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MarketScreener Homepage  >  Equities  >  Swiss Exchange  >  Blackstone Resources AG    BLS   CH0460027110

BLACKSTONE RESOURCES AG

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Blackstone Resources : Semi-annual Report 2020

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09/23/2020 | 12:25pm EDT

Semi-annual Report 2020

SEMI-ANNUAL REPORT 2020

CONSOLIDATED FINANCIAL STATEMENTS

Semi-Annual Report and outlook by the Chairman of the Board

Dear shareholders,

It is with my greatest pleasure that I announce our activities and successes during the first half of 2020. This has been one of the most interesting periods in the company's history. Despite the huge amount of economic disruption caused by the coronavirus pandemic, we have seen a number of trends accelerate in the aftermath, which favour Blackstone Resources vision for the future. Our goal is to develop a new battery technology that will help ensure a sustainable clean-energy world.

Report for the first half of 2020

  • Blackstone delivered a strong performance from our business activities during the first half of 2020, a profit of CHF 19'825'061 was recorded which equates to CHF 0.46 per share.
  • During the first half of 2020 the sale of our licenses of rare earth in Norway has been concluded for CHF 22 million. There was strong interest from both Canadian and Australian investors.
  • The transaction increased Blackstone's equity (excluding non-controlling interests) from CHF 25 million to CHF 44.8 million, which equates a book value of CHF 1.05 per share.
  • The price - earning ratio (P/E ratio) is 3.4 timesat the actual share price of CHF 1.58, compared to other battery manufacturers (Umicore, CATL) having a P/E ratio between 44 to 100 times.

Blackstone Resources is structured into three separate divisions: battery technology, battery metals and cash-flow assets. Below is a quick summary of how each of these areas has developed in the first half of the year.

Battery technology

  • Since early 2019, Blackstone Resources has invested heavily in researching and developing the next generation of battery technology through its German subsidiary Blackstone Technology GmbH.
  • The company has patented proprietary 3D-printing techniques to produce batteries in a variety of different form factors. The objective here is to reduce the amount of battery materials needed, the cost of the battery and increase energy density.
  • The company has also conducted research on the mass production of solid-state batteries, which can offer a significant increase in energy density and a much higher number of charging cycles.
  • Blackstone resources has teamed up with several strategic partners from Germany, Belgium, Poland, Austria, the United Kingdom and Switzerland. These include research specialists based at the Fraunhofer Institutes at both Offenburg and Goslar.
  • During the first half of the year, a number of significant milestones were past by Blackstone Technology. These included:
    1. The world's first functional battery cells with thick, printed electrodes (C/LFP), which have been successfully tested. This technology increases the energy density for common cathode chemistries by approximately 20%.
    2. Electrodes that use environmentally friendly, water-based binder systems. The production of these electrodes is completely free from pollutants and reduces reduction costs over the long term.
    3. The production step for calendaring electorates is no longer necessary as the necessary porosity is adjusted for in the printing process.
  • The short-term goal of Blackstone Technology will be to print complete battery cells, including housings, at an extremely high speed.

Page 2

SEMI-ANNUAL REPORT 2020

CONSOLIDATED FINANCIAL STATEMENTS

Battery metals

  • At the start of the year, Blackstone Resources announced the release of an exploration report for its lithium development project in Chile.
  • The exploration report supports Blackstone's opportunity to explore and develop a number of licence areas that it holds in the Antofogasta region, which is close to widely known lithium resources. These concessions account for approximately 4,800 hectares, an increase of 1,800 hectares.
  • In May, Blackstone received its technical NI 43-101 standard report for its Pajonales Project in Chile.
  • In that same month, Blackstone Resources sold its investment interest in rare earths in Norway for CHF 22 million. Blackstone will retain its mining concessions for past producing gold and silver mines and it has a buyback option for these invested interests in the future. The group also has a 2% royalty agreement in place until 2030.
  • First Cobalt - a company where Blackstone Resources has a significant invested interest - announced positive feasibility study results for their Cobalt refinery. An additional Investment of CHF 40 million in recommissioning and expanding refinery will achieve its target in the second half of 2020 with a production of more than 5'000 metric tonnes of Cobalt per year.

