to credit risk is distributed across a number of institutions. At 31 December 2020 all cash, short term deposits had a maturity date of 30 days or less. Credit risk is actively managed across the portfolio of institutions by ensuring that material surplus funds are placed with counter parties that are either covered by Government guarantee schemes or have a credit rating of at least BBB-.

 

 

 

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