Annual Results for the year ended 31 December 2019
30 September 2020
EDENVILLE ENERGY PLC
("Edenville", the "Company" or the "Group")
Annual Results for the year ended 31 December 2019
Edenville Energy Plc (AIM: EDL), the AIM quoted company operating the Rukwa Coal Project in southwest Tanzania ("Rukwa" or the "Rukwa Project"), is pleased to announce its audited results for the year ended 31 December 2019.
The Company's Annual Report for the year ended 31 December 2019 (the "Annual Report") will be available on the Company's website at: https://edenville-energy.com/annual-reports/ later today, pursuant to the Company's Articles of Association which allow Edenville to use electronic communications for the posting of the Annual Report.
Notice of the Company's Annual General Meeting will be announced shortly, along with information regarding how shareholders can request a hard copy of the Annual Report.
This announcement contains inside information for the purposes of Article 7 of Regulation (EU) 596/2014.
For further information please contact:
|
Edenville Energy Plc Jeff Malaihollo - Chairman Alistair Muir - CEO
|
+44 (0) 20 3934 6630 |
|
SP Angel Corporate Finance LLP (Nominated Adviser) David Hignell Charlie Bouverat Abigail Wayne
|
+44 (0) 20 3470 0470 |
|
Brandon Hill Capital Ltd (Broker) Oliver Stansfield, Jonathan Evans
|
+44 (0) 20 7936 5200 |
|
IFC Advisory Limited (Financial PR and IR) Tim Metcalfe Florence Chandler
|
+44 (0) 20 3934 6630 |
CHAIRMAN'S REPORT
2019 was a challenging year for the Company, given a lack of capital and difficult market conditions against a requirement to repay project debt, open up a new northern mining area and also further capital upgrades to the mining fleet and plant to improve efficiencies. Throughout 2019 the Company had to balance its limited financial resources whilst continuing to advance the Rukwa Project.
Consequently, during the year Company undertook two equity placings via its new broker Brandon Hill, who also became a significant shareholder themselves following direct participation in both fundraises. These capital raises enabled the Company to open up a new mining area to the north, which as expected has proven to have higher quality coal than previously mined, as well as upgrade the wash plant and improve efficiencies. These operational developments are outlined in more detail in the CEO's report below.
During the second half of 2019, following a thorough review of operations, the Board of Directors took the decision to align with a with a local Tanzanian businessman with a view of forming a strategic partnership which would address certain areas where the Company had historically fallen short. Discussions were held in the second half of 2019 and reference to the potential partnership was made in the Company's announcement of 29 November 2019.
The Board of Directors was also strengthened in September 2019 with the introduction of Alistair Muir, an experienced coal geologist with substantial coal mining and utilisation experience. Following a short transition period, Alistair took over the role of CEO, with Rufus Short stepping down to become a non-executive director. Arun Srinistava also departed the Board in 2019.
Post period
2020 has been dominated by the COVID-19 pandemic (the "Pandemic") throughout the world and unsurprisingly operations at Rukwa have naturally been affected. During the countrywide lockdown during the second quarter the Company was forced to suspend mine operations, leaving just a skeleton security force at the site. The pandemic also caused a delay in finalising all agreements with our strategic partnership. However the third quarter saw a recommencement of mining, processing and sales of coal from Rukwa and also the signing of the intended three related agreements with the strategic partner, designed to address mining, sales and the Company's capital position. As previously reported, these agreements ensure that operational costs will now be borne by the strategic partner and that the partner will purchase a minimum of 3,000 tonnes of washed coal per month, at a healthy profit margin to the Company. In addition, the strategic partner intends to utilise its extensive network within Tanzania and nearby markets to further boost sales, as the Company looks to bring monthly washed coal sales to an initial 10,000 tonnes per month, with further expansion targeted thereafter. In the current ramp up phase, a loan agreement with the strategic partners is expected to provide the Company with additional working capital.
In June 2020, the Board further changed with the appointment of Nick von Schirnding as an Independent Non-Executive Director who replaced Rufus Short. Nick has 25 years of experience in coal mining and natural resources including strategic development, M&A, driving operational change.
Looking ahead, the three agreements with the strategic partner, the renegotiation of the Company's debts, and the new Board, means that the Company is in now in a strong position to achieve its goals. In the longer term, given the significant size of the Rukwa deposit, we are still pursuing the coal to power project and have looked into opportunities of smaller power plants to supply local areas.
In closing, I would like to thank all our stakeholders, including you the Shareholders, our partners, the local authorities and local communities, my fellow Directors, our employees and contractors who have collectively overcome the significant challenges of 2019. I would also like to thank Rufus Short for his hard work over the last few years.
We look forward to reporting further progress from our Rukwa Mine in the coming months.
Dr Jeffrey Malaihollo
Chairman
CHIEF EXECUTIVE OFFICER'S REPORT
2019 Milestones
My time as Edenville CEO started in in November 2019, towards the end of this reporting period.
January 2019 got off to an encouraging start, with a second excavator being utilised in the mine alongside the existing machine. The Lamella water clarifier plant also became fully operational and the newly constructed pre-screen plant started processing test material in January 2019.
An open offer was undertaken in January to provide the Company with sufficient funds for further plant upgrades and more importantly, to open up the new Northern Mining Area, which studies showed contained a better quality of coal. The open offer was poorly subscribed, with approximately 10% of the planned £620,000 being raised. Accordingly, from February 2019, the Company took measures to conserve capital and continue supply to key customers, whilst seeking alternative funding arrangements. The resulting lack of working capital to complete the mine upgrade meant that production was adversely impacted in H1 2019 with approximately 19,000 tonnes of ROM coal processed to produce 3,900 tonnes of washed tonnes and 9,700 tonnes fine coal tonnes between 1 January 2019 and 31 May 2019.
On 29 April 2019 the Company announced a successful conditional fundraising of £510,000 (before expenses) and made preparations to apply some of this funding to the project development. The main areas targeted were opening up the pit in the Northern Mining Area and small upgrades on the plant and infrastructure. The Northern Mining Area was duly opened in June 2019 and has and continues to yield better quality coal than previously mined at Rukwa. Plant upgrades also took place and were completed in the third quarter. However, a lack of capital following debt service and repayment in Tanzania impacted the Company's ability to increase production to targeted levels, which subsequently impacted the expected sales and revenue streams.
In September 2019 commencement of the repayment of the outstanding Lind debt began and a further capital raise of £300,000 (before expenses) at 0.05p was announced on 6 September 2019. I also joined the Board at that time initially as a non-executive director, bringing experience as a coal geologist with strong coal mining and utilisation experience.
On 1 November, having grown increasingly comfortable with the investment potential Edenville offered, I replaced Rufus Short as CEO. Following several weeks in Tanzania the historic issues the Company had faced became apparent and in November 2019, the Board elected to restructure the business to ensure profitability at the Rukwa Coal Project. On 29 November 2019, the Company announced initial discussions with a Strategic Investor had commenced which were later formalised in a Heads of Terms Agreement. Whilst the actual agreements outlined in the Heads of Terms wouldn't be finalised until 2020, the revised operational model ensured the Company was no longer liable for costs related to increasing production. This had continually hampered the Company's working capital position and thereby its ability to operate efficiently. A Contract Coal Mining Agreement, a Sales & Marketing Agreement and a Loan Agreement have all now been entered into and are covered in more detail below.
Industrial Consumers
Following the various upgrades to the plant, capacity is currently circa 12,500tpm of washed coal. At the present this should be achievable at a technical level, although prior to these upgrades the plant had historically peaked at around 3,000tpm.
Total coal sales in the year of 2019 were 5,650 tonnes. The lack of washed coal in stockpiles, given liquidity and thereby mining constraints, made it difficult to establish the Company as a reliable producer in the region in 2019, nor for it to take advantage of the substantial contracts available in the neighbouring countries of Rwanda, Uganda, Burundi or the DRC. In December 2019 the company announced 2 contracts totalling 9,000tpm. The execution under these was impacted by the Pandemic. However, with the agreements now in place with the strategic investor, who has also committed for a further up to 5,000tpm, the Company hopes they can be satisfied when sufficient stockpiles have been established and combined with additional orders expected to be generated under the Sales & Marketing Agreement.
As a by-product a significant amount of fine coal product is also produced. Whilst this has a lower heating value than the Company's principal product (and is therefore better suited to on or near site utilisation) the Company continues to explore a number of avenues to monetise this. The reprocessing of fines or applying different technologies would also potentially create a higher quality and more desirable and saleable product. If the Company is successful in identifying a market for its fines production, it expects that revenue would fall to the bottom line and boost profitability.
Coal to Power
On 14 February 2019 Tanesco informed the Company that it had been unsuccessful in moving through the Request for Qualification process to supply power to Tanesco. To date no clear explanation has been given for this decision and as far as the Company is aware no other privately held coal projects in Tanzania progressed successfully through the process. The Company's Directors remain confident that if and when the transmission line infrastructure is built to Sumbawanga, the opportunity for a power plant development at the Rukwa Coal Project will continue to move forward. Edenville is also seeking to advance discussions on smaller plant options to satisfy local electricity demand and possible export options into Zambia.
The AFR RI-3A Tanzania - Zambia Transmission Interconnector project, which is being part financed by the World Bank, is continuing to move forward and could have positive implications for Edenville's planned coal to power business model. The financing agreement for credit is now in place and the procurement plan is continuing to progress. As previously stated, the Company's long term plan is to provide electricity to this transmission grid once it is completed and we are continuing to work towards this goal. Currently completion is stated as being in 2024.
Post period (1st January 2020 to 31st August 2020)
The post reporting period has been characterised by:
- A restructuring of the operation of the Rukwa Project and closing of three agreements with a strategic partner.
- The impact of the Pandemic on Rukwa and Tanzania as a whole.
- Adverse weather events that impacted production in the early part of the year.
On the restructuring side the Company now has in place three new contracts. These agreements have been reached with 2 different companies, although both have the same principle shareholder, a Dubai-based Tanzanian with extensive experience in logistics in east Africa. The three contracts include the Coal Mining Agreement and a US$1million Loan Agreement with Infrastructure and Logistics Tanzania Ltd ("ILTL"), and a Sales and Marketing agreement with MarTek Ltd.
It has been difficult to assess the impact of the Pandemic as Tanzania has not tested or reported details on cases in the country. The Company understands that the virus peaked at the same time as Europe with some lockdown and social distancing practices in place. Although the President announced a return to "business as usual" in mid-May 2020, logistically the movement of people in and out of Tanzania remained very difficult until the late summer.