Cash-flow assets

  • The milling plant is intended to produce a healthy cash flow for the company and is not a major part of the company's operations.
  • Prior to the coronavirus pandemic, significant progress had been made in bringing this gold milling plant online. However, the coronavirus pandemic hampered progress as the country came under heavy lockdown and subsequently, progress has been paused and will resume in the next few months.
  • The purpose of the milling plant is to pay for the company's growth in its exploration activities for battery metals and the research and development of new battery technology.
  • Cash flow that the milling plant will provide should also serve to stabilise corporate earnings in the future.

Other developments

  • In January 2020, Blackstone received a buy recommendation from AlphaValue - an independent equity research house that covers over 470 European stocks, split between 32 seasoned analysts.
  • AlphaValue gave Blackstone a target price of CHF 5.57 after significant stock price appreciation occurred after major breakthroughs were made by Blackstone Technology.
  • AlphaValue also awarded Blackstone Resources a BB credit rating.

Outlook for 2020

What we have witnessed is an acceleration and pickup in interest for the battery technology that we are developing. The pandemic if anything, has acted as a catalyst and raised even greater awareness about the importance of how better battery technology could lead to a more sustainable world with abundant renewable energy.

The long-term fundamentals that support the battery metal market remain strong. Electric vehicle sales are expected to increase 28 times from their current level by 2040. Each electric vehicle uses more than 10,000 times the lithium than a smart phone today. The electric vehicle industry is now booming and is turning to battery technology and battery material suppliers for solutions. This is exactly how Blackstone has positioned itself.

Lithium faces technical challenges and the supply of ethically sourced cobalt hinges on the success of new projects. The good news is that Blackstone is well-positioned in both areas.

Page 3

SEMI-ANNUAL REPORT 2020

CONSOLIDATED FINANCIAL STATEMENTS

The success of our lithium exploration project in Chile has been the highlight of 2020. The project now has a NI-43 resource report and is now entering the next phases of exploration. We expect in the second half of 2020 that we will commence feasibility studies prior to entering production.

We also foresee First Cobalt - where we have invested interests - to commence production from the only cobalt refinery in North America. This would be a tremendous milestone to achieve.

In the second half of 2020, we also expect to achieve a number of milestones for our battery technology business. We have already achieved success with our proprietary next gen 3D-printing technology. Our expectation is that we will apply the same printing techniques to the solid-state batteries.

In short 2020 has proved to be a very exciting and profitable year. It could be an inflection point for the firm and its future success. We expect the second half of the year to be even more exciting and exhilarating as the company participates in the recovery of the global economy.

I would like to thank our investors for their continued loyalty and support in 2020.

Yours sincerely,

Ulrich Ernst, lic. oec. publ.

Chairman and CEO

Page 4

SEMI-ANNUAL REPORT 2020

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Financial Position

(unaudited)

