Independent and sustainable
2023
ANNUAL
REPORT
for the financial year ended 30 June
Corporate highlights
IFC
Operational highlights
1
FY2023 results
1
Chairman’s review
2
Chief executive officer’s review
4
Board of directors
6
Five-year performance
9
Review of operations and strategic report
10
Geology and Mineral Resources
23
Principal risks and uncertainties
29
Corporate governance report
36
Environmental, social and governance report
45
Remuneration report
63
Annual remuneration report
65
ANNUAL FINANCIAL STATEMENTS
Directors’ responsibility statement
78
Directors’ report
79
Audit and risk committee report
83
Independent auditor’s report
85
Consolidated statement of comprehensive
income
94
Consolidated statement of financial position
95
Consolidated statement of changes in equity
96
Consolidated statement of cash flows
98
Notes to the financial statements
99
Company statement of financial position
130
Company statement of cash flows
131
Company statement of changes in equity
132
Notes to the company financial statements
134
Abbreviations
138
Corporate directory
139
CONTENTS
•
Revised Longonjo execution plan allowing for
staged mine development reducing upfront capital
expenditure to US$200 million with US$105 million
deferred until year three
•
Absa Bank mandated to arrange a US$120 million
project debt facility, which together with the
US$80 million funding, will fund the mine and
processing facilities into production
•
US$15 million Fundo Soberano de Angola (FSDEA)
loan facility as part of a broader US$80 million
investment (subject to due diligence and the
finalisation of investment terms) to facilitate the
development of the Longonjo Project
Post period-end
•
Meeting with United Kingdom (UK) Minister
Nusrat Ghani to discuss the potential UK and
United States (US) government support for the
Saltend Project
•
Pensana, working in partnership with Polestar,
Route2 and the Universities of Leeds and Hull,
awarded £316,643 in grant funding by Innovate
UK under its CLIMATES programme
•
Offtake memorandum of understanding for up
to 100% of Longonjo production
CORPORATE
HIGHLIGHTS
The directors of Pensana Plc (the company) submit
herewith the annual financial report of Pensana Plc
(consolidated entity) for the year ended 30 June 2023.
OPERATIONAL
HIGHLIGHTS
•
Completion of the Ore Reserve estimate during
September 2022 undertaken by Snowden Optiro over
both the Longonjo and Saltend operations in support
of a 20-year life of mine
•
Ongoing mineralogical studies confirm processing
potential of the rare earth host minerals at the Coola
carbonatite and Sulima West exploration targets
TOTAL COMPREHENSIVE LOSS
FOR THE PERIOD
US$5,189,120
(2022: US$11,446,441)
1
TOTAL LOSS AFTER
TAX FOR THE PERIOD
US$4,302,823
(2022: US$11,712,022)
1
PROPERTY, PLANT AND EQUIPMENT
AND INTANGIBLE ASSETS
US$59,414,968
(2022: US36,695,202)
1
CASH AND CASH EQUIVALENTS
US$9,695,491
(2022: US$2,930,162)
FY2023
RESULTS
3D rendering of the planned Saltend rare
earth processing hub
PENSANA PLC
2023 ANNUAL REPORT
1
1
Refer to
note 5
to the financial statements for details of
the restatement of prior year results.
Dear shareholders,
On behalf of my board colleagues, it is my pleasure to present
the Pensana 2023 annual report.
In last year’s review, I referred to the market commentary which
highlighted that the electrification of motive power is forecast
to become the biggest energy transition in history, with the
phasing out of internal combustion engines in favour of electric
vehicles and offshore wind, both of which rely heavily on
powerful rare earth permanent magnets.
The past 12 months have seen record highs for electric vehicle
sales and increases in offshore wind-generating capacity. This
increase in demand for magnet metals is taking place while the
UK, US, Canadian, Australian and European governments raise
concerns over the lack of supply chain resilience for rare earth
permanent magnets. A single country, China, controls 91% of
the refining capacity, 87% of the oxide separation and 94% of
magnet production. As per the article published by the Wall
Street Journal, April 2023, the need to realign at least part of
this supply chain is clear.
Against this backdrop, we have continued with our financing
of one of the world’s largest undeveloped deposits of
magnet metal rare earths, the Longonjo Neodymium and
Praseodymium (NdPr) Project in Angola and the Saltend rare
earth separation facility (RESF) in the UK.
By establishing 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.
CHAIRMAN’S
REVIEW
By establishing 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 our environmental, social and
governance (ESG) strategy.
Our Polestar collaboration to produce the world’s first climate-
neutral car, green bond accreditation from CICERO*, Norway’s
foremost institute for climate research, alongside 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 deep and meaningful carbon reduction, with
the company’s goal of achieving net zero across the value chain
by no later than 2040, speaks to these ambitions. This has
been more fully reported in the ESG report.
At the beginning of the calendar year, the company entered
into a non-disclosable exclusivity period with a major strategic
mining house for an equity investment of US$220 million at
68.4 pence per share. The process did not complete due to
internal issues at the mining house and, following discussions
with our major shareholders, FSDEA (Angola Sovereign Wealth
Fund) and M&G, supported by Angola’s Ministry of Mineral
Resources, Petroleum and Gas (MIREMPET), a detailed review
was undertaken reflecting the strong desire of all parties to bring
the Longonjo operation into production as soon as practical.
A revised execution plan was agreed, based on a staged
development of the mine and processing facilities with a
reduced upfront capital cost of US$200 million, with circa
US$105 million, related largely to the national power grid
connection, rail spur and subsequent expansion costs, deferred
until year three following commissioning.
FSDEA agreed to provide an initial US$15 million loan facility as
part of a US$80 million investment (subject to due diligence and
the finalisation of investment terms), which will be repaid out of
the larger facility, for the US$200 million staged development.
*
Shades of Green, formerly part of CICERO, now part of S&P Global, provides independent research-based evaluations of green bond and
sustainability financing frameworks to determine their environmental robustness. In December 2022, S&P Global acquired the Shares of Green
business from CICERO.
2
PENSANA PLC
2023 ANNUAL REPORT
The company has also mandated Absa Bank to arrange a
US$120 million project loan which together with the potential
US$80 million investment represents the funding required to
develop the mine and processing facilities.
At the time of writing, the technical and financial due diligence
being undertaken by industry specialists The Mineral
Corporation on behalf of the financiers was well underway
and expected to be signed off and reported on by the end
of the calendar year.
During peak construction activity, the mine will employ over
650 personnel and contractors and once in production, it
will create over 420 high-value full-time jobs and will be an
important project in the region.
Angola is a growing mining jurisdiction attracting global
investment from Rio Tinto, Anglo American, Trafigura,
Mota Engil, the US Department of Energy and the European
Union due to untapped geological endowment, excellent
infrastructure and a highly supportive government.
The US$550 million Lobito Corridor is anticipated to become
one of Africa’s most important rail transport systems and we
are expecting it to have a very positive impact on the transport
logistics during Longonjo’s construction and on the reagent and
product transport during operations.
We have overcome major challenges during the year. We
have re-engineered the Longonjo Project to be one of the
lowest capital expenditure projects among its peers thereby
considerably enhancing its ability to be financed, and we have
made substantial progress with our financiers and offtake
partners and are now on the cusp of commencing construction
of one of the first major rare earth mines to be developed in
over a decade.
This has been made possible by the ongoing financial support
of our major shareholders. I would like to take this opportunity
to thank President Carlos Lopez and the board of FSDEA and
also that of Mr Michael Stiasny and his team at M&G for their
ongoing support which is very much appreciated.
I would like to take this opportunity to thank the executive
team led by chief executive officer (CEO) Mr Tim George, and
individually Mr Rob Kaplan finance director, Mr Rocky Smith
chief operating officer and Mr William Izod chief commercial
officer for their considerable efforts throughout a challenging year
and for their achievements in bringing the Longonjo Project to the
financing stage.
Finally, I would like to thank my fellow directors for their very
valuable and much appreciated contributions during the
year. A note of thanks to Mr Steve Sharpe for his guidance
on financing, Ms Alison Saxby for her insights on the rare
earths market, Dr Jeremy Beeton for sharing his knowledge
and wisdom on project engineering and development and,
importantly, Baroness Lindsay Northover for keeping us
pointing to the north star of sustainability.
We very much look forward to reporting to you on the
continued progress of your company over the forthcoming
12 months.
Paul Atherley
Executive chairman
30 October 2023
Chairman Mr Paul Atherley gives evidence to the BEIS House
of Commons Select Committee on Critical Minerals, relating to
the recent enacted National Security and Investment Act
PENSANA PLC
2023 ANNUAL REPORT
3
targets at the Sulima West complex in addition to the Coola
carbonatite itself. Initial results are particularly encouraging in
terms of both adding to the resource base of the company and
opportunities for enhancing and prolonging the useful life of the
planned development at Longonjo.
Front-end engineering design (FEED) and value engineering
activities for the processing facilities planned at both
Longonjo and Saltend progressed through the year, and
our owner’s teams were enlarged to supervise the early
works packages initiated at both sites. This year was
interspersed with several due diligence processes by various
interested parties, culminating with the Q3 exclusivity period
during which a strategic major mining house considered a
US$220 million equity investment alongside the debt/bond
packages contemplated to fund both Longonjo and Saltend.
Unfortunately, the process stalled due to operational challenges
faced by the potential strategic investor.
Financial constraints in Q1 2023, as a consequence of the
stalled strategic investment process, necessitated temporary
suspension of on-site activity for the Saltend Project along
with all significant engagements with third-party contractors
being put on hold while alternative financing options are being
explored. The existing Intellectual Property developed to date
and core technical team expertise remain in place alongside the
agreement for lease in relation to the Saltend site.
Over the past months, following the financing envisaged
alongside a strategic major mining house being incomplete,
I am pleased to report that our owner’s team, along with key
financial support from our major shareholders, have rapidly
repositioned our Longonjo Rare Earth Project into a staged
development programme targeting first production in early
2026. The reduced US$200 million capital cost metallurgical
plant is a downscaled version of the identical processing unit
CHIEF
EXECUTIVE
OFFICER’S
REVIEW
Dear Pensana Shareholders,
The past year has seen a lively period for Pensana with
significant achievements and navigation of impediments for the
various projects under the group umbrella. Against a backdrop
of geopolitical variability, inflationary pressure and market
constraints, our team has worked to mitigate resultant risks and
preserve our position as one of the lowest capital expenditure
rare earth development projects globally.
We launched our Blueprint for Sustainable Rare Earths in which
we have committed to achieving 11 specific ambitions across
the business’ four ESG workstreams, i.e. carbon and climate;
the environment; colleagues and community; and strong
corporate governance. The Blueprint enshrines Pensana’s
commitment to developing a sustainable and low-carbon
supply chain through clear ambitions to produce the lowest
carbon rare earth products and to be net zero throughout its
value chain by no later than 2040. We have fully reported on
this in the ESG report.
The initial quarter importantly saw intriguing developments in
the UK political landscape alongside another well-contested but
peaceful democratic election in Angola. This marked a further
five-year term for the ‘open for business’ policies implemented
by President João Lourenço.
During September 2022, we announced the completion of the
Ore Reserve estimate undertaken by Snowden Optiro covering
both the Longonjo and Saltend operations in support of a
20-year life of mine according to the guidelines of the 2012
Australasian Code for Reporting of Mineral Resources and
Ore Reserves (JORC).
Exploration activity resumed on the Coola licence area,
culminating in the preliminary results for several exciting
The past year has seen a lively
period for Pensana with significant
achievements and navigation
of impediments for the various
projects under the group umbrella.
4
PENSANA PLC
2023 ANNUAL REPORT
stages within the existing defined mining, comminution,
flotation, thickening, calcining, leaching and product
precipitation process route. Key points in the revised
development implementation are:
•
Existing permits remain intact including the Exploitation
Licence, the Environmental and Social Impact
Assessment (ESIA) construction permit, the Resettlement
Action Plan (RAP) and the Livelihood Restoration
Plan (LRP) as developed in conjunction with the local
community and relevant provincial authorities;
•
Minimising pre-production spend while still ensuring that
the project’s potential for generating economic benefits on
a larger scale is not compromised;
•
Production of a standardised and globally saleable refined
radionuclide-free mixed rare earth product from Angola,
independent of other developments;
•
The modular sulphuric acid plant production unit capacity
provides the pivot point around which the engineering and
design work is currently being undertaken and optimised;
•
The historical testwork and pilot plant trials conducted
in collaboration with equipment vendors continue to
underpin the plant design criteria;
•
All preferred vendors of major and long-lead equipment
items have been engaged and remain committed to the
project;
•
Levels of accuracy based on recent pricing exercises
in preparation for a Class 2 AACE study will give a high
degree of confidence and adequate contingency;
•
Enhanced modularisation enables off-site pre-fabrication,
testing and containerised transport which will ensure a
faster and more efficient construction phase in terms of
schedule, equipment and manpower requirements; and
•
Job creation in Angola along with training and skills
transfer mechanisms remain intact.
The Longonjo Project team is currently focused on the
following key workstreams necessary to trigger the financing
of main construction, namely:
•
Continued project-specific and unchanged site
infrastructure development to facilitate commencement of
main construction activities;
•
An update of engineering detail within the initial
US$200 million capital expenditure envelope which
is well advanced;
•
Preferred vendor repricing on the revised equipment
schedule now largely complete;
•
Conclusion of the mine pit development schedule and
run-of-mine feed blending strategy detail in years one to
five to confirm the current annualised projections;
•
Completion of the optimised tailings storage facility (TSF)
detailed design;
•
Execution of LRP arrangements with the local community
under the RAP; and
•
Strengthening of the engineering team for the detailed
design and execution phase with the engagement of ADP
and ProProcess.
Notable developments towards de-risking aspects of the project
include:
•
The SRK team finalised geotechnical investigation in support
of the dual-purpose TSF detailed design. The selected TSF
site has been confirmed as also providing suitable excavated
material for use in the TSF starter walls, pit haul roads, plant
terracing and other construction-related requirements, thus
mitigating the need to develop borrow-pit sources and
associated licensing and material transport costs as well as
reducing the overall environmental impact.
•
Integration of the Longonjo Project bulk reagent consumption
requirements (including sulphur and caustic soda) into the
Trafigura/Mota Engil-led strategic mineral-focused Lobito
Corridor port and rail concessions is being pursued as part
of the ongoing operations readiness preparation. Logistical
and operational expenditure benefits are obvious in terms of
broader reagent supply to the existing Democratic Republic of
the Congo (DRC) Copperbelt mines alongside the limestone
which will be sourced from the existing quarries in the Lobito
area. In addition, global procurement and logistical support
for the construction phase have been negotiated with Deugro,
an internationally established freight-forwarding business with
a specific relationship with their Africa-centric specialised
project logistics division. This combination of global and local
logistics to enable efficient movement of material to and from
the project site is considered by management to contribute to
significantly de-risk this aspect of the project.
In restructuring the Longonjo Project, we are grateful also to
the assistance rendered by the special task team appointed
by H.E. Diamantino Azevedo, Minister of Mineral Resources,
Petroleum and Gas to accelerate the development of the
Longonjo Project. This task team is led by H. E. Dr. Jânio da Rosa
Corrêa Victor, the Secretary of State for Mines, to navigate any
issues which may affect the project execution.
I also thank the ongoing collaborative efforts of Eng. Jacinto
Rocha, Chair of the National Agency for Mineral Resources, and
H.E. Lotti Nolika, Governor of Huambo, alongside the support
from the Longonjo municipality.
I also wish to thank the Angolan Sovereign Wealth Fund for their
ongoing financial support, in the form of a US$15 million facility,
towards maintaining project momentum at Longonjo.
The above engagements are a testament to the enthusiastic
and continued support within the State organs of Angola for the
speedy development of Longonjo as a demonstration project for
the stated policy of diversification of the Angolan economy.
Tim George
Chief executive officer
30 October 2023
PENSANA PLC
2023 ANNUAL REPORT
5
DIRECTORS AND DIRECTORS’ DETAILS
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 a 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 STEM (science, technology, engineering and
mathematics) 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 and member of the investment committee 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
6
PENSANA PLC
2023 ANNUAL REPORT
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,
South Africa and 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$1 billion, a number of African lender facilities totalling over US$750 million and, most
recently, an equity rights issue of US$178 million 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
ROBERT
KAPLAN
Executive director/finance
director
Appointed: 31 March 2022
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
STEVEN LAWRENCE
SHARPE
Independent non-executive
director
Appointed: 29 September 2021
RT HON BARONESS
LINDSAY PATRICIA
NORTHOVER
Independent non-executive
director
Appointed: 2 November 2020
Baroness Northover is a Member of the House of Lords and 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
Commonwealth Development Corporation); a former Member of the Advisory Council,
Wilton Park; and a former trustee of the Malaria Consortium and UNICEF UK.
Other current directorships of listed companies:
•
None
Former directorships of listed companies in the past three years:
•
None
PENSANA PLC
2023 ANNUAL REPORT
7
BOARD OF DIRECTORS
continued
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 (2012 to 2022)
ALISON SAXBY
Independent non-executive
director
Appointed: 17 August 2022
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)
•
John Laing Plc (2015 to 2021)
DR JEREMY
JOHN BEETON
Independent non-executive
director
Appointed: 2 March 2021
8
PENSANA PLC
2023 ANNUAL REPORT
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 2023.
Pensana Plc
Pensana
Metals
Limited
Description
30 June
2023
US$
Restated
1
30 June
2022
US$
30 June
2021
US$
30 June
2020
US$
30 June
2019
US$
Statement of comprehensive income
Finance and other (cost)/income
(28)
28
342
3,268
327,705
Net loss before tax
(4,302,823)
(11,712,022)
(9,583,772)
(4,076,220)
(4,172,383)
Net loss after tax
(4,302,823)
(11,712,022)
(9,370,862)
(4,076,220)
(4,172,383)
Weighted average number of ordinary shares
(number)
254,074,694
229,019,699
199,554,645
155,723,451
152,573,315
Basic (loss) per share (US$ cents per share)
(1.69)
(5.11)
(4.70)
(2.62)
(2.73)
Diluted (loss) per share (US$ cents per share)
(1.69)
(5.11)
(4.70)
(2.62)
(2.73)
Statement of financial position
Property, plant and equipment
45,594,650
31,277,770
18,507,768
–
–
Intangible assets
13,820,318
5,417,432
132,040
9,642,118
6,445,573
Net current (liabilities)/assets
(2,654,366)
1,683,787
17,528,826
5,219,066
5,426,125
Total equity attributable to equity shareholders
56,760,602
38,378,989
36,168,634
14,861,184
11,871,698
Share price history
Share price at the start of the year (US$ cents)
72.0
150.5
18.6
16.2
12.7
Share price at the end of the year (US$ cents)
33.1
72.0
150.5
18.6
16.2
Market capitalisation (US$ million)
94.3
169.0
325.7
31.9
23.5
1
Refer to
note 5
to the financial statements for details of the restatement of prior year results.
FIVE-YEAR
PERFORMANCE
PENSANA PLC
2023 ANNUAL REPORT
9
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
that is currently dominated by China, with initial feedstock to be
shipped as clean, high-purity refined mixed rare earth product
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 and Longonjo being completed.
In July 2022, Pensana broke ground at Saltend, with
attendance from the then Secretary of State for Business,
Energy and Industrial Strategy, Rt Hon Kwasi Kwarteng MP.
During September 2022, final planning approval for the
company’s expanded site was obtained along with Snowden
Optiro issuing Pensana with its first JORC-compliant Mineral
Reserve estimate in September 2022.
Pensana launched its Blueprint for Sustainable Rare Earths
and has received full construction licence approval for the life
of mine plan for Longonjo under an updated ESIA submission
in addition to a RAP, LRP and stakeholder engagement
plan. 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 impact the environment. The ESG report on
page 45
sets out the full details of progress on these fronts.
OPERATING AND FINANCIAL REVIEW
During the year ended 30 June 2023, the consolidated
entity incurred a comprehensive loss of US$5,189,120
(2022: US$11,446,441), including:
•
administration and corporate expenses decreased by 39%
to US$5,375,576 (2022: US$8,787,109) mainly due to the
reduction in employee costs as a result of the reversal of
prior year bonuses not being paid, no current year bonuses
being applicable, as well as a reversal of share-based
payment charges for non-market vesting conditions not
expected to be met;
•
an expected credit loss (ECL) provision of US$308,260
(2022: US$669,470), relating to the impairment of debtors
outstanding as part of the equity raise completed on
25 June 2021;
•
a net foreign currency exchange gain of US$494,744
(2022: US$1,989,890 loss), comprising:
–
a gain on foreign exchange movements recorded in the
income statement of US$1,381,041 (2022: US$2,255,471
loss) on monetary balances and inter-company funding
which are considered repayable in the foreseeable future;
and
–
a loss on exchange movements on retranslation of
non-US dollar functional currency entities into the group’s
US dollar presentation currency and currency movements
on inter-company balances considered permanent as
equity and recorded in the statement of changes in equity
of US$886,297 (2022: US$265,581 gain).
Group net assets increased in the year by 48% to
US$56,760,602 from US$38,378,989. This was primarily driven
by additions to development assets and Saltend intangible
assets of US$25,602,375 (2022: US$19,287,032).
Of the other debtors as at 30 June 2023, US$280,893
(2022: US$630,097) relates to payment pending (net of
the ECL provision) as part of the equity raise completed on
25 June 2021. Management has reassessed the carrying
value of long-outstanding debtors as at 30 June 2023 and has
provided for an additional ECL of US$308,260 against this
receivable.
The increase in share capital (issued capital and share premium)
comprised the share capital issued by the company on equity
placings totalling US$24 million for the year, as detailed under
the corporate activities section.
Year-on-year, the cash and cash equivalents balance increased
by 231% to US$9,695,491 (2022: US$2,930,162) at year-end
due to higher proceeds from issues of equity securities, lower
10
PENSANA PLC
2023 ANNUAL REPORT
operating cash outflows and a reduction in cash outflows
relating to additions to property, plant and equipment.
With project spend decreasing year-on-year, the group
experienced a 40% decrease in net cash outflows from
operating and investing activities of US$17,332,760
(2022: US$28,794,950).
Net cash outflows from operating activities amounted to
US$5,753,905, showing a decrease from the previous year’s
figure of US$7,948,231. This reduction can be attributed to
a decrease in operating losses.
Investing cash flows totalled US$11,578,855
(2022: US$20,846,719), primarily associated with expenses
incurred at Longonjo, amounting to US$11,739,519
(2022: US$14,564,879), and work conducted at Saltend,
totalling US$2,029,356 (2022: US$6,158,982). In addition,
the group had significant capital project-related payables at
year-end which have been part-settled post year-end with
the remainder planned to be settled as additional short-term
funding is secured
Proceeds from the issuance of equity before share issue costs
for an amount of US$24,265,820 (2022: US$16,780,204) were
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 ending 31 March 2025. On the Saltend Project, the
UK Department for Business and Trade (UK DBT) has offered
Pensana a conditional grant of up to £4,000,000 towards the
funding which is anticipated to be received in Q4 FY2024 and
forms part of the forecast.
In Angola, the group has secured a US$15 million loan facility
secured over the indirect shareholding in the group’s Angolan
subsidiary which matures in February 2024 from FSDEA which
is available to meet operating cash flow requirements and
progress the Longonjo Project in the near term. The parent
company is well advanced in its main financing workstreams
on the Longonjo Project and is aiming to complete the main
financing in Q1 2024 which would enable settlement of
the FSDEA facility and provide funds for the wider project
development.
The forecast indicates that funding is required to settle
existing project-related contractor balances in the UK and
to also provide working capital. Continuing support of these
contractors will be required until the group has secured this
required funding and then remain as the group subsequently
moves towards main financing in the normal course of
project development.
The board notes that, in addition to the funding requirement
for the UK operations, additional funding will also be required
during the period to maintain liquidity if the grant funding is
delayed or the conditions are not met. Additionally, the group
would need to refinance the FSDEA facility in the event the
main financing is not complete by the maturity date of the
FSDEA loan. Given the support provided by the Angolan
government for the Longonjo Project, the directors anticipate
such a refinancing being made available to the group.
It is anticipated that the contemplated financing across the
group may include further issues of equity, export credit-backed
debt financing and issuing a green bond.
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.
Conditions regarding 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 of business.
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, in the exploration stage at the
Coola Project, and has no revenue, 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, the
chief executive officer’s review and the technical development
programme update as highlighted on
page 14
.
BREXIT
During the year, the board regularly considered the potential
impact of the UK leaving the European Union and its possible
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.
GROUP NET ASSETS
INCREASED IN THE YEAR BY
48%
TO
US$56,760,602
FROM US$38,378,989
THE SALTEND FACILITY IS
DESIGNED TO PRODUCE
± 12,500t
PER ANNUM
OF RARE EARTH OXIDE
± 4,500t
OF NDPR, BEING 5% OF
THE WORLD MARKET
PENSANA PLC
2023 ANNUAL REPORT
11
REVIEW OF OPERATIONS AND STRATEGIC REPORT
continued
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 from
2024 onwards and if additional independent primary magnet
metal sources are not brought into production, China’s position
as the dominant global NdPr producer will persist.
WARS IN UKRAINE/RUSSIA AND ISRAEL/GAZA
During the year, the board regularly considered the impact
of the Ukraine/Russia and Israel/Gaza wars 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 these wars.
PENSANA’S STRATEGY
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 to zero-emission solutions, demand for super-strong
permanent magnets essential in these motors and generators
is increasing.
Pensana plans to establish its Saltend refinery as an
independent, sustainable supplier of key magnet metal oxides to
a growing market, fuelled in part by the green energy transition,
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 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
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 RESF to be
established in over a decade and will become one of only three
major producers located outside China.