Rukwa and the complete Western Highlands region experienced an extended weather event during the 2019-20 wet season with extensive rains from December to April. This again impacted production in January to March, before the temporary closure of the mine due to the Pandemic. Some production was taken from the southern pit during the first half of the year, but access to the northern pit became problematic due to road conditions. These were resolved post the Covid-19 enforced lockdown as advised in the Company's announcement of 20 August 2020.
With the assistance of two rounds of funding the Company is in an improved financial position with its existing legacy UK debt also settled. The significantly smaller outstanding Tanzanian debt will be settled with some of the proceeds from the loan facility of US$1M from ILTL. The equity funding rounds were as follows:
- £700,000 was raised in January 2020 at a price of 0.04p per share and was subscribed for by existing major shareholders and one new major investor.
- £500,000 was raised in June 2020 also at a price of 0.04p all the funds coming from the same existing major shareholders.
Lind Partners LLC
In 2018, Edenville entered into a loan facility with Lind Partners LLC ("Lind") for principal of US$750,000 to fund the final construction parts of the mine at Rukwa. Repayment of the loan commenced in September 2019 with cash payments of approximately US51,000 per month, though Edenville does have the option of payment through shares. Payments were made on a regular basis to Lind between September 2019 to March 2020 inclusive, before a payment holiday was agreed with Lind as a result of the disruption related to the Pandemic. Currently Edenville's outstanding debt to Lind totals US$580,000.
Corporate social responsibility
The Company has continued to take its corporate and social responsibility very seriously. We understand that Edenville must meet the social requirements of an operator in Tanzania. The construction of a mining operation at Rukwa has already provided several opportunities to improve infrastructure for the local community, the most visible being the construction of the road from Kipandi, past Mkomolo village and beyond, to the mine. This has opened up a major artery in the area which services farmers, the local population and communications as well as the mine itself.
Wherever possible we have sought to employ local people from surrounding villages. Many of the operators and management are local and are proving to be highly competent and skilled employees. The positive social benefits also overflow into the general community where enterprising individuals are providing services such as food supply for workers.
Relinquishment of licences
There has been no new relinquishment. PL6098/2009 Muze which was identified for relinquishment last year has been released however Government records still indicate that it is held by Edenville.
Summary
In summary 2019 was a difficult year, primarily given liquidity constraints. However, despite clear headwinds the Company did still reach a number of milestones in terms of upgrades to the wash plant and opening the more attractive Northern Mining Area. It also identified a strategic partner moving forward, which we expect to address previous issues that arose in the investment case.
Accordingly, following the closing of these three agreements with the strategic partner over the summer, I believe the Company is now well placed to take a major step forward through the adoption of this new operational structure that ensures Edenville draws revenue from every tonne of washed coal sold.
On the operational side the Company is looking forward to seeing production increase at Rukwa and we have set ourselves an aspirational target of securing 25% of the local market. If that can be achieved, we will be pleased to tackle the problem of boosting production from the current wash plant or investing in additional capacity. Further with the completion of the Presidential elections the Company will look forward to engaging with the government on potential power scenarios.
Alistair Muir
Chief Executive Officer
GROUP STATEMENT OF COMPREHENSIVE INCOME
Year Ended 31 December 2019
|
|
Note |
2019 |
2018 |
|
|
|
£ |
£ |
|
Revenue |
5 |
233,414 |
337,125 |
|
Cost of sales |
|
(982,261) |
(1,191,312) |
|
|
|
|
|
|
|
|
|
|
|
Gross loss |
|
(748,847) |
(854,187) |
|
|
|
|
|
|
Administration expenses |
6 |
(904,410) |
(839,515) |
|
|
|
|
|
|
Share based payments |
26 |
(16,077) |
(76,319) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group operating loss |
|
(1,669,334) |
(1,770,021) |
|
|
|
|
|
|
Finance income |
10 |
113 |
529 |
|
Finance costs |
11 |
(177,843) |
(16,212) |
|
|
|
|
|
|
|
|
|
|
|
Loss on operations before taxation |
|
(1,847,064) |
(1,785,704) |
|
|
|
|
|
|
Income tax |
12 |
- |
- |
|
|
|
|
|
|
|
|
|
|
|
Loss for the year |
|
(1,847,064) |
(1,785,704) |
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive (loss)/income |
|
|
|
|
|
|
|
|
|
Item that will or may be reclassified to the profit and loss: |
|
|
|
|
Loss/(gain) on translation of overseas subsidiary |
|
(235,401) |
378,531 |
|
|
|
|
|
|
Total comprehensive loss for the year |
|
(2,082,465) |
(1,407,173) |
|
|
|
|
|
|
Attributable to: |
|
|
|
|
Equity holders of the Company |
|
(2,079,997) |
(1,404,725) |
|
Non-controlling interest |
|
(2,468) |
(2,448) |
|
|
|
|
|
|
Earnings per Share (pence) |
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share |
13 |
(0.05) |
(0.12) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All operating income and operating gains and losses relate to continuing activities.
No separate statement of comprehensive income is provided as all income and expenditure is disclosed above.
GROUP STATEMENT OF FINANCIAL POSITION
As at 31 December 2019
Company Registered Number 05292528
|
|
Note |
31 December 2019 |
31 December 2018 |
1 January 2018 |
|
|
|
|
|
As restated |
|
|
|
|
|
£ |
£ |
|
|
|
Non-current assets |
|
|
|
|
|
|
Property, plant and equipment |
14 |
6,085,403 |
6,582,394 |
1,059,583 |
|
|
Right of use assets |
15 |
97,727 |
- |
- |
|
|
Intangible assets |
16 |
321,368 |
332,466 |
5,071,318 |
|
|
|
|
|
|
|
|
|
|
|
6,504,498 |
6,914,860 |
6,130,901 |
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
Inventories |
17 |
247,538 |
256,082 |
- |
|
|
Trade and other receivables |
18 |
365,541 |
396,671 |
299,666 |
|
|
Cash and cash equivalents |
19 |
41,110 |
160,042 |
951,078 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
654,189 |
812,795 |
1,250,744 |
|
|
Current liabilities |
|
|
|
|
|
|
Trade and other payables |
20 |
(897,122) |
(556,063) |
(146,797) |
|
|
Borrowings |
21 |
(520,820) |
(288,118) |
- |
|
|
|
|
|
|
|
|
|
|
|
(1,417,942 |
(844,181) |
(146,797) |
|
|
|
|
|
|
|
|
|
Current assets less current liabilities |
|
(763,753) |
(31,386) |
1,1103,947) |
|
|
|
|
|
|
|
|
|
Total assets less current liabilities |
|
5,740,745 |
6,883,474 |
7,234,848 |
|
|
|
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
|
Borrowings |
21 |
(284,903) |
(282,076) |
- |
|
|
|
|
|
|
|
|
|
|
|
5,455,842 |
6,601,398 |
7,234,848 |
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
Called-up share capital |
22 |
3,414,935 |
2,722,036 |
2,679,750 |
|
|
Share premium account |
|
18,811,157 |
18,566,642 |
17,910,928 |
|
|
Share option reserve |
|
281,502 |
275,463 |
309,943 |
|
|
Foreign currency translation reserve |
|
698,095 |
933,496 |
554,965 |
|
|
Retained earnings |
|
(17,736,330) |
(15,884,731) |
(14,212,274) |
|
|
|
|
|
|
|
|
|
Attributable to the equity shareholders of the company |
5,649,359 |
6,612,906 |
7,243,312 |
|
|
|
Non- controlling interests |
|
(13,517) |
(11,508) |
(8,464) |
|
|
|
|
|
|
|
|
|
Total equity |
|
5,455,842 |
6,601,398 |
7,234,848 |
|
|
|
|
|
|
|
|
The financial statements were approved by the board of directors and authorised for issue on 29 September 2020 and signed on its behalf by:
Alistair Muir
Director
GROUP STATEMENT OF CHANGES IN EQUITY
Year Ended 31 December 2019
|
|
--------------------------------------------------Equity Interests--------------------------------------- |
|
|
|||||
|
|
Share Capital |
Share Premium |
Retained Earnings Account |
Share Option Reserve |
Foreign Currency Translation Reserve |
Total |
Non-controlling interest |
Total |
|
|
£ |
£ |
£ |
£ |
£ |
£ |
£ |
£ |
|
At 1 January 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issue of share capital |
42,286 |
697,714 |
- |
- |
- |
740,000 |
- |
740,000 |
|
Cost of issue |
- |
(42,000) |
- |
- |
- |
(42,000) |
- |
(42,000) |
|
Share options/warrants charge |
- |
- |
- |
76,319 |
- |
76,319 |
- |
76,319 |
|
Cancellation of share options |
- |
- |
110,799 |
(110,799) |
- |
- |
- |
- |
|
Foreign currency translation |
- |
- |
- |
- |
378,531 |
378,531 |
(746) |
377,785 |
|
Loss for the year |
- |
- |
(1,783,256) |
- |
- |
(1,783,256) |
(2,448) |
(1,785,704) |
|
Non- controlling interest share of goodwill |
- |
- |
- |
- |
- |
- |
150 |
150 |
|
|
_ |
|
|
|
|
|
|
|
|
At 31 December 2018 |
2,722,036 |
18,566,642 |
(15,884,731) |
275,463 |
933,496 |
6,612,906 |
(11,508) |
6,601,398 |
|
|
|
|
|
|
|
|
|
|
|
Issue of share capital |
692,899 |
244,515 |
- |
- |
- |
937,414 |
- |
937,414 |
|
Share options/warrants charge |
- |
- |
- |
16,077 |
- |
16,077 |
- |
16,077 |
|
Cancellation of share options |
- |
- |
10,038 |
(10,038) |
- |
- |
- |
- |
|
Changes on initial application of IFRS 16 |
- |
- |
(17,042) |
- |
- |
(17,042) |
- |
(17,042) |
|
Foreign currency translation |
- |
- |
- |
- |
(235,401) |
(235,401) |
- |
(235,401) |
|
Loss for the year |
- |
- |
(1,844,595) |
- |
- |
(1,844,595) |
(2,468) |
(1,847,063) |
|
Non- controlling interest share of goodwill |
- |
- |
- |
- |
- |
- |
459 |
- |
|
|
_ |
__ |
____ |
__ |
|
|
__ |
__ |
|
At 31 December 2019 |
3,414,935 |
18,811,157 |
(17,736,330) |
281,502 |
698,095 |
5,469,359 |
(13,517) |
5,455,842 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROUP CASH FLOW STATEMENTS
Year Ended 31 December 2019
|
|
|
Year ended 31 December |
Year ended 31 December |
|
|
Note |
2019 |
2018 |
|
|
|
£ |
£ |
|
Cash flows from operating activities |
|
|
|
|
Operating loss |
|
(1,669,334) |
(1,770,021) |
|
Depreciation |
|
234,290 |
229,732 |
|
Amortisation |
|
44,204 |
57,928 |
|
Interest paid |
|
(23,000) |
- |
|
Expected credit losses |
|
26,804 |
- |
|
Share based payments |
|
16,077 |
76,319 |
|
Increase in inventories |
|
8,544 |
(256,082) |
|
Increase in trade and other receivables |
|
26,741 |
(77,196) |
|
Increase in trade and other payables |
|
476,883 |
390,069 |
|
Foreign exchange differences |
|
(32,196) |
37,584 |
|
|
|
|
|
|
Net cash outflow from operating activities |
|
(890,987) |
(1,311,667) |
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
Purchase of exploration and evaluation assets |
|
- |
(468,145) |
|
Purchase of property, plant and equipment |
|
(33,559) |
(259,601) |
|
Finance income |
|
113 |
529 |
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
(924,433) |
(727,217) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
Borrowings |
|
100,000 |
- |
|
Proceeds from issue of convertible loan notes |
|
- |
548,853 |
|
Repayment of convertible loan notes |
|
(198,644) |
|
|
Repayment of lease liabilities |
|
(23,241) |
|
|
Lease interest |
|
(10,016) |
|
|
Proceeds from issue of ordinary shares |
|
937,414 |
740,000 |
|
Share issue costs |
|
- |
(42,000) |
|
|
|
|
|
|
|
|
|
|
|
Net cash inflow from financing activities |
|
805,513 |
1,246,853 |
|
|
|
|
|
|
|
|
|
|
|
Net increase/(decrease) in cash and cash equivalents |
|
(118,920) |
(792,031) |
|
Cash and cash equivalents at beginning of year |
|
160,042 |
951,078 |
|
Effect of foreign exchange rate changes on cash and cash equivalents |
|
(12) |
995 |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year |
19 |
41,110 |
160,042 |
|
|
|
|
|
|
|
|
|
|
NOTES TO THE GROUP FINANCIAL STATEMENTS
Year Ended 31 December 2019
1. General Information
Edenville Energy Plc is a public limited company incorporated in England and Wales. The address of the registered office is Aston House, Cornwall Avenue, London, N3 1LF. The company's shares are listed on AIM, a market operated by the London Stock Exchange.