in CHF

Note

June 30, 2020

December 31, 2019 Adj

Assets

Non-current assets

Property, plant and equipment

9

10'851'437

11'518'200

Exploration & evaluation assets

10

222'467

388'843

Intangible assets

11, 12

95'005'432

97'326'676

Advances and loans

205'552

194'141

Deferred tax assets

9'301

8'380

Total non-current assets

106'294'189

98.6%

109'436'240

97.9%

Current assets

Trade and other receivables

18'071

19'549

Accrued income

342'475

665'539

Other current assets

557'550

407'909

Marketable securities and short-term financial assets

143'266

384'782

Cash and cash equivalents

402'067

840'823

Restricted cash

64'200

64'200

Total current assets

1'527'629

1.4%

2'382'803

2.1%

Total assets

107'821'818

100.0%

111'819'043

100.0%

Equity and liabilities

Capital and reserve - attributable to equity holders

Share capital

13

21'350'000

21'350'000

Share premium

26'049'517

25'755'236

Treasury shares

-5'357

-6'964

Retained earnings/(losses) and other reserves

-2'523'411

-21'243'922

Equity attributable to equity holders of the parent

44'870'749

41.6%

25'854'350

23.1%

Non-controlling interest

47'234'521

48'649'737

Total equity

92'105'270

85.4%

74'504'087

66.6%

Non-current liabilities

Borrowings

8'405'710

29'530'153

Deferred tax liabilities

6'483'207

6'777'174

Pension liability

77'511

69'837

Total non-current liabilites

14'966'428

13.9%

36'377'163

32.5%

Current liabilities

Trade and other payables

213'433

336'433

Accrued expenses

506'541

570'540

Borrowings

30'146

30'820

Total current liabilities

750'120

0.7%

937'792

0.8%

Total liabilities

15'716'548

14.6%

37'314'956

33.4%

Total equity and liabilities

107'821'818

100.0%

111'819'043

100.0%

Page 5

SEMI-ANNUAL REPORT 2020

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Profit and Loss

(unaudited)

in CHF

Note

January-June 2020

January-June 2019

Revenues

-

-

Cost of goods sold

-

-

Gross profit

-

-

Operating expenses

General and administrative expenses

436'420

681'502

Other expenses

85'702

58'690

Personnel expenses

731'097

375'450

Marketing expenses

17'435

37'373

Depreciation and amortization

631'736

-

Total operating expenses

1'902'390

1'153'015

Non-operating income/(expenses)

Interest income

-

31'696

Disposal of mining rights/E&E assets (gain/loss)

14

22'140'000

6'551'458

Unrealized revaluation gain/(loss)

14'410

-99'926

Interest expense

-487'111

-139'431

Foreign exchange differences

-65'383

-

Other financial expense

-44'169

-12'997

Total non-operating income/(expenses)

21'557'748

6'330'800

Profit/(loss) before tax

19'655'358

5'177'785

Income tax expense

-169'703

-108'369

Profit/(loss) of the year

19'825'061

5'069'416

of which attributable to equity holders of parent

20'134'320

5'177'785

of which attributable to non-controlling interests

-309'258

-133'871

Non-diluted earnings per share

0.46

0.12

Diluted earnings per share

0.46

0.12

Page 6

SEMI-ANNUAL REPORT 2020

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Comprehensive Income and Loss

(unaudited)

in CHF

Note

January-June 2020

January-June 2019 Adj.

Net income

19'825'061

5'069'416

Other comprehensive income:

Items not be reclassified to net income/(loss):

-

Defined benefit plan actuarial gains/(losses)

-

-

Net items not to be reclassified to net income/(loss)

-

-

Items that will or maybe not be reclassified to net income/(loss):

-

Foreign currency translation adjustment

12

-1'039'109

-3'289'972

Net items that will or maybe reclassified to net income/(loss)

-1'039'109

-3'289'972

Total comprehensive income/(loss)

18'785'952

1'779'445

of which attributable to equity holders of parent

19'612'090

2'226'085

of which attributable to non-controlling interests

-826'138

-446'641

Consolidated Statement of Changes in Equity

(unaudited)

Foreign

Equity

currency

attributable

Non-

Issued

Share

Treasury

Retained

translation

to share-

controlling

Total

in CHF

Note

capital

premium

shares

earnings

adjustment

holders

interest

equity

Balance as at January 1, 2019

13

21'350'000

30'338'643

-6'980'203

-29'907'080

29'523

14'830'884

-86'992

14'743'892

Profit/(loss) of the year

5'

203'287

5'203'287

-133'871

5'069'416

Other comprehensive income

-

-

-

-

-54'626

-54'626

29'523

-25'103

Sale of treasury shares

-

-

6'894'428

-

-

6'894'428

-

6'894'428

Repurchase of treasury shares

-

-

-

-

-

-

-

-

Change in ownership interest

-

-

-

16'

317'553

-

16'317'553

11'250'215

27'567'768

Balance as at June 30, 2019

13

21'350'000

30'338'643

-85'775

-8'386'240

-25'103

43'191'526

11'058'875

54'250'401

Balance as at January 1, 2020, reported

13

21'350'000

25'755'236

-6'964

-22'141'283

9'296

24'966'286

48'120'368

73'086'654

Adjustment

12

3'083'336

-2'195'272

888'065

529'369

1'417'434

Balance as at January 1, 2020, adjusted

13

21'350'000

25'755'236

-6'964

-19'057'947

-2'185'976

25'854'350

48'649'737

74'504'088

Profit/(loss) of the year

-

-

-

20'

