Keras Resources : 2022 Annual Report

Contents

KERAS RESOURCES PLC 1

Company Information

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Chairman's Statement

I am pleased to provide an update on our progress since the last report and to set out our outlook for the business going forward.

The main activity of the Group is now in progressing our organic phosphate business in Utah, USA, where Keras increased its ownership from 51% to 100% on 30 March 2022.

The Diamond Creek phosphate mine

The Diamond Creek phosphate mine, which is believed to be one of the highest grade organic rock phosphate deposits in the US, comprises an opencast operation located on an 840 acre Federal Lease, and the Spanish Fork Processing Facility; both owned and operated by Falcon Isle Resources LLC and Falcon Isle Holdings LLC (collectively 'Falcon Isle'). Prior to the acquisition of the 49% outside interest on 30 March 2022, Falcon Isle was a 51% subsidiary of Keras during 2021, since which it has been a wholly owned subsidiary. Keras now has full management control with Graham Stacey also being appointed CEO of Falcon Isle where he can focus his efforts on the development of that business.

Diamond Creek is located approximately 80km south-east of Salt Lake City, and our focus going forward is to build the operation into the premier high-grade organic phosphate producer in the US. Our focus and target market is in supporting sustainable agriculture and we are strong advocates for the benefits of enhancing soil health and reducing the impact that synthetic fertilisers have on water resources. Our organic phosphate fertilizer products help farmers realise better crop growth and yields, and reduce the soil degradation seen when farmers use chemically manufactured fertilisers, while at the same time reducing the carbon footprint associated with growing their crops.

The mine is fully permitted, and the Spanish Fork processing plant is close to infrastructure and ideally located to take advantage of Salt Lake City's resources including labour, supplies, industrial engineering and financial services. The integrated mining and processing operation has compelling economics with a low capex, low-intensity seasonal mining operation and our in-house processing plant has flexibility to process a variety of organic rock phosphate products throughout the year. The mined material requires crushing, milling and bagging before being sold as high-grade organic rock phosphate fertiliser - a 23% total phosphorus pentoxide ('P205') premium product and importantly with minimum 12% available P205 which is significantly higher than our competitors in the US. Falcon Isle is currently investigating ways to expand its product offering and potential customer base by offering both granulated and liquidised fertilizers.

The mine has a pre-stripped area with production drilling information delineating approximately 2 years of planned production still in-situ. However, we believe there is significant scope to increase the current life of mine at Diamond Creek with historic "surface mineable resources" representing in excess of 60 years of production.

In 2022, 4,750 tons of phosphate were mined and delivered to the laydown area at Diamond Creek. Sales totalled 4,276 tons of phosphate for the year. Since Keras took control of the marketing function and with both the mining and processing facilities now operating as planned developing market share will be our primary focus for the next two years. Production rhythm is key to the supply of both consistent quantity and quality products which Keras's operational control has now enabled.

A key component of our marketing effort will be growth tests across a range of crops and soil types. This process is planned to run for the balance of 2023 and will provide focussed market feedback to support of our product use across crop types, regions and planting seasons.

We are now looking forward to commencing our mining season at Diamond Creek which takes place during the summer season from July to October 2023, while the mine site is free of snow.

Falcon Isle is currently operating profitably at the company level and has commenced repaying loans made to it by Keras.

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Chairman's Statement

continued

Nayéga manganese mine / Togo

The Group's interests in Togo are accounted for at 31 December 2022 as assets held for sale. Keras holds an 85% interest in Société Générale de Mines ("SGM"), which owns the Research Permits for the Nayéga manganese project ("Nayéga") in the Republic of Togo ("State").

On 17 May 2023 an agreement was signed between Keras and the State whereby it was agreed that Nayéga is a Togolese strategic asset and the exploitation permit will be awarded to Société Togolaise de Manganèse, a Togolese incorporated company 100% owned by the State ("STM") and Keras will no longer pursue the Nayéga exploitation permit. Keras will transfer all its intellectual knowledge on Nayéga to the State and provide advisory and brokerage services to fast track the development of Nayéga.

The State agreed to pay Keras a cash consideration of US$1.7m, which amount has now been received by Keras, and thereafter Keras will be paid advisory fees of 1.5% of gross revenue for 3 years and brokerage fees of 6.0% of gross revenue for the lesser of 3.5 years or 900,000 tonnes of beneficiated manganese ore produced and sold from Nayéga.

Financial review

The Consolidated Statement of Comprehensive Income for the year shows a loss of £847,000 (15 months to 31 December 2021 - loss £1,948,000).

The loss for the year includes costs relating to Togo. The carrying value of assets relating to the Nayéga mine at 31 December 2022 is materially equal to their estimated initial disposal value amounting to $1.7m, after allowing for costs of the sale. No amount is included in respect of the value of future income receivable from Nayéga.

Also included in the consolidated loss is a severance payment of $340,000 payable to the previous CEO of Falcon Isle.

In May 2022 Keras raised £1,950,000 (before costs) by an issue of new ordinary shares. These funds were used for the first tranche of US$800,000 of the cost of acquiring the former minority interest in Falcon Isle, including loans owed to the vendor, and for general working capital. The second tranche of $800,000, plus $240,000 of the severance payment referred to above, has been paid from the $1.7m received from the Republic of Togo. As the payment was made after 1 July 2023 there was a technical default for late payment, which default has been remedied within the 30 day period provided for in the agreement.

At a general meeting held on 25 July 2022 a resolution was passed consolidating the ordinary share capital on the basis of 1 new ordinary share of 1p for every 100 old ordinary shares of 0.01p. Following the passing of that resolution the number of ordinary shares in issue was reduced to 79,735,731.

Directors and Management

On 1 June 2022 Graham Stacey took over the role of Chief Executive Officer from me, and I moved into the role of Non-Executive Director.

On 1 September 2022, I took over from Brian Moritz as Non-Executive Chairman. Brian remains a Non-Executive Director and Company Secretary, and will continue to provide valuable oversight of the Company's finances.

At the same date Claire Parry joined the Board as an independent non-executive director. I would like to welcome Claire on behalf of myself and my colleagues.

Also on 1 September 2022 Dave Reeves, who was CEO for many years following the Company's flotation, resigned from the Board to concentrate on his role as managing director of Calidus Resources Ltd in Australia. I would like to thank Dave for his dedicated work over the years and wish him well for the future.

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