The principal activity of the Group is the exploration, development and mining of energy commodities predominantly coal in Africa.
2. Group Accounting Policies
Basis of preparation and statement of compliance
The Group's financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, IFRIC Interpretations and the parts of the Companies Act 2006 applicable to companies reporting under IFRS. The Group's financial statements have also been prepared under the historical cost convention, except for the measurement to fair value of assets and financial instruments as described in the accounting policies set out below.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Group's financial statements are disclosed in Note 4 of the 2019 Annual Report.
The Company's financial statements continue to be prepared under IFRS. Therefore, the Company's financial statements and the associated notes, together with the auditors' report on these financial statements, are presented separately from the Group.
Going concern
At 31 December 2019 the Group had cash balances totalling £41,110.
Covid 19 resulted in a countrywide lockdown in Tanzania forcing the Group to suspend its mining operations
leaving just a skeleton security force at the site. The pandemic also caused a delay in finalising all agreements with our strategic partnership. Mining operations re-commenced on 3 August 2020.
The Group subsidiary Edenville International (Tanzania) Limited has entered into three related agreements with the strategic partner, designed to address mining, sales and the groups's capital position. These agreements ensure that operational costs will now be borne by the strategic partner and that the partner will purchase a minimum of 3,000 tonnes of washed coal per month, at a healthy profit margin to the Group. In addition, the strategic partner will utilise its extensive network within Tanzania and nearby markets to further boost sales, as the Group looks to bring monthly washed coal sales to an initial 10,000 tonnes per month, with further expansion targeted thereafter. In the current ramp up phase, a loan agreement of US$1,000,000 with the strategic partners is expected to provide the Company with sufficient working capital. The loan agreement remains undrawn at present.
Following the year end the Group raised a further £500,000 before expenses by planning 1,250,000 ordinary share of 0.02p for 0.04p.
The Group meets its day to day working capital requirements through the sale of its coal resource, and monies raised in follow-on offerings. The Group's forecasts and projections indicate that the Group has sufficient cash reserves to operate within the level of its current facilities. These forecasts are based upon expected saleable levels of production.
Expenditure on excavation is related to the level of orders and both head office costs and Tanzanian administration costs can be reduced if it is found that order levels together with available cash resources are insufficient to meet the Group's working capital needs.
Whilst it is the Group's intention to rely on the available cash reserves, future income generated and if required reductions in its cost base, a negative variance in the forecasts and projections would make the Group's ability to continue as a going concern dependent on an additional fund raise. If the Group's forecasts are not achieved, the Directors would seek to raise the additional funds through equity issues which would be dependent upon investor appetite. After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future.
The Company therefore continues to adopt the going concern basis in preparing both its consolidated financial statements and for its own financial statements
Adoption of new and revised standards and changes in accounting policies
In the current year, the following new and revised standards and interpretations have been adopted by the Group.
IFRS 9 Prepayments features with negative compensation
IFRS 16 Leases
Amendments to IFRS 9 has had not had a material impact on the Group. The impact of IFRS 16 is detailed in notes 15 and 21.
Standards and interpretations in issue but not yet effective or not yet relevant
At the date of authorisation of these financial statements the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective:
|
|
|
Effective date for accounting period beginning on or after |
|
IFRS 3 |
Amendments to clarify the definition of a business |
1 January 2020 |
|
IFRS 3 |
Amendments updating a reference to The Conceptual Framework |
1 January 2022* |
|
IFRS 7,9, IAS 39 |
Amendments regarding pre-replacement issues in the context of IBOR reform |
1 January 2020 |
|
IFRS 7,9,16 |
Amendments regarding replacement issues in the context of the IBOR reform |
1 January 2021* |
|
IFRS 16 |
Amendment to provide lessees with an exemption from assessing whether a COVID-1+ related rent concession is a lease modification |
1 June 2020* |
|
IFRS 17 |
Insurance Contracts - new standard |
1 January 2023* |
|
IFRS 17 |
Amendments to address the implantation challenges that were identified after IFRS 17 was published |
I January 2023* |
|
IAS 1 |
Amendments regarding the classification of liabilities |
1 January 2023* |
|
IAS 8 |
Amendments regarding the definition of material |
1 January 2020 |
|
IAS 16 |
Amendments prohibiting a company from deducting the cost of property, plant and equipment amounts received from selling items produced while the company is preparing the asset for its intended use. |
1 January 2022* |
|
IAS 37 |
Amendments regarding the costs to include when assessing whether a contract is onerous |
1 January 2022* |
*Not yet endorsed by the European Union.
The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the Group's financial statements.
Share based payments
The Group operates a number of equity-settled, share-based compensation plans, under which the entity receives services from employees as consideration for equity instruments (options) of the Group. The fair value of the employee services received in exchange for the grant of options is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted:
· including any market performance conditions;
· excluding the impact of any service and non-market performance vesting conditions (for example, profitability, sales growth targets and remaining an employee of the entity over a specified time period); and
· excluding the impact of any non-vesting conditions (for example, the requirement of employees to save).
Assumptions about the number of options that are expected to vest include consideration of non-market vesting conditions. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each reporting period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity.
When the options are exercised, the Group issues new shares. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised
Basis of consolidation
The Group's financial statements consolidate the financial statements of Edenville Energy Plc and all its subsidiary undertakings (Edenville International (Seychelles) Limited, Edenville International (Tanzania) Limited and Edenville Power (TZ) Limited) made up to 31 December 2019. Profits and losses on intra-group transactions are eliminated on consolidation.
Subsidiaries are all entities over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases.
Business combinations
The Group adopts the acquisition method in accounting for the acquisition of subsidiaries. On acquisition the cost is measured at the fair value of the assets given, plus equity instruments issued and liabilities incurred or assumed at the date of exchange. The assets acquired and liabilities and contingent liabilities assumed in a business combination are measured at their fair value at the date of acquisition. Any excess of the fair value of the consideration over the fair value of the identifiable net assets acquired is recorded as goodwill.
Any deficiency of the fair value of the consideration below the fair value of identifiable net assets acquired is credited to the income statement in the period of the acquisition.
The results of subsidiary undertakings acquired or disposed of during the year are included in the group statement of comprehensive income statement from the effective date of acquisition or up to the effective date of disposal.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the group. Inter-company transactions and balances between group companies are eliminated.
Revenue recognition
consideration received or receivable, and represent amounts receivable for goods supplied, stated net of discounts, returns and value added taxes. Under IFRS 15 there is a five-step approach to revenue recognition which is adopted across all revenue streams. The process is:
Step 1: Identify the contract(s) with a customer;
Step 2: Identify the performance obligations in the contract;
Step 3: Determine the transaction price;
Step 4: Allocate the transaction price to the performance obligations in the contract; and
Step 5: Recognise revenue as and when the entity satisfies the performance obligation.
The Group has one revenue stream being the sale of coal and other aggregate bi-products produced by the Group. Sales are predominantly made at the Group's premises as customers collect their quantities from the mine. Such revenue is recognised at the point of contact at a pre-agreed fixed price on a per tonnage basis. For deliveries made to customer premises, revenue is recognised at the point of which the products leave the Group's premises
Presentational and functional currency
This financial information is presented in pounds sterling, which is the Group's functional currency.
In preparing the financial statements of individual entities, transaction in currencies other than the entity's functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the balance sheet date.
For the purposes of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations (including comparatives) are expressed in pounds sterling using exchange rates prevailing at the balance sheet date. Income and expense items are translated at the average exchange rate for the period. Exchange differences arising, if any, are classified as equity and transferred to the Group's foreign currency translation reserve. Such translation differences are recognised in the income statement in the period in which the foreign operation is disposed.
Financial instruments
Financial assets
Financial assets comprise investments, cash and cash equivalents and receivables. Unless otherwise indicated, the carrying amounts of the Group's financial assets are a reasonable approximation of their fair values.
Classification and measurement
The Group classifies its financial assets into the following categories: those to be measured subsequently at fair value (either through other comprehensive income (FVOCI) or through the income statement (FVPL) and those to be held at amortised cost.
Classification depends on the business model for managing the financial assets and the contractual terms of the cash flows.
Management determines the classification of financial assets at initial recognition. The Group's policy with regard to financial risk management is set out in note 3. Generally, the group does not acquire financial assets for the purpose of selling in the short term.