134'320

-

20'134'320

-309'258

19'825'061

Other comprehensive income

-

-

-

-

-1'039'109

-1'039'109

-1'105'958

-2'145'067

Total comprehensive income

-

-

-

20'134'320

-1'039'109

19'095'210

-1'415'216

17'679'994

Sale of treasury shares

-

-

-

-

-

-

-

-

Non-cash contribution

-

294'281

1'607

-374'700

-

-78'812

-

-78'812

Balance as at June 30, 2020

13

21'350'000

26'049'517

-5'357

701'673

-3'225'085

44'870'748

47'234'521

92'105'270

Page 7

SEMI-ANNUAL REPORT 2020

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Cash Flows

(unaudited)

in CHF

Operating activities

January-June 2020 January-June2019

Net Profit/(loss)

19'825'061

5'069'416

Adjustments for:

Depreciation and amortisation

631'736

-

Share of income from associates

-

2'979

Unrealised mark-to-market movements on investments

26'412

99'926

Gain on disposal of E&E asset

-22'140'000

-6'891'094

Accrued income

323'064

-

Deferred tax asset and liability

-294'887

-

Other non-cash items net 1

8'537

58'646

Interest expenses net

129'799

107'735

Cash generated by operating activities before working capital changes

-1'490'279

-1'552'392

Working capital changes

Decrease/(increase) in trade and other receivables

1'479

9'124

Decrease/(increase) in other current assets

-149'641

860'025

Increase/(decrease) in trade and other payables

-123'000

80'091

Increase/(decrease) in other current liabilities

-64'673

149'548

Total working capital changes

-335'835

1'098'788

Net cash generated by operating activities

-1'826'113

-453'604

Investing activities

Investment in E&E assets

45'803

-

Disposal of E&E assets

-196'668

-503'963

Investment in intangible assets

7'957

-

Investment/disposal of marketable securities

215'105

1'083'758

Net cash used by investing activities

72'197

579'795

Financing activities

Decrease/(increase) in loans and advances

-11'411

2'217'257

Increase/(repayment of borrowings)

1'324'752

-2'137'059

Repurchase and proceeds from treasury shares

-

44'928

Net cash used by financing activities

1'313'340

125'126

Net change in cash and cash equivalents

-440'576

251'317

Currency translation effect on cash and cash equivalents

1'819

-54'627

Cash and cash equivalents as at January 1

840'823

38'870

Cash and cash equivalents as at June 30

402'067

235'560

1 Includes change in pension liability, share-based payment expense and foreign currency difference

Page 8

SEMI-ANNUAL REPORT 2020

CONSOLIDATED FINANCIAL STATEMENTS

Notes to the Semi-Annual Report

1. Organisation

Blackstone Resources AG (hereafter "the Group" or "Blackstone") has its registered offices at Blegistrasse 5, 6340 Baar, Switzerland. The Company's purpose consists of acquiring mining rights, concessions, licenses, mining technologies, developing and operating mining facilities, and developing new battery technology and manufacturing techniques.

The Company will grow its already existing interests in mineral deposits and battery technology by acquiring additional licenses and making new investments.

2. Statement of compliance

The unaudited Condensed Consolidated Interim Financial Statements have been prepared in accordance with IAS 34 "Interim Financial Reporting". They do not include all of the information required for full annual financial statements and should be read in conjunction with the Consolidated Financial Statements of the Group for the year ended December 31, 2019.

3. Basis of preparation

The Condensed Consolidated Interim Financial Statements are presented in Swiss Francs (CHF) million. They are prepared on a historical cost basis except for certain financial instruments, which are stated at fair value.