Initial feedstock will be shipped as clean, high-purity mixed rare
earth product from the company’s Longonjo low environmental-
impact mine in Angola. The free-dig, open-cast mine and state-
of-the-art processing plant have been designed by Wood Group
to the highest international standards, are powered by low-carbon
hydroelectric power and are 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 in the
industrial, medical, military and communications sectors.
SUSTAINABILITY
During the period, Pensana’s Blueprint for Sustainable Rare
Earths was launched. This is a strategy which outlines how
sustainability will be integrated throughout the company over
the short, medium and long term including its ambition to reach
net-zero carbon.
The company’s subsidiary, Ozango Minerais SA, has received full
licence approval for the life of mine for the Longonjo site, subject
to conditions which will run through the life of mine. An action plan
has been mutually agreed with the Angolan Ministry of Mineral
Resources, Petroleum and Gas alongside retaining excellent
relations with the provincial and local communities. In FY2023,
the company successfully completed the first tranche of economic
displacement compensation with full community consent, with
those affected being provided with transitional support, with a view
to receiving, along with all economically displaced persons, land of
at least equal economic value.
Pensana continues to progress its ambition to become an
independent and sustainable source of rare earths. It 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
12
PENSANA PLC
2023 ANNUAL REPORT
used by CICERO* is aligned to the International Capital Market
Association’s Green Bond Principles, and the 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 disclosed against
the recommendations of the Task Force on Climate-related
Financial Disclosures (TCFD), having voluntarily disclosed in
FY2022, one year ahead of the requirement to do so. The
TCFD disclosures include a summary of the steps taken by the
company to mitigate risks and adapt the business model to be
more resilient to the threats from climate change.
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 a recently commissioned
hydropower scheme in an infrastructure-rich part of Angola.
Pensana has successfully achieved planning consent for the
larger Reedmere site at Saltend and, as part of this, undertook
a number of environmental and social assessments including
pollution and flood assessments, air emissions modelling,
biodiversity surveys and cultural heritage assessments.
LONGONJO MINE
Longonjo is differentiated from other rare earth projects as a low
capital expenditure development through 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 and the company’s
strategy to maximise beneficiation on-site and ship a low-
volume, high-purity mixed rare earth product, thus reducing
logistics costs.
Saltend, Humber Port
Port of Lobito
Benguela railway
MREC refinery
Concentrator
Mine
*
Shades of Green, formerly part of CICERO, now part of S&P Global,
provides independent research-based evaluations of green bond and
sustainability financing frameworks to determine their environmental
robustness. In December 2022, S&P Global acquired the Shares of
Green business from CICERO.
PENSANA PLC
2023 ANNUAL REPORT
13
REVIEW OF OPERATIONS AND STRATEGIC REPORT
continued
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 similar development projects. Longonjo is located
close to modern road and rail links to a new Atlantic port
development and a recently commissioned hydropower
scheme in an infrastructure-rich part of Angola.
The Longonjo Project lies just 4km from the sealed national
highway and rail line that runs from the Port of Lobito under
300km to the west and 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 Huambo through the municipality of
Longonjo to the 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 DRC 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 (3ft 6in), 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 per year.
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
.
Ongoing earthworks
and civil construction
programs at the
Longonjo Project
Port of Lobito
infrastructure
directly connects
to the Benguela
rail line
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. The 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.
TECHNICAL DEVELOPMENT AND
METALLURGICAL TESTWORK PROGRAMMES
Several metallurgical pilot testwork programmes continued
during the year, confirming the final design criteria for the
Longonjo concentrator, recovery plant and the Saltend refinery.
The Longonjo concentrator plant scenario is modelled around
an open pit free-dig orebody with an additional refinery to
14
PENSANA PLC
2023 ANNUAL REPORT
Longonjo concentrator process flow diagram
(Rougher and Cleaner Stages)
(Rougher and Cleaner Stages)
Tailings Storage
Facility
be built alongside producing a clean, high-purity, NdPr-rich
product. This two-stage process will see the 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.
One hundred tonnes 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 recovery plant piloting and
downstream Saltend testwork currently in progress.
During the year, concentrator testwork was completed at the
ALS Perth facility, primarily focused on reagent optimisation
and the impact of flotation reagent build-up in process water.
Recycling of this process water was also optimised.
The testwork for the recovery plant design was undertaken by
Nagrom at their facility in Perth. The following testwork was
completed during the reporting period:
•
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
construction materials. Vendors were involved in piloting to
advise on operating parameters and ensure learnings are
captured in the plant design;
•
Piloting of the leach extraction stage and the nanofiltration
technology, which demonstrated both high rare earth
extraction and a concentrated liquor that reduces the size of
downstream plant equipment; and
•
Piloting of the impurity removal processes, including ion
exchange, followed by piloting of the final mixed rare earth
product precipitation.
Lastly, confirmatory testwork was completed on the Saltend
refinery processes to provide samples for vendor testwork and
equipment sizing, including:
•
front-end caustification, oxidation and redissolution of the
Longonjo mixed rare earth product;
•
solvent extraction isotherm development;
•
impurity removal by ion exchange; and
•
final product precipitation for equipment sizing.
MREC
Plant Tailings
To MREC
Plant
PENSANA PLC
2023 ANNUAL REPORT
15
REVIEW OF OPERATIONS AND STRATEGIC REPORT
continued
Longonjo MREC refinery process flow diagram
Saltend SX refinery process flow diagram
16
PENSANA PLC
2023 ANNUAL REPORT
The images show examples of testwork stages that were undertaken.
1
Concentrate feeding to continuous pug
acid mixer
2
Leach extraction pilot circuit
3
Acid mixed product
4
Impurity removal circuit
5
Mixed rare earth precipitate
6
Rare earth carbonate precipitation circuit
7
Rare earth carbonate precipitate
4
7
6
3
2
5
1
PENSANA PLC
2023 ANNUAL REPORT
17
REVIEW OF OPERATIONS AND STRATEGIC REPORT
continued
During the reporting year, Pensana received full updated
construction licence approval for the extended life of mine for
the Longonjo Project.
In FY2022, 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 company completed a comprehensive stakeholder
engagement plan and a RAP. This process 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 non-governmental organisation (NGO)
specialising in Angolan land rights, led the process of identifying
land ownership. The business has developed a compensation and
eligibility matrix which will provide structure to ensure all project-
affected persons receive fair and equitable compensation.
Additionally, Pensana is developing an LRP. Through close
collaboration between Pensana’s local subsidiary, Ozango, and
the Municipality of Longonjo, various land options have been
studied to resettle the subsistence farming lands affected by
the mine footprint within the mining licence area. The business
now has a preferred solution and, in Q1 FY2024, will complete
detailed studies to assess the inputs and preparation required
to bring the replacement land up to sufficient agricultural
standard to at least match that of lands being displaced.
The project, as part of a comprehensive LRP, includes a
component of sustainable agricultural development, which will
offer a comprehensive training and development programme
to enhance agricultural yields in the area. This programme will
be co-delivered by Vuna Agri, an organisation experienced in
developing agricultural programmes across Africa.
Pensana has created and is now operating a series of
demonstration plots on the mine site. These plots are being
used to assess the benefits of different crops, fertilisers and
seeds to identify the optimised yield for the area, and there are
further plans to offer training on diversified agricultural activities.
In addition, different activities will be researched to assist with the
planning of land use in the rehabilitation phase. This will consider
the different pillars of the economy, biodiversity and climate.
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
The recruitment drive started in 2022 and continued into 2023
to support the early works programme and to bolster the
Ozango team on the ground in Longonjo. Engagement with
local communities continued during 2023 and procedures for
the employment of candidates were finalised. Recruitment
activities were put on hold during Q2 2023 due to funding
constraints, but have resumed post period-end.
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;
•
Caminho de Ferro de Benguela – The Trafigura/Mota Engil-
led ‘Lobito Atlantic Railway’ consortium was awarded
the licence to operate the Lobito logistics corridor from
the Lobito port to the DRC. Several meetings were held
in respect of the arrangements for both the movement of
goods for the project and operational phases;
•
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:
•
ongoing review of the reagent requirements and
identification of alternative sourcing options;
•
development and review of group-level policies and
procedures;
•
development of documents for the Longonjo Project
consisting of policies, procedures, standards and checklists
for use in both the project and operational phases;
•
engagement with various service providers on solutions
for health, safety and the environment, procurement and
maintenance management; and
•
ongoing interaction with Deugro South Africa to manage the
project logistics.
PARTNERSHIPS AND COLLABORATION
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 emissions from the extraction of
raw materials to when the car is delivered to the customer and
onwards to the end of vehicle life.
18
PENSANA PLC
2023 ANNUAL REPORT
Longonjo licence granted to cover areas needed for mining
infrastructure and the prospective carbonatite geology
PROJECT DELIVERY TEAM
Following the previous design workstreams completed in the
Wood FEED study and the identified long-lead equipment
suppliers, Pensana has engaged with the African-based ADP
Group and ProProcess to develop and implement the detailed
design and execution plan within the initial US$200 million
capital expenditure envelope. ADP, which is part of the
Lycopodium Group, has designed, built and commissioned
metallurgical plants in Angola since 1997, with particular
emphasis on a modular approach to optimise regional
fabrication, installation and commissioning time. ProProcess
is an Africa-centric vertically integrated hydrometallurgy
engineering and modular fabrication company servicing the
global mining community over the past 14 years.
Expansion of the owner’s team under the Mining Consultancy
Company Limited (MCC) (formerly Project Paradigm
Partners) supervision continues to be an integral part of the
Longonjo Project development to increase local capacity in
the Angolan subsidiary, Ozango Minerais, and has matured
well over the past two years. Initially assuming responsibility
for the design and execution of the operational support
infrastructure (electrical, civils, earthworks, camp and water
infrastructure), the owner’s team responsibilities now extend
to overarching co-ordination of execution of the project as well
as the procurement, construction, operational readiness and
commissioning management activities.
COMMUNITY DEVELOPMENT
A key focus area for the company is ensuring the project
delivers a strong RAP and LRP as an integral part of its
activities. The project will not displace housing or any existing
structures and involves only economic displacement of
subsistence agricultural activities within the licence area,
which will be compensated for on a land for land basis.
Two extensive nearby land blocks have been identified to
provide new land for those economic activities displaced
by the project following positive meetings with the Sobas
(traditional leaders) and other relevant parties. The replacement
land is currently in the latter stages of agricultural quality and
yield assessment by experienced personnel in agricultural
potential and ecology, led by Vuna Agri, with a view to the land
being acceptable and available as needed during the project
development and implementation.
PENSANA PLC
2023 ANNUAL REPORT
19
REVIEW OF OPERATIONS AND STRATEGIC REPORT
continued
CORPORATE ACTIVITIES
Equity placings
July
2020
August
2020
August
2020
September
2020
January
2021
On 1 July 2020, the
company issued
16,508,633 fully paid
ordinary shares to
FSDEA, 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
821,157 fully paid
ordinary shares to
third-party service
providers at a price
of AUD0.33 per
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)
by way of a placing
of 13,500,000 new
ordinary shares
with FSDEA.
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.
BOARD APPOINTMENTS
Ms Alison Saxby was appointed as an independent non-
executive director with effect from 17 August 2022. 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 consultancy Roskill.
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 heavy rare earth oxides (HREOs) and further
downstream expansion into magnet metal/alloy production
and magnet recycling.
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 the period 2021 to 2023, the company’s key focus
was the finalisation of the FEED studies, value engineering
and optimisation in preparation for the initiation of early-stage
construction at both the Saltend and Longonjo Projects.
In July 2022, Pensana announced a memorandum of
understanding with Yorkshire Energy Park for an offtake of
up to 10MW of green electricity from their facility. We have
continued to engage with the park and have agreed a further
expansion area 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.
20
PENSANA PLC
2023 ANNUAL REPORT
June
and July
2021
January
2022
August
2022
January
2023
May
2023 and
June 2023
On 25 June 2021,
the group raised circa
US$21.1 million (net
of share issuance
costs) via the placing
of 12,500,000
fully paid ordinary
shares to long-term
shareholders, FSDEA
and chairman,
Mr Paul Atherley.
On 6 July 2021,
7,108,037 shares
related to share
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.
During August 2022,
the group raised
US$10.0 million
via the placing of
12,331,334 shares
with FSDEA.
On 5 January 2023,
M&G invested
US$3.8 million in
the company by
way of a placement
of 7,250,000 new
ordinary shares.
During May 2023,
M&G invested
US$5.2 million in
the company by
way of a placement
of 15,000,000 new
ordinary shares at a
price of £0.275 per
share.
During May and
June 2023, FSDEA
invested a total of
US$5.2 million in the
company by way of
a placement of a total
of 15,000,000 new
ordinary shares at a
price of £0.275 per
share.
Alongside these technical and engineering workstreams, key
ESG requirements were further inserted into the design process
in co-operation with HCV Africa, Ivy House and Grupo Simples.
In preparation for the main construction programmes, logistics
and procurement optimisation support from Deugro served
to alleviate 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 2021, 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, supported
by FSDEA and M&G, 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.
Key collaborations with Polestar and Equinor, signing a letter of
intent securing private wire connection to Yorkshire Energy Park,
green bond accreditation from CICERO*, launching our Blueprint
for Sustainable Rare Earths and signing a 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.
*
Shades of Green, formerly part of CICERO, now part of S&P Global,
provides independent research-based evaluations of green bond and
sustainability financing frameworks to determine their environmental
robustness. In December 2022, S&P Global acquired the Shares of
Green business from CICERO.
PENSANA PLC
2023 ANNUAL REPORT
21
REVIEW OF OPERATIONS AND STRATEGIC REPORT
continued
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 and mixed rare earth
carbonate development, the business is required to undertake
a programme of economic displacement. A RAP has been
authored and filed with the Angolan authorities and an LRP 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 company will move into the
implementation stage of the programme prior to construction
commencing and will ensure that all affected are supported
in ensuring food security and are offered opportunities for
economic development. To deliver the LRP, 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,
Petroleum 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. This relationship is evidenced by the
creditors standing by the company.
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
2022 and 2023, 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
30 October 2023
Mr Paul Atherley (Pensana executive chairman) and
Mr Hans Pehrson (Polestar Head of Research and
Development (R&D) and Electric Propulsion Strategy)
at the Polestar 0 launch
22
PENSANA PLC
2023 ANNUAL REPORT
GEOLOGY AND
MINERAL RESOURCES
GEOLOGY
The Longonjo carbonatite is located within the north-east-
orientated Lucapa Lineament of central Angola, as shown
in Figure 1. 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 are widespread across
the carbonatite.
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 is based.
Figure 2: Simplified geological map of Longonjo with all drillhole collars
as of September 2020
Figure 1: Simplified geological map
of Angola showing the Lucapa Belt
PENSANA PLC
2023 ANNUAL REPORT
23
Figure 3: Plan view of the Mineral Resource block model for the weathered zone coloured
by average NdPr grade over simplified geology of the Longonjo carbonatite. 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
GEOLOGY AND MINERAL RESOURCES
continued
24
PENSANA PLC
2023 ANNUAL REPORT
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 August
2020. 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 the fresh
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 of NdPrO.
*
NdPr = neodymium and 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:
•
It contains more than 2.3 times the previous estimate of
the Measured and Indicated Resources used in the
preliminary feasibility study
1
(announced on the ASX on
15 November 2019);
•
The proportion of the resources reported in the Measured
and Indicated categories has increased from 31% to 68%
2
;
and
•
The overall contained NdPrO has increased 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
Comparison of contained NdPr within the November 2019 and new
total Longonjo Mineral Resource estimates at a 0.1% NdPr cut-off
(Measured, Indicated and Inferred categories).
Longonjo Mineral Resource estimate 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. Any discrepancies in totals are due to rounding.
MINING ORE RESERVES
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 Ore Reserves 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. These 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.
PENSANA PLC
2023 ANNUAL REPORT
25
GEOLOGY AND MINERAL RESOURCES
continued
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
(million)
NdPrO
(%)
TREO
(%)
NdPrO
(tonnes)
TREO
(tonnes)
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 are 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
26
PENSANA PLC
2023 ANNUAL REPORT
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 MREC plant from stockpiles.
Figure 5: Longonjo mining stage designs
COOLA EXPLORATION PROJECT
The Coola Exploration Project licence is located in Angola,
approximately 160km east of the Port of Lobito, and covers an
area of 7,456km
2
.
Systematic exploration of the licence over the past three years
has identified three highly prospective targets, namely the
Sulima West carbonatite, the Coola carbonatite and the Benga
Novo alkaline complex. The three targets are located between
40km and 100km north of Pensana’s Longonjo Project.
Pensana, through Coola Mining LDA in which Pensana holds
a 90% interest, was granted the Coola exploration licence in
May 2020 and has since completed multiple field programmes
in 2020, 2021 and 2022 involving stream sediment sampling,
soil sampling, geological mapping, rock chip sampling, trench
and pit sampling, initial radiometric surveys, preliminary
mineralogical investigations and assaying confirming rare
earth mineralisation across all three carbonatites/alkaline
complexes. In 2023, further mapping and sampling were
conducted with 100kg bulk samples being extracted for
PENSANA PLC
2023 ANNUAL REPORT
27
GEOLOGY AND MINERAL RESOURCES
continued
bench-scale metallurgical testwork and, in October 2023,
ground geophysics (magnetics and radiometrics) were
completed at the Coola carbonatite and Sulima West
(magnetics, radiometrics and gravity). The geophysical data is
currently being processed and interpreted.
Sulima West is a roughly 5km diameter alkaline carbonatite
ring complex with a corresponding high radiometric response.
Ten historical trenches each of about 90m in length located
in the western segment of the structure were identified from
satellite imagery and corresponded with the highest radiometric
response.
The trenches are excavated into an iron/manganese-rich laterite
very similar in appearance to the REE laterite developed over
the Longonjo carbonatite. Initial reconnaissance sampling of
the trenches returned significant values for rare earth oxides
with up to 10.6% TREO encountered in the laterite. Manganese
oxide values of up to 15.9% MnO were also reported. Close-
spaced soil sampling clearly identifies a rare earth enriched
zone of 15ha with >2% TREO in soils. In 2022, initial trench and
pit sampling was conducted, reporting rare earth grades of up
to 9.7% TREO averaging 3.4% TREO over 68m in the trench
and up to 5.2% TREO, averaging 4.3% TREO over 6m for
the pit. In addition, a prominent outcrop of secondary apatite-
maghemite was observed and sampling returned values of up
to 22% P2O5.
The Sulima West laterite is comprised predominantly of Mn
and Fe oxides. The sample also contains a number of different
REE-bearing minerals, including florencite, bastnaesite and
monazite. The La in the sample is present in both the florencite
and monazite, while the majority of the Ce is hosted in the
bastnaesite, and Nd is hosted almost exclusively in monazite.
The REE-bearing phases are typically associated with one
another as well as the Mn and Fe oxides. All REE-bearing
phases tend to have moderate liberation and exposure.
Florencite has the best liberation of the individual minerals, with
almost 30 mass % better than 80% liberated. Bastnaesite has
the best exposure with 27.4 mass % better than 80% exposed.
The apatite-maghemite sample consists primarily of Fe oxides
and apatite. The apatite is enriched in REEs and, as such, the
apatite is the most significant host to the Ce, La and Nd in
the sample. The apatite is relatively coarse-grained and is well
liberated and exposed.
The presence of highly anomalous TREO of >10%, the
anomalous radioactivity, outcropping fenite, as well as
significant manganese and supergene apatite, are all supportive
of a carbonatite at depth.
The Coola carbonatite is a roughly circular body, measuring
about 900m across as inferred from the limited outcrops of
carbonatite and fenite. The circular shape suggests that the
Coola carbonatite may be a ring dyke or breccia pipe, similar
to the carbonatite at Longonjo.
Rock chip sampling of the ring dyke returned values of between
0.6% and 4.9% TREO (average 2.6%). Soil geochemistry over
the covered carbonatite returned values of between 0.37% and
13.18% TREO (average 3.21%).
Soil geochemistry over the fluorite-rich zone at Coola identified
an area of 25 000m
2
with average fluorite values of 17%
(Calcium Fluoride) CaF2.
Mineralogical studies of the Coola carbonatite identified the rare
earth mineral to be bastnaesite, which occurs as discrete veins,
veinlets, and segregations within the carbonatite. Preliminary
mineral liberation studies confirmed that the REE-bearing phase
is bastnaesite (10.66 mass %), which is host to more than
90% of the light REEs found in this sample. The bastnaesite
is moderately sized with 85 mass % occurring in size classes
ranging from 50-250μm with practically no fines (<1% <10μm).
The bastnaesite is moderately liberated and exposed.
Economic grades of REE mineralisation in the form of
bastnaesite have been located in banded dolomitic
carbonatites at the Coola carbonatite and the fluorite
occurrence may be of economic significance.
The Benga Novo intrusion is interpreted as a very large
caldera occurring immediately to the north of the Sulima West
intrusion. It is regarded to be at least 8km to 10km across and
is characterised by flat, deeply weathered soils with a solitary
alkaline granite outcropping in the south-eastern part.
The identification of a significant, clay dominated, deeply
weathered regolith over parts of the main Benga Novo intrusion
may be prospective for the occurrence of ionic clay hosted REE
deposits and/or bauxite. Initial sampling of the clays showed a
low Al2O3 content (<18%) with no bauxite minerals identified,
however, the clays typically contain up to 1,600ppm TREO.
The Benga Novo intrusion is believed to be vast (approaching
100km
2
) and the potential for alkaline silicate-related
mineralisation such as REE, Nb, U and Zr is deemed positive.
28
PENSANA PLC
2023 ANNUAL REPORT
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 of 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.
If appropriate, 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. A non-exclusive and
non-binding memorandum of undertaking with a large non-Chinese magnet manufacturer for an offtake of
25% of Pensana’s rare earth oxide production has been entered into with this in mind.
Demand risk
Medium
Low
The 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.
PENSANA PLC
2023 ANNUAL REPORT
29
Risk
Risk
appetite
Risk
rating
Change
year-on-year
Nature of risk and management of risk
External risks
continued
Foreign exchange risk
Medium
Medium
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 pounds to align to input costs in the various
jurisdictions it operates within. On completion of main financing, consideration will be given to foreign
currency hedging.
Market supply
concentration
Medium
High
Currently, China is the dominant producer 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 offtake agreements with the goal of preserving future revenue streams.
The group has entered into strategic partnerships and memoranda of understanding with offtake customers.
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
This is deemed a medium risk due to Angola’s strong economic performance and the Angolan government’s
support and backing of the Longonjo Project. In addition, FSDEA is the group’s largest shareholder.
The group continues to 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.
PRINCIPAL RISKS AND UNCERTAINTIES
continued
30
PENSANA PLC
2023 ANNUAL REPORT
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 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. This
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 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.
PENSANA PLC
2023 ANNUAL REPORT
31
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
mixed rare earth product at Longonjo for export to the
Saltend processing plant 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, 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
owner’s team to ensure active contract management to enforce any penalty clauses for project delays due to
contractor delays.
32
PENSANA PLC
2023 ANNUAL REPORT
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 materials both for the project and
operations phases.
Managing the risk
Management has 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 Longonjo and Saltend as well as exploring independent options for Pensana.
Strategic risks
Financing
Low
High
The company is of the opinion that in addition to the funding
requirement for the UK operations, additional funding will also
be required during the period to maintain liquidity if the grant
funding is delayed or the conditions are not met. Additionally,
the group would need to refinance the FSDEA facility in the
event the main financing is not complete by the maturity date
of the FSDEA loan. Given the support provided by the Angolan
government for the Longonjo Project, the directors anticipate
such a refinancing being made available to the group.
It is anticipated that the contemplated financing across the
group may include further issues of equity, export credit-
backed debt financing and issuing a green bond. The ability
of the company and group to continue as a going concern is
dependent on securing additional funding given the forecast
expenditure.
The group is in pre-production phase and therefore has no
revenues from operations currently. 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 fundraising. The group is currently in the process of attempting to raise 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.
PENSANA PLC
2023 ANNUAL REPORT
33
PRINCIPAL RISKS AND UNCERTAINTIES
continued
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 to process 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 risks
Physical risks resulting
from climate change
can be event-driven
(acute) or longer-term
shifts (chronic) in
climate patterns
Medium
High
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 a 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 business has ensured climate change modelling has been considered as part of project development.
Further modelling opportunities have been identified and will be deployed at relevant junctures in project
development.
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.
Saltend physical risks have been assessed in accordance with all relevant English statutes and regulations.
Longonjo’s physical risks have been identified and assessed in accordance with International Finance
Corporation (IFC) Performance Standards and as recommended by independent assessment through the ESIA.
34
PENSANA PLC
2023 ANNUAL REPORT
Risk
Risk
appetite
Risk
rating
Change
year-on-year
Nature of risk and management of risk
Environmental risks
continued
Climate change –
transitional risks
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
Low
High
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. Statute or original equipment
manufacturer (OEM) procurement rules may be integrated
which directly restrict trade for material not meeting
climate limits and requirements thus disqualifying Pensana
from trade.
Managing the risk
The company will continue to monitor potential regulatory, financial market, customer and investor requirements
on short- and medium-term horizons and ensure the business is well placed to comply with both current and
future requirements.
The group will continue to work with partners (including governments, NGOs and commercial partners)
to explore carbon and impact reduction, including sourcing renewable energy and exploring innovative
partnerships such as that with Equinor (for the future use of hydrogen) and Polestar 0 (on their climate-neutral
car ambition).