The group's business model is primarily that of "hold to collect" (where assets are held in order to collect contractual cash flows). When the group enters into derivative contracts, these transactions are designed to reduce exposures relating to assets and liabilities, firm commitments or anticipated transactions.
Financial Assets
The Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss
ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original EIR. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.
ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).
For trade receivables (not subject to provisional pricing) and other receivables due in less than 12 months, the Group applies the simplified approach in calculating ECLs, as permitted by IFRS 9. Therefore, the Group does not track changes in credit risk, but instead, recognises a loss allowance based on the financial asset's lifetime ECL at each reporting date.
The Group considers a financial asset in default when contractual payments are 90 days past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows and usually occurs when past due for more than one year and not subject to enforcement activity.
At each reporting date, the Group assesses whether financial assets carried at amortised cost are credit impaired. A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.
Financial Assets held at fair value through other comprehensive income (FVOCI)
The classification applies to the following financial assets:
- Debt instruments that are held under a business model where they are held for the collection of contractual cash flows and also for sale ("collect and sale") and which have cash flows that meet the SPPI criteria. An example would be where trade receivable invoices for certain customers were factored from time to time. All movements in the fair value of these financial assets are taken through comprehensive income , except for the recognition of impairment gains and losses, interest revenue (including transaction costs by applying the effective interest method), gains or losses arising on derecognition and foreign exchange gains and losses which are recognised in the income statement. When the financial asset is derecognised, the cumulative fair value gain or loss previously recognised in other comprehensive income is reclassified to the income statement.
- Equity investments where the group has irrevocably elected to present fair value gains and losses on revaluation of such equity investments, including any foreign exchange component, are recognised in other comprehensive income.
- When equity investment is derecognised, there is no reclassification of fair value gains or losses previously recognised in other comprehensive income to the income statement. Dividends are recognised in the income statement when the right to receive payment is established.
Financial Assets held at fair value through profit or loss (FVPL)
The classification applies to the following financial assets. In all cases, transaction costs are immediately expensed to the income statement.
- Debt instruments that do not meet the criteria of amortised costs or fair value through other comprehensive income.
- Equity investments which are held for trading or where the FVOCI election has not been applied. All fair value gains or losses and related dividend income are recognised in the income statement.
- Derivatives which are not designated as a hedging instrument. All subsequent fair value gains or losses are recognised in the income statement.
Derecognition
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.
On derecognition of a financial asset measured at amortised cost, the difference between the asset's carrying amount and the sum of the consideration received and receivable is recognised in profit or loss.
Financial Liabilities
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. The Group's financial liabilities include trade and other payables and loans.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by IFRS 9. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognised in the statement of profit or loss and other comprehensive income.
Trade and other payables
After initial recognition, trade and other payables are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in the statement of profit or loss and other comprehensive income when the liabilities are derecognised, as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss and other comprehensive income.
Derecognition
A financial liability is derecognised when the associated obligation is discharged or cancelled or expires.
When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in profit or loss and other comprehensive income.
Liabilities within the scope of IFRS 9 are classified as financial liabilities at fair value through profit and loss or other liabilities, as appropriate.
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.
Financial liabilities included in trade and other payables are recognised initially at fair value and subsequently at amortised cost.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined using the average costing method. Components of inventories consist of coal, parts and supplies, net of allowance for obsolescence. Coal inventories represent coal contained in stockpiles, coal that has been mined and hauled to the wash plant (raw coal) for processing and coal that has been processed (crushed, washed and sized) and stockpiled for shipment to customers.
The cost of raw and prepared coal comprises extraction costs, direct labour, other direct costs and related production overheads (based on normal operating capacity). It excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses
The Company performs inventory obsolescence at each reporting date. In determining whether inventories are obsolete, the Company assesses the age at which inventories held in the store in order to make an assessment of the inventory write down to net realisable value.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand, demand deposits and other short term highly liquid investments that are readily convertible to a known amount of cash and are subject to insignificant risk of changes in value.
Convertible loan notes
The convertible loan notes issued by the Company are classified separately as financial liabilities in accordance with the substance of contractual arrangements.
Property, plant and equipment
Property, plant and equipment are stated at cost on acquisition less accumulated depreciation and accumulated impairment losses.
Depreciation is provided on all property, plant and equipment categories at rates calculated to write off the cost, less estimated residual value on a reducing balance basis over their expected useful economic life. The depreciation rates are as follows:
|
|
Basis of depreciation |
|
|
|
|
Fixtures, fittings and equipment |
25% reducing balance |
|
Plant and machinery |
5 years straight line or 25% reducing balance |
|
Office equipment |
25% reducing balance |
|
Motor vehicles |
25% reducing balance |
Costs capitalised include the purchase price of an asset and any costs directly attributable to bringing it into working condition for its intended use.
Production assets
Coal land, mine development costs, which include directly attributable construction overheads, land and coal rights are recorded at cost. Coal land and mine development are depleted and amortised, respectively, using the units of production method, based on estimated recoverable tonnage. The depletion of coal rights and depreciation of restoration costs are expensed by reference to the estimated amount of coal to be recovered over the expected life of the operation.
Coal Mine Reclamation Costs
Future cost requirements for land reclamation are estimated where surface operations have been conducted, based on the Group's interpretation of the technical standards of regulations enacted by the Government of Tanzania. These costs relate to reclaiming the pit and support acreage at surface mines and sealing portals at deep mines. Other costs include reclaiming refuse and slurry ponds as well as related termination/exit costs.
The Group records asset retirement obligations that result from the acquisition, construction or operation of long-lived assets at fair value when the liability is incurred. Upon the initial recognition of a liability, that cost is capitalised as part of the related long-lived asset and expensed over the useful life of the asset. The asset retirement costs are recorded in Land, Coal Rights and Restoration Costs.
The Group expenses reclamation costs prior to the mine closure. The establishment of the end of mine reclamation and closure liability is based upon permit requirements and requires significant estimates and assumptions, principally associated with regulatory requirements, costs and recoverable coal lands. Annually, the end of mine reclamation and closure liability is reviewed and necessary adjustments are made, including adjustments due to mine plan and permit changes and revisions of cost and production levels to optimize mining and reclamation efficiency. The amount of such adjustments is reflected in the year end reclamation provision calculation.
Stripping (waste removal) costs
As part of its mining operations, the Group incurs stripping (waste removal) costs both during the production phase of its operations. Stripping activities undertaken during the production phase of a surface mine (production stripping) are accounted for as set out below.
After the commencement of production, further development of the mine may require a phase of unusually high stripping that is similar in nature to development phase stripping. The cost of such stripping is accounted for in the same way as development stripping (as outlined above). Production stripping is generally considered to create two benefits, being either the production of inventory or improved access to the ore to be mined in the future. Where the benefits are realised in the form of inventory produced in the period, the production stripping costs are accounted for as part of the cost of producing those inventories.
Where the benefits are realised in the form of improved access to ore to be mined in the future, the costs are recognised as a non-current asset, referred to as a 'stripping activity asset', if the following criteria are met:
a) Future economic benefits (being improved access to the ore body) are probable;
b) The component of the ore body for which access will be improved can be accurately identified; and
c) The costs associated with the improved access can be reliably measured
If any of the criteria are not met, the production stripping costs are charged to profit or loss as operating costs as they are incurred.
In identifying components of the ore body, the Group works closely with the mining operations personnel for each mining operation to analyse each of the mine plans. Generally, a component will be a subset of the total ore body, and a mine may have several components. The mine plans, and therefore the identification of components, can vary between mines for a number of reasons. These include, but are not limited to: the type of commodity, the geological characteristics of the ore body, the geographical location, and/or financial considerations.
The stripping activity asset is initially measured at cost, which is the accumulation of costs directly incurred to perform the stripping activity that improves access to the identified component of ore, plus an allocation of directly attributable overhead costs. If incidental operations are occurring at the same time as the production stripping activity, but are not necessary for the production stripping activity to continue as planned, these costs are not included in the cost of the stripping activity asset.
If the costs of the inventory produced and the stripping activity asset are not separately identifiable, a relevant production measure is used to allocate the production stripping costs between the inventory produced and the stripping activity asset. This production measure is calculated for the identified component of the ore body and is used as a benchmark to identify the extent to which the additional activity of creating a future benefit has taken place. The Group uses the expected volume of waste extracted compared with the actual volume for a given volume of ore production of each component.
The stripping activity asset is accounted for as an addition to, or an enhancement of, an existing asset, being the mine asset, and is presented as part of 'Intangible assets' in the statement of financial position. This forms part of the total investment
Right of use assets
In the previous period, the Group only recognised lease assets and lease liabilities in relation to leases that were classified as "finance leases" under IAS 17 "Leases". The assets were presented in property, plant and equipment and the liabilities as part of the Group's borrowings. For adjustments recognised on adoption of IFRS 16 on 1 January 2019, please refer to note 15.
Right-of-use assets are measured at cost, which is made up of the initial measurement of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the asset at the end of the lease, less any lease incentives received.
The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term.
The Group also assesses the right-of-use asset for impairment when such indicators exist.
The right-of-use assets are included in a separate line within non-current assets on the Consolidated Balance Sheet
Finance costs
Finance costs of debt, including premiums payable on settlement and direct issue costs are charged to the income statement on an accruals basis over the term of the instrument, using the effective interest method.
Income taxation
The taxation charge represents the sum of current tax and deferred tax.
The tax currently payable is based on the taxable profit for the period using the tax rates that have been enacted or substantially enacted by the balance sheet date. Taxable profit differs from the net profit as reported in the income statement
because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.
Deferred taxation
Deferred tax is recognised, using the liability method, in respect of temporary differences between the carrying amount of the Group's assets and liabilities and their tax base. Deferred tax liabilities are offset against deferred tax assets within the same taxable entity or qualifying local tax group. Any remaining deferred tax asset is recognised only when, on the basis of all available evidence, it can be regarded as probable that there will be suitable taxable profits, within the same jurisdiction, in the foreseeable future against which the deductible temporary difference can be utilised. Deferred tax is determined using tax rates that are expected to apply in the periods in which the asset is realised or liability settled, based on tax rates and laws that have been enacted or substantially enacted by the balance sheet date. Deferred tax is recognised in the income statement, except when the tax relates to items charged or credited directly in equity, in which case the tax is also recognised in equity.
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as deduction, net of tax, from the proceeds.
Goodwill
At the date of acquisition of a subsidiary undertaking, fair values are attributed to the acquired identifiable assets, liabilities and contingent liabilities. Goodwill represents the difference between the fair value of the purchase consideration and the acquired interest in the fair value of those net assets.
