Keras Resources : 2022 Interim Statements

Registered no. 07353748

KERAS RESOURCES PLC

UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL REPORT

FOR THE SIX MONTHS ENDED 30 JUNE 2022

KERAS RESOURCES PLC

CONTENTS

	Page
Company Information	1
Chairman's Review	2
Condensed Consolidated Statement of Comprehensive Income	5
Condensed Consolidated Statement of Financial Position	6
Condensed Consolidated Statement of Changes in Equity - 31 March 2021	7
Condensed Consolidated Statement of Changes in Equity - 30 September 2021	8
Condensed Consolidated Statement of Changes in Equity - 31 December 2021	9
Condensed Consolidated Statement of Changes in Equity - 30 June 2022	10
Condensed Consolidated Statement of Cash Flows	11
Notes to the Condensed Consolidated Interim Financial Report	12

KERAS RESOURCES PLC

COMPANY INFORMATION

Directors:	R Lamming	Non-Executive Chairman
	G Stacey	Chief Executive Officer
	B Moritz	Non-Executive Director
	C Parry	Non-Executive Director
Company secretary:	B Moritz
Company number:	07353748
Registered office:	Coveham House
	Downside Bridge Road
	Cobham, Surrey KT11 3EP
Nominated advisor	SP Angel Corporate Finance LLP
& Joint Broker:	35-39 Maddox Street
	London W1S 2PP
Joint broker:	Shard Capital Partners LLP
	23rd Floor, 20 Fenchurch St, Bridge,
	London EC3M 3BY
Solicitors:	Memery Crystal
	165 Fleet Street
	London EC4A 2DY
Group auditors:	PKF Littlejohn LLP
	1 Westferry Circus

Canary Wharf

London E14 4HD

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KERAS RESOURCES PLC

CHAIRMAN'S REVIEW

FOR THE SIX MONTHS ENDED 30 JUNE 2022

This is my first statement since becoming Non-Executive Chairman on 1 September 2022 and it is a pleasure to provide an update on the Company's activities over the past six months during what has been a transformational period for the Company. The acquisition of the outstanding 49% of Falcon Isle Resources ("Falcon Isle"), which owns the Diamond Creek high-grade premium organic phosphate mine ("Diamond Creek") has now placed Keras in full control of the operation which markets organic fertilisers with the highest available phosphate (P2O5) in the US. The mine itself is situated high in the Wasatch mountains, 20 miles from the milling plant in Spanish Fork which provides convenient access to locally available contracting services, consumables, technical and financial service providers and easy access to distribution links.

Since taking control of the operation substantial progress has been made towards building our business into a cash- generative producer of high-grade premium organic fertiliser for the US market and establishing a strategic position in this fast-growing sector. The Spanish Fork processing plant is now back in production, two mining campaigns have been undertaken at the Diamond Creek mine and repeat customers are now beginning to make longer-term offtake commitments. We are now focussing on Falcon Isle's marketing efforts, which were previously the responsibility of our partner, and ensuring we continue to build our position in the US organic phosphate to fertiliser industry.

The Utah Department of Oil, Gas & Mining (UDOGM) and US Forest Service (USFS) carried out a routine inspection and site visit during April 2022 and all permits and authorisation approvals were renewed in line with the project's licence obligations. We are currently in the process of expanding our permitted mining footprint in line with new regulations. Two phases of summer mining have been completed as planned, a second phase as a required result of increased sales demand to ensure ample product availability for the 2022-2023 spring sales season. We are targeting 25,000 tons per annum as our medium-term annual sales objective into a market which is expected to grow at 8% per annum in tonnage terms as well as 14% in value terms. As an owner operator of our processing plant we are able to tailor our product mix to customer requirements which, in addition to product quality, gives us an important competitive advantage in the region. As a result of the extended mining season, our drilling programme which we will undertake to further define the ore reserve at Diamond Creek will now commence in spring next year. The Board continues to review and evaluate all areas of the business to look to further optimise efficiencies and create economies of scale.

We have previously reported on the delivery and commencement of construction of a granulator plant during the second half of 2021, this construction was paused as announced in November 2021 while the acquisition of the outstanding 49% in the business was negotiated and completed during March 2022, this pause gave us the opportunity to evaluate value-enhancing opportunities such as the incorporation of supplementary feed circuits to produce custom blended organic products including Nitrogen and Potassium feedstock to potentially supplement the phosphate-only granulates we'd previously planned. Decisions on the final configuration of the plant will be made during the coming months and construction will re-commence thereafter.

Marketing and Market Fundamentals

Sales has been a key focus for us as we are looking to continue to build market share for our products under the PhosAgri brand. Core to our marketing is highlighting the value that our premium >12% available P2O5 products can offer from

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KERAS RESOURCES PLC

CHAIRMAN'S REVIEW

FOR THE SIX MONTHS ENDED 30 JUNE 2022

a value-in-use basis along with the benefits of its high calcium content. Importantly we are also getting a deeper understanding of our client requirements and adapting our product mix to suit the cyclical seasonal agriculture business which will be key to increasing our market share in the dynamic North American organic fertiliser market. We have the flexibility within our operational set up to be able to adapt accordingly which will be an important aspect of ongoing discussions across our existing and prospective new customer bases.

We are delighted with a 40% increase in sales for August 2022 to 700t against our 500t forecast, as well as repeat forward orders off the back of which we have set out sales guidance of between 7,500 tons and 8,000 tons of phosphate product forecast from 1 September 2022 to June 2023 at an all-in sustaining cost (AISC) margin of between $80 and $100 per ton. Importantly, whilst we offer an organic product, we are not limited to the organic market as PhosAgri can be used as a blend, so widening our audience in this regard will enables us to investigate retail potential and further downstream avenues.

All of this ties into the market backdrop and we are excited by the significant opportunity offered to us by the North American fertiliser industry which research forecasts to grow at 8% per annum on a consolidated annual growth rate (CAGR) in volume terms, and more importantly 14% on a value basis which suggest a material disjoint between demand and supply growth. Synthetic fertiliser pricing has seen a 60% increase year on year which, albeit due to geopolitical pressure on the supply of fertiliser inputs, is forecast to continue which will both support pricing for organic fertilisers but also growers' substitution of synthetic fertilisers with organic substitutes. Demand is also underpinned by key long- term drivers, including security of supply, environmental factors, the ongoing education and awareness around soil health, as well as the increasing demand for organic food - all of which our PhosAgri products support, and particularly with our location close to the Central California Valley.

Carbon Market

As previously outlined, we are also looking to leverage our low carbon footprint relative to synthetic fertiliser producers and the net carbon sequestration that provides. This presents a revenue augmentation opportunity through the generation and trading of carbon credits. We are exploring this through partnering with growers and verification agencies to create and trade carbon credits and develop offset programmes. This would not deviate from our current business model but complement and augment our revenue model. Whilst early stage we are actively pursuing this avenue and will provide further updates as this project matures.

Togo

As reported previously, on the 18th October 2019 the Council of Ministers of the Republic of Togo published a decree granting the right for large-scale exploitation of the manganese deposit at Nayéga to the Company's subsidiary, Société Générale des Mines ("SGM"). Since that date the Company has concentrated its efforts on obtaining the required Exploitation Permit. The terms of the permit and associated protocols have been agreed, and SGM has been converted from a private to a public company, as required by law and in compliance with the draft Mining Convention. However, the exploitation permit approval has not been forthcoming. We continue to negotiate in good faith with the authorities in Togo to achieve a satisfactory outcome and will update the market in due course on developments.

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