The preparation of the Condensed Consolidated Interim Financial Statements in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting, as issued by the International Accounting Standards Board (IASB), requires the management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The actual result may differ from these estimates. Judgements made by the management in the application of International Financial Reporting Standards that have a significant effect on the Condensed Consolidated Interim Financial Statements and estimates with a significant risk of material adjustment in the next period were the same as those applied to the Consolidated Financial Statements for the year ended December 31, 2019.

4. Accounting policies

The accounting policies applied in the preparation of the Condensed Consolidated Interim Financial Statements are consistent with those followed in the preparation of the Group's Consolidated Financial Statements for the year ended December 31, 2019. The new or amended IFRS 16 and interpretations, which must be applied for the reporting period starting on January 1, 2020 had no significant impact on this semi-annual report.

The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective. Other new, revised and amended standards, amendments, improvements and interpretations apply for the first time in 2020, but do not have a material impact on the Condensed Consolidated Interim Financial Statements of the Group.

5. Impact from COVID-19

Covid-19 has had a significant impact on the company's operations. More specifically, it has affected the business' portfolio of mining interests.

Gold mill

Prior to the global pandemic, significant progress had been made on the controlling interest Blackstone has in a Peruvian gold milling plant. The test mill had been operating and processing ore into doreé. The main mill, which has already been constructed, was ready to go into operation after extensive testing

Page 9

SEMI-ANNUAL REPORT 2020

CONSOLIDATED FINANCIAL STATEMENTS

and planning. However, work had to be put on hold as Peru has been heavily impacted by the coronavirus pandemic.

Peru underwent a significant lockdown that prevented travel in and out of the country. However, the demand for gold has increased significantly in recent months as the US dollar continues to weaken. Investors have been rotating into gold as part of an inflation trade over concerns about the ever- increasing supply of fiat money, such as the US dollar. Consequently, Blackstone has received a significant pickup in enquiries about purchasing doreé from the milling plant. Once the milling plant is back in operation, the fundamentals supporting gold will have a significant impact on the success of the plant.

Battery metals

Covid-19 has had a negligible impact on the company's portfolio of exploration interests. In most cases, feasibility studies and technical reports on some of the company's invested interests had been carried out before the global pandemic broke out.

One of the most promising projects that the company is pursuing is its exploration project in Chile. It has already received its NI-43 prior to the outbreak. Travel restrictions also did not prevent the company's team from travelling to and from Peru. Consequently, the project has not been impacted by Covid-19.

Restrictions were in place in Norway. However, they have since been lifted and the company has been able to visit the areas where it owns concessions.

Battery technology

Covid-19 has had zero impact on a battery technology division, which is managed by a wholly owned subsidiary Blackstone Technology, based in Erfurt, Germany. During the lockdown, research continued and consequently significant breakthroughs were made during this period. The company's management team believes that Covid-19 may have actually provided a tailwind for battery technology and could see an increase in the adoption of electric vehicles, which has seen significant government support.

Robust earnings figures from companies like Tesla confirmed this trend. The news flow surrounding electric vehicles and battery technology has also increased since the start of the year. This indicates that there is a lot of momentum supporting this market and its long-term story. Battery technology has, therefore, offered significant resilience during this crisis.

6. Foreign exchange rates

Conversion rates of major foreign currencies are applied as follows.

Income statement and cash flow statement (average rates for the period):

Currency

Jan.-

Jan.-June

June

2019

2020

CHF

CHF

EUR 1.00

1.0617

1.1165

USD 1.00

0.9658

0.9684

GBP 1.00

1.2176

1.2477

Balance sheet (period end rates):

Currency

June

Dec. 2019

2020

CHF

CHF

EUR 1.00

1.0604

1.0870

USD 1.00

0.9472

0.9684

GBP 1.00

1.1746

1.2831

Page 10

SEMI-ANNUAL REPORT 2020

CONSOLIDATED FINANCIAL STATEMENTS

7. Seasonality

The Group is not exposed to significant seasonal or cyclical variations in its operations.

8. Segment reporting

The Group is organised and managed by means of individual countries. Since the Group does not yet generate revenues and profits from its assets and trading activities, a segment income disclosure is not feasible and therefore omitted for disclosure purposes.

