Unaudited condensed consolidated interim statement of cash flow

For the six months ended 30 June 2022

Notes to the unaudited condensed consolidated interim financial statements

For the six months ended 30 June 2022

Note 1           General information

Katoro Gold plc ("Katoro" or the "Company") is incorporated in England & Wales as a public limited company. The Company's registered office is located at 60 Gracechurch Street, London EC3V OHR.

The principal activity of Katoro, through its subsidiaries (together the 'Group'), is to carry out evaluation and exploration studies within a licenced portfolio area with a view to generating commercially viable Mineral Resources, namely gold and nickel mines. In Haneti, the Group has one nickel mining project, which has mineral exploration licences currently held by Eagle Exploration Ltd. In addition, in South Africa the Group has entered into binding conditional agreement to form a 50/50 unincorporated joint venture pertaining to gold tailing project.

The condensed interim consolidated financial statements do not represent statutory accounts within the meaning of section 435 of the Companies Act 2016.

The condensed consolidated financial statements of the Company have been prepared in accordance with the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority and Accounting Standard IAS 34, 'Interim Financial Reporting', as adopted by the UK.

The interim report does not include all of the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the period ended 31 December 2021, which has been prepared in accordance with UK-adopted IFRSs, and any public announcements made by Kibo Energy Plc during the interim reporting period.

The condensed consolidated financial statements of the Group are presented in Pounds Sterling, which is the functional and presentation currency for the Group and its related subsidiaries.

The condensed consolidated financial statements do not represent statutory accounts within the meaning of section 435 of the Companies Act 2016.

Accounting policies applied are consistent with those of the previous financial period and annual report unless where new standards became effective during the period and a newly adopted accounting policy for Investments in equity instruments - Associates.

The seasonality or cyclicality of operations does not impact on the interim financial statements.

Investments in equity instruments - Associates

Associates are all entities over which the group has significant influence but not control, generally accompanying a shareholding between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting.

Use of Estimates and Judgements

The preparation of these condensed interim consolidated financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.

The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources.

In particular, there are significant areas of estimation, uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements.

• Valuation of share options and warrants;

• Credit loss allowance for other financial assets; and

• Valuation of mining licence in Kibo Nickel Ltd.

• Valuation of investments in equity instruments - associates.

Please refer to note 16 where the estimate for investment in equity instruments - associates valuation is disclosed.

Note 2           Going concern

The Company currently generates no revenue and had net assets of £487,584 as at 30 June 2022 (31 December 2021: £922,426 and 30 June 2021: £421,129).

The Group has adequate cash and cash equivalents (financial resources) to ensure the Group is able to continue as a going concern for the foreseeable future until such time that revenues are earned through the sale or development and mining of a mineral deposit. There can be no assurance that such funds will continue to be available on reasonable terms, or at all in future. The Directors regularly review cash flow requirements to ensure the Group can meet financial obligations as and when they fall due.

The Directors continue to review the Group's options to secure additional funding for its general working capital requirements, alongside its ongoing review of potential acquisition targets and corporate development needs.

The Group and Company will require additional finance in order to progress work on its current assets and bring them to commercial development and cash generation.

As a result, the Directors continue to monitor and manage the Company's cash and overheads carefully in the best interests of its shareholders.

Whilst the Directors continue to consider it appropriate to prepare the financial statements on a going concern basis the above constitutes a material uncertainty that shareholders should be aware of.

Note 3           Trade and other payables

Note 4          Earnings per share

 The calculation of loss per share is based on the following loss and number of shares:

The Group presents basic and diluted EPS data on the basis that the current structure has always been in place. Therefore, the number of Katoro shares in issue as at the period end has been used in the calculation. Basic Earnings/loss per share is calculated by dividing the Profit/loss for the period from continuing operations of the Group by the weighted average number of shares in issue during the period.

The Company had in issue warrants and options at 30 June 2022, the inclusion of such warrants and options in the weighted average number of shares in issue would be anti-dilutive and therefore they have not been included for the purpose of calculating the loss per share.

Note 5            Unaudited results

These condensed consolidated interim financial results have not been audited or reviewed by the Group's auditors.

Note 6             Share Capital

The called-up and fully paid share capital of the Company is as follows:

A reconciliation of share capital is set out below:

Note 7            Warrant and Share based payment reserve

Warrants

The following reconciliation serves to summarise the composition of the warrant reserve as at period end:

Reconciliation of the quantity of warrants in issue:

No warrants have been issued in the six-month period ended 30 June 2022.