Goodwill is initially recognised at fair value. Any negative goodwill is credited to the income statement in the year of acquisition. If an undertaking is subsequently sold, the amount of goodwill carried on the balance sheet at the date of disposal is charged to the income statement in the period of disposal as part of the gain or loss on disposal.
Goodwill is associated with exploration and evaluation and development assets, the impairment of which is discussed in the accounting policy note for exploration and evaluation assets.
Operating segments
Operating segments are reported in a manner consistent with the internal reporting provided to the chief executive officer.
The Board considers that the Group's project activity constitutes one operating and reporting segment, as defined under IFRS 8.
The total profit measures are operating profit and profit for the year, both disclosed on the face of the combined income statement.
Share Capital
The Group's ordinary shares are classified as equity instruments.
3. Financial Risk Management
Fair value estimation
The carrying value less impairment provision of trade receivables and payables is assumed to approximate their fair values, due to their short-term nature. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the group for similar financial instruments.
4. Critical accounting estimates and areas of judgement
The calculation of value in use is most sensitive to the following assumptions:
· Production volumes
· Sales volumes
· Discount rates
· Coal prices
· Operating overheads
Estimated production volumes are based on the production capability of the plant and estimated customer demand.
The Group generally estimates value in use using a discounted cash flow model. The future cash flows are adjusted for risks specific to the asset and discounted using a pre-tax discount rate of 10%.
The directors have assessed the value of exploration and evaluation expenditure and development assets and intangible assets. In their opinion there has been no impairment loss to these intangible assets in the period, other than the amounts charged to the income statement.
Share based payments (note 26)
The estimate of share based payments costs requires management to select an appropriate valuation model and make decisions about various inputs into the model including the volatility of its own share price, the probable life of the options, the vesting date of options where non-market performance conditions have been set and the risk free interest rate.
Valuation of provision for restoration costs (note 14)
The company makes full provision for the future cost of rehabilitating mine sites and related production facilities on a discounted basis at the time of developing the mines and installing and using those facilities. The rehabilitation provision represents the present value of rehabilitation costs relating to mine sites, which are expected to be incurred in the future, which is when the producing mine properties are expected to cease operations. These provisions have been created based on the company's internal estimates and a third party estimate from an independent consultant. Assumptions based on the current economic environment have been made, which management believes are a reasonable basis upon which to estimate the future liability. These estimates are reviewed regularly to take into account any material changes to the assumptions. However, actual rehabilitation costs will ultimately depend upon future market prices for the necessary rehabilitation works required that will reflect market conditions at the relevant time. Furthermore, the timing of rehabilitation is likely to depend on when the mines cease to produce at economically viable rates. This, in turn, will depend upon future coal prices, which are inherently uncertain.
Management increases reclamation costs estimates at an annual inflation rate to the anticipated future mine closure date. This inflation rate is based on the historical rate for the industry for a comparable.
Due to limited mining activity to date, management have assessed the liability to be $21,868 which has not been adjusted for as it is immaterial.
Recoverability of VAT receivable (note 18)
The group considers the recoverability of the VAT balance in Tanzania to be a key area of judgement, as the VAT can only be claimed backed when the Company turns profitable. The directors believe that the debtor is recoverable based on their knowledge of the market in Tanzania.
5. Segmental Information
The Board considers the business to have one reportable segment being Coal production assets.
Other represents unallocated expenses and assets held by the head office. Unallocated assets primarily consist of cash and cash equivalents.
|
|
|
|
Coal Production Assets |
|
|
|
2019 |
|
|
Coal |
Other |
Total |
|
Consolidated Income Statement |
|
|
£ |
£ |
£ |
|
Revenue - Tanzania |
|
|
218,953 |
- |
218,953 |
|
Revenue - other |
|
|
14,461 |
|
14,461 |
|
Cost of sales (excluding depreciation and amortisation) |
|
|
(781,840) |
- |
(781,840) |
|
Impairment of stock |
|
|
- |
- |
- |
|
Depreciation |
|
|
(173,073) |
- |
(173,073) |
|
Depletion of development assets |
|
|
(27,348) |
- |
(27,348) |
|
|
|
|
|
|
|
|
Gross profit |
|
|
(748,847) |
- |
(748,847) |
|
Administrative expenses |
|
|
(201,351) |
(675,480) |
(876,831) |
|
Share based payment |
|
|
- |
(16,077) |
(16,077) |
|
Depreciation |
|
|
(26,986) |
(593) |
(27,579) |
|
|
|
|
|
|
|
|
Group operating loss |
|
|
(977,184) |
(692,150) |
(1,669,334) |
|
Finance income |
|
|
- |
113 |
113 |
|
Finance cost |
|
|
(10,018) |
(167,825) |
(177,843) |
|
|
|
|
|
|
|
|
Loss on operations before taxation |
|
|
(987,202) |
(859,862) |
(1,787,064) |
|
Income tax |
|
|
- |
- |
- |
|
|
|
|
|
|
|
|
Loss for the year |
|
|
(987,902) |
(859,862) |
(1,787,064) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coal Production Assets |
|
|
|
2018 |
|
|
|
|
|
|
Consolidated Income Statement |
|
|
|
|
|
|
Revenue - Tanzania |
|
|
275,226 |
- |
275,226 |
|
Revenue - other |
|
|
61,899 |
- |
61,889 |
|
Cost of sales (excluding depreciation and amortisation) |
|
|
(868,549) |
- |
(868,549) |
|
Impairment of stock |
|
|
(8,492) |
- |
(8,492) |
|
Depreciation |
|
|
(226,343) |
- |
(226,343) |
|
Depletion of development assets |
|
|
(87,928) |
- |
(87,928) |
|
|
|
|
|
|
|
|
Gross profit |
|
|
(854,187) |
|
(854,187) |
|
Administrative expenses |
|
|
(131,990) |
(702,930) |
(834,920) |
|
Share based payment |
|
|
- |
(76,319) |
(76,319) |
|
Depreciation |
|
|
(3,805) |
(790) |
(4,595) |
|
|
|
|
|
|
|
|
Group operating loss |
|
|
(989,982) |
(780,039) |
(1,770,021) |
|
Finance income |
|
|
- |
529 |
529 |
|
Finance cost |
|
|
- |
(16,212) |
(16,212) |
|
|
|
|
|
|
|
|
Loss on operations before taxation |
|
|
(989,982) |
(795,722) |
(1,785,704) |
|
Income tax |
|
|
- |
- |
- |
|
|
|
|
|
|
|
|
Loss for the year |
|
|
(989,982) |
(795,722) |
(1,785,704) |
|
|
|
|
|
|
|
|
By Business Segment
|
Carrying value of segment assets |
Additions to non-current assets and intangibles |
Total liabilities
|
|
|||
|
|
2019 |
2018 |
2019 |
2018 |
2019 |
2018 |
|
|
|
£ |
£ |
£ |
£ |
£ |
£ |
|
|
Coal |
7,067,652 |
7.568,618 |
106,509 |
727,746 |
606,900 |
414,289 |
|
|
Other |
91,035 |
159,037 |
- |
- |
1,095,945 |
711,967 |
|
|
|
|
|
|
|
|
|
|
|
|
7,158,687 |
7,727,655 |
106,509 |
727,746 |
1,702,845 |
1,126,256 |
|
|
|
|
|
|
|
|
|
|
|
By Geographical Area |
|
|
|
|
|
|
|
|
|
£ |
£ |
£ |
£ |
£ |
£ |
|
|
Africa (Tanzania) |
7,067,652 |
7,568,618 |
106.509 |
727,746 |
606,900 |
414,289 |
|
|
Europe |
91,035 |
159,037 |
- |
- |
1,095,945 |
711,967 |
|
|
|
|
|
|
|
|
|
|
|
|
7,158,687 |
7,727,655 |
106,509 |
727,746 |
1,702,845 |
1,126,256 |
|
|
|
|
|
|
|
|
|
|
Information about major customers
Included in revenues arising from the sale of coal are revenues which arose from sales to the Group's largest customers based in Tanzania. No other customers contributed 10% or more to the Group's revenue in either 2019 or 2018.
|
|
2019 |
2018 |
|
|
£ |
£ |
|
Customer 1 |
149,236 |
- |
|
Customer 2 |
39,399 |
- |
|
Customer 3 |
25,014 |
220,600 |
|
|
|
|
|
|
213,649 |
220,600 |
|
|
|
|
|
|
|
|
6. Expenses by Nature
|
|
2019 |
2018 |
|
|
£ |
£ |
|
Staff costs |
198,793 |
232,858 |
|
Audit fees |
34,850 |
30,000 |
|
Office and other administrative services |
60,445 |
46,741 |
|
AIM related costs including investor relations |
37,097 |
36,721 |
|
Professional, legal and consultancy fees |
418,681 |
384,668 |
|
Travel, entertaining and subsistence |
16,456 |
29,681 |
|
Exchange gain |
(13,584) |
5,129 |
|
Depreciation |
61,217 |
4,595 |
|
Amortisation |
16,856 |
- |
|
Provisions and expected credit losses |
45,332 |
26,680 |
|
Other costs |
28,267 |
42,442 |
|
|
|
|
|
|
904,410 |
839,515 |
|
|
|
|
|
|
|
|
7. Auditors' Remuneration
|
|
2019 |
2018 |
|
|
£ |
£ |
|
Fees payable to the Company's auditor for the audit of the parent company and consolidated accounts |
34,850 |
30,000 |
|
|
|
|
8. Employees
|
|
2019 |
2018 |
|
|
£ |
£ |
|
Wages and salaries |
194,488 |
212,873 |
|
Social security costs |
3,356 |
18,825 |
|
Pensions |
741 |
1,160 |
|
|
|
|
|
|
198,585 |
232,858 |
|
|
|
|
|
|
|
|
Included within Development expenditure/Exploration and evaluation assets (note 16) are capitalised wages and salary costs of £233,397 (2018: £241,458).
The average number of employees and directors during the year was as follows:
|
|
2019 |
2018 |
|
Administration and security |
12 |
7 |
|
Mining and security |
35 |
31 |
|
|
|
|
|
|
47 |
38 |
|
|
|
|
9. Directors' Remuneration
|
|
2019 |
2018 |
|
|
£ |
£ |
|
|
|
|
|
Emoluments |
128,220 |
211,000 |
|
Pensions |
741 |
1,160 |
|
|
|
|
|
|
128,943 |
212,160 |
|
|
|
|
The highest paid director received remuneration of £71,375 (2018: £130,702).
Directors' interest in outstanding share options per director is disclosed in the directors' report.