9. Property, plant and equipment

The summarised financial information in respect of Blackstone's property, plant and equipment is set out below:

Real estate

Plant and

in CHF

buildings

equipment

Total

Property, plant and equipment

31 Decmeber 2019, reported

5'187'556

7'064'957

12'252'513

Adjustment

1)

-311'082

-423'231

-734'313

1 January 2020, adjusted

4'876'474

6'641'726

11'518'200

Depreciation

-69'526

-230'451

-299'977

Currency translation

-208'190

-158'597

-366'787

Net property, plant and equipment as at June 30, 2020

4'598'758

6'252'679

10'851'437

  1. The assets as shown in the table are 100% attributable to GESAC, the Peruvian gold refining operation. The adjustment is due to the final purchase price allocation (PPA) on the acquisition of the majority of South America Invest ("SAI") on May 30, 2019 within the one-year adjustment period that included the adoption of the functional currency of SAI and its 100% subsidiary GESAC to USD.

10. Exploration & evaluation assets

The summarised financial information in respect of Blackstone's E&E assets is set out below:

in CHF

Norway

Chile

Total

Acquisition costs as at January 1, 2020

386'591

93'750

480'341

Additions

45'803

45'803

Disposal

-196'668

-

-196'668

Currency translation

-4'557

-10'954

-15'511

Acquisition costs as at June 30, 2020

185'366

128'599

313'965

Accumulated depreciation as at January 1, 2020

91'498

-

91'498

Additions

-

-

-

Disposal

-

-

-

Currency translation

-

-

-

Accumulated depreciation as at December 30 June, 2020

91'498

-

91'498

Net E&E Assets as at June 30, 2020

93'868

128'599

222'467

Pursuant to the shareholder agreement dated June 5, 2020 between Blackstone and Adriatica Group Ltd ("Adriatica"), Blackstone disposed five rare earth concessions in Norway to Adriatica for a total consideration of CHF 22'340'000. Blackstone will retain its remaining mining concessions for past producing gold and silver mines.

Blackstone has a buyback option, but not an obligation to repurchase those concessions for the same price consideration. The option expires on December 31, 2021. Furthermore, Adriatica Group Ltd

Page 11

SEMI-ANNUAL REPORT 2020

CONSOLIDATED FINANCIAL STATEMENTS

grants Blackstone a royalty agreement until 2030 for the amount of 2% of the actual turnover which is payable semi-annually. The realised gain on the disposal is described in note 14.

11. Intangible assets

The summarised financial information in respect of Blackstone's intangible assets is set out below:

Other

intangible

in CHF

Goodwill Concessions

assets

Total

Intangible assets

31 Decmeber 2019, reported

82'998'665

12'772'256

3'942

95'774'863

Adjustment

1)

2'048'955

-497'143

0

1'551'813

1 January 2020, adjusted

85'047'620

12'275'113

3'942

97'326'675

Additions

-

-

7'957

7'957

Retirements

-

-

-

Currency translation

-1'859'208

-23'767

-460

-1'883'435

Acquisition costs as at December 30 June, 2020

83'188'412

12'251'347

11'439

95'451'197

Accumulated depreciation as at January 1, 2020

-

-

-

-

Additions

-

-445'765

-

-445'765

Currency translation

-

-

-

Accumulated depreciation as at June 30, 2020

-

-445'765

-

-445'765

Net intangible assets as at June 30, 2020

83'188'411

11'805'582

11'439

95'005'432

  1. The adjustment is due to the final purchase price allocation on the acquisition of the majority of South America Invest ("SAI") on May 30, 2019 within the one-year adjustment period that included the adoption of the functional currency of SAI and its 100% subsidiary GESAC to USD. SAI is fully consolidated. The transaction was treated as a business combination and accounted for using the acquisition method pursuant to IFRS 3 (refer to note 12).

12. Acquisition of business and subsidiaries

On May 30, 2019, the Group acquired 30.46 % of the shares and voting interests in SAI. As a result, the Company's equity interest in SAI increased from 20.48% to 50.94%, granting it control of SAI. It was highlighted in note 24 C of the Annual Report 2019 that if new information is obtained within one year of the date of acquisition relating to facts and circumstances that existed at the date of acquisition, which identifies adjustments to the reported figures, then the accounting for the acquisition will be revised accordingly.

