EDL.L Regulatory News (EDL)

21 June 2019

EDENVILLE ENERGY PLC

("Edenville" or the "Company" or the "Group")

Annual Results for the year ended 31 December 2018

Edenville Energy plc (AIM: EDL), the company developing a coal project in southwest Tanzania, is pleased to announce its audited results for the year ended 31 December 2018.

2018 Highlights

Post Period Highlights

Annual Report and Notice of AGM

The Company's Annual Report for the year ended 31 December 2018 and Notice of Annual General Meeting will be posted to shareholders on Monday 24 June 2019 and will be available on the Company's website at: https://edenville-energy.com/annual-reports/ on 24 June 2019..

The Company's Annual General Meeting will be held at the offices of Womble Bond Dickinson (UK) LLP, 4 More London Riverside, London, SE1 2AU at 11.00 a.m. on Tuesday 23 July 2019.

Commenting, Jeffrey Malaihollo, Chairman of Edenville, said: "2018 was a significant, but very challenging year for the Company. We made substantial progress, becoming a revenue producing commercial coal producer for the first time, although it has taken longer than we had hoped to overcome the challenges we faced and reach the positive position we are now in.

"Having gone through the operational and financial challenges in 2018 and early 2019, I believe the Company is now in the best position it's been for many years. It is now a coal producing company, with a wide range of customers and monthly income. With the expected start of mining of the Northern Area in the coming weeks we remain on track to become cashflow positive within the next 10 months, targeting an initial 6,000 tonnes per month of washed coal production, which we consider to be a breakeven level, increasing to 10,000+ tonnes per month thereafter."

For further information please contact:

Chairman's Statement

2018 was a significant, but very challenging year for the Company. The year started with the Company fulfilling test orders for washed coal and during the year we managed to increase our production, widened our customer base and signed several long-term supply contracts. We also overcame some challenges related to an unusually heavy rainy period, lack of available transportation and a high percentage of fine coal arising from our production. We had to make modifications to increase the plant capacity and bought additional mining equipment to enable production to go up to 10,000 tonnes per month of washed coal, further details of which are outlined in the CEO's report.

During the year 2018 we also had to raise capital both through equity and convertible loan means to execute our plans. This was done against a background of a very tough market worldwide for junior mining companies. In early 2019 we also invited all Shareholders to support the Company through an Open Offer and subsequently undertook a placing to provide the additional capital required.

Having gone through the operational and financial challenges in 2018 and early 2019, I believe the Company is now in the best position for many years. It is now a coal producing company, with a wide range of customers and monthly income. We have all the equipment and manpower to bring our production to the maximum capacity of the current plant. In addition the Company now has supportive institutional shareholders.

Looking ahead in 2019, our short-term goal is to open the Northern Mining Area, increase our production to reach break-even point in Q3 2019 and be cash flow positive within the next 10 months.

In the medium term we are looking at ways to monetise the large amount of fine coal by-product being produced, which could make a significant difference to the profitability of the Company. We will also look further into the economics of having our own transportation fleet to supply selected customers.

In the longer term we are still pursuing the coal to power project and will always look for opportunities for additional cash-flow positive projects.

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 2018. This gives me confidence that we will be able to face up to any difficulties ahead of us and make the Company as success.

We look forward to reporting further sales and progress from our Rukwa Mine in the coming months.

Dr Jeffrey Malaihollo

Chairman

Chief Executive Officer's Report

2018 was a year of significant progress for the Company's Rukwa coal project in southwest Tanzania (the "Project"). Following commissioning of the wash plant in late 2017, the Company started 2018 supplying test orders to several customers. This period coincided with the wet season rains and whilst access to site was sometimes challenging, deliveries continued to be dispatched. Further development of site infrastructure was carried out in January, in particular with the completion of the coal test laboratory facilities.

As the upper levels of the coal were mined we were greatly encouraged by the often high calorific values present, test results from washed coal as high as 6,700GCV were obtained, whilst fine coal reported over 4,700GCV in certain batches.

Early in the year the plant was running at a throughput of approximately 30 tonnes per hour. Challenges with water supply, operating in the wet season and a high proportion of fines in the feed contributed to this lower than modelled throughput.

On 23 February 2018 the Tanzanian Deputy Minister of Minerals, Mr Doto Biteko visited the Project site along with other Regional government officials. The Deputy Minister was shown the mine and the plant and it was explained how the coal could be for both third party commercial use and any future power plant development in the region. Mr Biteko was also very interested in how the Project was benefiting the local community through employment and business opportunities.