Remuneration of key management personnel
The remuneration of the directors and other key management personnel is set out below:
|
|
2019 |
2018 |
|
|
£ |
£ |
|
|
|
|
|
Emoluments |
190,871 |
255,935 |
|
Pensions |
741 |
1,160 |
|
|
|
|
|
|
191,612 |
257,095 |
|
|
|
|
10. Finance Income
|
|
2019 |
2018 |
|
|
£ |
£ |
|
|
|
|
|
Interest income on short-term bank deposits |
113 |
529 |
|
|
|
|
|
|
113 |
529 |
|
|
|
|
11. Finance Costs
|
|
2019 |
2018 |
|
|
£ |
£ |
|
|
|
|
|
Interest on convertible loan notes |
160,379 |
11,496 |
|
Convertible loan finance costs |
7,446 |
4,716 |
|
Hire purchase interest |
2,712 |
- |
|
Lease liability interest |
7,306 |
- |
|
|
|
|
|
|
177,843 |
16,212 |
|
|
|
|
12. Income Tax
|
|
2019 |
2018 |
|
|
£ |
£ |
|
|
|
|
|
Current tax: |
|
|
|
Current tax on loss for the year |
- |
- |
|
|
|
|
|
Total current tax |
- |
- |
|
Deferred tax |
|
|
|
On write off/impairment on intangible assets |
- |
- |
|
|
|
|
|
Tax charge for the year |
- |
- |
|
|
|
|
No corporation tax charge arises in respect of the year due to the trading losses incurred. The Group has Corporation Tax losses available to be carried forward and used against trading profits arising in future periods of £7,034,804 (2018: £6,256,070).
A deferred tax asset of £1,336,275 (2018: £1,063,129) calculated at 19% (2018: 17%) has not been recognised in respect of the tax losses carried forward due to the uncertainty that profits will arise against which the losses can be offset.
The tax assessed for the year differs from the standard rate of corporation tax in the UK as follows:
|
|
2019 |
2018 |
|
|
£ |
£ |
|
|
|
|
|
Loss on ordinary activities before tax |
(1,847,064) |
(1,785,704) |
|
|
|
|
|
Expected tax credit at standard rate of UK Corporation Tax |
|
|
|
19% (2017: 19%) |
(350,942) |
(339,284) |
|
Disallowable expenditure |
31,147 |
24,372 |
|
Capital allowances in excess of depreciation |
(326,253) |
- |
|
Movement in deferred tax not recognised |
646,048 |
314,912 |
|
|
|
|
|
Tax charge for the year |
- |
- |
|
|
|
|
|
|
|
|
13. Earnings Per Share
|
The basic loss per share is calculated by dividing the loss attributable to equity shareholders by the weighted average number of shares in issue.
The loss attributable to equity shareholders and weighted average number of ordinary shares for the purposes of calculating diluted earnings per ordinary share are identical to those used for basic earnings per ordinary share. This is because the exercise of warrants would have the effect of reducing the loss per ordinary share and is therefore anti-dilutive.
|
||
|
|
2019 |
2018 |
|
|
£ |
£ |
|
Net loss for the year attributable to ordinary shareholders |
(1,847,064) |
(1,785,704) |
|
|
|
|
|
|
|
|
|
Weighted average number of shares in issue |
3,554,665,440 |
1,476,497,888 |
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share |
(0.05p) |
(0.12p) |
|
|
|
|
14. Property, Plant and Equipment
|
|
Coal Production assets |
Plant and machinery |
Fixtures, fittings and equipment |
Motor vehicles |
Total |
|
|
As restated |
|
|
|
|
|
|
£ |
£ |
£ |
£ |
£ |
|
Cost |
|
|
|
|
|
|
As at 1 January 2018 |
- |
1,111,852 |
7,184 |
89,709 |
1,208,745 |
|
Transfer from intangible asses |
5,225,232 |
- |
- |
- |
5,225,232 |
|
Additions |
|
259,601 |
- |
- |
259,601 |
|
Foreign exchange adjustment |
276,059 |
64,088 |
176 |
4,237 |
344,560 |
|
|
|
|
|
|
|
|
As at 31 December 2018 |
5,501,291 |
1,435,541 |
7,360 |
93,946 |
7,038,138 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
|
|
As at 1 January 2018 |
- |
64,873 |
6,719 |
77,570 |
149,162 |
|
Depletion/Charge for the year |
57,928 |
226,551 |
115 |
3,066 |
287,660 |
|
Foreign exchange adjustment |
- |
14,986 |
176 |
3,760 |
18,922 |
|
|
|
|
|
|
|
|
As at 31 December 2018 |
57,928 |
306,410 |
7,010 |
84,396 |
455,744 |
|
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
|
As at 31 December 2018 |
5,443,363 |
1,129,131 |
350 |
9,550 |
6,582,394 |
|
|
|
|
|
|
|
|
|
Coal Production assets |
Plant and machinery |
Fixtures, fittings and equipment |
Motor vehicles |
Total |
|
|
£ |
£ |
£ |
£ |
£ |
|
Cost |
|
|
|
|
|
|
As at 1 January 2019 |
5,501,291 |
1,435,541 |
7,360 |
93,946 |
7,038,138 |
|
Additions |
|
680 |
- |
105,829 |
106,509 |
|
Disposal |
|
(168,189) |
- |
- |
(168,189) |
|
Foreign exchange adjustment |
(183,654) |
(42,060) |
(107) |
(2,579) |
(228,400) |
|
|
|
|
|
|
|
|
As at 31 December 2019 |
5,317,637 |
1,225,972 |
7,253 |
197,196 |
6,748,058 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
|
|
As at 1 January 2019 |
57,928 |
306,410 |
7,010 |
84,396 |
455,744 |
|
Depletion/ Charge for the year |
27,348 |
226,110 |
87 |
8,093 |
261,638 |
|
Disposal |
- |
(33,638) |
- |
- |
(33,638) |
|
Foreign exchange adjustment |
(1,934) |
(16,481) |
(107) |
(2,557) |
(21,089) |
|
|
|
|
|
|
|
|
As at 31 December 2019 |
83,342 |
482,401 |
6,990 |
89,925 |
662,655 |
|
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
|
As at 31 December 2019 |
5,234,295 |
743,571 |
263 |
107,271 |
6,085,403 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant and machinery depreciation amounting to £173,073 (2018I £226,343) is included within cost of sales as it relates to mining equipment.
15. Right of Use Assets
|
|
|
|
|
Mining asset leases |
|
|
|
|
|
£ |
|
Cost |
|
|
|
|
|
As at 1 January 2019 |
|
|
|
- |
|
Recognised on adoption of IFRS 16 |
|
|
|
114,016 |
|
Foreign exchange adjustment |
|
|
|
- |
|
|
|
|
|
|
|
As at 31 December 2019 |
|
|
|
114,016 |
|
|
|
|
|
|
|
Amortisation |
|
|
|
|
|
As at 1 January 2019 |
|
|
|
- |
|
Charge for the year |
|
|
|
16,856 |
|
Foreign exchange adjustment |
|
|
|
(567) |
|
|
|
|
|
|
|
As at 31 December 2019 |
|
|
|
16,289 |
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
As at 31 December 2019 |
|
|
|
97,727 |
|
|
|
|
|
|
|
|
|
|
|
|
16. Intangible Assets
|
|
|
Development and Production |
|
|
|
|
|
Expenditure |
Mining Licences |
Total |
|
|
|
As restated |
|
|
|
|
|
£ |
£ |
£ |
|
Cost or valuation |
|
|
|
|
|
As at 1 January 2018 |
|
4,757,087 |
1,485,965 |
6,243,052 |
|
Additions |
|
468,145 |
- |
468,145 |
|
Transfer to property, plant and equipment |
|
(5,225,232) |
- |
(5,225,232) |
|
Foreign exchange adjustment |
|
- |
86,232 |
86,232 |
|
|
|
|
|
|
|
At 31 December 2018 |
|
- |
1,572,197 |
1,572,197 |
|
|
|
|
|
|
|
Accumulated depletion, amortisation and impairment |
|
|
|
|
|
As at 1 January 2018 |
|
- |
1,171,734 |
1,171,734 |
|
Amortisation |
|
- |
- |
- |
|
Foreign exchange adjustment |
|
- |
67,997 |
67,997 |
|
|
|
|
|
|
|
At 31 December 2018 |
|
- |
1,239,731 |
1,239,731 |
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
As at 31 December 2018 |
|
- |
332,466 |
332,466 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mining Licences |
Total |
|
|
|
|
£ |
£ |
|
Cost or valuation |
|
|
|
|
|
As at 1 January 2019 |
|
|
1,572,197 |
1,572,197 |
|
Foreign exchange adjustment |
|
|
(52,485) |
(52,485) |
|
|
|
|
|
|
|
At 31 December 2019 |
|
|
1,519,712 |
1,519,712 |
|
|
|
|
|
|
|
Accumulated depletion, amortisation and impairment |
|
|
|
|
|
As at 1 January 2019 |
|
|
1,239,731 |
1,239,731 |
|
Depletion of development and production assets |
|
|
- |
- |
|
Foreign exchange adjustment |
|
|
(41,387) |
(41,387) |
|
|
|
|
|
|
|
At 31 December 2019 |
|
|
1,198,344 |
1,198,344 |
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
As at 31 December 2019 |
|
|
321,368 |
321,368 |
|
|
|
|
|
|
Mining Licences
Intangible assets arose as a result of the valuation placed on the original six Tanzanian licences acquired on the acquisition of Edenville (Tanzania) Limited. The allocation price was based on the price paid to acquire these the Group's licences.
These assets are reviewed for impairment annually alongside the coal production assets
17. Inventories
|
|
2019 |
2018 |
|
|
£ |
£ |
|
|
|
|
|
ROM stockpiles |
11,108 |
11,493 |
|
Fines |
230,906 |
238,881 |
|
Washed coal |
5,524 |
5,708 |
|
|
|
|
|
|
247,538 |
256,082 |
|
|
|
|
|
|
|
|
The cost of inventories recognised as an expense during the year in was £697,405 (2018: £853,388).
Inventory of washed coal has been reduced by £nil (2018: £8,492) as a result of write-downs to net realisable value. This write down is recognised as an expense during the year.
