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Press Release: Avesoro Resources Inc. - Financial -12-

21 Mar 2018 11:00 am
financial position 
Trade payables and accruals                           -        41,002   41,002 
Due to related parties                                -           464      464 
Derivative liability                                105             -      105 
Finance lease liability                               -         7,788    7,788 
Borrowings                                            -       134,091  134,091 
Total                                               105       183,345  183,450 
 
 
                                         Liabilities at  Other         Total 
                                          fair value      financial     $'000 
                                          through the     liabilities 
                                          profit and      at 
                                          loss            amortised 
                                          $'000           cost 
                                                          $'000 
December 31, 2016 
Liabilities as per statement of 
financial position 
Trade payables and accruals                           -        11,801   11,801 
Due to related parties                                -         1,342    1,342 
Derivative liability                                105             -      105 
Finance lease liability                               -        12,160   12,160 
Borrowings                                            -        93,471   93,471 
Total                                               105       118,774  118,879 
 

22. Financial and capital risk management

(a) Financial risk management

The Company's activities expose it to a variety of financial risks, which include interest rate and liquidity risk, foreign exchange risk and credit risk.

Interest rate and liquidity risk

Fluctuations in interest rates impact on the value of short term cash investments, finance lease liability and borrowings giving rise to interest rate risk. The Company has in the past been able to actively source financing through public offerings and debt financing. This cash is managed to ensure surplus funds are invested in a manner to achieve maximum returns while minimising risks. In the ordinary course of business, the Company is required to fund working capital and capital expenditure requirements. The Company typically holds cash and cash equivalents with a maturity of less than 30 days.

The Directors consider there to be minimal interest rate risk from fluctuations in market interest rates since the interest on the borrowings are largely fixed. If USD LIBOR, which is the variable component of the interest increased by 100% during the year ended December 31, 2017, finance cost would have increased by $1 million.

The Company ensures that its liquidity risk is mitigated by a combination of cash flow forecasts, budgeting, monitoring of operational performance and placing financial assets on short term maturity, thus all financial liabilities are met as they become due.

The Company's liabilities, stated at their gross, contractual and undiscounted amounts, fall due as indicated in the following table:
 
At December 31,   Within 30   30 days to6       6 to 12       Over12 
2017               days$'000  months$'000        months$'000  months$'000 
Trade and other 
 payables             28,673            12,322             8               463 
Finance lease 
 liability               594               880         1,346             7,191 
Borrowings and 
 finance costs           199            25,345        21,329           130,034 
At December 31, 
2016 
Trade and other 
 payables              8,421             5,806             -                 - 
Finance lease 
 liability               325             1,626         1,951            12,262 
Borrowings and 
 finance costs         9,082             1,832        17,135            84,609 
 

Foreign exchange risk

Foreign exchange risk to the Group arises from transactions denominated in currencies other than US dollars. In the normal course of business the Company enters into transactions denominated in foreign currencies, primarily Pounds Sterling, Canadian Dollars, Euros, Australian Dollars and South African Rand. As a result, the Company is subject to exposure from fluctuations in foreign currency exchange rates. The Company does not enter into derivatives to manage these risks.
 
Carrying value of foreign currency balances       December 31,  December 31, 
                                                   2017          2016 
                                                  $'000         $'000 
Cash and cash equivalents, include balances 
denominated 
in: 
 Canadian Dollar (CAD)                                       -            17 
 Pound Sterling (GBP)                                      133         2,746 
 West African CFA Franc (XOF)                           13,999             - 
 Others                                                      5            53 
 
Investments, include balances denominated in: 
 Pounds Sterling (GBP)                                      21            55 
 
Receivables and other assets, include balances 
denominated 
in: 
 Canadian Dollar (CAD)                                     259           225 
 Pounds Sterling (GBP)                                     136           406 
 West African CFA Franc (XOF)                           20,334             - 
 Others                                                      -            29 
 
Trade and other payables, include balances 
denominated 
in: 
 Canadian Dollar (CAD)                                     175           198 
 Euro (EUR)                                              2,985           186 
 Pound Sterling (GBP)                                      517         1,082 
 South African Rand (ZAR)                                  972         1,146 
 West African CFA Franc (XOF)                           36,510             - 
 Others                                                     36            65 
 
 

The sensitivities below are based on financial assets and liabilities held at December 31, 2017 and 2016 where balances were not denominated in the functional currency of the Company. The sensitivities do not take into account the Company's income and expenses and the results of the sensitivities could change due to other factors such as changes in the value of financial assets and liabilities as a result of non-foreign exchange influenced factors.
 
                               Effect on net assets of USD 
                                strengthening 10% 
                               December     December 
                                31, 2017     31, 2016$'000 
                                $'000 
Canadian Dollar (CAD)                  (8)               (4) 
Pound Sterling (GBP)                    23             (212) 
South African Rand (ZAR)                97               115 
Euro (EUR)                             299                19 
West African CFA Franc (XOF)           218                 - 
 

Credit risk

Financial instruments that potentially subject the Company to credit risk consist of cash and cash equivalents. The Company has an investment policy requiring that cash and cash equivalents only are deposited in permitted investments with certain minimum credit ratings.
 
                                                          December   December 
                                                           31, 2017   31, 2016 
                                                           $'000      $'000 
Financial institutions with Standards & Poor's A rating       2,784     13,457 
Financial institutions regulated by the Central Bank 
 of the West African States                                  13,999          - 
Financial institutions un-rated                               1,004          - 
 

(b) Capital risk management

The Company's objectives when managing capital is to maintain its ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to ensure sufficient resources are available to meet day to day operating requirements. The Company defines capital as 'equity' as shown in the consolidated statement of financial position.

The Company's board of directors takes responsibility for managing the Company's capital and does so through board meetings, review of financial information, and regular communication with officers and senior management.

The Company does not currently pay out dividends.

The Company's investment policy is to invest its cash in deposits with high credit worthy financial institutions with short term maturity.

The Company is not subject to externally imposed capital requirements and there has been no change in the overall capital risk management as at December 31, 2017.

23. Commitments

Operating expenditure contracted for at December 31, 2017 but not yet incurred is as follows:
 
                              Less than  Between one  Over five 
                               one year   and five     years 
                                          years 
                              $'000      $'000        $'000 
Operating lease expenditure          65          461          - 
Other operating expenditure       4,652            -          - 
Capital expenditure               1,698            -          - 
 

Operating expenditure commitments comprises of operating leases as at December 31, 2017.

Commitments in respect of finance leases are disclosed in Note 15.

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