The Group decided, after the year-end closing 2019, to apply USD as its functional currency for SAI and GESAC respectively. Despite the fact that the purchase price and its financing was paid in CHF, the future expected cash flows from revenues and earnings of SAI and GESAC will be in USD. Thus, the functional currency of SAI and GESAC is the USD. The final purchase price allocation (PPA) and pushdown of PPA-adjustments have been calculated in USD resulting in a currency translation difference (CTA). The adjustments have been made in line with IFRS 3.49.

A. Consideration transferred

in CHF

Loan payable

31'770'000

Total consideration transferred

31'770'000

Pursuant to the shareholder agreement dated May 30, 2019 between the Company and Adriatica, the Company acquired 30.46% participation in SAI for a total consideration of CHF 31.77 million. The purchase price was settled through an increase in the existing loan facility with Adriatica. The loan is secured through the Company's participation in SAI. The loan bears 1% interest p.a. and expires on December 31, 2023.

Page 12

SEMI-ANNUAL REPORT 2020

CONSOLIDATED FINANCIAL STATEMENTS

B. Acquisition-related costs

The Company did not incur any acquisition-related costs as the negotiation took place with one single shareholder, Adriatica who sold its entire participation to the Company.

C. Identifiable assets acquired and liabilities assumed

The following table summarises the recognised amounts of assets acquired and liabilities assumed at the date of acquisition:

in CHF

Property, plant and equipment

12'495'480

Mining concessions (intangible assets)

13'028'997

Cash, accrued income, other current assets, 3rd party loans

912'588

Subtotal assets

26'437'066

Loans and borrowings

-3'295'664

Deferred tax liabilities

-7'233'182

Trade and other payables

-106'555

Total identifiable net assets acquired

15'801'665

The acquired cash flow was CHF 28'269.

The valuation techniques used for measuring the fair value of material assets acquired were as follows:

Property, plant and Market comparison technique and cost technique: The valuation considers

equipmentmarket prices for similar items when they are available, and depreciated replacement cost when appropriate. The Company has applied a combination of two different valuation approaches, i.e. replacement cost based on current market prices and the Canadian method of Hatch Ltd. which is suitable to value such assets. The Company decided to apply the average value resulting from both valuations. Depreciated replacement cost reflects adjustments for physical deterioration as well as functional and economic obsolescence, if necessary.

Intangible assets Market comparison technique: The fair value is determined based on a comparable transaction method. It is being measured based on providing reliable market value benchmark comparisons. The Company has compared the overall price paid per ounce for such transactions as well as applying a common standard industry practice approach by using a 10% EBITDA potential of this material.

D. Goodwill

Goodwill arising from the acquisition has been recognised as follows:

in CHF

Note

2019

Consideration transferred

(12A)

31'770'000

NCI, based on fair values (full goodwill method)

51'169'934

Fair Value of pre-existing interest in SAI

21'360'788

Fair Value of identifiable net assets

(12C)

-15'801'665

Goodwill

88'499'058

The remeasurement to fair value of the Company's existing 20.48% interest in SAI resulted in a gain of CHF 1'793'024 (CHF 21'360'788 less the CHF 19'567'764 carrying amount of the equity-accounted investee at the date of acquisition. This amount has been included in the 'net realized gain and loss'.

Page 13

SEMI-ANNUAL REPORT 2020

CONSOLIDATED FINANCIAL STATEMENTS

The goodwill is mainly attributable to two important factors. Firstly, to the skills and technical expertise of the management and workforce to accelerate the two projects. The gold mining plant in Peru and manganese exploration in Columbia. Secondly, on the long-term market potential in exploring these commodities. None of the goodwill recognised is expected to be deductible for tax purposes.

The following table shows a comparison of the consolidated statement of the financial position as of December 31, 2019 as reported in the Annual Report 2019 vs. the adjusted numbers as a result of the adjustment of the final purchase price allocation and the adoption of a functional currency as explained in Note 12. It is important to note that the balance sheet does not change fundamentally.