Ms Geraldine Tchimbali – Site
services manager on-site at
Longonjo
PENSANA PLC
2023 ANNUAL REPORT
35
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
of the company. The governance highlights during this period
include the following:
BOARD EVOLUTION AND
SUCCESSION PLANNING
The Pensana board has the most suitable and appropriate
balance of skills and expertise at board level for the company’s
current and future stages of development, including industry-
specific expertise following the appointment of Ms Alison Saxby
as an independent non-executive director in 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 board will continue to ensure that sufficient financial
and other resources are in place to ensure the successful
implementation of Pensana’s 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, FSDEA, local and national agencies in the
UK, local communities and leaders continues on a regular basis
and is seen as a key driver to building sustainable, long-term
projects that will create a wider benefit for all involved.
GOVERNANCE POLICIES
Publicly disclosed policies as well as the company’s code of
conduct cover the business’ approach to group governance
including anti-bribery and corruption 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
Executive chairman
30 October 2023
36
PENSANA PLC
2023 ANNUAL REPORT
QCA CORPORATE GOVERNANCE CODE PRINCIPLES AND RECOMMENDATIONS
The company hereby discloses how the provisions of the QCA Corporate Governance Code have been followed during the
financial year.
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, sets 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 has obtained funding support from FSDEA
in relation to commencement of mine construction at Longonjo
and is in advanced discussions with a range of funders to
put in place a fully financed solution for Longonjo. Funding
alternatives for Saltend are also being advanced, with a team of
skilled and experienced executives, employees and contractors
to ensure construction is timeously and properly completed.
• code of conduct;
• securities trading policy;
•
health, safety and environment policy;
•
shareholder communications and continuous disclosure
strategy;
• risk management policy;
• board charter;
• diversity policy;
•
modern slavery statement; and
•
principles for sustainable procurement.
The board of directors of Pensana
is responsible for establishing the
corporate governance framework of
the group.
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/corporate-governance.
This statement outlines the main corporate governance
practices in place for the period ended 30 June 2023, 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:
PENSANA PLC
2023 ANNUAL REPORT
37
CORPORATE GOVERNANCE REPORT
continued
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.
Shareholders are also able to email or contact the company
with any queries.
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, using a double materiality approach as well as
through risk identification and mitigation workshops performed
by senior management and reported to 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.
Senior management are also in regular communication with
key shareholders by means of shareholder meetings and
stakeholders by way of interaction with senior representatives
of those stakeholders.
The ESG board sub-committee monitors key stakeholder
engagement for the company and ensures that the company
fulfils its environmental and social responsibilities as identified
by management and the board.
The company retains relationships with relevant stakeholders
(including council, communities, the Humber Energy
Cluster, universities, FE/colleges, schools, national elected
officials, local elected officials, marketing bodies, wildlife and
environmental bodies, unions and charities) and engages with
each group with a focus on two-way communication. The
chief commercial officer retains ownership of the stakeholder
engagement process for the UK and in Angola, the CEO and
country manager take responsibility for ensuring stakeholder
feedback is listened to and where relevant acted upon.
Examples have included additional data gathering exercises as
part of the planning consent for Saltend and amendments to
community support packages for those affected by economic
land displacement as part of the Longonjo Project.
38
PENSANA PLC
2023 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;
•
health, safety, climate and the environment;
•
system/information technology process risk; and
•
the degree of risk tolerance and risk appetite in respect of
each identified risk.
The key risks, as identified, are disclosed annually in the company’s
annual report.
The board has appointed an audit and risk committee which is
chaired by a senior independent non-executive director. One of
the functions of the audit and risk committee is to 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.
PENSANA PLC
2023 ANNUAL REPORT
39
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 81
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 annual report on
page 81
.
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. If any of the directors
feel that their skill sets need to be updated in any particular area,
refresher training options will be investigated and provided as
necessary. 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 6
to
8
.
The board as a whole, with its blend of experience and skills in
rare earths, mining, exploration, finance, as well as the Angolan
and UK operating environments, contains the necessary mix of
experience, skills, personal qualities (including gender balance)
and capabilities to deliver the strategy of the company for the
benefit of the shareholders over the medium to long term.
CORPORATE GOVERNANCE REPORT
continued
40
PENSANA PLC
2023 ANNUAL REPORT
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 conducted by the company
secretary at the end of the reconstituted board’s first full 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.
Pensana’s nomination committee is responsible for reviewing
the skills, expertise, composition and balance of the board on
an ongoing basis as part of the company’s succession planning.
When considering new appointments, a brief is prepared and an
independent external search agency is utilised to identify potential
candidates.
The committee continues to focus on succession planning,
reviewing the programmes which the company has in place to
grow talent within Pensana.
As part of our succession practices, the nomination committee will
continue to review programmes in place to assimilate talent into
leadership and specialist positions.
No formal board performance evaluation has been undertaken
in the period. A board performance evaluation will be conducted
during FY2025 following a full year in office of the reconstituted
board. During FY2024, an investigation will be undertaken as to the
most appropriate assessment mechanism and/or service provider.
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 the broader 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.
Principles for sustainable procurement have been developed by
the company, which reference the code of conduct and require
compliance on matters such as avoiding discrimination, bribery
and corruption, ethical practice generally and transparency from
all suppliers on these matters.
The board evaluation process to be conducted and referenced
in Principle 7 above will establish means of monitoring and
assessing on an ongoing basis the state of the corporate culture
of the company.
PENSANA PLC
2023 ANNUAL REPORT
41
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.
The chairman leads the board and is primarily responsible for
the effective working of the board, including the following:
•
In consultation with the board, ensures good corporate
governance and sets clear expectations with regard to
company culture, values and behaviour;
•
Sets the board’s agenda and ensures that all directors
are encouraged to participate fully in the activities and
decision-making process of the board;
•
Is the ultimate custodian of shareholders’ interests;
•
Engages with shareholders and other governance-related
stakeholders, as required; and
•
Meets with the senior independent director and with the
non-executive directors without the executive directors
present, in order to encourage open discussions and to
assess the executive directors’ performance.
The CEO is primarily responsible for implementing Pensana’s
strategy established by the board and for the operational
management of the business including the following:
•
Leads and provides strategic direction to the company’s
management team;
•
Runs the company on a day-to-day basis;
•
Implements the decisions of the board and its committees,
with the support of the executive committee;
•
Monitors, reviews and manages key risks;
•
Ensures that the assets of Pensana are adequately
safeguarded and maintained;
•
Leads by example in establishing a performance-
orientated, inclusive and socially responsible company
culture; and
•
Chairs the executive committee and is a member of the
ESG committee, thereby having direct involvement in the
strategic management of Pensana’s ESG matters.
CORPORATE GOVERNANCE REPORT
continued
42
PENSANA PLC
2023 ANNUAL REPORT
Principle 9
Maintain governance
structures and processes that
are fit for purpose and support
good decision-making by
the board
continued
Application
Disclosure
The company should maintain
governance structures and
processes in line with its corporate
culture and appropriate to its size
and complexity.
The audit and risk committee assists the board in discharging
its oversight responsibilities relating to audit and risk matters.
The ESG committee assists the board in discharging its ESG-
related oversight responsibilities.
The remuneration committee assists the board in discharging
its oversight responsibilities relating to remuneration and
the company’s executive directors, senior executives,
management and non-management. The remuneration
committee also comprises the nomination committee. The
function of the nomination committee is to identify and
recommend candidates to fill vacancies and to determine
the appropriateness of director nominees for election to the
board.
Work undertaken by board committees during the year
included:
Audit and risk committee:
Oversaw development of
a comprehensive risk register, focusing on the group’s
development of the Longonjo Project.
Nomination and remuneration committee:
Oversaw the
appointment of Ms Alison Saxby as a non-executive director
(nomination committee) and the realignment of the share
incentive scheme (remuneration committee).
ESG committee:
Approval of the Blueprint for Sustainable
Rare Earths, oversaw the ESG strategy, including publication
of policies on Pensana’s website as well as the RAP at
Longonjo.
Board:
Oversaw the process to obtain shareholder and
other regulatory approvals for the issue of shares to ASF
Yova Mining.
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.
An audit and risk committee report is included in the
company’s annual report on
pages 83
and
84
.
A directors’ remuneration report is included in the company’s
annual report on
pages 63
to
75
. A principal risks and
uncertainties report as well as a section 172 statement are
included in the company’s annual report on
pages 29
to
35
,
respectively.
The results of all voting at a shareholders’ meeting will be
disclosed on the company’s website.
Principle 10
Communicate how the
company is governed and is
performing by maintaining a
dialogue with shareholders and
other relevant stakeholders
PENSANA PLC
2023 ANNUAL REPORT
43
CORPORATE GOVERNANCE REPORT
continued
Number
of votes
for
Number
of votes
against
Number
of votes
withheld
Number
of votes
at chairman’s
or proxy’s
discretion
Statutory accounts
85,966,420
(99.16%)
15,874
(0.02%)
64,763
714,387
(0.82%)
To approve the directors’ remuneration report
85,756,309
(98.88%)
252,743
(0.29%)
38,005
714,387
(0.82%)
To approve the directors’ remuneration policy
85,699,496
(98.83%)
300,180
(0.35%)
47,381
714,387
(0.82%)
To re-elect Mr Timothy George as a director
85,693,042
(98.82%)
311,799
(0.36%)
42,216
714,387
(0.82%)
To re-elect Rt Hon Baroness Lindsay Northover PC as a director
85,687,996
(98.83%)
304,173
(0.35%)
54,888
714,387
(0.82%)
To elect Mr Robert Kaplan as a director
85,669,014
(98.80%)
323,048
(0.37%)
54,995
714,387
(0.82%)
To elect Ms Alison Saxby as a director
85,739,014
(98.88%)
253,048
(0.29%)
54,995
714,387
(0.82%)
To reappoint BDO LLP as the auditor
85,739,319
(98.88%)
252,743
(0.29%)
54,995
714,387
(0.82%)
To authorise the audit and risk committee to determine the
remuneration of the auditor
85,748,247
(98.88%)
252,743
(0.29%)
46,067
714,387
(0.82%)
To authorise the directors to issue new ordinary shares or grant rights
to subscribe for or convert securities into ordinary shares
85,755,752
(98.88%)
253,048
(0.29%)
38,257
714,387
(0.82%)
Disapplication of pre-emptive provisions
85,679,92
(99.10%)
67,379
(0.08%)
299,757
714,387
(0.82%)
To authorise the purchase of ordinary shares
85,697,186
(98.83%)
304,411
(0.35%)
45,460
714,387
(0.82%)
That a general meeting other than an annual general meeting (AGM)
may be called on not less than 14 clear days’ notice
85,711,000
(99.12%)
42,907
(0.05%)
293,150
714,387
(0.82%)
44
PENSANA PLC
2023 ANNUAL REPORT
As part of its commitment to ESG, Pensana has launched its
market-leading Pensana Blueprint for Sustainable Rare Earths ensuring
the business places ESG risk management and carbon reduction
performance at its core.
ENVIRONMENTAL,
SOCIAL AND
GOVERNANCE REPORT
data deemed applicable for external reporting by the company,
based on the current levels of operations, is published on
pages 58
to
61
. In April 2022, the board members attended
an extensive training session on ESG commissioned and
specifically tailored to Pensana which was delivered by
Dr Sarah Gordon from respected ESG consultancy, Sartarla.
The session covered all aspects of ESG as well as current and
emerging trends.
The company remains committed to its membership of the
United Nations Global Compact and the TCFD. The latter
saw Pensana register as a supporter and disclose against the
recommendations when this was a voluntary action. Pensana
is pleased that such disclosure is now mandatory across the
sector, and the company has duly reported under the new
regime. The business further highlights its commitment to
aligning its work to other standards including the Equator
Principles and the IFC Performance Standards through
the Blueprint.
Progress continues towards developing a sustainable and
traceable value chain. Pensana views its ESG responsibilities
in the context of its value chain, including opportunities to
influence both upstream and downstream activity. It continues
to demonstrate this commitment through partnerships with
other businesses across the value chain, for example, through
its relationships with Polestar and Equinor.
ESG risk identification is incorporated into the company’s risk
process with ESG risks embedded within its 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 34
).
Through the integrated risk assessment processes for climate
change, Pensana 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
Pensana has launched its ambitious Blueprint for Sustainable
Rare Earths (the Blueprint). Approved by the board’s ESG sub-
committee on 7 September 2023, 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
(shown on
page 62
) include, among others, a commitment
to deep and meaningful carbon reduction (achieving 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 company makes. Pensana demonstrates
its commitment to de-risking its projects by operating to
reputable and independent ESG standards. This should
provide confidence to investors and customers that its claims
are reliable and meet the most rigorous standards required
by stakeholders.
Pensana takes its responsibility towards addressing high ESG
standards very seriously. To support the desire to build the
world’s first sustainable magnet metal supply chain, a full-time
sustainability manager has been employed since the early
stages of the company’s work and serves as a member of the
executive committee reporting directly to the CEO. The CEO
has responsibility for the delivery of ESG at Pensana and the
board oversees ESG and its associated impacts through a
mandated board sub-committee chaired by non-executive
director Baroness Lindsay Northover, with the remainder of the
membership being non-executive directors Mr Steven Sharpe
(until 9 December 2022), Ms Alison Saxby (from 9 December
2022) and CEO Mr Tim George. The committee is responsible
for the approval of the company’s sustainability strategy and
was directly involved in the authoring and approval of the
Blueprint. The approval of this document also includes approval
of the company’s material non-financial topics, metrics, KPIs
and ambitions. The material non-financial issues as determined
can be found in the Blueprint. The ESG committee retains
responsibility for overseeing the effectiveness of the company’s
performance in all elements of ESG.
In FY2022, Pensana identified its material data points for
internal and external reporting and will report against the same
metrics in FY2023. While not all of these are yet applicable, the
PENSANA PLC
2023 ANNUAL REPORT
45
and has undertaken a high-level desk-based review of climate
risk in Angola. The detail of this and the scenarios and climate
change models used can be seen in the TCFD disclosure
starting on
page 49
. The company has developed qualitative
risk and opportunity assessments from transitional risk using
internal expertise.
The company views R&D into ESG issues and opportunities
as crucial to its future strategy. Pensana has successfully
secured funding for two projects. The first will be an Innovate
UK-funded project commencing in October 2023. This
£316,643 project, working in partnership with Polestar,
Route2 and the Universities of Leeds and Hull, will review and
measure ESG impacts across the six capitals of integrated
reporting (manufactured, natural, social, human, intellectual
and financial) and will then use the data to identify future
opportunities to reduce the negative impacts and increase the
positive impacts of ESG across the entire value chain (note:
this project was approved post period). The second project is
a PhD studentship funded through the White Rose Doctoral
partnership and hosted by the Universities of Leeds and York.
The studentship will use our Longonjo Project as a case study
of the socio-economic impacts of rare earth mining.
CLIMATE AND CARBON
The extraction and processing of 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 (IEA) has forecast that there
could be a sevenfold increase by 2040 in demand for rare earth
elements for use in clean energy technologies
1
.
This section provides a progress update for three of Pensana’s
objectives from the Blueprint:
•
Provide a reliable and sustainable source of separated
rare earth metals and compounds, essential to global
decarbonisation products;
•
Produce the rare earth products with the lowest embedded
carbon on the market; and
•
Promote deep and meaningful carbon reduction across our
entire value chain, to be net zero no later than 2040.
As part of its commitment to being climate aware, Pensana
voluntarily became a partner of the TCFD before this
became mandatory. It is required to disclose against the
recommendations of the TCFD for FY2023. However, as it
voluntarily disclosed against the recommendations for FY2022,
the company’s progress on climate change disclosure can
be seen in this report. Pensana has disclosed in a measure
consistent with the TCFD recommendations and recommended
disclosure.
To ensure Pensana supports the demand from customers and
investors not only to develop products to reduce the impact
of climate change, but products that themselves have a low
carbon footprint, the company instructed Route2, a leading
consultancy in quantifying sustainability impacts, to develop
a product life cycle carbon emissions analysis aligned to the
GHG Protocol Product Life Cycle and Reporting Standard.
This comprehensive study was completed in FY2023. Findings
were presented across the business, including to the ESG
board sub-committee and C-suite senior management. This
work not only quantified the impacts of the engineering and
design already completed, but also demonstrated where
future material carbon emissions are likely to be in the value
chain, allowing a targeted strategic approach to their reduction
particularly through the evolution of partnerships and research.
Climate and decarbonisation will be a specific strand of the
Innovate UK-funded research project as detailed previously.
Furthermore, Pensana continues to strive to embed low-carbon
design into its planning. This has included the electrification of
key plant items and planning of logistics, benefiting from the
siting of the Longonjo Mine adjacent to the newly refurbished
Benguela railway, which runs directly to the Port of Lobito.
As part of its value chain approach, Pensana continues to work
closely with partners to further enhance ESG performance. This
includes the partnership with Equinor for the potential supply of
hydrogen in the rare earth recycling process. The company has
further developed its partnership with Polestar as part of the
Polestar 0 Project to develop the world’s first climate-neutral
car. Pensana and Polestar are working very closely together to
identify carbon emission points across the value chain and will
review options to reduce those emissions to zero.
The company discloses details on its carbon and climate
performance through the TCFD disclosure starting on
page 49
and ESG data on
pages 58
to
61
.
PROTECTING THE NATURAL
ENVIRONMENT
Longonjo
Ozango Minerais, the subsidiary responsible for the operation
of the Longonjo site, has received full and updated licence
approval for the operation of the mine site for the life of mine in
addition to the previous licence and ESIA approvals.
Pensana is committed to making every effort to protect and
enhance the natural environment and included an objective in
the Blueprint to “integrate leading practice across our business
to protect and enhance the natural environment in and around
our operations”.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT
continued
1
International Energy Agency – The Role of Critical Minerals in Clean
Energy Transitions.
46
PENSANA PLC
2023 ANNUAL REPORT
While the project has been structured to identify risk areas
early in the process, and therefore reported on risk mitigations
in the previous reporting period, the company remains
committed to embedding protection of the environment within
its decision-making and is working towards ISO14001. While
there are no recognised or registered protected areas for
biodiversity adjacent to the proposed mining area, it has made
a commitment to reduce the area of the mining plan to avoid an
area of high-conservation value within the mine lease boundary.
This habitat is home to species of conservation concern
including the endemic Angolan Cave Chat (Xenocopsychus
ansorgei). Additionally, all staff continue to be trained on
ecological challenges, and a select group of competent staff
are trained to deal with any ad hoc wildlife sightings safely
and ethically.
Furthermore, environmental management and risk alleviation
are high-priority areas throughout the operations. All operations
will be compliant with environmental legislation and IFC
Performance Standards. Applying high operating standards
has included ensuring that the planned construction of the
TSF meets the requirements of the Global Industry Standard
on Tailings Management and that comprehensive monitoring
and reporting plans are designed and integrated early in the
construction process in the event that any risks emerge. A
rehabilitation plan has been developed and will continually
evolve throughout the life of the mine. Ozango has appointed
an experienced Angolan environment co-ordinator, who will
provide expertise to ensure compliance with all environmental
licence requirements and build stakeholder relations in-country.
Saltend
Pensana 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% climate change and a
0.1% annual exceedance probability design for 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 company to plan for flood risk
mitigation. While the planning process identified the operational
area as 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.
Pensana has now submitted its application under the
environmental permitting requirements. As part of this, the
business has undertaken a number of risk and environmental
assessments. These assessments show that the facility will
not adversely impact local air quality, cause any groundwater
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.
Pensana has agreed on an ambition as part of the Blueprint
to “implement a world-class rare earth recycling scheme
displacing some of the need for mining and reducing landfilling”
and, as such, it continues to explore circular economic
opportunities.
OUR COLLEAGUES,
THEIR SAFETY AND THE
COMMUNITIES IN WHICH
THEY LIVE
Health and safety
Pensana completed a full review of its health and safety
governance and management system at group level in FY2022
and has updated its structure to adapt to the growing business,
with a continual improvement philosophy applied by the
company. Pensana continues to develop, review and update
documented processes, performance indicators and reporting
procedures to ensure senior management can effectively
oversee the health and safety implementation at each of the
subsidiaries. The company has opted to work towards reporting
health and safety statistics based on the Health and Safety
Performance Indicators. It draws on the guidance published
by the International Council on Mining and Metals (ICMM) and
has integrated definitions of health and safety performance
indicators from this.
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 operating subsidiaries.
All staff are encouraged to engage in good health and safety
procedures through regular briefings, site walkabouts and
easy-to-access hazard and incident reporting. Pensana has
developed practices for monitoring and mitigating risks where
they exist in current operations, including the encouragement
of hazard identification by staff. As part of the evolution of
the management system, project areas are in place to further
develop the company’s approach to occupational health, action
tracking, incident investigation, auditing, worker consultation,
specialist work areas and training. The company has appointed
an experienced Angolan health and safety co-ordinator to co-
ordinate the programmes on-site in Longonjo.
PENSANA PLC
2023 ANNUAL REPORT
47
ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT
continued
In the period, Pensana recorded four cases of malaria
contracted by colleagues in Angola. None of these cases was
serious and all were effectively and efficiently treated before
returning to work. The local hospital in Longonjo is experienced
in malaria treatment and the company has established a strong
relationship for early testing, diagnosis and treatment of malaria.
In FY2024, it will deploy a malaria education programme and
will ensure continued investment and deployment of appropriate
mitigation measures including the availability of mosquito nets.
Pensana has placed the health and safety of our colleagues as a
highly material issue to the business and the Blueprint contains
an ambition to implement a zero-harm approach to health and
safety. The company had one recordable incident in the period,
whereby a kitchen worker required medical treatment beyond
first aid relating to a sprained finger.
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.
As part of the development of the ESIA for the Longonjo site,
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 and plant infrastructure development,
the company has undertaken a programme of economic
resettlement. No homes have been displaced. A RAP for
cultivated plots has been authored and filed with the Angolan
authorities and an LRP 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.
Additional support on the development of specialist agricultural
support and the authorship of the LRP has been and is still
being provided by Vuna Agri, a consultancy experienced in the
delivery of African agricultural and LRP programmes.
In the period, Pensana completed the legal formalities required
to proceed with the land from 28 project-affected households
(PAHs). This process involved mutual consent from PAHs and
agreement on compensation packages for infrastructure and
perennial crops. Those PAHs are now in receipt of transitional
support. The transitional support consists of a food package
of typical foods for the area on a fortnightly basis. All PAHs
affected will be provided with replacement land at least to
an equal area to the land being displaced. In order to deliver
a successful LRP, the company has, in liaison with the local
administration and local communities, identified two potential
replacement land blocks. Post period, it has completed an
agricultural potential survey of the replacement land and further
studies remain ongoing to ensure the replacement land can
provide sufficient agricultural potential to support those whose
plots will be displaced.
As part of the commitment to uphold the IFC Performance
Standards, Pensana has launched a grievance mechanism
through which members of the community can raise grievances
they do not feel are being dealt with elsewhere. This system
has engaged a mechanism for the involvement of traditional
community leaders and local administration should Ozango
and the complainant not be able to reach a resolution of mutual
agreement. Zero grievances have thus far been needed to be
moved into the additional resolution process, but Pensana
recognises this is an important provision.
The company has allocated space within the mine boundary
for the development of agricultural demonstration and test
plots. This space will allow it to explore effective agricultural
techniques for the area and host a training base for those
project-affected persons interested in developing their
agricultural skill set. The area will also allow testing of
alternative techniques including development of alternative
crops and exploration of land use to support an optimised
mine restoration programme balancing the needs of economy,
carbon and biodiversity. This is now up and running and the
first round of test planting has been harvested.
As Ozango grows its employee base in the Longonjo area,
the company is aiming, as far as possible, to recruit local
staff for the operation of our sites to ensure we are providing
opportunities for the communities local to our operations.
This all feeds into the objective in the Blueprint of developing
infrastructure and skills so that communities local to our sites
see a direct, long-term, economic benefit from our presence.
This will, as with all ambitions, be delivered in three phases:
construction, optimisation and operations. The key strategic
target for the business in the construction phase is to recruit to
ensure all roles are filled to enable safe operations at Longonjo
and Saltend, with a focus on providing local employment.
The company will ensure that an IFC Performance Standards-
aligned RAP and LRP are delivered, ensuring no adverse
impact on local populations and will deliver an LRP to facilitate
optimal use of land and development of the skills of families
affected.
Pensana has developed strong relationships with stakeholders
across the spectrum in the UK. As part of the successful
planning application, the company 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
48
PENSANA PLC
2023 ANNUAL REPORT
institutions including the Universities of Leeds, Hull, York and
Lincoln to review prospects for research collaboration and
development opportunities.
OPERATING AN ETHICAL
BUSINESS WITH STRONG
CORPORATE GOVERNANCE
Pensana has approved an ambition as part of the Blueprint
to integrate leading practice across our business to embed
strong corporate governance in everything we do. This is
demonstrated within this section, alongside the corporate
governance report, which forms part of this annual report.
Publicly disclosed policies cover our approach to anti-bribery
and corruption and diversity alongside the details within the
company’s code of conduct. Furthermore, the company has
set up a working group to review and develop governance
structures, policies and procedures. The governance report can
be viewed on
pages 36
to
44
.
In this reporting period, Pensana published its second 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.
Pensana has launched its first Principles for Sustainable
Procurement to support the Blueprint ambition to implement a
world-class sustainable supply chain backed by strong digital
evidence. The principles ensure Pensana’s suppliers disclose
to us, prior to contractual agreement, key information on their
impacts on human rights, health and safety, the environment
and climate, as well as their commitments on ethical
behaviour, anti-corruption and social impact. The principles
require suppliers to be open and transparent to facilitate the
development of a fully transparent and de-risked supply chain.
The company remains committed to equality and opportunity
in all forms and actively promotes anti-discrimination across
all its workplaces. Pensana’s data on its gender split can
be seen on
page 61
. The business recognises that it does
not yet fully comply with the Financial Conduct Authority
listing rules on diversity and inclusion on company boards.