18. Trade and Other Receivables
|
|
2019 |
2018 |
|
|
£ |
£ |
|
Trade Receivables |
- |
53,941 |
|
Less: provision for impairment of trade receivables |
- |
(27,900) |
|
|
|
|
|
Trade receivables - net |
- |
26,041 |
|
Other receivables |
34,324 |
77 |
|
VAT receivable |
329,133 |
368,579 |
|
Prepayments |
2,084 |
1,974 |
|
|
|
|
|
|
365,541 |
396,671 |
|
|
|
|
|
|
|
|
Included within VAT receivable is VAT owed to Edenville International (Tanzania) Limited which is only recoverable against future sales made by Edenville International (Tanzania) Limited. The Group expects to recover the above VAT from sales of commercial coal.
19. Cash and Cash Equivalents
Cash and cash equivalents include the following for the purposes of the cash flow statement:
|
|
2019 |
2018 |
|
|
£ |
£ |
|
|
|
|
|
Cash at bank and in hand |
41,110 |
160,042 |
|
|
|
|
20. Trade and Other Payables
|
|
2019 |
2018 |
|
|
£ |
£ |
|
|
|
|
|
Trade and other payables |
476,876 |
366,175 |
|
Social security costs and other taxes |
9,713 |
6,980 |
|
Accruals and deferred income |
410,535 |
182,908 |
|
|
|
|
|
|
897,124 |
556,063 |
|
|
|
|
21. Borrowings
|
|
2019 |
2018 |
|
|
£ |
£ |
|
Convertible loan notes |
|
|
|
Repayable with 1 year |
361,581 |
288,118 |
|
Repayable within 2 to 5 years |
141,463 |
282,076 |
|
|
|
|
|
|
503,044 |
570,194 |
|
|
|
|
|
|
|
|
|
Other loans |
|
|
|
Repayable with 1 year |
120,000 |
- |
|
|
|
|
|
|
120,000 |
- |
|
|
|
|
|
|
|
|
|
Hire purchase finance |
|
|
|
Repayable with 1 year |
22,863 |
- |
|
Repayable within 2 to 5 years |
44,136 |
- |
|
|
|
|
|
|
66,999 |
- |
|
|
|
|
|
|
|
|
|
Lease liability |
|
|
|
|
|
|
|
Repayable with 1 year |
16,376 |
- |
|
Repayable within 2 to 5 years |
99,304 |
- |
|
|
|
|
|
|
115,680 |
- |
|
|
|
|
|
|
|
|
|
Total |
|
|
|
Repayable with 1 year |
520,820 |
288,118 |
|
Repayable within 2 to 5 years |
284,903 |
282,076 |
|
|
|
|
|
|
805,723 |
570,194 |
|
|
|
|
Lease liabilities
|
|
|
Mining licence leases |
|
|
|
2019 |
|
|
|
£ |
|
|
|
|
|
At 1 January 2019 |
|
135,584 |
|
Interest expense |
|
(22,437) |
|
Lease payments |
|
7,306 |
|
Foreign exchange movement |
|
(4,773) |
|
|
|
|
|
|
|
66,917 |
|
|
|
|
Convertible loan
In November 2018 $750,000 conditionally convertible loan notes were issued: the face value of these convertible securities is $900,000. A commitment fee of £37,500, which has been offset against the proceeds of issue of the convertible loan notes, was payable by the Company as well as issuing share options over 99,568,966 ordinary shares exercisable for 4 years at a conversion price on 0.29p per share. The company is required to make repayments of $45,000 over 20 months commencing in February 2019. If repayments are made in cash, then an additional 3% is payable on the $45,000. The company may elect to make the repayment in its shares priced at 90% of the average five day Volume Weighted Average Price (VWAP) chosen by the investor during the 20 days before issuance, or a combination of both.
The company has the option to buy back the entire outstanding face value at any time at a premium of 5%. If this right is exercised the investor has an option to convert 25% of the face value into shares at the lesser of the repayment price or 0.29p per share. The repayment price being 130% of the 10-day VWAP immediately prior to the company entering the Convertible Agreement.
In addition to the above the investor was offered 36,000,000 collateral shares which were issued by the company on 20 February 2019.
In April 2019, the company agreed a repayment holiday up to September 2019 in respect of the convertible loan notes. As a condition of granting the repayment holiday the outstanding balance at the time. $855,000, was increased by 15% to $983,250
Other loans
This represents a loan of £100,000 with a fixed coupon interest rate of 20%.
22. Share Capital
|
|
No |
£ |
No |
£ |
£ |
|
|
Ordinary shares of 0.02p each |
Ordinary shares of 0.02p each |
Deferred shares of 0.001p each |
Deferred shares of 0.001p each |
Total share capital |
|
Issued and fully paid |
|
|
|
|
|
|
At 1 January 2018 |
1,336,317,797 |
267,265 |
241,248,512,346 |
2,412,485 |
2,679,750 |
|
On 3 May 2018 Ordinary shares issued at 0.35p |
211,428,572 |
42,286 |
- |
- |
42,286 |
|
|
|
|
|
|
|
|
As at 31 December 2018 |
1,547,746,369 |
309,551 |
241,248,512,346 |
2,412,485 |
2,722,036 |
|
|
No |
£ |
No |
£ |
£ |
|
|
Ordinary shares of 0.02p each |
Ordinary shares of 0.02p each |
Deferred shares of 0.001p each |
Deferred shares of 0.001p each |
Total share capital |
|
Issued and fully paid |
|
|
|
|
|
|
At 1 January 2019 |
1,547,746,369 |
309,551 |
241,248,512,346 |
2,412,485 |
2,722,036 |
|
On 20 February 2019 Ordinary shares were issued at 0.02p |
36,000,000 |
7,200 |
- |
- |
7,200 |
|
On 20 February 2019 Ordinary shares were issued at 0.12p |
64,515,192 |
12,903 |
- |
- |
12,903 |
|
On 2 May 2019 500,000 Ordinary shares at 0.02p |
500,000,000 |
100,000 |
- |
- |
100,00 |
|
On 20 May 2019 2,263,980,200 Ordinary shares at 0.02p |
2,263,980,200 |
452,796 |
- |
- |
452,796 |
|
On 11 September 2019 600,000,000 Ordinary shares at 0.05p |
600,000,000 |
120,000 |
- |
- |
120,000 |
|
|
|
|
|
|
|
|
As at 31 December 2019 |
5,012,241,761 |
1,002,450 |
241,248,512,346 |
2,412,485 |
3,414,935 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The deferred shares have no voting rights, dividend rights or any rights of redemption. On return of assets on winding up the holders are entitled to repayment of amounts paid up after repayment to ordinary share holders
23. Capital and Reserves Attributable to Shareholders
|
|
2019 |
2018 |
|
|
£ |
£ |
|
Share capital |
3,414,935 |
2,722,036 |
|
Share premium |
18,811,157 |
18,566,642 |
|
Other reserves |
979,597 |
1,208,959 |
|
Retained deficit |
(17,736,330) |
(15,884,876) |
|
|
________ |
________ |
|
Total equity |
5,649,359 |
6,612,761 |
|
|
|
|
|
|
|
|
There have been no significant changes to the Group's capital management objectives or what is considered to be capital during the year.
24. Capital Management Policy
The Group's policy on capital management is to maintain a low level of gearing. The group funds its operation primarily through equity funding.
The Group defines the capital it manages as equity shareholders' funds less cash and cash equivalents.
The Group objectives when managing its capital are:
· To safeguard the group's ability to continue as a going concern.
· To provide adequate resources to fund its exploration, development and production activities with a view to providing returns to its investors.
· To maintain sufficient financial resources to mitigate against risk and unforeseen events.
The group's cash reserves are reported to the board and closely monitored against the planned work program and annual budget. Where additional cash resources are required the following factors are considered:
· the size and nature of the requirement.
· preferred sources of finance.
· market conditions.
· opportunities to collaborate with third parties to reduce the cash requirement.
25. Financial Instruments
The Board of Directors determine, as required, the degree to which it is appropriate to use financial instruments to mitigate risk with the main risk affecting such instruments being foreign exchange risk, which is discussed below.
|
Categories of financial instruments |
2019 |
|
2018 |
|
|
|
£ |
|
£ |
|
|
Financial assets |
|
|
|
|
|
|
|
|
|
|
|
Receivables at amortised cost including cash and cash equivalents: |
|
|
|
|
|
Cash and cash equivalents |
41,110 |
|
160,042 |
|
|
Trade and other receivables |
363,457 |
|
394,697 |
|
|
Total |
404,567 |
|
554,739 |
|
|
|
|
|
|
|
|
Financial liabilities |
|
|
|
|
|
Financial liabilities at amortised cost: |
|
|
|
|
|
Trade and other payables |
887,411 |
|
549,082 |
|
|
Convertible loan notes |
503,044 |
|
570,194 |
|
|
|
1,390,455 |
|
1,119,276 |
|
|
|
|
|
|
|
|
Net |
(985,888) |
|
(565,537) |
|
Cash and cash equivalents
This comprises cash held by the Group and short-term deposits. The carrying amount of these assets approximates to their fair value.
General risk management principles
The Directors have an overall responsibility for the establishment of the Group's risk management framework. A formal risk assessment and management framework for assessing, monitoring and managing the strategic, operational and financial risks of the Group is in place to ensure appropriate risk management of its operations.
The following represent the key financial risks that the Group faces:
Interest rate risk
The Group only interest-bearing asset is cash invested on a short-term basis which attracts interest at the bank's variable interest rate.
The Group is exposed to interest rate risk through its convertible loan notes, its only interest-bearing liabilities. The level of interest payable will vary depending on whether the repayments are made with shares or in cash. The effective interest rate based on repayments of $49,162 (2018:$45,000) per month is 20.78% (2018:17.93%). If repayments are made in cash then the monthly repayments increase by 3%.
Credit risk
Credit risk arises principally from the Group's trade receivables and investments in cash deposits. It is the risk that the counterparty fails to discharge its obligation in respect of the instrument.
VAT receivable is owed to Edenville International (Tanzania) Limited which is only recoverable against future sales made by Edenville International (Tanzania) Limited. The Group expects to recover the above VAT from sales of commercial coal.
The Group holds its cash balances with reputable financial institutions with strong credit ratings. There were no amounts past due at the balance sheet date.
The maximum exposure to credit risk in respect of the above at 31 December 2019 is the carrying value of financial assets recorded in the financial statements.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as and when they fall due.
Liquidity risk is managed through an assessment of short, medium and long-term cash flow forecasts to ensure the adequacy of working capital.
The Group's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. To achieve this aim, it seeks to maintain cash balances to meet expected requirements for a period of one year.
Currency Risk
The Group is exposed to currency risk as the assets of its subsidiaries are denominated in US Dollars. The Group's policy is, where possible, to allow group entities to settle liabilities denominated in their functional currency (primarily US Dollars) with cash. The Company transfers amounts in sterling or US dollars to its subsidiaries to fund its operations. Where this is not possible the parent company settles the liability on behalf of its subsidiaries and will therefore be exposed to currency risk.