Share Options

The following reconciliation serves to summarise the composition of the share-based payment reserve as at period end:

Reconciliation of the quantity of Share options in issue:

During the current year no share options issued in August 2020 vested.

Note 8            Exploration and evaluation assets

Exploration and evaluation assets consist solely of separately identifiable prospecting assets held by Kibo Nickel and its subsidiaries.

The following reconciliation serves to summarise the composition of intangible prospecting assets as at period end:

Haneti comprises tenements (prospecting licences, offers and applications) prospective for nickel, platinum-group-elements and gold. It covers an area of approximately 5,000 sq. km in central Tanzania and forms a near contiguous project block. The project area straddles the Dodoma, Kondoa and Manyoni districts all within the Dodoma (Administrative) Region. The main prospective belt of rocks within the project, the Haneti-Itiso Ultramafic Complex (HIUC), is centred on the small town of Haneti, located 88 kilometres north of Tanzania's capital city Dodoma. The HIUC sporadically crops out over a strike length of 80 kilometres with most outcrop exposure occurring 15 kilometres east of Haneti village where artisanal mining of the semi-precious mineral chrysoprase (nickel stained chalcedonic quartz) is being carried out at a few localities.

Note 9            Board of Directors

There were no changes to the board of directors during the interim period, or any other committee's composition.

Note 10          Subsequent events

Blyvoor Joint Venture Project

During the preceding year, the board of directors were in the process of seeking admission for the vending of its and the counterparty's interest in the Joint Venture into a separate company to be listed on the Standard List of the London Stock Exchange plc. The funding process did not succeed, and the board is currently considering its position and options in this matter.

Haneti Nickel

A desktop review of all historical exploration data is being undertaken. The review will take into account the knowledge gained from the 2022 Haneti diamond drilling campaign (the first ever completed on the Project). The results are intended to further improve and refine targeting for future exploration programmes on the Project.

Just prior to Covid-19 restrictions a number of major and mid-tier companies expressed an interest in Haneti and a key requirement of their due diligence work was access to diamond drill core for analysis.  With that drill core now in hand the JV will be engaging again with potential project partners.

Babayu Lithium

Additional liaison with the Tanzanian government regarding the lithium licence applications within the broader Babayu and other related areas. Further regional desktop studies focusing on the lithium potential of the broader Dodoma area are to be conducted with the aim of identifying further prospective target areas for staking and other potential opportunities for further investment.

Note 11           Commitments and contingencies

There are no material contingent assets or liabilities as at 30 June 2022.

Note 12          Segment report

Segmental disclosure per category

Segmental disclosure per geographical location

There are no notable changes from the prior interim report. During the preceding interim period there was an addition of a new geographical location in which the Group prospecting operation has been initiated which is South Africa where the Group has entered into binding conditional agreement to form a 50/50 unincorporated joint venture pertaining to gold tailing project.

Note 13         Other financial assets

Following various administrative difficulties in transferring ownership of Reef Miners Limited from Kibo Gold Limited to Lake Victoria Gold Limited, both parties concluded on 07 March 2022 to cancel the previous Sale of Share Agreement by mutual consent.

As per the cancellation agreement, the Reef Transaction was cancelled by mutual agreement between the parties, with neither party having any claim against another party following specifically from the cancellation agreement.

On the same day Katoro Gold plc and Lake Victoria Gold Limited entered into a "Joint Venture Agreement". Under the terms and conditions of the "Joint Venture Agreement", Lake Victoria Gold Limited became the 80% shareholder of Kibo Gold Limited, Cypriot subsidiary of Katoro Gold plc, on the date of the Agreement with Katoro Gold plc owing the remaining 20%.

Prior to the implementation of the above "Joint Venture Agreement", Katoro Gold plc held 200 ordinary shares in the equity of Kibo Gold Limited, constituting 100% of the issued share capital in the company.

On the effective date, Lake Victoria Gold Limited subscribed for 800 new shares in Kibo Gold Limited, equal to 80% of the total issued share capital of the company on conclusion of the "Joint Venture Agreement", for the subscription amount of €88,000.

Katoro Gold plc indemnifies Lake Victoria Gold Limited against any claims resulting from the cancellation of the Sale of Share Agreement. The position of ownership of Reef Mining Limited was completely returned to Katoro Gold plc, and no contingent amounts are due and payable by Lake Victoria Gold Limited in this regard.