The company has a strong director team with an appropriate
skill set but will continue to work towards compliance as
board vacancies arise.
TASK FORCE ON CLIMATE-RELATED
FINANCIAL DISCLOSURES
Disclosure against the recommendations of the TCFD is
mandatory for Pensana for the first time this year. However,
Pensana voluntarily disclosed in FY2022. Pensana has taken
great strides to ensure that addressing climate change, and
specifically the requirements of the TCFD, has been embedded
in the development of the business. This disclosure represents
the company’s performance for the period FY2023 and
highlights our developments in the reporting year.
For the purposes of compliance, the ESG committee and
senior management believe this disclosure adheres to the
requirements of the TCFD and considers that they have given
sufficient information to be consistent with the TCFD framework
in the current year.
PENSANA PLC
2023 ANNUAL REPORT
49
ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT
continued
1.
GOVERNANCE
1a
Describe the board’s oversight of climate-related risks and opportunities
DISCLOSURE
The board has ultimate responsibility for group risk and opportunity. It established an audit and risk sub-committee to monitor these closely.
Climate risks are integrated and therefore reported and managed via the same channels as other risks across the business. For more
information on the audit and risk committee, refer to
page 83
.
The board established an ESG sub-committee to have specific and focused oversight of the climate and carbon workstream. It reviews the
effectiveness of the company’s approach to all ESG areas, including addressing climate risks. The sustainability manager submits a report
to each ESG committee meeting which contains an update on progress against the requirements of the TCFD and further highlights areas
of relevance to the committee, including progress against targets. Frequency and attendance at ESG committee meetings can be found
on
page 81
.
The board has demonstrated the importance of climate, among ESG issues, to the business through the formation of the ESG committee
chaired by an ESG specialist, Baroness Northover. Part of the mandate of the ESG committee is to critique and review the company’s
performance in effectively considering climate-related issues in all elements of decision-making. Both the audit and risk committee and the
ESG committee mandate the consideration of climate-related issues in all elements of decision-making.
The board, in 2022, received independent training on ESG risk from Sartarla, an organisation specialising in ESG risk, with a section on the
training including climate and related disclosure.
In FY2024, the board and management will review a monitoring plan for progression against ESG targets and KPIs, including climate.
Currently, the board oversees progress against the targets and goals through a qualitative approach through sustainability manager reports.
PROGRESS DURING FY2023
The board, via the ESG committee, received a comprehensive report of the findings from the independently completed GHG product level
assessment including highlights of where future carbon emissions are modelled and the key risk factors and future opportunities across
the product value chain. This project and the findings were presented to the ESG committee prior to the agreement of the Blueprint and
therefore allowed the committee to make an informed decision on a carbon reduction target. For more information on the GHG screening,
refer to
page 46
.
The board agreed the Blueprint and approved the inclusion of a workstream entitled carbon and climate. This workstream is specifically
focused on ensuring that, at a board-led strategic level, the company embeds ambitious performance targets relating to climate change
and ensures that it is resilient to the future effects of climate change.
As an example of board oversight on business direction, the ESG committee has noted potential legislative and investment rule changes
and customer demands in both the short and medium term and has therefore directed the company to ensure it is adequately prepared to
meet these requirements and be ready for the opportunity provided by customers looking to source sustainable and compliant materials.
1b
Describe management’s role in assessing and managing climate-related risks and opportunities
DISCLOSURE
Senior management oversees risk across the business in each of their respective areas, with climate risks being expressly included
and escalated as required through operational teams to management. The CEO retains overall responsibility for the performance of the
climate mitigation system and thus reporting of such activity to the board and associated sub-committees. The CEO is supported by the
sustainability manager who has technical expertise in the area of 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. Climate-related risks are considered on
the short-, medium- and long-term time horizons.
Climate risks and opportunities are reported integrally with other business risks to the audit and risk committee, with the ESG committee
overseeing the effectiveness of the system with respect to climate. Specific risks and risk areas were identified through the company’s
risk identification process with support provided by the company’s sustainability manager where required in assessing risk ratings and if
risks should be added to risk registers. The sustainability manager heads up the business-wide climate risk and opportunity identification
process and ensures cross-business risks are identified.
Please read in conjunction with disclosure 3a (refer to
page 55
).
PROGRESS DURING FY2023
A company-wide climate risk and opportunity review was completed in FY2022 and risk categories were added to the group risk register
directly related to climate. This was reviewed in FY2023.
50
PENSANA PLC
2023 ANNUAL REPORT
2.
STRATEGY
2a
Describe the climate-related risks and opportunities the organisation has identified over the short,
medium and long term
DISCLOSURE
Pensana has identified three time horizons for the assessment of climate risk and opportunity, aligned to the business’ current
development plan. They provide a structure against which risk impact and risk appetite can be assessed. The three horizons are:
•
Short term – less than three years, which aligns to our construction and early operations phases;
•
Medium term – three to 10 years, which aligns to our business optimisation period; and
•
Long term – beyond 10 years.
Pensana remains on a journey towards fully embedding tackling climate change within its corporate governance, and more details on this
can be found in the Blueprint on the Pensana website at
https://pensana.co.uk/sustainability/
.
Pensana has identified its core business strategy as a climate-related opportunity. There will be an increase in demand for neodymium
permanent magnets driven by sustainable technologies, leaving a significant shortfall if additional supply is not hastily created. This material
will be required to be produced sustainably to align to the demands of the market, and Pensana has developed its core strategy to
develop a product to address the shortfall in demand from the green technology transition in a sustainable, low-carbon manner. Pensana
has further embedded its commitment by developing its medium-term strategy to move towards embedding recycled feedstock and
embracing circular economy opportunities. Additional opportunities embraced over the short term include exploration of renewable power
and consideration of low-carbon technology and electrification throughout the design process.
The company has identified, as part of the integrated risk process, a number of risk areas which align directly or indirectly to climate
change. Each of these is then assessed on its own merits and each is assessed separately against all three time horizons. As a result of
this process, Pensana has identified the potential of both physical and transitional risks of climate change over a period beyond 10 years
(long term) as a principal risk to the business (refer to
page 34
). While identified as risks, the company did not identify the physical or
transitional risks in the short and medium term as principal to the business.
The company’s risk assessment process assesses all risks on a matrix which considers likelihood and impact. The likelihood process is
adjusted for climate change with an assessment for each risk three times, once against each of the three distinct time horizons (short term,
medium term and long term). The process for assessing impact has impact ratings across each of the following categories: revenue, cost,
safety and health, the environment, regulatory, public stakeholders and socio-economic. The highest of the risk scoring categories is used
to score each risk with the highest risks identified being reviewed by senior management and where required, reported to the audit and risk
committee.
As the process works by assessing individual risks, examples of the specific risks which contributed to the identification of the physical and
transitional climate change risks over 10 years into the future as a principal risk include:
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);
•
Remaining presence of hard-to-abate GHG emissions in operations affecting ‘net zero’, carbon costs and corporate reputation; and
•
Statute or OEM procurement rules are developed which directly restrict trade for material not meeting climate limits and requirements,
thus disqualifying Pensana from trade.
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 the transportation
phase and associated loading, unloading and storage logistics leading to preferred supply routes becoming unusable, thus creating
supply backlogs or the requirement for alternative supply routes and logistics infrastructure; and
•
Water-related physical climate impacts from drought and flooding for operations, power supply and wider community use in Angola
creating supply shortages or operational outages.
One of the major aggravating factors in the assessment of the long-term risk is the lack of reliable data on rare earth production and the
lack of reliable and granular data on climate change in Angola. While Pensana has endeavoured to use the most current and relevant
information available, further information is still needed. Pensana continues to take additional steps to model the risks directly associated
with the projects to develop more robust risk assessments while taking parallel opportunities to educate stakeholders on the importance of
rare earth materials and the need to address data gaps.
PENSANA PLC
2023 ANNUAL REPORT
51
ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT
continued
2a
continued
Describe the climate-related risks and opportunities the organisation has identified over the short,
medium and long term
PROGRESS DURING FY2023
Pensana continues work focused on developing a robust understanding of the scale of the risk to the company from climate change. In
order to gain a more detailed and bespoke understanding of the climate risks to the business, Pensana has in this period:
•
completed an independent (Route2) and 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
(refer to
page
46
); and
•
liaised with potential customers, such as OEMs, to understand the dynamic of their future demand and the risks they foresee in their
supply chains to enable Pensana to be abreast of customer-driven future required mitigation including increased liaison with Polestar as
part of the partnership with the Polestar 0 Project (refer to
page
46
).
Additionally, design work through the optimisation process has continued to identify 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.
Pensana will continue to review opportunities to undertake a localised physical climate risk assessment of the Longonjo site and the
associated logistics.
52
PENSANA PLC
2023
ANNUAL REPORT
2b
Describe the impact of climate-related risks and opportunities on the organisation’s business, strategy
and financial planning
DISCLOSURE
Climate change has had a significant influence on the business. 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 i.e., neodymium permanent magnets. The board
agreement of the Blueprint demonstrates the core importance of ESG to its strategy, including performance related to climate and location
of resources to ensure this can be delivered. Refer to
page 12
on strategy.
Pensana has taken a number of decisions to address the risks and opportunities of climate change. This has included resourcing studies
into financing and/or sourcing renewable power and optimising electrification and reducing water consumption/increasing water recycling
in the business’ planned operations. Further statutory and investor requirements have involved additional cash investment into surveys
related to climate at both proposed projects. This includes stormwater and flood modelling among others.
Pensana’s target to embed deep and meaningful carbon reduction across its value chain, and to be net zero no later than 2040, will
be reached through a robust and thorough business-wide approach. Currently, engineering and procurement teams are reviewing
opportunities to reduce emissions before construction commences. This includes sourcing renewable power, plant electrification
and efficient design for logistics. Going forward, the company will continually review future reduction opportunities including those
in procurement (for example, reagents) and those downstream (such as a circular economy). Driven by customer demand and the
requirement to meet future expected regulations, this carbon reduction strategy has engaged staff and resources, including capital
allocation, across the business involved in product development and marketing, sales, R&D and supply chain and sourcing. In addition
to external resources, the company has established partnerships with other similarly-minded businesses such as the electric vehicle
manufacturer Polestar (refer to
page 46
). For more information on the target and product screening, refer to
pages 46
and
57
.
As a result of customer demand and forthcoming regulations in the areas of carbon and climate, the company has prioritised addressing
the associated risks and reviewing opportunities to access the market. As a result of this, it has committed to developing low-carbon
products and has invested in R&D, staff resources, project capital and operational costs directly associated with addressing these risks.
While climate change models demonstrate a likely increase in price, there remains a risk as to the exact pricing. Pensana has considered
this and it can be seen as a principal risk (refer to
page 34
). In terms of wider financial impacts, Pensana has identified climate change over
10 years as a principal risk, therefore the business will develop its knowledge in this respect on a pathway aligned to that of the company’s
development. The primary short-term driver of activity in this regard, and the key driver of the principal risk rating of long-term climate
change, is to address data gaps in climate knowledge, especially for our Longonjo operations in Angola. Filling these data gaps, alongside
the development of detailed process design and development, will further facilitate a greater understanding of wider financial impacts
including those associated with revenue, procurement spend and future mitigation and adaptation of capital expenditure.
Away from deep and meaningful carbon reduction, the wider transitional risks have been considered in the company’s financial planning.
Directed by the board, the business has ensured continued resource availability through the employment of a senior sustainability expert
who sits on the company’s executive committee and reports directly to the CEO.
The company has opted against a detailed transition plan at this point as the current focus remains, at this point, to ensure initial design
and operational strategy are robust against future scenarios. The business acknowledges that transition plans are important and will switch
focus to transition once it develops an understanding of its operational baseline. Pensana has committed via the Blueprint to embed deep
and meaningful carbon reduction with net zero no later than 2040 into the strategy, which will be overseen by the board.
The approach to physical risk has involved detailed climate forecasts (refer to recommendation 2c). As required by regulation, this has
entailed changes to the design process (for example, stormwater mitigation design) for both sites, resulting in increases in the project
capital expenditure.
PROGRESS DURING FY2023
Pensana completed an independent (Route2) and 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
(refer to
page 46
).
Post period, Pensana, in partnership with the Universities of Leeds and Hull, Route2 and Polestar, has secured funding from Innovate UK’s
Climates fund to investigate further ESG opportunities across the NdFeB magnet value chain, including those arising from the circular
economy (refer to
page 46
).
PENSANA PLC
2023 ANNUAL REPORT
53
ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT
continued
2c
Describe the resilience of the organisation’s strategy, taking into consideration different climate-
related scenarios, including a 2°C or lower scenario
DISCLOSURE
Pensana’s strategy to develop a sustainable supply of rare earths was tested against two of the IEA’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 by 2040, respectively. The sustainable development scenario represents
a well below 2°C scenario and the stated policies scenario is a more conservative benchmark considering actions put in place to achieve
benchmarks globally. Under both scenarios, Pensana’s strategy and business plan to supply sustainable rare earths demonstrated robust
strength in a sector essential to global net zero moving towards 2040, aligning to Pensana’s long-term time horizon (>10 years) and within the
life of the Longonjo and Saltend Projects. Furthermore, while Pensana acknowledges the transitional risk of rare earth demand not increasing
as suggested by the forecasts (which would in turn undermine the strategy of producing a product with a future demand shortfall), it is
satisfied this risk is very low.
The company then reviewed third-party evidence in order to model future pricing of the rare earths market in which it will sell its products. Using
both climate modelling and price forecast modelling (which incorporates climate change mitigation change in demand) for the life of mine,
Pensana has tested its potential future revenue models and ensured that its future market and therefore core revenue stream are well placed to
take advantage of the future increases in demand from green technology. While climate change models demonstrate a likely increase in price,
there remains a risk as to the exact pricing. Pensana has considered this and it can be seen as a principal risk (refer to
page 34
).
As Pensana does not have revenue in excess of a one billion US dollar equivalent, it believes the scenarios analysed are adequate to provide
sufficient assurance of business strategy robustness under multiple scenarios.
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 company to plan for flood risk mitigation at the site. This mandated modelling as part of the
planning application has ensured the Saltend site has been designed to withstand a flood event.
Refer to
page 11
on business strategy.
PROGRESS DURING FY2023
Pensana has stress-tested its core business strategy against climate scenarios developed by the IEA. Models used were reviewed in
FY2023 and the IEA models used in ‘The Role of Critical Minerals in Clean Energy Transitions’ and the report ‘Global rare earths strategic
planning outlook Q1 2023’ published by Wood Mackenzie were considered the best available.
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
54
PENSANA PLC
2023 ANNUAL REPORT
3.
RISK MANAGEMENT
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 (refer to
page 51
).
Pensana works on an integrated approach to climate risk. Colleagues in each business area are expected 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. The company encourages all colleagues to use available data and the ESG team furnishes staff with
relevant data where required. It has already established data collection methods for water and carbon and can therefore use these metrics
to monitor local changes due to climate change and in turn use this in the future to stress test climate models and risk assessments.
Colleagues are expected to consider the impacts of emerging and existing climate legislation and associated impacts on their own work
areas, with additional support, where required, provided by technical expertise from the in-house ESG team and, where relevant, external
consultancies. The ESG team, led by the sustainability manager, leads the process of identifying legislation and associated risks at a group
level reporting this, through existing channels, to the board.
Each climate risk is assessed separately for each of the three time horizons to allow management to understand the risks over the different
time horizons and direct mitigations and capital as suitable. Each risk is assessed by competent management of the relevant business area
and through the ESG team’s climate expertise. Risks are assessed for both consequence and likelihood, with climate risks each assessed
three times, once against each of the climate horizons using an internal framework developed by an independent experienced risk analyst.
This framework is used across the company in all functional areas to ensure that climate risks are treated on a level parallel to other risks,
such as reputation, finance, etc.
For risks assessed as high risk, these are reported to the board and where relevant reported in the company’s principal risk register
(refer to
page 29
).
Please read in conjunction with disclosure 1b (refer to
page 50
).
PROGRESS DURING FY2023
Pensana made comprehensive progress in FY2022 in this area and the focus in FY2023 has been on consolidation and continual review.
For reference, in FY2022, progress included:
•
an amendment to the group risk process to include an adapted rating system for climate risks aligned to the main system but adjusted
to cater for three timescales (<three years; three to 10 years; >10 years); and
•
completion of the maiden transitional risk and opportunity assessment.
PENSANA PLC
2023 ANNUAL REPORT
55
ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT
continued
3b
Describe the organisation’s processes for managing climate-related risks
DISCLOSURE
Climate risk management is integrated into business processes. Risks are overseen by the group audit and risk committee which has
overall responsibility for the company’s risk appetite. Risks are managed throughout the company through an escalation process. All
business functions have direct responsibility for their own risks, with technical support from the specialist sustainability team where
required. Risks that are deemed of sufficient impact or likelihood are escalated to group management (using an internally designed risk
matrix that scores all risks as high, medium or low based on likelihood and impact), including C-suite, and from there, risks are escalated
to the audit and risk committee. The group ESG committee has an independent role to ensure the effectiveness of the climate risk
management process, among ESG risk processes. For group risk management, refer to
page
29
and recommendation 2a.
PROGRESS DURING FY2023
Management instructed and ensured an update of a group-wide climate risk screening including transitional and physical risks.
3c
Describe how processes for identifying, assessing and managing climate-related risks
are integrated into the organisation’s overall risk management
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 FY2023
Management reviewed those risks relevant to climate change as part of the regular risk review process and updated risk and impact
ratings where relevant. As a result, the long-term (>10 years) physical and transitional risks remain principal risks to the business, with a
change of appetite to the risk posed by transitional risks from medium to low.
4.
METRICS AND TARGETS
4a
Disclose the metrics used by the organisation to assess climate-related risks and opportunities
in line with its strategy
DISCLOSURE
Pensana has identified its material ESG issues as part of the Blueprint and has set a series of challenging ambitions. These are broken
into four workstreams, with climate and carbon identified as one (refer to
page 62
), and a series of measures and KPIs set to measure
progress against its strategy (refer to
page 62
).
This includes performance and measurement of company-wide and product-level GHG data (
page 58
) and water (
page 59
).
Pensana has disclosed data for its operations but as it remains pre-operational, the publishing of historical trends is not yet relevant.
Information on the forward-looking modelling and expected pricing can be seen on
page 54
and the disclosure recommendation 2c.
Pensana does not yet link climate indicators and performance to remuneration at any level of the organisation.
PROGRESS DURING FY2023
Pensana has launched the Blueprint for Sustainable Rare Earths highlighting 11 material ESG ambitions and targets, including those it has
deemed material to addressing climate change.
Pensana has ensured the continued evolution of its material non-financial data reporting suite.
56
PENSANA PLC
2023 ANNUAL REPORT
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 58
.
As disclosed in recommendation 2a (
page 51
), Pensana has identified the long-term transitional risk from carbon emissions as part of its
principal risk profile and has identified a low appetite for this risk. Refer to
page 35
for more information on transitional risks specific to carbon.
PROGRESS DURING FY2023
The company has completed a product-level GHG screening based on engineering data, thus allowing it to manage its carbon emissions
going forward into production and allowing the identification of future deep and meaningful carbon emissions reduction opportunities.
Part of Pensana’s Innovate UK-funded research project will address potential future carbon reduction and climate risks and opportunities.
Refer to
page 46
.
4c
Describe the targets used by the organisation to manage climate-related risks and opportunities
and performance against targets
DISCLOSURE
Pensana has committed to developing a sustainable supply chain for rare earths. Through the publication of the Blueprint for Sustainable
Rare Earths, Pensana has committed to a series of strategic ambitions and targets relating to climate. These include:
•
providing a reliable and sustainable source of separated rare earth metals and compounds, essential to global decarbonisation
products;
•
producing rare earth products with the lowest embedded carbon on the market;
•
promoting deep and meaningful carbon reduction across our entire value chain, to be net zero no later than 2040; and
•
integrating leading practice across our business to protect and enhance the natural environment in and around our operations (which
includes water within its scope).
The company’s current focus on working towards targets is a qualitative approach to deep and meaningful carbon reduction, i.e.
engineering and design are being empowered to reduce emissions where financially and technically feasible. For example, this has heavily
included electrification of carbon-intensive plant items. The business currently believes the actions being taken are appropriate for the
stage of development it is currently at. While no quantitative or interim targets were approved and monitored in FY2023, management and
the board will review interim targets and KPIs on a periodic basis and will consider both qualitative and quantitative metrics during reviews.
The business deep and meaningful carbon reduction target has been developed by reviewing the GHG screening exercise completed by
Route2, consideration of net-zero targets across the key supply sectors (wind turbines and electric vehicles) and national-level targets,
especially in Europe. Pensana acknowledges there are knowledge gaps in the work required to achieve this, but has invested in R&D and
in corporate-level partnerships (such as Polestar) to both address these knowledge gaps and work towards identifying solutions.
The company has based its carbon calculations for Scope 1, 2 and 3 on the GHG Protocol on a basis of operational control albeit not yet
including Scope 3 emissions (refer to
page
58
). The company envisions it will use the GHG Protocol’s ‘The Product Life Cycle Accounting
and Reporting Standard’ to monitor the ambition to produce rare earth products with the lowest embedded carbon on the market. This
standard has already been used for baselining as the GHG product screening was completed using this standard. Pensana will continue to
review the effectiveness of this standard to review this ambition.
Refer to
pages 58
and
62
for information on metrics and targets.
PROGRESS DURING FY2023
Pensana launched the Blueprint publishing ambitions and targets the company will work towards as per the disclosure above.
Pensana has continued to develop partnerships and R&D programmes (refer to
page 46
) to further improve the business’ knowledge of
future investment and changes needed to reach a net-zero target across the value chains.
PENSANA PLC
2023 ANNUAL REPORT
57
ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT
continued
ESG DATA FOR THE PERIOD ENDED 30 JUNE 2023
CLIMATE AND CARBON
Data point
Angola
UK*
Total
Methodology
Scope 1 GHG
emissions
1+
110tCO
2
e
0
(FY2022: 0)
110tCO
2
e
(FY2022: 97tCO
2
e)
Calculated using the GHG Protocol and based
on a boundary of operational control.
2
Scope 2 market-
based GHG
emissions
1+
0
(FY2022: 97tCO
2
e)
0
(FY2022: 0)
0
(FY2022: 0)
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 company 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
Regulations, Pensana is required to report an
emissions intensity. However, as it has zero
revenue and zero product output, a relevant
intensity cannot be calculated.
*
Pensana currently has no facilities under operational control in the UK. Only corporate office-based functions of our colleagues and not the offices
themselves are within the operational control boundary in the UK.
+
Indicates data disclosed required under the Streamlined Energy and Carbon Reporting Regulations.
1
A Corporate Accounting and Reporting Standard – Revised Edition
2
Greenhouse gas reporting: conversion factors 2021 –
https://www.gov.uk/government/publications/greenhouse-gas-reporting-conversion-
factors-2021
Where no figure is quoted for a prior reporting period, no disclosure was made.
58
PENSANA PLC
2023 ANNUAL REPORT
ENVIRONMENT AND ECOLOGY
Data point
Angola
UK*
Total
Methodology
Permit or compliance
breaches
(environmental)
0
(FY2022: 0)
0
(FY2022: 0)
0
(FY2022: 0)
Upheld breaches of environmental permits
or government-induced conditions such as
planning consents against the business.
Energy consumption
directly from
electricity
540kWh
(FY2022: 1,300kWh)
0
(FY2022: 0)
540kWh
(FY2022: 1,300kWh)
Calculated using the GHG Protocol and
based on a boundary of operational control;
note the company 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.
The FY2023 value is lower due to change in
use of on-site solar energy for operational
reasons.
Energy consumption
not from electricity
401,600kW
(FY2022:
388,300kWh)
0
(FY2022: 0)
401,600kW
(FY2022: 388,300kWh)
Calculated using the GHG Protocol and
based on a boundary of operational control.
Consists solely of diesel oil, with the energy
factor taken from ‘Carbon emission factors
and calorific values from the UK Greenhouse
Gas Inventory (2021)’
3
.
Total energy
consumption
+
402,100kWh
(FY2022: 389,600kWh)
0
(FY2022: 0)
402,100kWh
(FY2022: 389,600kWh)
Calculated using the GHG Protocol and based
on a boundary of operational control.
Water import – from
groundwater
750m
3
(FY2022: 1,500m
3
)
0
(FY2022: 0)
750m
3
(FY2022: 1,500m
3
)
Water that is being held in, and can be
recovered from, an underground formation
(as defined by the CDP
4
).
Water import – from
fresh surface water
0
(FY2022: 0)
0
(FY2022: 0)
0
(FY2022: 0)
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 the CDP
4
).
No Pensana sites are yet connected to fresh
water supplies.
Water import – from
third party
0
(FY2022: 0)
0
(FY2022: 0)
0
(FY2022: 0)
This includes water provided by municipal
water suppliers, public or private utilities, and
wastewater from any other organisation (as
defined by the CDP
4
).
No Pensana sites are yet connected to
municipal water supplies.
*
Pensana currently has no facilities under operational control in the UK. Only corporate office-based functions of our colleagues and not the offices
themselves are within the operational control boundary in the UK.
+
Indicates data disclosed required under the Streamlined Energy and Carbon Reporting Regulation.
3
Carbon Emission Factors and Calorific Values from the UK Greenhouse Gas Inventory (Ricardo Energy & Environment, 2021) to support the UK
Emissions Trading Scheme
https://www.gov.uk/government/publications/using-uk-greenhouse-gas-inventory-data-in-uk-ets-monitoring-
and-reporting-the-country-specific-factor-list
4
Definitions taken from the CDP Water questionnaire (accessed September 2022): ):
https://www.cdp.net/en/guidance/guidance-for-companies
Where no figure is quoted for a prior reporting period, no disclosure was made.