There was no impact on the Consolidated Statement of Profit and Loss except for the foreign currency translation adjustment (CTA) in the Consolidated Statement of Comprehensive Income and Loss as well as for the Consolidated Statement of Cash Flows since the CTA is cash neutral. The adjustment on the Consolidated Statement of Changes in Equity is reflected in the separate statement.

Page 14

SEMI-ANNUAL REPORT 2020

CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

Variance

in CHF

Note

Adjusted

Reported

IFRS 3.49

Assets

Non-current assets

Property, plant and equipment

5

11'518'200

12'252'512

-734'312

Exploration & evaluation assets

6

388'843

388'843

0

Intangible assets

7, 24

97'326'676

95'774'863

1'551'813

Advances and loans

9

194'141

203'607

-9'466

Deferred tax assets

10

8'380

8'380

0

Total non-current assets

109'436'240

108'628'206

808'035

Current assets

Trade and other receivables

11

19'549

19'549

0

Accrued income

665'539

665'629

-90

Other current assets

407'909

408'013

-104

Marketable securities and short-term financial assets

12

384'782

384'782

0

Cash and cash equivalents

840'823

840'829

-6

Restricted cash

64'200

64'200

-

Total current assets

2'382'803

2'383'002

-199

Total assets

111'819'043

111'011'208

-204

Equity and liabilities

Capital and reserve - attributable to equity holders

Share capital

13

21'350'000

21'350'000

-

Share premium

25'755'236

25'755'236

-0

Treasury shares

13

-6'964

-6'964

0

Retained earnings/(losses) and other reserves

-21'243'922

-22'131'986

888'064

Equity attributable to equity holders of the parent

25'854'350

24'966'286

888'064

Non-controlling interest

48'649'737

48'120'368

529'369

Total equity

74'504'087

73'086'654

1'417'433

Non-current liabilities

-

Borrowings

15

29'530'153

29'372'933

157'220

Deferred tax liabilities

10

6'777'174

7'168'072

-390'898

Pension liability

18

69'837

69'837

-

Total non-current liabilites

36'377'163

36'610'842

-233'679

Current liabilities

Trade and other payables

336'433

338'784

-2'351

Accrued expenses

570'540

767'651

-197'111

Borrowings

15

30'820

207'276

-176'456

Total current liabilities

937'792

1'313'712

-375'919

-

Total liabilities

37'314'956

37'924'554

-609'598

-

Total equity and liabilities

111'819'043

111'011'208

807'836

13. Equity

At June 30, 2020, the share capital consisted of 42'700'000 registered shares issued and outstanding, with a par value of CHF 0.50 each, amounting to a total share capital of CHF 21'350'000. The share capital has been unchanged compared to December 31, 2019.

Page 15

SEMI-ANNUAL REPORT 2020

CONSOLIDATED FINANCIAL STATEMENTS

14. Disposal of mining rights and E&E assets

Pursuant to the shareholder agreement dated June 5, 2020 between Adriatica Group Ltd and Blackstone, Adriatica Group Ltd acquired 5 rare earth concessions in Norway for a total consideration

of CHF 22'340'000. The net gain from the disposal of the Norwegian mining rights was CHF 22'140'000. The purchase price was settled through the existing loan facility with Adriatica Group. As of June 30, 2020, the loan facility between Adriatica and Blackstone have been settled in full.

Pursuant to the shareholder agreement dated June 5, 2019 between Blackstone and Adriatica, Blackstone sells to Adriatica its E&E interest in Troi Gobi, Mongolia for a total consideration of CHF 30'000'000. The disposal resulted in a net gain of CHF 6'551'458.

15. Events after the balance sheet date

There have been no other material events between June 30, 2020, and the date of authorisation that would require adjustments of the Condensed Consolidated Interim Financial Statements of disclosure.

These unaudited Condensed Consolidated Interim Financial Statements of Blackstone Resources AG were authorised for issue by the Board of Directors on September 23, 2020.

Page 16

Disclaimer

Blackstone Resources AG published this content on 23 September 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 23 September 2020 16:24:01 UTC


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