As per the "Joint Venture Agreement", the Conditions Precedent for the conclusion of the Share Issue have been met on the 7th of March 2022 and that the "effective date" of transfer of ownership of 80% of the shareholding is on the 7th of March 2022, as the issued shares to Lake Victoria Gold Limited rank Pari-Passu with the issued shares.

The "Joint Venture Agreement" furthermore details the following requirements:

-  Lake Victoria Gold Limited will contribute capital to Kibo Gold plc in the form of a shareholder's loan amounting to €792,000;

-  Lake Victoria Gold Limited will be obliged to declare a preference dividend to Katoro Gold Plc in the amount of €792,000 which is payable in any number of instalments by the earlier of 31 December 2023 and the date is ceases to be a shareholder in the company; and

-  In the event that the preference dividend has not been declared and paid by Kibo Gold Limited to Katoro Gold plc by 31 December 2023, the outstanding balance owing will be paid by Lake Victoria Gold Limited to Katoro Gold plc directly.

The investment in Kibo Gold plc was as of 7 March 2022 recognised as an associate to reflect the terms of the "Joint Venture Agreement".

The receivable in Lake Victoria Gold has been fully impaired at 30 June 2022 due to the credit risk of LVG, which is as a result of previous payments not being received as they become due and is still outstanding at the date of this interim report.

The resulting profit on disposal was recognised during the period ended 30 June 2022:

Blyvoor Joint Venture

On 30 January 2020, the Group entered into a Joint Venture Agreement with Blyvoor Gold Mines (Pty) Ltd, whereby Katoro Gold plc and Blyvoor Gold Mines (Pty) Ltd would become 50/50 participants in an unincorporated Joint Venture.

In accordance with the requirements of the Joint Venture Agreement, the Katoro Group was to provide a ZAR15.0 million loan (approximately £790,000) to the JV ('the Katoro Loan Facility'), which will fund ongoing development work on the Project.

As at 31 December 2020, the Group has advanced funding in the amount of £1,201,767 of which 100% relate to expenditure allocated to the Joint Venture operations, carried by the Katoro Gold plc Group.

Furthermore, the Group has continued to advance funding in the amount of £97,207 of which 100% relate to expenditure allocated to the Joint Venture operations, carried out by the Katoro Gold plc Group.

The Katoro Loan Facility shall form part of the development capital project financing that Katoro shall procure in accordance with its obligations contained in the Agreement, as detailed below, provided that:

· the balance of the Katoro Loan Facility then outstanding shall be subordinated to third party creditors participating in the development capital project financing;

· the Katoro Loan Facility will bear interest at the 12-month London Inter Bank Offered Rate, or its successor; and

· the Katoro Loan Facility will be repayable within 12 months after:

- the last third-party creditor participating in the project financing shall have been paid; or

- any earlier date on which the Parties may agree.

Note 14           Related parties

Name                                                           Relationship

Kibo Energy plc                                          Significant shareholder and controlling parent 

Related parties of the Group comprise subsidiaries, significant shareholders, and the Directors.

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation.

Transactions with related parties are effected on a commercial basis and related party debts are repayable on a commercial basis.

The transactions during the period between the Company and its subsidiaries included the settlement of expenditure to/from subsidiaries, working capital funding, and settlement of the Company's liabilities through the issue of equity in subsidiaries. The loans to/from Group companies do not have fixed repayment terms and are unsecured.

Note 15          Principal risks

The principal risks and uncertainties identified in the last Annual Report of Katoro Gold plc, issued in May 2021, have not materially changed/altered in the interim period.

Note 16          Use of Estimates and Judgements

The investment in equity instruments - associates have been valued on the fair value of the disposal price of the Kibo Gold Subgroup to LVG:

Note 17          Financial instruments - Fair value and Risk Management

The carrying amount of all financial assets and liabilities approximates the fair value. Directors consider the carrying value of financial instruments of a short-term nature, that mature in 12 months or less, to approximate the fair value of such assets or liability classes.

The carrying values of longer-term assets are considered to approximate their fair value as these instruments bear interest at interest rates appropriate to the risk profile of the asset or liability class.

The Group does carry any unlisted financial instruments measured in the statement of financial position at fair value at 30 June 2022 nor in any of the comparative periods.