PENSANA PLC
2023 ANNUAL REPORT
59
ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT
continued
COLLEAGUES AND
COMMUNITY
Data point
Angola
UK*
Total
Methodology
Total recordable cases
5
0
5
(FY2022: 0)
Total recordable cases is the total of
recordable incidents and recordable disease
cases as defined by the ICMM
5
.
This figure includes four cases of malaria and
one recordable injury. Refer to
page 48
.
Total recordable injury frequency rate
(per million hours)
5.15
(FY2022: 0)
Total recordable disease cases are the sum of
all new occupational disease cases that meet
recording criteria during the ICMM
5
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
.
The business recorded only one recordable
injury in the period. Refer to
page 48
.
Reported as a single metric including
employees of Pensana Plc, Pensana Metals
Limited and Ozango Minerais; project
owner’s teams and contractors associated
with the respective projects, excluding those
contracted directly on the Saltend Project.
Total recordable
fatalities
0
(FY2022: 0)
0
(FY2022: 0)
0
(FY2022: 0)
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
5
.
% grievances raised
and resolved between
Ozango and individual
raising grievance
100%
n/a
100%
Grievances were raised through official
grievance mechanism systems for the mine
site and the powerline project resolved at step
1 between Ozango and the individual raising
the grievance.
% grievances
raised referred
to independent
committee and
resolved
0%
n/a
0%
Grievances raised through official grievance
mechanism systems for the mine site and the
powerline project resolved at step 2 through
independent committee stage (refer to
page 48
).
It should be noted that zero grievances
reached this stage as all were resolved at
step 1.
*
Pensana currently has no facilities under operational control in the UK. Only corporate office-based functions of our colleagues and not the offices
themselves are within the operational control boundary in the UK.
5
For the purpose of health and safety reporting, Pensana uses the ICMM’s Health and Safety Performance 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.
60
PENSANA PLC
2023 ANNUAL REPORT
Pilot plant leach extraction circuit
in operation
ETHICAL BUSINESS AND
CORPORATE GOVERNANCE
Data point
Angola
UK*
Total
Methodology
Breaches upheld
relating to ethical
business
0
(FY2022: 0)
0
(FY2022: 0)
0
(FY2022: 0)
Breaches of ethical conduct upheld by the
business after being raised and investigated.
Breaches raised
via internal whistle-
blowing
0
(FY2022: 0)
0
(FY2022: 0)
0
(FY2022: 0)
Queries raised via internal whistle-blowing
were upheld as breaches after investigation.
Gender split on the
board
Male 71%/Female 29%
(FY2022: Male 83%/Female 17%)
% members of the Pensana Plc board broken
down by gender as of 30 June 2023.
Gender split in the
workforce
Male 85%/
Female 15%
(FY2022:
Male 85%/
Female 15%)
Male 68%/
Female 32%
(FY2022:
Male 64%/
Female 36%)
Male 80%/
Female 20%
6
(FY2022:
Male 80%/
Female 20%)
% employees within Pensana Plc and all
subsidiaries under operational control as of
30 June 2023.
*
Pensana currently has no facilities under operational control in the UK. Only corporate office-based functions of our colleagues and not the offices
themselves are within the operational control boundary in the UK.
6
Includes three male employees contracted through Pensana Metals Limited based in Australia.
Where no figure is quoted for a prior reporting period, no disclosure was made.
PENSANA PLC
2023 ANNUAL REPORT
61
ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT
continued
PENSANA BLUEPRINT FOR SUSTAINABLE RARE EARTHS
Pensana has committed to 11 ambitions across the ESG suite
Provide a reliable and sustainable source of
separated rare earth metals and compounds,
essential to global decarbonisation products.
Send zero waste to landfill by 2035.
Produce the rare earth products with the lowest
embedded carbon on the market.
Implement a world-class rare earth recycling
scheme displacing some of the need for mining
and reducing landfilling.
Promote deep and meaningful carbon
reduction across our entire value chain, to be
net zero no later than 2040.
Integrate leading practice across our business
to protect and enhance the natural environment
in and around our operations.
Develop infrastructure and skills so that
communities local to our sites see a direct,
long-term economic benefit from our presence.
I
mplement a zero-harm approach to health and
safety.
Integrate leading practice across our business
to embed strong corporate governance in
everything we do.
Implement a world-class sustainable supply
chain backed by strong digital evidence of
sourcing.
Integrate leading practice across our business
to protect the human rights of our colleagues
and partners.
THE CLIMATE CRISIS
OUR COLLEAGUES, THEIR SAFETY AND
THE COMMUNITIES IN WHICH THEY LIVE
PROTECTING THE NATURAL
ENVIRONMENT
OPERATING AN ETHICAL BUSINESS WITH
STRONG CORPORATE GOVERNANCE
62
PENSANA PLC
2023 ANNUAL REPORT
REMUNERATION
REPORT
STATEMENT OF THE CHAIRMAN OF
THE REMUNERATION 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 6 July 2020.
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 AGM held on 1 December 2022.
A resolution to approve the directors’ remuneration report was
tabled for consideration by shareholders. A total of 86,723,439
votes were cast with 98.88% of shareholders voting in favour
and 0.29% voting against.
During the financial year ended 30 June 2023, the remuneration
committee had earmarked share awards under the long-term
incentive (LTI) plan to continue aligning the interests of the
executive team with the long-term success of the company.
At this stage of the company’s development, the awards under
the LTI plan are necessarily largely related to the financing of
the Longonjo and Saltend Projects, construction completion
parameters and first production.
However, due to the company’s delay in securing main
financing during FY2023 and the resultant impact on the
timing of project delivery, the contemplated share awards
for FY2023 were deemed inappropriate. As a result, no
share-based awards were granted for FY2023. Similarly, the
FY2022 awards lapsed at year-end for the KPIs involving
project delivery, financing and production and the share-based
charges recognised in prior periods subsequently reversed
during FY2023. The delay in securing main financing has
also resulted in the FY2022 bonus provisions not being paid
and consequently the related bonus charges were reversed
in FY2023.
Pensana is committed to providing competitive and
performance-based remuneration packages to our directors
and while the lapsed share incentive plans are a disappointing
development, the remuneration committee recognises the
significant progress that has been made to date on both
the Saltend and Longonjo Projects. Consequently, while the
remuneration committee believes that the overall framework
of the LTI plan remains entirely appropriate, it is the interplay
between the KPIs of the short-term incentive (STI) and LTI plans
that requires further consideration. This process is underway,
ensuring as always that any awards align with our company’s
strategic objectives and updated project milestones.
Our intention is to ensure that our directors and key
management are appropriately incentivised to contribute to the
company’s success. We will keep shareholders informed of
any developments relating to the incentive plans in subsequent
reports.
We recognise the importance of fostering a culture of
accountability and alignment with shareholders’ interests, and
we remain dedicated to reviewing our remuneration policies
and incentive structures to ensure they are effective and
reflective of our company’s performance and future prospects,
while aligning to market comparators and trends.
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.
Shareholders will be asked to approve the annual remuneration
report as an ordinary resolution at the AGM in December 2023.
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
30 October 2023
PENSANA PLC
2023 ANNUAL REPORT
63
REMUNERATION REPORT
continued
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.
No increases were awarded to executive directors during FY2023.
With effect from 1 July 2023, executive director base annual salaries, reflected in British pounds to align
to their contract terms, were as follows:
•
Mr Paul Atherley
– £288,750 (2022: £288,750);
•
Mr Timothy George – £315,000 (2022: £315,000); and
•
Mr Robert Kaplan
– £220,000 (2022: £220,000).
Benefits
Provision of an appropriate
level of benefits for the relevant
role and local market.
Executive directors do not currently receive any benefits.
Variable remuneration
Annual bonus
Linked to key financial,
operational, health, safety
and the environment, socio-
economic development and
strategic goals of the company,
which reflect critical factors of
success.
Maximum opportunity for FY2023 of 150% of salary.
The committee reviewed the annual bonus targets for FY2023 to ensure that they are aligned to our
strategic priorities and completion of main financing. The bonus scorecard for FY2023 was linked to:
•
completion of main financing;
•
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.
No bonuses were awarded to executives during the year.
LTI plan
Aligned with shareholders and
motivating the delivery of long-
term objectives.
No share awards were issued to executives during the year. Awards are currently reviewed under six
performance conditions: absolute total shareholder return (TSR) (market-based), lost time injury frequency
rate (LTIFR), full financing of the Longonjo Project, full financing of the Saltend Project, construction
completion of the 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
to operate.
Pensana’s remuneration framework is focused on simplicity, consisting of fixed
remuneration, an annual bonus and a single LTI plan.
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.
64
PENSANA PLC
2023 ANNUAL REPORT
ANNUAL REMUNERATION REPORT
THE FOLLOWING INFORMATION HAS BEEN AUDITED:
Single total figure of remuneration for the year ended 30 June 2023
Salaries
and fees
US$
Total
fixed
US$
Bonuses
1
US$
Benefits
US$
Options
and rights
2
US$
Total
variable
US$
Total
2023
US$
Non-executive directors
S Sharpe
4
159,693
159,693
–
–
–
–
159,693
J Beeton
63,275
63,275
–
–
–
–
63,275
L Northover
63,275
63,275
–
–
–
–
63,275
A Saxby
3
55,893
55,893
–
–
–
–
55,893
Executive directors
T George
330,975
330,975
–
–
224,384
224,384
555,359
P Atherley
348,010
348,010
–
–
–
–
348,010
R Kaplan
265,151
265,151
–
–
179,507
179,507
444,658
Key management
R Smith
262,500
262,500
–
–
–
–
262,500
¹
No bonuses were paid for FY2022 and the related bonus charges were reversed in FY2023. No bonuses were provided or paid in FY2023.
2
The options and rights represent the legacy shares that vested during the year. No performance shares relating to FY2022 and FY2023 vested during
the year.
3
Appointed on 17 August 2022.
4
At the request of the board, Mr Sharpe assumed significant additional duties for the period January 2023 to May 2023 relating to the proposed
strategic investment by a third party. As compensation for these duties, he received US$48,209 in addition to the director fee of US$56,420.
Single total figure of remuneration for the year ended 30 June 2022
Salaries
and fees
US$
Total
fixed
US$
Bonuses
US$
Benefits
US$
Options
and rights
1
US$
Total
variable
US$
Total
2022
US$
Non-executive directors
S Sharpe
2
50,183
50,183
–
–
–
–
50,183
J Beeton
66,232
66,232
–
–
–
–
66,232
S Bates
3
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
4
364,273
364,273
236,778
–
–
236,778
601,051
R Kaplan
5
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
The options and rights represent the legacy shares that vested during the year. No performance shares vested during the year.
²
Appointed on 29 September 2021.
3
Resigned on 29 September 2021.
4
Served as executive chairman since 1 July 2021.
5
Appointed as an executive director on 31 March 2022.
PENSANA PLC
2023 ANNUAL REPORT
65
The charts above have been compiled using the following assumptions:
Fixed remuneration
Salary as at 1 July 2023
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 FY2024, the committee has determined that the base salaries (per annum) for the executive directors should be as set out below.
Base salary from
1 July 2022
£
Base salary from
1 July 2023
£
Executive directors
T George
315,000
315,000
P Atherley
1
288,750
288,750
R Kaplan
2
220,000
220,000
1
Served as executive chairman, effective 1 July 2021.
2
Appointed as an executive director on 31 March 2022.
Maximum
Mid
Minimum
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
Maximum
Mid
Minimum
Maximum
Mid
Minimum
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 Timothy George
Mr Robert Kaplan
Mr Paul Atherley
ANNUAL REMUNERATION REPORT
continued
66
PENSANA PLC
2023 ANNUAL REPORT
SHARE-BASED PAYMENTS
Performance rights
2023
During the prior year, no performance rights were issued to directors and key management personnel.
2022
During the prior year, no performance rights were issued to directors and key management personnel.
Share-based options
2023
During the year, no options were issued to directors and key management personnel.
2022
During the prior year, no options were issued to directors and key management personnel.
Share-based option holdings of key management personnel as at 30 June 2023
Name
Balance
as at
1 July 2022
Number
Granted
Number
Vested
in shares
Number
1
Balance
as at
30 June 2023
(beneficial
interest)
Number
T George
833,333
–
(416,667)
416,666
R Kaplan
666,667
–
(333,333)
333,334
1
Vested, but not issued as at 30 June 2023.
Share-based option 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
PENSANA PLC
2023 ANNUAL REPORT
67
ANNUAL REMUNERATION REPORT
continued
LTI PLAN SHARE AWARDS
2023
No new awards were granted during 2023.
The company is actively investigating the feasibility of implementing a new share incentive plan that aligns with our company’s
strategic objectives and new project milestones aligned to the staged development of the projects.
2022
The company established an employee incentive plan and share awards were issued to executive directors and key management
personnel during FY2022 for the first time as follows.
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.
Due to the delay in securing the main financing on the Saltend and Longonjo Projects, certain share incentive performance conditions
relating to the FY2022 LTI share plan awards have not been met or are unlikely to be met. These specifically related to 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) and first production at the RESF (12.5% of award). As a result of the lapsing of these awards, the directors will not receive
the shares or related benefits outlined in the original plan agreements. The share-based charges recognised in prior periods relating to
these awards were reversed during FY2023.
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 2024
1,595,833
1
The FY2021 allocation was added to the FY2022 allocation due to the expanded scope around the FEED study and the associated timing delays.
As the KPIs could not be finalised, management agreed to defer the allotment and have it included in the FY2022 share award. The value of these
shares is estimated at US$516,395.
68
PENSANA PLC
2023 ANNUAL REPORT
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 2023 were as
follows. The company does not have a minimum requirement or guideline for director shareholdings.
Name
Balance
as at
1 July 2022
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 2023
Number
P Atherley
13,427,898
2
–
–
–
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
Vested as at 31 December 2022 but unissued as at 30 June 2023 and therefore excluded from the total balance. Legacy performance rights
reclassified during FY2021. Refer to the share-based option holding table on
page 67
.
2
These include historical share purchases prior to the group’s listing on the LSE (9,069,861), share purchases on the LSE during FY2021 (500,000)
and vested and issued share options of 3,858,037.
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 of
performance
rights
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
Vested as at 31 December 2021 but unissued as at 30 June 2022 and therefore excluded from the total balance. Legacy performance rights
reclassified during FY2021. Refer to the share-based option holding table on
page 67
.
Had the shares which have vested been issued as at 30 June 2022, the balance for Mr T George and Mr R Kaplan would have been 1,666,667 and
1,333,333, respectively.
Payments to past directors
No payments were made to past directors in the year ended 30 June 2023 (2022: US$nil).
Payments for loss of office
No payments for loss of office were made in the year ended 30 June 2023 (2022: US$nil).
PENSANA PLC
2023 ANNUAL REPORT
69
THE FOLLOWING SECTION IS UNAUDITED:
Relative importance of spend on pay
The following table sets out the percentage change in payments to shareholders and overall expenditure on pay across the group:
2023
US$
2022
US$
Change
%
Payments to shareholders
–
–
n/a
Group employment costs
1,701,642
5,439,626
(69)
Pay ratios
During FY2023 and FY2022, 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-figure remuneration for the year ended 30 June 2023
Year
Salaries
and fees
US$
Bonuses
1
US$
Other
US$
Benefits
US$
Options
and rights
US$
Total
US$
% change
year-on-
year
Non-executive
directors
S Sharpe
2
2023
159,693
–
–
–
–
159,693
218
2022
50,183
–
–
–
–
50,183
n/a
S Bates
3
2023
–
–
–
–
–
–
(100)
2022
16,558
–
–
–
–
16,558
(66)
L Northover
2023
63,275
–
–
–
–
63,275
(4)
2022
66,232
–
–
–
–
66,232
46
J Beeton
2023
63,275
–
–
–
–
63,275
(4)
2022
66,232
–
–
–
–
66,232
196
A Saxby
2023
55,893
–
–
–
–
55,893
n/a
2022
–
–
–
–
–
–
n/a
Executive directors
P Atherley
2023
348,010
–
–
–
–
348,010
(42)
2022
364,273
236,778
–
–
–
601,051
n/a
T George
2023
330,975
–
–
–
224,384
555,359
(53)
2022
364,531
258,303
–
–
558,634
1,181,468
(53)
R Kaplan
2023
265,151
–
–
–
179,507
444,658
106
2022
62,920
40,898
–
–
111,726
215,544
n/a
1
Bonus payments are subject to additional conditionality.
2
At the request of the board, Mr Sharpe assumed significant additional duties for the period January 2023 to May 2023 relating to the proposed
strategic investment by a third party. In compensation for these duties, he received US$48,209 in addition to the director fee of US$56,420.
3
Ms Bates resigned on 29 September 2021.
ANNUAL REMUNERATION REPORT
continued
(Indexed, July 2017 =
70
PENSANA PLC
2023 ANNUAL REPORT
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. The directors believe this
comparison is appropriate as it compares the company to an index comprising small cap stocks below the US$150 million free
float-adjusted market cap.
0
200
400
600
800
1,000
1,200
1,400
3 September 2023
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 2023.
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. Due to 98.88% votes in favour of the policy, the
policy is deemed satisfactory from a shareholder perspective.
Refer to
page 44
of the corporate governance report for details of the total number of votes cast, votes for and against, as well as
votes withheld during the AGM for each resolution passed.
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
100)
PENSANA PLC
2023 ANNUAL REPORT
71
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:
•
Letter of appointment as executive director/chairman,
agreement 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 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 Timothy 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).
ANNUAL REMUNERATION REPORT
continued
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 – Finance director
(effective 31 March 2022)
(previously chief financial officer, 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.
Humber bridge, Hull, UK
72
PENSANA PLC
2023 ANNUAL REPORT
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
30 June 2023 (2022: 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 2023 AGM and
will thereafter come into immediate effect following the AGM.
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 and the 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.
PENSANA PLC
2023 ANNUAL REPORT
73
Having established the 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 the market.
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 (for example, 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
74
PENSANA PLC
2023 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
30 October 2023
PENSANA PLC
2023 ANNUAL REPORT
75
ANNUAL
FINANCIAL
STATEMENTS
Directors’ responsibility statement
78
Directors’ report
79
Audit and risk committee report
83
Independent auditor’s report
85
Consolidated statement of comprehensive income
94
Consolidated statement of financial position
95
Consolidated statement of changes in equity
96
Consolidated statement of cash flows
98
Notes to the financial statements
99
Company statement of financial position
130
Company statement of cash flows
131
Company statement of changes in equity
132
Notes to the company financial statements
134
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 consolidated financial statements
and have elected to prepare the company financial statements
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
TO DISCLOSURE 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 30 October 2023 and
are signed on its behalf by:
Paul Atherley
Executive chairman
DIRECTORS’
RESPONSIBILITY
STATEMENT
78
PENSANA PLC
2023 ANNUAL REPORT
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 2023.
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 6
to
8
.
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 22
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.
PRICE RISK, CREDIT RISK, LIQUIDITY RISK
AND CASH FLOW RISK
The principal risks and uncertainties section on
pages
29
to
35
sets out the company’s exposure and mitigation relating
to price risk, credit risk, liquidity risk and cash flow risk.
POLITICAL CONTRIBUTIONS AND CHARITABLE
DONATIONS
During the current and previous years, the group did not make
any political contributions and charitable donations.
RESEARCH AND DEVELOPMENT (R&D)
During the year, Pensana continued R&D efforts in relation to
the optimisation of production of high-purity rare earth products
from Longonjo and Saltend.
BRANCHES OUTSIDE OF THE UK
The company has no branches outside the UK.
ACQUISITION OF OWN SHARES
The company did not acquire any of its own shares during
the financial year ended 30 June 2023.
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 Longonjo, 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/alloy production.
BOARD APPOINTMENTS
Ms Alison Saxby was appointed as an independent non-
executive director with effect from 17 August 2022. 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.
BOARD DIVERSITY DISCLOSURE
1
As of 30 June 2023, Pensana assessed its board diversity
in accordance with the requirements outlined in the UK
corporate governance code. The following are the results of our
evaluation:
Gender diversity
At the chosen reference date, Pensana’s board of directors
consisted of seven individuals, of which two were women.
This represents 29% of the total board composition, under
the minimum recommended requirement of at least 40% of
individuals on the board being women. Pensana has therefore
not met this target.
1
Human resources records were used as the method of collecting data.
PENSANA PLC
2023 ANNUAL REPORT
79
DIRECTORS’ REPORT
continued
Senior positions held by women
As of the chosen reference date, Pensana’s board of directors
includes the following senior positions:
Executive chairman: Mr Paul Atherley
Chief executive officer: Mr Timothy George
Finance director: Mr Robert Kaplan
Independent non-executive director:
Baroness Lindsey Northover
Independent non-executive director: Dr Jeremy Beeton
Independent non-executive director: Ms Alison Saxby
Independent non-executive director: Mr Steven Sharpe
Of these positions, two are held by women, indicating that
Pensana has met the requirement of having at least one of the
specified senior positions on its board held by a woman.
Minority ethnic background
As of the chosen reference date, Pensana’s board of directors
includes no individuals from minority ethnic backgrounds, and
has therefore not met the requirement of having at least one
person from a minority ethnic background on the board.
Non-met targets and reasons
Pensana is committed to promoting diversity and inclusion at
all levels of the organisation. However, we regret to report that
we have not met the diversity targets in this reporting period as
stated above.
With Pensana focusing on establishing an independent supply
chain of rare earths, the processes with regard to adherence
to diversity targets, recruitment and succession planning with
the board of directors are in the process of being formalised.
We recognise the importance of addressing these gaps and are
actively implementing measures to improve board diversity. As
part of the envisaged independent board evaluation planned for
FY2024, the board composition and diversity will be evaluated
and an action plan will be put together to address board
diversity including recruitment strategies.
Pensana remains committed to achieving greater diversity and
inclusivity within our board and will provide regular updates on
our progress in future reports. By making these disclosures,
Pensana demonstrates its commitment to transparency and
accountability regarding board diversity, as required by UK
company disclosure requirements.
POST BALANCE SHEET EVENTS
On 27 June 2023 Fundo Soberano de Angola (FSDEA)
provided a US15miilion loan facility (subject to due diligence
and the finalisation of investment terms) to the group as
part of a broader US$80 million investment to facilitate the
development of the Longonjo Project. The loan facility was
formally executed on 7 August 2023.
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
(ESG) report on
page 45
for further details on the company’s
environmental initiatives and reporting, as well as relevant
statements regarding emissions.
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.
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
21 February 2020. A resolution for BDO LLP’s reappointment
will be proposed at the forthcoming AGM.
STATEMENT OF DISCLOSURE OF
INFORMATION TO THE 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.
80
PENSANA PLC
2023 ANNUAL REPORT
SHARES UNDER OPTION OR ISSUED
ON EXERCISE OF OPTIONS
As at the date of this report, there are 750,000 unissued shares
or interests under option (30 June 2022: 1,500,000).
INDEMNIFICATION OF DIRECTORS
AND OFFICERS
During the financial year, the company paid a premium of
US$21,968 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’ COMMITTEES
The following sets out the composition of the directors’
committees.
Audit and risk committee
P Atherley
1
L Northover
S Sharpe
A Saxby
2
1
Resigned from the audit and risk committee on 9 December 2022.
2
Appointed on 17 August 2022.
Remuneration committee
J Beeton
L Northover
S Sharpe
A Saxby
1
1
Appointed on 17 August 2022.
Nomination committee
J Beeton
L Northover
S Sharpe
A Saxby
1
1
Appointed on 17 August 2022.
ESG committee
T George
L Northover
S Sharpe
1
A Saxby
2
1
Resigned from the ESG committee on 9 December 2022.
2
Appointed on 17 August 2022.
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
committee
Nomination
committee
ESG
committee
Number
eligible
to attend
Attended
Number
eligible
to attend
Attended
Number
eligible
to attend
Attended
Number
eligible
to attend
Attended
Number
eligible
to attend
Attended
P Atherley
1
10
10
1
1
–
–
–
–
–
–
T George
10
10
–
–
–
–
–
–
3
3
J Beeton
10
10
–
–
3
3
3
3
–
–
L Northover
10
10
3
3
3
3
3
3
3
3
S Sharpe
2
10
10
3
3
3
3
3
3
2
2
R Kaplan
10
10
–
–
–
–
–
–
–
–
A Saxby
3
9
9
2
2
3
3
3
3
2
2
1
Resigned from the audit and risk committee on 9 December 2022.
2
Resigned from the ESG committee on 9 December 2022.
3
Appointed on 17 August 2022.
PENSANA PLC
2023 ANNUAL REPORT
81
DIRECTORS’ REPORT
continued
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
14,444,116
–
–
T George
1,250,000
708,333
1,250,000
R Kaplan
1,000,000
487,500
1,000,000
J Beeton
–
–
–
L Northover
–
–
–
A Saxby
–
–
–
S Sharpe
–
–
–
1
FY2022 long-term incentive (LTI) share awards.
Refer to the share awards issued table and to the shareholdings table on
page
68
for more details.
Approval by and signature on behalf of the board:
Paul Atherley
Executive chairman
30 October 2023
82
PENSANA PLC
2023 ANNUAL REPORT
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 during
the potential strategic equity investor due diligence process
through December 2022 to March 2023, finalisation of front-
end engineering and design and the subsequent re-engineered
staged development approach at Longonjo, in preparation for
early-stage project development and the need for financing.