The Group has no formal policy is respect of foreign exchange risk; however, it reviews its currency exposure on a regular basis. Currency exposures relating to monetary assets held by foreign operations are included in the Group's income statement. The Group also manages its currency exposure by retaining the majority of its cash balances in sterling, being a relatively stable currency.
The effect of a 10% rise or fall in the US dollar/Sterling exchange rate would result in an increase or decrease in the net assets of the group of £753,111.
Fair value of financial assets and liabilities
Fair value is the amount at which a financial instrument could be exchanged in an arm's length transaction between informed and willing parties, other than a forced or liquidation sale and excludes accrued interest. Where available, market values have been used to determine fair values. Where market values are not available, fair values have been calculated by discounting expected cash flows at prevailing interest rates and by applying year end exchange rates.
The Directors consider that there is no significant difference between the book value and fair value of the Group's financial assets and liabilities.
The tables below summarise the maturity profit of the combined Group's non-derivative financial liabilities at each financial year end based on contractual undiscounted payments
|
2018 |
|
|
|
|
|
Less than 1 year |
1- 2 years |
2-5 years |
|
Convertible loan notes (current and non - current) |
288,118 |
282,076 |
- |
|
Trade payables |
333,940 |
- |
- |
|
Other payables |
39,215 |
- |
- |
|
Accruals |
182,908 |
- |
- |
|
|
844,181 |
282,076 |
|
|
2019 |
|
|
|
|
|
Less than 1 year |
1- 2 years |
2-5 years |
|
Trade payables |
466,645 |
- |
- |
|
Other payables |
10,232 |
- |
- |
|
Accruals |
410,535 |
- |
- |
|
Borrowings |
520,820 |
284,903 |
- |
|
|
1,408,232 |
284,903 |
|
26. Equity-Settled Share-Based Payments
The following options over ordinary shares have been granted by the Company:
|
Grant Date |
Exercise price |
Number of options outstanding at 31 December 2018 |
|
21 October 2013 |
5.00p |
6,011,481 |
|
28 March 2017 |
1.08p |
42,000,000 |
|
5 November 2018 |
0.29p |
99,568,966 |
|
26 April 2019 |
0.26p |
100,000,000 |
The options granted on 21 October 2013 are exercisable from 21 October 2014. The options are valid for a period of 10 years from the date of grant. There are no vesting conditions.
Of the 46,000,000 issued on 28 March 2017, 32,000,000 were issued to the Directors and a member of senior management and 8,000,000 to two engineers, 4,000,000 of which lapsed during the year.
The 38,000,000 options issued to the Directors and a member of senior management will vest one third immediately, one third upon production of in excess of 5,000 tonnes of commercial coal per month over three consecutive months and one third upon completion of the Bankable Feasibility Study for the Rukwa Power Plant.
8,000,000 of the options of which 4,000,000 have lapsed during the year were granted to two engineers, will vest one half upon production of in excess of 5,000 tonnes of commercial coal per month over three consecutive months and one half upon production of in excess of 10,000 tonnes of commercial coal per month over three consecutive months.
The options are exercisable for a 5-year period from 27 March 2017.
During the year on the issue of convertible loan notes (see note 21), 99,568,966 options were issued to the investor. These options are exercisable over a 4-year period at an exercise price of 0.29p
On 26 April 2019, 100,000,000 options were issued to an investor, on variation of an agreement. These options are exercisable over a 4- year period at an exercise price of 0.26p
At the date of grant, the options were valued using the Black-Scholes option pricing model. The fair value per option granted and the assumptions used in the calculation were as follows:
|
Date of grant |
21 October 2013 |
28 March 2017 |
5 November 2018 |
26 April 2019 |
|
Expected volatility |
85% |
131% |
70% |
101% |
|
Expected life |
4 years |
3 years |
4 years |
3.5 years |
|
Risk-free interest rate |
1.23% |
0.37% |
0.96% |
0.75% |
|
Expected dividend yield |
- |
- |
- |
- |
|
Possibility of ceasing employment before vesting |
- |
- |
- |
- |
|
Fair value per option |
0.09p |
0.56p/0.42p/0.28p |
0.08p |
0.02 |
Volatility was determined by reference to the standard deviation of daily share prices for one year prior to the date of grant.
The charge to the income statement for share-based payments for the year ended 31 December 2019 was £16,077 (2018: £76,319).
Movements in the number of options outstanding and their related weighted average exercise prices are as follows:
|
|
2019 |
2018 |
||
|
|
Number of options |
Weighted average exercise price per share pence
|
Number of options |
Weighted average exercise price per share pence |
|
At 1 January |
147,580,477 |
0.71 |
52,011,481 |
1.53 |
|
Granted |
100,000,000 |
0.26 |
99,568,966 |
0.29 |
|
Exercised |
- |
- |
- |
- |
|
Cancelled |
(7,005,741) |
2.76 |
(4,000,000) |
1.08 |
|
|
|
|
|
|
|
At 31 December |
240,574,706 |
0.46 |
147,580,447 |
0.71 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at year end |
215,241,373 |
|
118,247,114 |
|
|
|
|
|
|
|
The weighted average remaining contractual life of options as at 31 December 2019 was 2.78 years (2018: 3.73years).
Warrants
Movements in the number of warrants outstanding and their related weighted average exercise prices are as follows:
|
|
2019 |
2018 |
||
|
|
Number of options |
Weighted average exercise price per share pence
|
Number of options |
Weighted average exercise price per share pence |
|
At 1 January |
- |
- |
241,666,667 |
0.96 |
|
Granted |
127,500,000 |
0.02 |
- |
- |
|
Exercised |
- |
- |
- |
- |
|
Cancelled/expired |
- |
- |
(241,666,667) |
(0.96) |
|
|
|
|
|
|
|
At 31 December |
127,500,000 |
0.02 |
241,666,667 |
0.96 |
|
|
|
|
|
|
The weighted average remaining contractual life of warrants as at 31 December 2019 was 2.42 years (2018: Nil years).
127,500,000 warrants were issued to the company's broker on at an exercise price of 0.02p. The warrants expire on 31 May 2022.
27. Contingent Liabilities
Edenville International (Tanzania) Limited has a dispute with a third party and arises from an Acquisition and Option Agreement signed in August 2010 (and its variation made in 2015) ("Agreement"). The third party is seeking financial compensation and other costs in addition to a dispute over certain mining licenses granted in the name of Edenville International (Tanzania) Limited. In the opinion of the directors and after taking appropriate legal advice, they have concluded that the case has no merit.
28. Reserves
The following describes the nature and purpose of each reserve:
|
Share Capital |
represents the nominal value of equity shares |
|
Share Premium |
amount subscribed for share capital in excess of the nominal value |
|
Share Option Reserve |
fair value of the employee and key personnel equity settled share option scheme and broker warrants as accrued at the balance sheet date. |
|
Retained Earnings |
cumulative net gains and losses less distributions made |
29. Related Party Transactions
Key management personnel are those persons having authority and responsibility for planning, directing and controlling activities of the Company, and are all directors of the Company. For details of their compensation please refer to the Remuneration report.
During the year the Company paid £547,984 (2018: £1,435,463) to or on behalf of its wholly owned subsidiary, Edenville International (Tanzania) Limited. The amount due from Edenville International (Tanzania) Limited at year end was £9,117,401(2018: £8,565,706). This amount has been included within loans to subsidiaries.
Also included in trade creditors is an amount of £3,584 (2018: £13,500) owed to Aaridhi Consultants in respect of Directors fees for Arun Srivastava.
At the year end the Company was owed £3,712 (2018: £3,712) by its subsidiary Edenville International (Seychelles) Limited.
At the year end the Company was owed £ (2018: £6,340) by its subsidiary Edenville Power Tz Limited.
At the year end the Company was owed £6,340 (2018: £6,340) by its subsidiary Edenville Power Tz Limited.
At the year end Edenville International (Tanzania) limited was owed $41,677 by Edenville Power Tz Limited and $9,517 was owed to JICL Consultants.
30. Events After the Reporting Date
On 9 January 2020 the company issued 50,000,000 ordinary shares of 0.02p each at 0.05p, in settlement of invoices.
On 21 January 2020 the company issued 1,750,000,000 ordinary shares of 0.02p each at 0.04p.
On 8 June 2020 the company issued 1,250,000 ordinary shares of 0.02p for 0.04p raising gross proceeds of £500,000.
In June 2020 the group's subsidiary Edenville International (Tanzania) Limited ("EITL") entered into a Coal Mining Agreement (the "Agreement") with Infrastructure and Logistics Tanzania Limited ("ILTL").
Under the terms of the Agreement ILTL are expected to also become a customer of Edenville. It is envisaged under the Agreement that ILTL will enter into a long-term Coal Supply Agreement, which would see ILTL provide an anchor tenancy at the Company's Rukwa coal project ("Rukwa" or the "Project') by initially purchasing 3,000 tonnes of washed coal per month at standard market rates, before increasing this to 5,000 tonnes a month over a 12 month period.
ILTL are also expected to use their logistics network and expertise with respect to existing and potential customers.
In July 2020 EITL entered into a US$1 million Loan Agreement (the "Loan Agreement") with ILTL. The loan shall attract interest at a rate of 9% per annum only on funds drawn. At present no amounts have been drawn.
In August 2020 EITL entered into a Sales and Marketing Agreement with MarTek Global FZ-LLC ("MarTek"). MarTek is a Dubai-based sister company to Infrastructure and Logistics Tanzania Limited ("ILTL"), with both having the same principal shareholder.
In August 2020, 83,333,333 warrants were exercised at a price of 0.06p per share
EITL's mining operations ceased during the COVID 19 lockdown in Tanzania, recommencing again on 3 August 2020.
31. Financial Commitments
The group has future aggregate minimum lease payments under non- cancellable operating leases of $Nil (2018: $43,472) and required expenditure of $Nil (2017: $Nil) in respect of its licences for the forthcoming year.
32. Ultimate Controlling Party
The Group considers that there is no ultimate controlling party.
33. Prior Year Adjustment
During April 2018 the groups mining activities moved into the production phase. At this stage costs of £5,225,232. Previously these costs continued to be classified within intangible assets to together with a fair value gain less depletion in the period. The 2018 figures have been restated to show the transfer of £5,225,232 to property, plant and equipment on completion of the development of the asset. The foreign exchange gain and depletion of the asset are now shown with property , plant and equipment. This adjustment has no impact on Group Statement of Comprehensive Income or on the Group Statement of Changes in Equity.
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