The two most recent equity raises in January 2023 and April/
May 2023, coupled with the US$15 million loan facility from
FSDEA (ring-fenced to Longonjo) ensured the ability to progress
the re-engineered Longonjo Project workstreams, continuation
of on-site early works and the conclusion of key design
workstreams at Saltend.
The directors have prepared a cash flow forecast for the period
ending 31 March 2025.
On the Saltend Project, the UK Department for Business and
Trade (UK DBT) has offered Pensana a conditional grant of up
to £4,000,000 towards the funding which is anticipated to be
received in Q4 FY2024 and forms part of the forecast.
In Angola, the group has secured a US$15 million loan facility
secured over the indirect shareholding in the group’s Angolan
subsidiary which matures in February 2024 from FSDEA which is
available to meet operating cash flow requirements and progress
the Longonjo Project in the near term.
The forecast indicates that funding is required to settle existing
project-related contractor balances in the UK and to also provide
working capital. Continuing support of these contractors will be
required until the group has secured this required funding and
then remain as the group subsequently moves towards main
financing in the normal course of project development.
The board notes that, in addition to the funding requirement for
the UK operations, additional funding will also be required during
the period to maintain liquidity in the event that the grant funding
is delayed or the conditions are not met. Additionally, the group
would need to refinance the FSDEA facility in the event the main
financing is not complete by the maturity date of the FSDEA
loan. Given the support provided by the Angolan government for
the Longonjo Project, the directors anticipate such a refinancing
being made available to the group.
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 cash flow forecasts and strategic
plans covering among others offtake, financing, strategic
collaborations and exploration prepared by management,
including the assumptions made. Having considered the cash
flow 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.
IMPAIRMENT ASSESSMENT OF LONGONJO
AND SALTEND
Judgement was exercised in assessing the extent to which
impairment existed as at 30 June 2023 in respect of the
Longonjo and Saltend Projects. In forming this assessment,
internal and external factors were evaluated, including those that
applied last year. Management determined that no impairment
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.
Based on management’s assessment, we are satisfied that no
impairment was required. 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 assessment, required under International
Financial Reporting Standards (IFRS), were incorporated.
AUDIT AND RISK
COMMITTEE REPORT
PENSANA PLC
2023 ANNUAL REPORT
83
AUDIT AND RISK COMMITTEE REPORT
continued
for the financial year ended 30 June 2023
AUDIT TENDERING AND AUDIT EFFECTIVENESS
BDO was first appointed as the external auditor of the group in
2020, when a formal tender was conducted to appoint the new
external auditor. Mr Ryan Ferguson has been the BDO lead
partner since 2020. Another audit tender must be concluded
on or before the 2025 audit and the audit and risk committee
will continue to review the appropriate timing of such tender.
In accordance with the guidance set out in the Financial
Reporting Council’s ‘Practice Aid for audit committees’, the
assessment of the external audit has not been a separate
compliance exercise, or an annual once-off exercise, but rather
it has formed an integral part of the audit and risk committee’s
activities. This has allowed the audit and risk committee to form
its own view on audit quality and on the effectiveness of the
external audit process, based on the evidence it has obtained
during the year.
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 three directors: Mr Steven Sharpe (chairman)
(senior independent non-executive director), Baroness Lindsay
Northover (senior independent non-executive director) and
Ms Alison Saxby.
The qualifications of the audit and risk committee members are
summarised as follows:
•
Mr Steven Sharpe – BA(Hons);
•
Baroness Lindsay Northover – D(Phil); and
•
Ms Alison Saxby – BEng(Hons).
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 auditor and
agree the appointment when required;
•
undertake a formal assessment of the auditor’s
independence each year which includes:
–
pre-approval and 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
of the audit 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, finance director and company
secretary. Additional formal meetings are held as necessary.
Audit and risk committee
Audit and risk committee
Number
Number
eligible
eligible
to attend
to attend
Attended
Attended
P Atherley
P Atherley
1
1
1
1
L Northover
3
3
S Sharpe
3
3
A Saxby
2
2
2
1
Resigned from the audit and risk committee on 9 December 2022.
2
Appointed on 17 August 2022.
During the past year, the committee:
•
met with the external auditor and discussed their reports;
•
approved the publication of the annual and half-year financial
results;
•
considered the going concern position 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 the auditor;
•
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
30 October 2023
84
PENSANA PLC
2023 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 as
at 30 June 2023 and of the Group’s loss for the year then
ended;
•
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 2023 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 the Companies Act 2006.
BASIS FOR OPINION
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities 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 committee.
Independence
Following the recommendation of the Audit and Risk
Committee, we were appointed by The Directors on
21 February 2020 to audit the financial statements for the
year ended 30 June 2020 and subsequent financial periods.
The period of total uninterrupted engagement including
retenders and reappointments is 4 years, covering the years
30 June 2020 to 30 June 2023. 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
Parent Company.
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. These financial statements do
not include any adjustments that may be necessary if the group
was not 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.
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 Board’s paper and associated cash flow
forecasts in respect of the Directors’ assessment of going
concern and challenging the key underlying judgments and
assumptions. In doing so we compared forecast operating
and capital expenditures to recent actuals and approved
budgets and evaluated the extent to which forecast
cash receipts are committed. We evaluated the licence
obligations and commitments to confirm that they had been
appropriately included in the forecast;
•
reviewing the FSDEA loan agreement and confirming the
terms of the agreement are appropriately reflected in the
forecasts;
INDEPENDENT
AUDITOR’S REPORT
to the members of Pensana Plc
PENSANA PLC
2023 ANNUAL REPORT
85
•
obtaining an analysis of current cash balances and creditor
positions and agreeing a sample to underlying bank
statements and accounts payable ledgers, while confirming
the extent to which restrictions exist on the use of liquid
funds across different group entities. Given the dependence
on continued support by suppliers, we obtained written
representations by internal legal counsel and the Board
confirming that no legal proceedings had been initiated
against the Group and obtained correspondence with key
suppliers to search for contradictory evidence;
•
obtaining the Board’s written assessment regarding the
status of planned fundraising and evaluating the Board’s
analysis of requirements to be completed and assessment
of risks and uncertainties regarding a successful fundraise;
•
making inquiries of the Directors regarding potential funding
options related to the wider Longonjo and Saltend projects,
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;
•
evaluating sensitivity analysis and stress tests on the
forecasts;
•
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. This included challenging the basis of delays
to date in securing the project funding. We formed our
own assessment of risks and uncertainties based on our
understanding of the business and the mining sector; and
•
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.
INDEPENDENT AUDITOR’S REPORT
continued
to the members of Pensana Plc
OVERVIEW
Coverage
85% (2022: 98%) of Group loss before tax
94% (2022: 89%) of Group total assets
Key audit matters
(Elevated Risks)
2023
2022
1.
Material uncertainty related to going concern
Yes
Yes
2.
Carrying value of the Longonjo development asset
Yes
Yes
3.
Carrying value of the Saltend Project
Yes
Yes
Materiality
Group financial statements as a whole
US$720k (2022:US$430k) based on 1% (2022: 1%) of total assets.
86
PENSANA PLC
2023 ANNUAL 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 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 the Longonjo development
project and the Saltend development project.
Our Group audit scope focused on the Group’s significant
components which comprised the Angolan operating
subsidiary, the Australian operating subsidiary and the UK
parent company. The significant components were subject to
full scope audits conducted by the group engagement team
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,
with specific procedures performed on any significant balances
impacting the Group results.
CLIMATE CHANGE
Our work on the assessment of potential impacts of climate-
related risks on the Company’s operations and financial
statements included:
•
Making enquiries of Management to understand the actions
they have taken to identify climate-related risks and their
potential impacts on the financial statements and adequately
disclose climate-related risks within the annual report;
•
Performing a qualitative risk assessment which took into
consideration the sector in which the Group operates and
how climate change affects this particular sector;
•
Reviewing climate-related disclosures in the Annual Report
for consistency with disclosures made in the financial
statements;
•
Completing a TCFD disclosure review in respect of
governance, strategy, risk management, metrics and targets
and comparing this to FCA reporting guidance for listed
entities; and
•
Reviewing minutes of Board and Audit & Risk Committee
meetings and other papers related to climate change
and performing a risk assessment as to how the Group’s
commitments may impact the Group’s financial statements
and our audit.
We challenged the extent to which climate-related
considerations, including the expected cash flows from the
initiatives and commitments have been reflected, where
appropriate, in Management’s going concern assessment.
We also assessed the consistency of Managements disclosures
included as Environmental, social and governance report on
page 45
with the financial statements and with our knowledge
obtained from the audit.
Based on our risk assessment procedures, we did not identify
there to be any Key Audit Matters materially impacted by
climate-related risks.
PENSANA PLC
2023 ANNUAL REPORT
87
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. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
In addition to the matter described in the “material uncertainty related to going concern” section above, we have determined the
matters below to be key audit matters to be communicated in our report.
Key audit matter
How the scope of our audit addressed the key audit matter
Carrying value of the
Longonjo development
asset.
See note 3 and
note 4 for details
of the accounting
policy and critical
accounting estimate
and judgments relating
to this key audit matter
At 30 June 2023, the Group
held a development asset on the
consolidated statement of financial
position as detailed in
note 12
,
totalling US$41.1 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 2023 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 licences to confirm the Group held legal title to
the Longonjo Project and evaluated legal advice obtained by
the Group;
•
We considered publicly available information and other
information obtained during the course of our work and assessed
whether there were any other potential indicators of impairment
that had not been identified by Management;
•
Reviewed the license commitments and the entity’s compliance
with these commitments;
•
Compared the Group’s market capitalisation to its net asset value
to confirm a premium existed;
•
Reviewed reports in respect of 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 and reviewed Board approved budgets, made inquiries
of Management and inspected minutes of Board meetings to
confirm that further development expenditure was planned for
the assets;
•
Made inquiries regarding the unsuccessful strategic investment by
a third party in the year to evaluate the background and confirm
that it did not impact on the underlying feasibility of the project;
•
Obtained and reviewed the Life of Mine plan to evaluate the
level of headroom demonstrated by the financial model for the
Longonjo Project to confirm it represented a significant premium
to the carrying value. We performed sensitivity analysis for key
assumptions, including pricing, to identify 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; and
•
Assessed the appropriateness of the disclosures included in
the financial statements with regards to the requirements of the
relevant accounting standards.
Key observations
We found Management’s conclusion that there are no impairment
indicators at 30 June 2023 relating to the development asset to be
acceptable and appropriately disclosed.
INDEPENDENT AUDITOR’S REPORT
continued
to the members of Pensana Plc
88
PENSANA PLC
2023 ANNUAL REPORT
Carrying value of the
Saltend Project.
See note 3 and
note 4 for details
of the accounting
policy and critical
accounting estimate
and judgments relating
to this key audit matter
At 30 June 2023, the Group held
an asset under construction on the
statement of financial position as
detailed in
note 12
, totalling $4.3m
and intangibles of $13.6m relating to
the Saltend Project.
As detailed in
note 4
, there are
judgements and inherent uncertainties
around the recoverability of assets
under construction and intangibles.
Management and the Board are
required to evaluate the assets for
potential impairment. Management
are required to include appropriate
disclosures in the financial statements,
specifically in relation to key estimates
and judgements.
Given the materiality of the asset
under construction and intangible
assets in the context of the Group’s
statement of financial position and the
judgements involved by management
in making the assessment of
evaluating whether potential
impairment exists, we considered this
to be a focus area for our audit and a
key audit matter.
We evaluated Management’s impairment assessment against the
requirements of IAS 36 Impairment of Assets and performed our own
assessment to determine whether impairment was required. In doing
so, we:
•
Reviewed the planning permission to confirm the Group held
permission to develop the Saltend site and evaluated the status of
the Agreement for Lease in relation to the site;
•
Considered publicly available information and other information
obtained during the course of our work and assessed whether
relevant information had been considered in the impairment
assessment;
•
Obtained and reviewed Management’s strategic financial model
and evaluated the headroom indicated by the forecasts. We also
performed sensitivity analysis for key assumptions, including
pricing;
•
Obtained Board approved budgets, made inquiries of
Management and inspected 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
•
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
at 30 June 2023 relating to the asset under construction and
intangibles to be acceptable and appropriately disclosed.
Key audit matter
How the scope of our audit addressed the key audit matter
PENSANA PLC
2023 ANNUAL REPORT
89
INDEPENDENT AUDITOR’S REPORT
continued
to the members of Pensana Plc
OUR APPLICATION OF MATERIALITY
We apply the concept of materiality both in planning, performing our audit, and in evaluating the effect of misstatements. We consider
materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable
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.
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
2023
US$
2022
US$
2023
US$
2022
US$
Materiality
US$720,000
US$430,000
US$410,000
US$320,000
Basis for determining materiality
1% of total
assets
1% of total
assets
1.5% of total
assets
(excluding inter-
company)
0.5% of total
assets
Rationale for the benchmark applied
Materiality has been based on total assets as the Group (excluding inter-
company) and the Parent Company are in the development phase of their
operations and are not generating revenue or making profits. We consider
total assets to be one of the principal considerations for users of the financial
statements. Parent company materiality was revised from 0.5% of total
assets to 1.5% of total assets (excluding inter-company) given the increased
development activity in the UK component while ensuring the materiality
remained below Group materiality.
Performance materiality
US$470,000
US$280,000
US$267,000
US$208,000
Basis for determining performance
materiality
65% (2022: 65%) of materiality
considering factors such as the
expected total value of known and
likely misstatements (based on
past experience), our knowledge
of the Group’s internal controls and
Management’s attitude towards
proposed adjustments.
65% (2022: 65%) of materiality
considering factors such as the
expected total value of known and
likely misstatements (based on past
experience), our knowledge of the
Parent Company’s internal controls
and Management’s attitude towards
proposed adjustments.
90
PENSANA PLC
2023 ANNUAL REPORT
Component materiality
For the purposes of our Group audit opinion, we set materiality for each significant component of the Group, based on a percentage
of between 25% and 60% (2022: 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 $180,000 to $430,000 (2022: $132,000 to $240,000).
In the audit of each component, we further applied performance materiality levels of 65% (2022: 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 $14,600 (2022:
$7,200). We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds.
OTHER INFORMATION
The directors are responsible for the other information. The other information comprises the information included in the 2023 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.
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 or the 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.
PENSANA PLC
2023 ANNUAL REPORT
91
INDEPENDENT AUDITOR’S REPORT
continued
to the members of Pensana Plc
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
of users 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:
Non-compliance with laws and regulations
Based on:
•
Our understanding of the Group and the industry in which
it operates;
•
Inquiries of Management and those charged with
governance, including the Audit and Risk Committee;
•
Obtaining and understanding of the Group’s policies and
procedures regarding compliance with laws and regulations.
We considered the significant laws and regulations to be
UK-adopted international accounting standards, the Listing
Rules of the Financial Conduct Authority, the Companies Act
2006, tax legislation in the UK, Australia and Angola, mining
legislation, environmental legislation and the QCA corporate
governance code.
The Group is also subject to laws and regulations where the
consequence of non-compliance could have a material effect
on the amount or disclosures in the financial statements, for
example through the imposition of fines or litigations. We
identified such laws and regulations to be health and safety
legislation, employment laws and the UK Bribery Act 2010.
Our procedures in respect of the above included:
•
Reviewing minutes of meetings of those charged with
governance and holding discussions with Management
regarding their knowledge of any known or suspected
instances of fraud;
•
Involvement of tax specialists to support our planning phase
risk assessment and involvement of tax specialists in relation
to R&D credits;
•
Reviewing correspondence with regulatory and tax
authorities, where applicable, for any instances of non-
compliance with laws and regulations; and
•
Enquiring with management and those charged with
governance if there are aware of any actual or suspected
non-compliance with laws and regulations.
Fraud
We assessed the susceptibility of the financial statements to
material misstatement, including fraud. Our risk assessment
procedures included:
•
Reviewing minutes of meetings of those charged with
governance and holding discussions with Management
regarding their knowledge of any known or suspected
instances of fraud;
•
Obtaining an understanding of the Group’s internal controls
and how they detect, prevent, and mitigate risks related to
fraud;
•
Discussing amongst the engagement team how and where
fraud might occur in the financial statements; and
•
Involving our specialist forensics audit support team to
support the engagement team in the assessment of
potential fraud risks.
Based on our risk assessment, we considered the areas most
susceptible to fraud to be management override of controls
via posting inappropriate journal entries and management bias
regarding key accounting estimates and judgments.
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Our procedures in respect of the above included:
•
Testing the appropriateness of journal entries made
throughout the year which met specific risk-based criteria to
supporting documentation;
•
Evaluating cash calls provided to the Angolan operating
subsidiary for unusual characteristics;
•
Selecting certain immaterial accounts for tests of detail to
introduce unpredictability in to our audit;
•
Assessing the judgements made by Management when
making key accounting estimates and judgements, and
challenging Management on the appropriateness of these
estimates and judgements, specifically around key audit
matters as discussed above;
•
Performing detailed reviews of the Group’s year end
adjusting entries and investigating any that appear unusual
as to their nature or amount to supporting documentation;
and
•
Performing a detailed review of the Group’s consolidation
entries and investigating any that appear unusual with
regards to their nature or amount to corroborative evidence.
We also communicated relevant identified laws and regulations
and potential fraud risks to all engagement team members
who were all deemed to have appropriate competence and
capabilities and remained alert to any indications of fraud or
non-compliance with laws and regulations throughout the audit.
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.
A further description of our responsibilities is available on
the Financial 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
30 October 2023
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
PENSANA PLC
2023 ANNUAL REPORT
93
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
for the financial year ended 30 June 2023
Note
30 June 2023
US$
Restated
1
30 June 2022
US$
Administration expenses
7
(5,375,576 )
(8,787,109 )
Impairment of financial assets
10
(308,260 )
(669,470 )
Foreign currency exchange gain/(loss)
(2,255,471 )
Loss from operations
(4,302,795 )
(11,712,050 )
Finance income
Finance costs
(28 )
Loss before income tax
(4,302,823 )
(11,712,022 )
Income tax
8
Total loss for the year
(4,302,823 )
(11,712,022 )
Other comprehensive loss
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
2
(886,297 )
Total comprehensive loss for the year
(5,189,120 )
(11,446,441 )
Net loss for the period is attributable to:
Owners of Pensana Plc
(4,302,823 )
(11,712,022 )
Total comprehensive loss is attributable to:
Owners of Pensana Plc
(5,189,120 )
(11,446,441 )
Loss per share attributable to owners of Pensana Plc
Basic (cents per share)
16
(1.69 )
(5.11 )
Diluted (cents per share)
16
(1.69 )
(5.11 )
1
Refer to
note 5
for details of the restatement of prior year results.
2
Exchange differences arising on translation of foreign operations will be reclassified to profit or loss if specific future conditions are met.
Notes to the financial statements are included on
pages 99
to
129
.
94
PENSANA PLC
2023 ANNUAL REPORT
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
as at 30 June 2023
Note
30 June 2023
US$
Restated
1
30 June 2022
US$
1 July 2021
US$
ASSETS
Non-current assets
Property, plant and equipment
12
Intangible assets
11
Total non-current assets
Current assets
Cash and cash equivalents
9
Trade and other receivables
10
Total current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
13
Total current liabilities
Total liabilities
Net assets
Equity
Issued capital
14
Share premium
15
Reserves
15
Accumulated losses
15
(60,944,496 )
(56,641,673 )
(49,841,241 )
Total equity
1
Refer to
note 5
for details of the restatement of prior year results.
The notes on
pages 99
to
129
form part of these financial statements.
behalf by:
Steven Sharpe
PENSANA PLC
2023 ANNUAL REPORT
95
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
for the financial year ended 30 June 2023
Fully paid
ordinary
shares
US$
Share
premium
US$
Accumulated
losses
US$
Balance as at 1 July 2021
(49,841,241 )
Loss for the year (as restated)
1
(11,712,022 )
Other comprehensive income (as restated)
1
Total comprehensive loss for the year (as restated)
1
(11,712,022 )
Vesting and lapses of historical performance rights and options
Issue of shares (
note 14
)
Capital raising costs
(410,887 )
Issue of shares – conversion of performance rights (
note 14
)
Share-based payments
Balance as at 30 June 2022
(56,641,673 )
Balance as at 1 July 2022
(56,641,673 )
Loss for the year
(4,302,823 )
Other comprehensive income
Total comprehensive loss for the year
(4,302,823 )
Issue of shares (
note 14
)
Capital raising costs
(361,614 )
Share-based payments
Balance as at 30 June 2023
(60,944,496 )
1
Refer to
note 5
for details of the restatement of prior year results.
Notes to the financial statements are included on
pages 99
to
129
.
96
PENSANA PLC
2023 ANNUAL REPORT
Merger
reserve
US$
Foreign
currency
reserve
US$
Share-based
payments
reserve
US$
Equity
reserve
US$
Total
US$
(500,000 )
(11,712,022 )
(11,446,441 )
(4,911,590 )
(410,887 )
(83,713 )
(500,000 )
(500,000 )
(4,302,823 )
(886,297 )
(886,297 )
(886,297 )
(5,189,120 )
(361,614 )
(272,965 )
(272,965 )
(198,038 )
(500,000 )
PENSANA PLC
2023 ANNUAL REPORT
97
CONSOLIDATED STATEMENT
OF CASH FLOWS
for the financial year ended 30 June 2023
Note
30 June 2023
US$
30 June 2022
US$
Cash flows from operating activities
Operating cash flows
21
(5,753,905 )
(7,948,231 )
Net cash used in operating activities
(5,753,905 )
(7,948,231 )
Cash flows from investing activities
Interest received
R&D tax credit
Payments for property, plant and equipment and intangibles
21
(13,990,532 )
(20,846,747 )
Net cash used in investing activities
(11,578,855 )
(20,846,719 )
Cash flows from financing activities
Interest paid
Proceeds from issues of equity securities
Share issue costs
(361,614 )
(410,887 )
Net cash provided by financing activities
Net increase/(decrease) in cash and cash equivalents
(12,425,633 )
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on the balance of cash held in foreign currencies
(1,431,796 )
Cash and cash equivalents at the end of the year
9
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 10
.
98
PENSANA PLC
2023 ANNUAL REPORT
NOTES TO THE
FINANCIAL STATEMENTS
for the financial year ended 30 June 2023
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 2023 in United States dollars (US$). Pensana Plc public
the world’s first sustainable magnet metal supply chain. Initial feedstock will be shipped as a clean, high-purity mixed rare earth
In early 2020, Pensana Metals Limited redomiciled the group to the UK pursuant to a scheme of arrangement in which Pensana
Metals Limited became a wholly owned subsidiary of Pensana Plc. Prior to the transaction, the company was incorporated on
13 September 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 group
structure. 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
2.
NEW ACCOUNTING STANDARDS AND INTERPRETATIONS
From 1 July 2022, the group has adopted the following standards and interpretations, mandatory for annual periods beginning
on or after 1 January 2022:
Description
Effective date
Improvements to IFRS
Annual Improvements to IFRS: 2018 – 2020 Cycle
1 January 2022
Amendments to IFRS 3
Conceptual Framework for Financial Reporting
(Amendments to IFRS 3)
1 January 2022
Amendments to IAS 37
Amendments to IAS 37
Provisions, Contingent Liabilities
and Contingent Assets
(Amendment – Onerous
Contracts – Cost of Fulfilling a Contract)
1 January 2022
Amendments to IAS 16
Amendments to IAS 16
Property, Plant and Equipment
(Amendment – Proceeds before Intended Use)
continued
Accounting standards and interpretations issued but not yet effective
The group has elected not to early adopt the following revised and amended standards:
Description
Effective date
Amendment to IAS 1 and IFRS
Practice Statement 2
Disclosure of Accounting Policies –
Amendments to
IAS 1 and IFRS Practice Statement 2
1 January 2023
Amendment to IAS 8
IAS 8
Accounting Policies, Changes in Accounting
Estimates and Errors
(Amendment – Definition of
Accounting Estimates)
1 January 2023
Amendment to IAS 12
IAS 12
Income Taxes
(Amendment – Deferred Tax
related to Assets and Liabilities arising from a Single
Transaction)
1 January 2023
IFRS 17
1
IFRS 17
Insurance Contracts
1 January 2023
Amendments to IAS 12
1
International Tax Reform — Pillar Two Model Rules –
Amendments to IAS 12
1 January 2023 (subject to
UK endorsement)
Amendments to IAS 1
1
Non-current liabilities with covenants –
Amendments to IAS 1
1 January 2024
Amendments to IFRS 16
1
Lease liability in sale and leaseback –
Amendments to IFRS 16
1
Not yet endorsed by the European Union.
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.
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 September 2019
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 152,973,315
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 Pensana
Metals Limited comprised 50,000,000 shares 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 152,973,315 CHESS 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 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 were made 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
Basis of measurement
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.
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
The group financial statements and parent company
financial statements have been prepared on a going
concern basis with the directors of the opinion that the
group and parent company will be able to meet their
obligations as and when they fall due.
As at 30 June 2023, the group has a net asset position
of US$56,760,601 (2022: US$38,378,989), net current
liabilities of US$2,654,366 (2022: US$1,683,7871 net
current assets), had incurred a net loss after income tax of
US$4,302,823 (2022: US$11,712,0221) and experienced
cumulative net cash outflows from operating and investing
activities of US$17,332,760 (2022: US$28,794,950).
Cash and cash equivalents totalled US$9,695,491
(2022: US$2,930,162) at the year-end.
The directors have prepared a cash flow forecast for the
period ending 31 March 2025.
On the Saltend Project, the UK DBT has offered Pensana
a conditional grant of up to £4,000,000 towards the
funding which is anticipated to be received in Q4 FY2024
and forms part of the forecast.
In Angola, the group has secured a US$15 million loan
facility secured over the indirect shareholding in the group’s
Angolan subsidiary which matures in February 2024 from
FSDEA which is available to meet operating cash flow
requirements and progress the Longonjo Project in the
near term. The parent company is well advanced in its
main financing workstreams on the Longonjo Project and
is aiming to complete the main financing in Q1 2024 which
would enable settlement of the FSDEA facility and provide
funds for the wider project development.
The forecast indicates that funding is required to settle
existing project-related contractor balances in the UK
and to also provide working capital. Continuing support
of these contractors will be required until the group has
secured this required funding and then remain as the
group subsequently moves towards main financing in the
normal course of project development.
The board notes that, in addition to the funding
requirement for the UK operations, additional funding will
also be required during the period to maintain liquidity
in the event that the grant funding is delayed, or the
conditions are not met. Additionally, the group would
need to refinance the FSDEA facility in the event the main
financing is not complete by the maturity date of the
FSDEA loan. Given the support provided by the Angolan
Government for the Longonjo Project, the directors
anticipate such a refinancing being made available to
the group.
In assessing the going concern basis of preparation, the
directors have also considered supply chain challenges,
inflation, the availability of funding and its impact on the
progression of the Longonjo Project in Angola and the
Saltend Project in the UK. Similarly, the directors have also
considered the impact of the ongoing Russia-Ukraine and
Israel-Gaza wars as it relates to costs and the potential
volatility in the debt and equity markets.
The directors have continued to actively engage with
institutional investors and financing institutions in the
UK, Europe and Africa 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 parent company and group to continue as a going
concern is dependent on securing such additional funding.
As noted earlier, on the Saltend Project, the UK DBT has
offered Pensana a conditional grant of up to £4,000,000
towards the funding; engagement continues at the highest
level within the UK government and the UK Infrastructure
Bank and bond financiers, which is coupled with strategic
engagement with offtake partners. Despite the current
turbulence in the world’s financial markets, the directors
have received positive interest from several key sectors
across the rare earth supply chain and are confident of
unlocking the Saltend main financing by mid-2024 in
collaboration with these key industry players.
Despite the ongoing engagements, the directors note that
the required funding outlined above has not been secured
at the date of approval of these financial statements and
the availability of such funding on terms that would be
acceptable is not guaranteed. Similarly, the grant from
the UK DBT remains conditional and is dependent on
progression of the main financing, while settlement of the
FSDEA loan is similarly dependent on the main financing.
These circumstances indicate the existence of a material
uncertainty which may cast significant doubt about the
group’s and parent company’s ability to continue as
a going concern and therefore the group and parent
company may be unable to realise their assets and
discharge their liabilities in the normal course of business.
The group and parent company financial statements do
not include the adjustments that would result if the group
The consolidated financial information comprises the
financial statements of Pensana Plc and its subsidiaries
as at 30 June 2023.
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 20
. 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. 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.
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.
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
In the company’s financial statements, investments in
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 Pensana
Metals Limited comprised 50,000,000 shares 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 152,973,315
CHESS 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
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 occurred 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.
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
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.
The presentational currency of the group and parent
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).
The financial results and position of foreign subsidiaries
whose functional currency is different from the group’s
presentation currency are 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
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
Initial recognition and measurement
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 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 on the principal
amount outstanding. This assessment is referred to as
the solely payments of principal and interest test and is
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
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 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
The group recognises an allowance for expected credit
losses (ECLs) for other receivables, as well as for inter-
company receivables at company level. 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 effective interest rate.
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).
PENSANA PLC
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
Initial recognition and measurement
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
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 and company
become 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,
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.
R&D tax credits
1
R&D tax credits are recognised when reliable estimates
of the future benefits have been made and when it is
reasonably certain that the tax credit will be received.
R&D tax credits related to capital expenditure are
deferred on the balance sheet and netted off against the
development asset associated with the grant deferral.
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 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.
1
Refer to
note 5
for details of the restatement of prior year results.
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
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,
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.
accumulated depreciation on buildings.
depreciated once commissioning of the assets occurs.
Depreciation will be charged over the useful life of
Depreciation is calculated on a straight-line basis over the
estimated useful life of the assets as follows:
Asset
Depreciation rate
Motor vehicles
25%
Office equipment
33.33%
Computer equipment
33.33%
Plant and machinery
10%
Buildings
2%
The assets’ residual values, useful lives and amortisation
methods are reviewed, and adjusted if appropriate, at
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.
Recognition and measurement
Intangible assets are recognised at cost and capitalised
when the costs can be measured reliably and it is
probable that there will be future economic benefits.
Intangible assets that are deemed to have indefinite lives
and intangible assets that are not yet ready for use are
not amortised; they are reviewed annually for impairment
or more frequently if events or changes in circumstances
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
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. 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
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,
Other 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
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
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
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.
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 will
be available against which the temporary difference
can be utilised.
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
tax (VAT)
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
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
to have been issued for no consideration in relation to
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.
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 development 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 2023, 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
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
scope of IFRS 16.
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.
Right-of-use asset
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. 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.
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
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
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.
Significant accounting judgements
Impairment assessment of development assets,
assets under construction and Saltend intangibles
Impairment indicator assessment of development
assets (
notes 11
and
12
), as well as impairment
assessment of assets under construction and Saltend
intangibles (
notes 11
and
12
).
The ultimate recovery of the value of the group’s
development assets, assets under construction and
Saltend intangibles as at 30 June 2023 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 or the sale
thereof.
Judgement was exercised in assessing the extent to
which impairment existed as at 30 June 2023 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 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 Saltend Projects.
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 Saltend Projects, together with
the implied economic value of the assets, and concluded
that no impairment provisions were necessary.
Recoverability of equity receivable (note 10)
Management have taken legal advice from their external
counsel and have issued a letter of demand to the
debtor. The company’s broker has maintained full security
over the shares originally issued for trading and an ECL
provision of US$308,260 has been recognised in the year
(30 June 2022: US$669,470). To date, and in an attempt
to avoid the costs associated with litigation, the company
has attempted to recover the amount due through a
settlement and payment plan that was agreed with the
debtor. This payment plan has, however, been reneged
upon by the debtor. In the first instance, the company
will now seek to exercise all the rights at its disposal in
order to recover the outstanding debt due by the debtor,
reserving all rights in that regard.
Refer to
note 10
for further details.
Recognition of R&D tax credits (note 5)
R&D tax credits are recognised when reliable estimates
of the future benefits have been made and when it is
reasonably certain that the tax credit will be received.
Management have considered the nature of the tax
claims, the limited history of successful tax claims and
receipt thereof. Management also do not recognise any
tax credits before submissions have been made to the
relevant tax authority.
Significant accounting estimates and
assumptions
Share-based payment transactions (note 24)
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.
Climate change
Management has considered the impact of climate
change in preparing these consolidated financial
statements. These considerations, which are integral to
the group’s strategy and operations, were considered in
the following areas:
•
The judgements involved in the evaluation of
indicators of impairment for the group’s development
assets and assets under construction (
note 4
);
•
The judgements used in the evaluation of the group’s
exploration and evaluation assets for impairment
(
note 4
); and
•
The evaluation of the residual values and economic
useful lives of property, plant, and equipment
(
note 12
).
The effects of climate-related strategic decisions are
incorporated into management’s judgements and
estimates, as it relates to the future cash flow projections
underpinning the recoverable amounts of mining
interests, when the decisions have been approved by
the board, and the implementation of these is likely to
occur. The considerations with respect to climate change
did not have a material impact on the key accounting
judgements and estimates noted above in the current
year, however, the emphasis on climate-related strategic
decisions, such as a focus on decarbonisation, further
electrification and sourcing of renewable power may have
5.
RESTATEMENT OF PRIOR YEAR FINANCIAL STATEMENTS
The company undertook a review of the classification of costs capitalised in respect of the Saltend Project during the year.
Previously, such costs were wholly classified as property, plant and equipment. Based on evaluation of the underlying costs,
it has been determined that US$5.2 million (30 June 2022) of the costs should have been classified as intangible assets
given their nature. As such, the comparative periods have been restated to reclassify such amounts from property, plant and
equipment to intangible assets. The restatement had no impact on net assets or loss for the periods. Refer to
notes 11
and
12
.
In the year ended 30 June 2022, the R&D tax credit related to capital expenditure incurred was recorded in the consolidated
income statement within income tax. The associated costs to which the R&D tax credit related were capitalised in line with the
group’s policy on development assets and the credits are receivable in cash in the absence of corporate tax liabilities such that
they are judged to represent a form of government grant. Based on IFRS requirements, the R&D tax credit should therefore,
in line with government grant accounting, have been deferred on the balance sheet and netted off against the development
asset to be released to the income statement as the asset is depreciated in future periods. As such, the total loss for the year
was understated by US$1,329,553 and the capitalised costs relating to the development at Saltend (previously recognised in
property, plant and equipment) were overstated by US$1,256,296. The results for the year ended 30 June 2022 have been
restated to reflect the grant deferral in development assets. No other previous financial years are materially impacted by this
30 June 2022
(Previously
reported)
US$
Restatement 1
US$
Restatement 2
US$
30 June 2022
(Restated)
US$
2022
Income tax (credit)
(1,329,553)
1,329,553
–
–
Property, plant and equipment
37,770,292
(1,256,296)
(5,236,226)
31,277,770
Intangibles
181,206
–
5,236,226
5,417,432
Other comprehensive loss
Foreign currency translation
192,324
73,257
–
265,581
Total comprehensive loss for the year
(10,190,145)
(1,256,296)
–
(11,446,441)
Foreign currency reserve
(615,002)
(73,257)
–
(688,259)
Basic loss per share
(4.53)
(0.58)
–
(5.11)
Diluted loss per share
(4.53)
(0.58)
–
(5.11)
OPERATING SEGMENTS
Description of 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 2023 and at 30 June 2022. 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$
2023
Non-current assets – opening balance
1
30,228,932
6,466,270
–
36,695,202
Non-current assets – additions
11,243,252
11,476,514
–
22,719,766
Non-current assets – closing balance
41,472,184
17,942,784
–
59,414,968
Current and non-current liabilities
1,830,614
12,298,921
735,559
14,865,091
Cash and cash equivalents
30,594
8,883,904
780,993
9,695,491
Administration expenses
(1,795,341)
(3,495,167)
(85,068)
(5,375,576)
Operating profit/(loss)
(689,624)
(3,178,374)
(434,797)
(4,302,795)
Depreciation
51,607
6,417
133
58,157
Profit/(loss) before tax
(689,624)
(3,178,403)
(434,796)
(4,302,823)
Profit/(loss) for the year
(689,624)
(3,178,403)
(434,796)
(4,302,823)
2022
Non-current assets – opening balance
18,473,893
162,330
3,585
18,639,808
Non-current assets – additions
1
11,755,039
6,303,940
(3,585)
18,055,394
Non-current assets – closing balance
1
30,228,932
6,466,270
–
36,695,202
Current and non-current liabilities
151,250
2,027,511
1,467,625
3,646,386
Cash and cash equivalents
296,966
2,550,436
82,760
2,930,162
Administration expenses
(6,777,309)
(2,088,553)
78,753
(8,787,109)
Operating loss
1
(2,380,118)
(7,520,376)
(1,811,556)
(11,712,050)
Depreciation
17,103
3,911
3,494
24,508
Income tax credit
1
–
–
–
–
Loss before tax
(2,380,118)
(7,520,376)
(1,811,528)
(11,712,022)
Loss for the year
(2,380,118)
(7,520,376)
(1,811,528)
(11,712,022)
1
Refer to
note 5
for details of the restatement of prior year results.
Non-current assets consist mainly of development assets and assets under construction. Additions and depreciation of
non-current assets are disclosed in
note 12
OTHER EXPENSES
2023
US$
2022
US$
Administration expenses
General administration costs
1,953,918
1,796,217
Audit fees
193,854
200,481
Consultant fees
480,133
699,680
Travel expenses
388,593
318,283
Legal fees
451,380
210,670
Operating lease rental expenses
Lease payments (short-life leases)
147,899
117,307
Depreciation on non-current assets
Property, plant and equipment
58,157
24,508
Employee benefits
1,2
Performance rights and options granted to directors, officers and employees
(272,965)
876,657
Directors’ fees and employee benefits
1,794,683
4,409,611
Social security costs
179,924
133,695
Total administration expenses
5,375,576
1
Key management personnel remuneration, disclosed in
note 23
, includes amounts in employee benefits disclosed above. Information in
respect of the highest-paid director is provided in the remuneration report.
2
.
The foreign currency exchange gain of US$1,381,041 (2022: US$2,255,471 loss) comprises realised foreign exchange
movements on retranslation of monetary balances and unrealised foreign exchange movements on inter-company loans which
INCOME TAXES
CONSOLIDATED
2023
US$
Restated
1
2022
US$
Current taxation
Current tax charge/(credit)
–
–
No liability to corporation tax arose in the ordinary activities for the year ended 30 June 2023 or 30 June 2022.
The tax assessed for the year utilised the standard rate of tax in the UK of 25% (2022: 19%). The change is tax rates is the
result of the increased rate enacted.
The differences are explained as follows:
2023
US$
Restated
1
2022
US$
Loss from continuing operations before tax
(4,302,823)
(11,712,022)
Loss on continuing activities multiplied by the rate of corporation tax in the UK
of 25% (2022: 19%)
(1,075,706)
(2,225,284)
Tax effects of:
Different tax rates in overseas jurisdictions
(1,704)
(260,970)
Permanent differences
(39,083)
285,949
Deferred tax assets not recognised
1,116,493
2,200,305
Total tax credit
1
–
1
Refer to
note 5
for details of the restatement of prior year results.
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 25% 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.
Longonjo benefits from a six-year tax holiday in Angola from the commencement of production until the exoneration period
expires.
the future profitability of the individual entities within the group, the timing of which is considered uncertain. The unrecognised
potential deferred tax asset created during the year was US$1,116,493 (30 June 2022: US$2,189,458). The total unrecognised
potential deferred tax asset in respect of losses carried forward is US$15,561,711 (30 June 2022: US$14,296,507). These
CASH AND CASH EQUIVALENTS
2023
US$
2022
US$
Cash at bank and on hand
9,695,491
2,930,162
9,695,491
2023
US$
2022
US$
Trade receivables
34,756
43,425
Prepayments
184,744
328,794
R&D tax receivables
1,037,336
1,256,295
VAT receivables
934,641
130,478
Other receivables
323,757
641,019
2,515,234
2,400,011
Opening balance
2,400,011
5,370,007
Movement in trade receivables, other receivables and prepayments
483,991
1,288,652
Funds received
(60,508)
(3,589,178)
Provision for impairment
(308,260)
(669,470)
Closing balance
2,515,234
Of the other receivables as at 30 June 2023, US$1,239,059 (gross) (30 June 2022: US$1,299,567) relates to payment pending
as part of the equity raise completed on 25 June 2021. The net amount included in the closing balance as at 30 June 2023
was US$280,893 (30 June 2022: US$630,097).
Management have taken legal advice from their external counsel and have issued a letter of demand to the debtor. The
company’s broker has maintained full security over the shares originally issued for trading and an ECL provision of US$308,260
Saltend intangible assets
CONSOLIDATED
2023
US$
Restated
1
2022
US$
Carrying value
Balance at the beginning of the year
5,236,226
–
Additions
9,452,299
5,236,226
R&D government grant deferred
(1,037,336)
–
Adjustment on currency translation
(74,120)
–
Balance at the end of the year
13,577,069
5,236,226
1
Refer to
note 5
for details of the restatement of prior year results.
These costs were capitalised in respect of the Saltend Project and have been classified as intangible assets given their nature,
being consulting fees relating to process design and testwork. Previously, such costs were wholly classified as property, plant
and equipment. Refer to
note 5
for details of the restatement of prior year results.
CONSOLIDATED
2023
US$
2022
US$
Carrying value
Balance at the beginning of the year
181,206
132,040
Additions
62,043
49,166
Balance at the end of the year
243,249
181,206
Total intangibles
13,820,318
5,417,432
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
US$
Plant and
equipment
US$
Restated
1
Develop-
ment
asset
US$
Restated
1
Assets under
construc-
tion
2
US$
Motor
vehicles
US$
Office
equipment
US$
Computer
equipment
US$
Restated
1
Total
US$
2023
Cost
Balance as at
1 July 2022
28,310
17,675
29,969,013
1,217,581
83,384
7,325
21,281
31,344,569
Adjustment
on currency
translation
–
–
(599,055)
(20,244)
–
–
(602)
(619,901)
R&D government
grant deferred
–
–
(1,155,382)
–
–
–
–
(1,155,382)
Additions
–
15,346
12,914,832
3,075,630
130,855
–
13,413
16,150,076
Disposals
–
–
–
–
–
–
–
–
Balance as at
30 June 2023
28,310
33,021
41,129,408
4,272,967
214,239
7,325
34,092
45,719,362
Depreciation
Balance as at
1 July 2022
3,828
5,344
–
–
48,923
2,590
6,114
66,799
Charge for
the year
2,632
5,015
–
–
39,615
1,038
9,857
58,157
Adjustment
on currency
translation
–
–
–
–
–
–
(244)
(244)
Disposals
–
–
–
–
–
–
–
–
Balance as at
30 June 2023
6,460
10,359
–
–
88,538
3,628
15,727
124,712
Net book value
As at
30 June 2022
24,482
12,331
29,969,013
1,217,581
34,461
4,735
15,167
31,277,770
As at
30 June 2023
21,849
22,662
41,129,408
4,272,967
125,701
3,697
18,366
1
Refer to
note 5
for details of the restatement of prior year results.
2
Assets under construction relate to Saltend.
US$
Plant and
equipment
US$
Restated
1
Develop-
ment
asset
US$
Restated
1
Assets under
construc-
tion
2
US$
Motor
vehicles
US$
Office
equipment
US$
Computer
equipment
US$
Restated
1
Total
US$
2022
Cost
Balance as at
1 July 2021
6,199
10,204
18,400,076
65,728
54,507
6,080
30,611
18,573,405
R&D government
grant deferred
–
–
(1,256,295)
–
–
–
–
(1,256,295)
Additions
22,111
7,471
12,825,232
1,151,853
28,877
1,245
14,017
14,050,806
Disposals
–
–
–
–
–
–
(23,347)
(23,347)
Balance as at
30 June 2022
28,310
17,675
29,969,013
1,217,581
83,384
7,325
21,281
31,344,569
Depreciation
Balance as at
1 July 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
9,090
24,508
Disposals
–
–
–
–
–
–
(23,346)
(23,346)
Balance as at
30 June 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
29,969,013
1,217,581
34,461
4,735
15,167
1
Refer to
note 5
for details of the restatement of prior year results.
2
2023
US$
2022
US$
Trade and other payables
1
13,003,570
1,526,310
Accrued expenses
1,811,853
2,060,866
Statutory liabilities
49,668
59,210
14,865,091
1
CONSOLIDATED
2023
Number
2023
US$
2022
Number
2022
US$
Fully paid ordinary shares
Balance at the beginning of the period
235,599,539
295,425
216,145,822
279,398
Share placement
12,331,334
14,993
–
–
Shares issued conversion of performance rights
–
–
7,108,037
1,015
Share placement
7,250,000
8,626
12,345,680
15,012
Share placement
15,000,000
18,927
–
–
Share placement
15,000,000
18,927
–
–
Balance at the end of the financial year
285,180,873
356,898
235,599,539
295,425
COMPANY
Fully paid ordinary shares
Balance at the beginning of the period/incorporation
235,599,539
295,425
216,145,822
279,398
Share placement
12,331,334
14,993
–
–
Shares issued conversion of performance rights
–
–
7,108,037
1,015
Share placement
7,250,000
8,626
12,345,680
15,012
Share placement
15,000,000
18,927
–
–
Share placement
15,000,000
18,927
–
–
Balance at the end of the financial year
285,180,873
356,898
235,599,539
295,425
Placements during 2023
On 5 August 2022, the company issued 12,331,334 fully paid ordinary shares to the FSDEA at a price of £0.67 per share and
raised US$10 million.
On 5 January 2023, the company issued 7,250,000 fully paid ordinary shares to M&G Investment Management at a price of
£0.44 per share and raised US$3.8 million.
On 9 May 2023, the company issued 15,000,000 fully paid ordinary shares to M&G Investment Management at a price of
£0.28 per share and raised US$5.2 million.
On 9 May 2023, the company issued 15,000,000 fully paid ordinary shares to FSDEA at a price of £0.28 per share and raised
US$5.2 million. The issue was done in two tranches, where the balance of the shares was issued on 27 June 2023.
Placements during 2022
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.
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.
The company may, by ordinary resolution, declare a dividend to be paid to the
members, according to their respective rights and interest in the profits, and may
fix the time for payment of such dividend, but no dividend shall exceed the amount
recommended by the board.
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 financial
statements 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 24
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$500,000 from non-
controlling interests in the 2019 financial year. Ozango holds the title to the
Longonjo NdPr Project.
Accumulated losses
Cumulative net losses recognised in the statement of comprehensive income.
Merger reserve
The company issued shares at par value as part of a group reorganisation to
acquire 100% of the share capital of Pensana Metals. The difference arising in the
group at the date of the group reorganisation is recorded in the non-distributable
merger reserve as part of the transaction. The company-level merger reserve
represents the difference between the investment and nominal value of shares
2023
cents per
share
Restated
1
2022
cents per
share
Basic loss per share
From continuing operations
1.69
5.11
Total basic loss per share
1.69
5.11
Diluted loss per share
From continuing operations
1.69
5.11
Total diluted loss per share
1.69
5.11
1
Refer to
note 5
for details of the restatement of prior year results.
Basic loss per share
The net loss and weighted average number of ordinary shares used in the calculation of basic loss per share are as follows:
2023
US$
Restated
1
2022
US$
Net loss
(4,302,823)
(11,712,022)
Losses used in the calculation of basic loss per share from continuing operations
(4,302,823)
(11,712,022)
Losses used in the calculation of diluted loss per share attributable to
ordinary shareholders
(4,302,823)
(11,712,022)
1
Refer to
note 5
for details of the restatement of prior year results.
2023
Number
2022
Number
Weighted average number of ordinary shares for the purpose of calculating basic loss
per share
254,074,694
229,019,699
Weighted average number of ordinary shares for the purpose of calculating diluted loss
per share
254,074,694
229,019,699
The 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. Diluted loss per share equals basic loss per share as no anti-dilutive factors exist.
The consolidated entity has certain obligations to perform exploration work and expend minimum amounts of money on mineral
exploration tenements.
No provision is required 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 Parkway Business Centre Limited in the UK, as well as
with Workspace in South Africa. 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 not 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
COMPANY
2023
US$
2022
US$
2023
US$
2022
US$
Operating lease expenditure
Less than one year
1
79,722
87,575
74,515
81,762
79,722
87,575
74,515
81,762
1
The short-term lease commitments that are less than one year have been reviewed under IFRS 16, and the short-term lease exemption has
Exploration commitments
Commitments for payments under exploration permits and mineral leases in existence at the reporting date but not yet
incurred, are as follows:
CONSOLIDATED
2023
US$
2022
US$
Exploration and evaluation expenditure
No longer than one year
5,718
11,915
Longer than one year and not longer than five years
–
15,756
Longer than five years
–
–
5,718
27,671
Capital commitments
Capital expenditure contracted for at the reporting date but not yet incurred was as follows:
CONSOLIDATED
COMPANY
2023
US$
2022
US$
2023
US$
2022
US$
Capital expenditure
3,784,108
3,298,647
–
–
The directors are not aware of any other contingent liabilities or contingent assets that are likely to have a material effect on the
OWNERSHIP INTEREST
Name of entity
Country of
incorporation
Principal
activity
2023
%
3
2022
%
3
Parent entity
Pensana Plc
2
United Kingdom
Controlled entities
Saltend Magnet Metals Limited
United Kingdom
Manufacturing
100
100
Pensana Metals Limited
Australia
Mining
100
100
Carlton Resources Proprietary Limited
Australia
Holding company
100
100
Carlton Miyabi Tanzania Limited
Tanzania
Holding company
100
100
Carlton Kitongo Tanzania Limited
Tanzania
Holding company
100
100
Bright Star Tanzania Limited
Tanzania
Holding company
100
100
Rift Valley Resources (Africa) Proprietary
Limited
Australia
Holding company
100
100
Rift Valley Resources Tanzania Limited
Tanzania
Holding company
100
100
Tasman Goldfields Australia Operations
Proprietary Limited
Australia
Holding company
100
100
Sable Minerals Proprietary Limited
Australia
Holding company
100
100
Sable Min Unipessoal Lda (previously Sable
Minerals GmbH)
Portugal
Holding company
100
100
SBLRTHS Unipessoal Lda (previously Sable
Rare Earths GmbH)
Portugal
Holding company
100
100
Ozango Minerais S.A.
1
Angola
Mining
84
84
Coola Mining LDA
1
Angola
Exploration
90
90
Mtemi G (Tanzania) Limited
Tanzania
Holding company
100
100
Mtemi O (Tanzania) Limited
Tanzania
Holding company
100
100
Mtemi U (Tanzania) Limited
Tanzania
Holding company
100
100
1
Pensana Plc is the immediate and ultimate controlling party of the group as at 30 June 2023. 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
The registered office is located at Suite 31, Second Floor, Cheapside, London, United Kingdom, EC2V 6DN.
3
NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS
Reconciliation of cash and cash equivalents
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
2023
US$
2022
US$
Cash and cash equivalents
9,695,491
2,930,162
Reconciliation of loss for the period to net cash flows from operating activities
CONSOLIDATED
2023
US$
Restated
1
2022
US$
Net loss
(4,302,823)
(11,712,022)
Add/less non-cash items
Depreciation
58,157
24,508
Share-based payments
(272,965)
876,657
Unrealised foreign exchange (gains)/losses
(1,381,041)
2,255,471
Impairment of financial assets
308,260
669,470
Decrease/(increase) in assets
Trade and other receivables
(702,950)
(32,356)
Increase/(decrease) in liabilities
Trade and other payables
539,457
(29,959)
Net cash used in operating activities
(5,753,905)
(7,948,231)
Reconciliation of additions to property, plant and equipment and intangibles to payments for property,
plant and equipment and intangibles used in investing activities
CONSOLIDATED
Note
2023
US$
Restated
1
2022
US$
Additions to property, plant and equipment
12
(16,150,076)
(14,050,806)
Additions to Saltend intangible assets
11
(9,452,299)
(5,236,226)
Additions to exploration and evaluation
11
(62,043)
(49,166)
Total additions
(25,664,418)
(19,336,198)
Capital items included in working capital
11,673,885
(1,510,549)
Payments for property, plant and equipment and intangibles
(cash flow investing activities)
(13,990,532)
(20,846,747)
1
Refer to
note 5
Senior management and the board monitor and manage the financial risk relating to the operations of the group and company.
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, senior management and the board
seek to minimise potential adverse effects on financial performance. There have been no substantive changes in the group
and company’s exposure to financial instrument risks, their 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
The group and company manage their capital to ensure that they will be able to continue as a going concern. The capital
structure of the group and company 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 14
and
15
, 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
The group and company are 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 and company actively monitor factors that could impact market prices including market demand,
Interest rate risk
The group and company’s cash flow interest rate risk for assets primarily arises from cash at bank and deposits which are
subject to market bank rates. Cash deposits with banks and financial institutions are managed by senior management and the
board in accordance with the group and company’s internal policy. 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$96,952 (2022: US$29,302).
A 1% change in interest rates on interest-bearing assets for the company will increase or decrease net loss and accumulated
losses by US$86,621 (2022: US$25,504).
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 10
. 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
group and company’s internal policy. We are exposed to credit risk from our investing activities that include balances with banks
and financial institutions of US$9,695,491 (30 June 2022: US$2,930,162). The balance with banks and financial institutions for
company was exposed to trade and other receivables of US$349,352 (2022: US$642,202). An impairment analysis is
performed at each reporting date by senior management on all trade and other receivable balances. The maximum exposure to
credit risk for trade and other receivables at the reporting date is the carrying value of each class of financial asset. In respect of
other receivables that were past due by more than 90 days, an estimated credit loss allowance has been recognised based on
note 10
Foreign currency risk
The group and company are exposed to fluctuations in foreign currencies arising from the purchase of goods and services
and the holding of assets and liabilities in currencies that are not the functional currency of the relevant group entity. In general,
the group does not enter into any material derivatives to manage these currency risks and no significant positions were held in
2023 and 2022.
As at 30 June 2023, the group had exposure to other foreign currencies; primarily the following exposure to Australian dollar,
British pound and the Angolan kwanza that is not designated in cash flow hedges:
CONSOLIDATED
COMPANY
2023
US$
2022
US$
2023
US$
2022
US$
Level of exposure of foreign currency risk
Carrying value of foreign currency balances
Cash and cash equivalents include balances
denominated in:
Australian dollar
740,443
15,580
653
743
British pound
4,579,577
2,539,160
4,357,759
2,539,160
Angolan kwanza
30,589
269,454
–
–
Tanzanian shilling
–
566
–
–
Euro
381
64,493
–
–
Trade and other payables include balances
denominated in:
Australian dollar
23,618
819,612
1,332
25,342
British pound
11,750,719
414,918
11,088,348
414,918
Angolan kwanza
1,086,278
16,933
–
–
South African rand
52,559
3,085
48,210
640
A 5% change in the Australian dollar/British pound exchange rate will increase or decrease net loss and accumulated losses by
US$267,550 (2022: US$144,463).
A 5% change in the Australian dollar/British pound exchange rate will increase or decrease net loss and accumulated losses for
the company by US$217,921 (2022: US$126,995).
Ultimate responsibility for liquidity risk management rests with the board of directors, who have built an appropriate liquidity risk
management framework for the management of the group and company’s short-, medium- and long-term funding and liquidity
management requirements. With reference to the current going concern commentary (
note 3
), the group will look to manage
liquidity risk by maintaining adequate reserves, and by continuously monitoring forecast and actual cash flows and matching
the maturity profiles of financial assets, expenditure commitments and liabilities.
Maturity profile of financial instruments
The following table details the group’s remaining contractual maturity for its non-derivative financial assets and liabilities.
The table has been drawn up based on undiscounted cash flows and details the group’s exposure to interest rate risk as at
30 June 2023 and 30 June 2022.
Less than
1 year
US$
1 to 5 years
US$
5+ years
US$
Total
2023
Group and company
Financial assets
Amortised cost
261,329
–
–
261,329
Group
Financial liabilities
Non-interest-bearing
14,815,424
–
–
14,815,424
Company
Financial liabilities
Non-interest-bearing
11,587,582
–
–
11,587,582
Less than
1 year
US$
1 to 5 years
US$
5+ years
US$
Total
2022
Group and company
Financial assets
Amortised cost
630,097
–
–
630,097
Group
Financial liabilities
Non-interest-bearing
3,587,177
–
–
3,587,177
Company
Financial liabilities
Non-interest-bearing
1,974,219
–
–
CONSOLIDATED
2023
US$
2022
US$
Short-term employee benefits
1,974,607
2,240,592
Post-employment benefits
–
–
Share-based payment
(272,965)
605,388
1,701,642
2,845,980
This includes compensation for two executive directors (2022: three), five non-executive directors (2022: four) and one
executive (2022: one). Further details of the key management personnel compensation can be found in the remuneration report
Performance rights
2023
During the year, no performance rights were issued to directors and key management personnel.
2022
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 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 of the 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 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%
Options
2023
During 2023, no share-based options were issued.
2022
During 2022, no share-based options were issued.
Reconciliation of options outstanding
The following reconciles outstanding share options provided as share-based payments at the beginning and end of the
financial year:
Number
of options
2023
Weighted
average
exercise
price
2023
Number
of options
2022
Weighted
average
exercise
price
2022
Balance at the beginning of the financial year
1,500,000
–
2,750,000
–
Issued or to be issued during the financial year
–
–
–
–
Vested during the financial year
(750,000)
US$0.103
(750,000)
US$0.103
Expired during the financial year
–
–
(500,000)
US$0.175
Balance at the end of the financial year
750,000
US$0.103
1,500,000
US$0.103
Exercisable at the end of the financial year
750,000
–
1,500,000
–
1
During 2021, 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 Mr T George and Mr R Kaplan, that were originally subject to commencement of
concentrate sales by the end of 31 December 2021, were restructured to realign to the amended project scopes and the planned addition of
an mixed rare earth recovery plant and solvent extraction refinery alongside the concentrator plant. As a result thereof, the timeline for vesting
was amended to 31 December 2021 – 2023 with vesting to take place on a one-third time-weighted basis.
Share awards
2023
During the year, no new share awards were issued to executive management or to employees.
2022
During the year, share awards were issued to executive management and to employees.
Share awards issued to executive management
No share awards were issued to executives during the current year.
Share awards were issued to executives during the prior 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
page 63
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)
Due to the delay in securing the main financing on the Saltend and Longonjo Projects, certain share incentive performance
conditions relating to the FY2022 LTI share plan awards have not been met or are unlikely to be met. These specifically related
to financing of the Longonjo Project (12.5% of award) and financing of the Saltend Project (12.5% of award), construction
completion of the RESF (12.5% of award) and first production at the RESF (12.5% of award). As a result of the lapsing of these
awards, the directors will not receive the shares or related benefits outlined in the original plan agreements. The share-based
charges recognised in prior periods relating to these awards were reversed during FY2023.
Share awards issued to employees
No share awards were issued to employees during the current year.
Share awards were issued to employees during the prior year. These awards are subject to two performance conditions:
completion of the construction 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$1.3 (£1.08)
Due to the delay in securing the main financing on the Saltend Project, the share incentive performance conditions relating to
the FY2022 LTI share plan awards have not been met or are unlikely to be met. These specifically related to an award on 33%
construction completion of the RESF (25% of award), an award on 100% construction completion of the RESF (25% of award)
and an award on first production at the RESF (50% of the award). As a result of the lapsing of these awards, the employees will
not receive the shares or related benefits outlined in the original plan agreements. The share-based charges recognised in prior
Parent entity
The parent entity of the group is Pensana Plc which is incorporated in the UK.
Equity interests in related parties
Details of the percentage of ordinary shares held in subsidiaries are disclosed in
note 20
to the financial statements.
Transactions with key management personnel and related parties
The aggregate compensation made to key management personnel is disclosed in
note 23
to the financial statements, and
CONSOLIDATED
2023
US$
2022
US$
Fee payable to BDO LLP as the company’s external auditor for the audit of the
company’s annual financial statements
150,654
156,574
Fee payable to BDO LLP as the company’s external auditor for non-audit services
to the group
1
43,200
43,907
1
During the period, there were non-audit service fees of US$43,200 (2022: US$43,907) incurred by BDO LLP with respect to the half-year
On 27 June 2023 FSDEA-provided a US15miilion loan facility to the group as part of a broader US$80 million investment
(subject to due diligence and the finalisation of investment terms) to facilitate the development of the Longonjo Project. The loan
PENSANA PLC
2023 ANNUAL REPORT
129
OF FINANCIAL POSITION
for the financial year ended 30 June 2023
Note
30 June 2023
US$
Restated
1
30 June 2022
US$
ASSETS
Non-current assets
Investment in subsidiaries
C3
13,627,499
13,362,139
Trade and other receivables
C2
50,621,963
39,617,189
Property, plant and equipment
C5
3,353,594
1,320,202
Intangible assets
C6
13,577,069
5,236,226
Total non-current assets
81,180,125
59,535,756
Current assets
Cash and cash equivalents
C1
8,662,086
2,550,436
Trade and other receivables
C2
2,417,360
946,840
Total current assets
11,079,446
3,497,276
Total assets
92,259,571
63,033,032
LIABILITIES
Current liabilities
Trade and other payables
C4
25,198,149
16,753,382
Total current liabilities
25,198,149
16,753,382
Total liabilities
25,198,149
16,753,382
Net assets
67,061,422
46,279,650
Equity
Issued capital
14
356,898
295,425
Share premium
15
70,826,007
47,043,782
Reserves
15
13,300,904
13,551,117
Accumulated losses
15
(17,422,387)
(14,610,674)
Total equity
67,061,422
46,279,650
1
Refer to
note C8
for details of the restatement of prior year results.
The notes to the financial statements, included on
pages 99
to
129
, form an integral part of these financial statements.
The company’s loss for the financial year was US$2.8 million (2022: US$7.5 million). The company has taken advantage of the
section 408 exemption in the Companies Act 2006 not to present a separate statement of comprehensive income.
The financial statements were approved by the board of directors and authorised for issue on 30 October 2023 and are signed on its
behalf by:
Steven Sharpe
Chairman of the audit and risk committee
Registered number: 12206525. Pensana Plc (the company) is incorporated in the United Kingdom, registered in England and Wales
and domiciled in the United Kingdom.
COMPANY STATEMENT
OF CASH FLOWS
for the financial year ended 30 June 2023
Note
30 June 2023
US$
30 June 2022
US$
Cash flows from operating activities
Operating cash flows
C7
(5,329,653)
(5,278,812)
Net cash used in operating activities
(5,329,653)
(5,278,812)
Cash flows from investing activities
Funding of group companies
(11,004,774)
(17,282,121)
Payments for property, plant and equipment and intangibles
C7
(1,683,586)
(6,168,699)
Net cash used in investing activities
(12,688,360)
(23,450,820)
Cash flows from financing activities
Interest paid
28
–
Proceeds from issues of equity securities
24,265,820
16,780,204
Share issue costs
(361,614)
(410,887)
Net cash provided by financing activities
23,904,234
16,369,317
Net increase/(decrease) in cash and cash equivalents
5,886,221
(12,360,315)
Cash and cash equivalents at the beginning of the year
2,550,436
16,383,163
Effects of exchange rate changes on the balance of cash held in foreign currencies
225,429
(1,472,412)
Cash and cash equivalents at the end of the year
C1
8,662,086
2,550,436
The notes to the financial statements, included on
pages
99
to
129
, form an integral part of these financial statements.
COMPANY STATEMENT
OF CHANGES IN EQUITY
for the financial year ended 30 June 2023
Issued share
capital
US$
Share
premium
US$
Shares to
be issued
US$
Opening balance as at 1 July 2021
279,398
34,195,957
–
Loss for the year
–
–
–
Other comprehensive income
–
–
–
Total comprehensive income for the year
–
Issue of shares (
note 14
)
15,012
13,176,014
–
Capital raising costs
–
(410,887)
–
Issue of shares – conversion of performance rights
1,015
82,698
–
Share-based payments
–
–
–
Balance as at 30 June 2022
295,425
47,043,782
–
Opening balance as at 1 July 2022
295,425
47,043,782
–
Loss for the year
–
–
–
Other comprehensive income
–
–
–
Total comprehensive income for the year
–
Issue of shares (
note 14
)
61,473
24,143,839
–
Capital raising costs
–
(361,614)
–
Share-based payments
–
–
–
Balance as at 30 June 2023
356,898
70,826,007
–
The notes to the financial statements, included on
pages
99
to
129
, form an integral part of these financial statements.
Accumulated
losses
US$
Merger
reserve
US$
Foreign
currency
reserve
US$
Share-based
payments
reserve
US$
Total
US$
(7,090,298)
11,557,230
1,203,611
767,178
40,913,076
(7,520,376)
–
–
–
(7,520,376)
–
–
(816,868)
–
(816,868)
(7,520,376)
–
(816,868)
–
(8,337,244)
–
–
–
–
13,191,026
–
–
–
–
(410,887)
–
–
–
(83,713)
–
–
–
–
923,679
923,679
(14,610,674)
11,557,230
386,743
1,607,144
46,279,650
(14,610,674)
11,557,230
386,743
1,607,144
46,279,650
(2,811,713)
–
–
–
(2,811,713)
–
–
22,752
–
22,752
(2,811,713)
–
22,752
–
(2,788,961)
–
–
–
–
24,205,312
–
–
–
–
(361,614)
–
–
–
(272,965)
(272,965)
(17,422,387)
11,557,230
409,495
1,334,179
PENSANA PLC
2023 ANNUAL REPORT
133
NOTES TO THE COMPANY
FINANCIAL STATEMENTS
for the financial year ended 30 June 2023
BASIS OF PREPARATION
The basis of preparation for the Pensana Plc company financial statements is set out within the consolidated financial statements.
The company’s results are presented in US dollars, the presentation currency of the group, and are rounded to the nearest dollar.
Significant accounting policies, new accounting pronouncements and going concern
The accounting policies applied, new accounting pronouncements and going concern are consistent with those adopted and
disclosed in the group financial statements for the year ended 30 June 2023.
Information included in the notes to the consolidated financial statements
The following information has also been included in the notes to the consolidated financial statements as disclosed above:
Note 14
– Issued capital
Note 23
– Key management personnel
Note 15
– Reserves
Note 24
– Share-based payments
Note 18
– Commitments for expenditure
Note 26
– Auditor’s remuneration
Note 19
– Contingent liabilities and contingent assets
Note 27
– Subsequent events
Note 22
– Financial instruments
C1. CASH AND CASH EQUIVALENTS
30 June 2023
US$
30 June 2022
US$
Cash at bank and on hand
8,662,086
2,550,436
8,662,086
2,550,436
C2. TRADE AND OTHER RECEIVABLES
Prepayments
US$
R&D
receivables
US$
VAT
receivables
US$
Other
debtors
US$
Amounts
owed by
group
undertakings
US$
Total
US$
Current
As at 30 June 2022
316,743
–
–
630,097
–
946,840
Movement in the period
(213,226)
1,037,336
927,155
(280,745)
–
1,470,520
As at 30 June 2023
103,517
1,037,336
927,155
349,352
–
2,417,360
Non-current
As at 30 June 2022
–
–
–
–
39,617,189
39,617,189
Movement in the period
–
–
–
–
11,004,774
11,004,774
As at 30 June 2023
–
–
–
–
50,621,963
50,621,963
1
Refer to
note 10
for details of the equity receivable.
134
PENSANA PLC
2023 ANNUAL REPORT
C2. TRADE AND OTHER RECEIVABLES
continued
Prepayments
US$
Other
debtors
US$
Amounts
owed by
group
undertakings
US$
Total
US$
Current
As at 30 June 2021
21,976
4,888,745
–
4,910,721
Movement in the period
294,767
(4,258,648)
–
(3,963,881)
As at 30 June 2022
316,743
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
Refer to
note 10
for details of the equity receivable.
Balances with subsidiaries at the period-end were:
30 June 2023
US$
30 June 2022
US$
Pensana Metals Limited
15,927,182
15,546,231
Ozango Minerais SA
9,330,288
8,912,615
Coola Mining Lda
49,667
45,018
SBLRTHS Unipessoal Lda
2,446,635
2,505,168
Sable Min Unipessoal Lda
21,912,122
12,608,157
Saltend Magnet Metals Limited
956,069
–
Total
50,621,963
39,617,189
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 company’s loan receivables.
Pensana Plc is the immediate and ultimate controlling party of the group as at 30 June 2023. Refer to
note 20
to the
consolidated financial statements.
C3. INVESTMENT IN SUBSIDIARIES
Investments in subsidiaries are stated at cost less, where appropriate, provisions for impairment.
30 June 2023
US$
30 June 2022
US$
Pensana Metals Limited
12,124,374
11,756,018
Sable Min Unipessoal Lda
1,503,125
1,606,121
Total
13,627,499
13,362,139
Refer to
note 20
for details of interests held in subsidiaries.
PENSANA PLC
2023 ANNUAL REPORT
135
NOTES TO THE COMPANY FINANCIAL STATEMENTS
continued
for the financial year ended 30 June 2023
C4. TRADE AND OTHER PAYABLES
30 June 2023
US$
30 June 2022
US$
Inter-company loan payable to Pensana Metals Limited
13,567,544
14,725,658
Trade payables
11,185,722
477,038
Statutory liabilities
42,809
53,292
Accrued expense
402,074
1,497,394
Total
25,198,149
16,753,382
C5. PROPERTY, PLANT AND EQUIPMENT
Development
asset
US$
Assets under
construction
1
US$
Computer
equipment
US$
Restated
2
Total
US$
2023
Cost
Balance as at 1 July 2022
89,945
1,217,795
16,706
1,324,446
Additions
–
2,064,099
3,466
2,067,565
Adjustment on currency translation
(7,154)
(20,244)
(602)
(28,000)
Balance as at 30 June 2023
82,791
3,261,650
19,570
3,364,011
Depreciation
Balance as at 1 July 2022
–
–
4,244
4,244
Charge for the year
–
–
6,418
6,418
Adjustment on currency translation
–
–
(245)
(245)
Balance as at 30 June 2023
–
–
10,417
10,417
Net book value
As at 30 June 2022
89,945
1,217,795
12,462
1,320,202
As at 30 June 2023
82,791
3,261,650
9,153
3,353,594
2022
Cost
Balance as at 1 July 2021
89,945
65,728
6,990
162,663
Additions
–
1,152,067
9,716
1,161,783
Balance as at 30 June 2022
89,945
1,217,795
16,706
1,324,446
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
As at 30 June 2021
89,945
65,728
6,657
162,330
As at 30 June 2022
89,945
1,217,795
12,462
1,320,202
1
Assets under construction relate to Saltend.
2
Refer to
note C8
for details of the restatement of prior year results.
136
PENSANA PLC
2023 ANNUAL REPORT
C6. INTANGIBLE ASSETS
2023
US$
Restated
1
2022
US$
Carrying value
Balance at the beginning of the year
5,236,226
–
Additions
9,452,299
5,236,226
R&D government grant deferred
(1,037,336)
–
Adjustment on currency translation
(74,120)
–
Balance at the end of the year
13,577,069
5,236,226
1
Refer to
note C8
for details of the restatement of prior year results.
These costs were capitalised in respect of the Saltend Project and have been classified as intangible assets given their nature,
being consulting fees relating to process design and testwork. Previously, such costs were wholly classified as property, plant
and equipment.
C7. NOTES TO THE STATEMENT OF CASH FLOWS
Reconciliation of loss for the period to net cash flows from operating activities
30 June 2023
US$
30 June 2022
US$
Net loss before tax
(2,811,713)
(7,520,376)
Add/less non-cash items
Depreciation
6,418
3,911
Share-based payments
(272,965)
923,679
Impairment of financial assets
308,260
669,470
(Increase)/decrease foreign exchange losses
(582,236)
743,067
Increase in assets
Trade and other receivables
(801,951)
(294,767)
(Decrease)/increase in liabilities
Trade and other payables
(1,175,466)
196,204
Net cash used in operating activities
(5,329,653)
(5,278,812)
Reconciliation of property, plant and equipment and intangibles additions for the period to net cash
flows from investing activities
CONSOLIDATED
Note
2023
US$
Restated
1
2022
US$
Additions to property, plant and equipment
C5
(2,067,565)
(1,161,783)
Additions to intangible assets
C6
(9,452,299)
(5,236,226)
Total additions
(11,519,864)
(6,398,009)
Capital items included in working capital
9,836,278
229,310
Payments for property, plant and equipment and intangibles (cash flow investing activities)
(1,683,586)
(6,168,699)
1
Refer to
note C8
for details of the restatement of prior year results.
C8. RESTATEMENT OF PRIOR YEAR FINANCIAL STATEMENTS
The company has undertaken a review of the classification of costs capitalised in respect of the Saltend Project during the
year. Previously, such costs were wholly classified as property, plant and equipment. Based on evaluation of the underlying
costs, it has been determined that US$5.2 million (30 June 2022) of the costs should have been classified as intangible assets
given their nature. As such, the comparative periods have been restated to reclassify such amounts from property, plant and
equipment to intangible assets. The restatement had no impact on net assets or loss for the periods. Refer to
notes C5
and
C6
for further details.
PENSANA PLC
2023 ANNUAL REPORT
137
μm
Micrometre
3D
Three-dimensional
ADP
ADP Group
AGM
Annual general meeting
AIM
Alternative Investment Market of the London
Stock Exchange
ASX
Australian Securities Exchange
AUD
Australian dollar
°C
Degrees Centigrade
Ce
Cerium
CEO
Chief executive officer
CICERO
Centre for International Climate Research
Shades of Green, formerly part of CICERO,
now part of S&P Global, provides independent
research-based evaluations of green bond
and sustainability financing frameworks to
determine their environmental robustness. In
December 2022, S&P Global acquired the Shares
of Green business from CICERO.
CO
2
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
DRC
Democratic Republic of the Congo
ECL
Expected credit loss/es
ESG
Environmental, social and governance
ESIA
Environmental and Social Impact Assessment
Fe
Iron
FEED
Front-end engineering design
FRC
Financial Reporting Council
FSDEA
Fundo Soberano de Angola
ft
Foot
FTSC
FTSE Small cap
FTSE
Financial Times Stock Exchange
FY
Financial year
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
IAS
International Accounting Standards
ICMM
International Council on Mining and Metals
IEA
International Energy Agency
IFC
International Finance Corporation
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
kW
Kilowatt
kWh
Kilowatt hour
La
Lanthanum
LRP
Livelihood Restoration Plan
LSE
London Stock Exchange
LIFE
Lost time injury frequency rate
m
Metre
m
2
Square metre
m
3
Cubic metre
mg/l
Milligrams per litre
mm
Millimetre
MREC
Mixed rare earth carbonate
Mn
Manganese
MnO
Manganese Oxide
Mt
Million tonnes
MW
Megawatt
Nb
Niobium
Nd
Neodymium
NdFeB
Neodymium Iron Boron
NdPr
Neodymium and Praseodymium
NdPrO
Neodymium and Praseodymium oxide
NGO
Non-governmental organisation
OEM
Original equipment manufacturer
PAH
Project-affected households
ppm
Parts per million
QCA
Quoted Companies Alliance
R&D
Research and development
RAP
Resettlement Action Plan
REE
Rare earth element
REO
Rare earth oxide
RESF
Rare earth separation facility
SRK
SRK Consulting Group
STEM
Science, technology, engineering and
mathematics
STI
Short-term incentive
SX
Solvent extraction
t
Tonne
TCFD
Task Force on Climate-related Financial
Disclosures
tCO
2
e
Tonnes (t) of carbon dioxide (CO
2
) equivalent
TREO
Total rare earth oxide
TSF
Tailings storage facility
TSR
Total shareholder return
U
Uranium
UK
United Kingdom
UK DBT
UK Department for Business and Trade
UNICEF
United Nations Children’s Fund
US
United States
US$
United States dollar
VAT
Value added tax
Zr
Zirconium
ABBREVIATIONS
138
PENSANA PLC
2023 ANNUAL REPORT
Directors
Mr Paul Atherley – Executive chairman
Mr Timothy George – Executive director/chief executive officer
Mr Robert Kaplan – Finance director
Dr Jeremy Beeton – Non-executive director
Baroness Lindsay Northover – Non-executive director
Ms Alison Saxby – Non-executive director
Mr Steven Sharpe – Non-executive director
Chief executive officer
Mr Timothy George
Chief operating officer
Mr Rocky Smith
Company secretary
St James’s Corporate Services Limited
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
Simmons and Simmons
City Point, 1 Ropemaker Street
London EC2Y 9SS
United Kingdom
LSE code
PRE
Website
www.pensana.co.uk
Pensana Plc
Company registration number: 12206525
CORPORATE
DIRECTORY
www.pensana.co.uk