Early in the Project life there were challenges for customers to source transport for the collection of their product. By the second half of 2018 this was largely solved as reliable transport became more readily available. The Company has also considered having its own base fleet of trucks to make deliveries where needed, but has not yet considered this needs to be implemented.

In April 2018 the Company raised £740,000 (before expenses) to continue the development of the Project and provide working capital.

As the year progressed and the dry season arrived, coal production continued to increase and the customer base was strengthened. However, customers were keen to have extended trials before entering into long term contracts and this resulted in the first supply contract not being signed until late August 2018. This was for 5,000 tonnes of coal per month and was followed in October by two further contracts for up to 500 and 3,500 tonnes respectively. In parallel we had been looking at ways to increase throughput in the plant and had commissioned a water treatment plant to be built (the "Lamella Plant"). The Lamella Plant was completed and operational in December 2018. Several options for a pre-screening plant to take out the fine coal had been reviewed and whilst a planned initial plant purchase was not completed, construction was started on a suitable facility in country. We had planned to have this operational in Q4 2018, but substandard contractor performance meant the Company had to take over construction. The unit was subsequently completed in December 2018 and was operational from January 2019.

The Company's mining consultants, Sound Mining Systems (SMS) of Johannesburg completed an updated mine plan in September 2018, focused on the area to the north of the current mining operations. We have targeted significantly larger coal measures that in places have thicknesses of over 40m. It is planned the Northern Mining Area, as we refer to it, will provide feed for the Project for at least the next 10 years at a very low strip ratio of below 1:1 .

In November due to the requirements to expand production and meet customers' requirements the Company took out a convertible facility for US$750,000 before expenses. This was used primarily for capital purchases, including a second loader, a second excavator, completion of the pre-screen plant, in pit lighting for night shift operations and land compensation measurements and payments in the Northern Mining Area.

During 2018 the Project produced approximately 75,000 tonnes of Run of Mine (ROM) coal, 15,000 tonnes of washed coal and 32,000 tonnes of fine coal.

Coal to Power

During the early part of 2018 we had several productive meetings with senior management of Tanzania Electric Supply Company ("Tanesco") and were greatly encouraged by their willingness to move forward to look at solutions for coal to power implementation.

A very positive development occurred in June 2018 when the World Bank announced it had approved US$455 million of funding for power transmission line construction in Tanzania. This included the transmission line from Sumbawanga to Tunduma in the south, along with the associated Sumbawanga substation near to the Company's Rukwa Project area. This step forward in the development of the infrastructure needed to realise the construction of Edenville's Coal to Power Project is very significant. It is understood that the construction procurement plan is currently being implemented and we hope to have further positive news on the development of power line infrastructure to Sumbawanga in 2019.

In parallel with this news the Company decided to extend its Memorandum of Understanding with Sinohydro Corporation of China for a further 18 months in June 2018. Whilst a feasibility study on a 120MW plant has already been carried out, the potential for a significantly larger plant of up to 300MW is now being considered and much of Sinohydro's work will continue to be focused towards this option.

In September 2018 Tanesco came forward with a Request for Qualification ("RFQ") for coal fired generation projects in Tanzania. The RFQ was considered the first step in a formal tender process to move forward to an eventual Power Purchase Agreement and subsequently construction and operation of a coal fired power plant. There was a very compact time schedule in which to prepare the necessary submission, this being one month from notification. The Company successfully submitted the necessary documents in October 2018 and Tanesco officially accepted these as being complete and complying with TanescoÕs requirements.

However, two weeks later, for reasons not given by Tanesco, the RFQ was cancelled and subsequently reinstated for a resubmission date in December 2018. Edenville resubmitted their RFQ documents in line with the criteria set forward by Tanesco, which appeared identical to the previous criteria.

Post Period

January 2019 got off to a good start with the second excavator being utilised in the mine along with our original machine. The Lamella Plant was operational and the newly constructed pre-screen plant started processing test material in January 2019 and became fully operational in February.

In January 2019 the Company decided to carry out an Open Offer to existing shareholders in order to raise the remaining capital needed to open up the Northern Mining Area and subsequently increase production. The Open Offer however was poorly subscribed and only approximately 10% of the planned £619,099 was eventually raised. This left the Company in a challenging situation on how to meet customers' orders and expand the operation.

At the time of the closing of the Open Offer on 14 February 2019 Tanesco informed the Company that it had been unsuccessful in moving through the RFQ process to supply power to Tanesco. No clear explanation has been given for this decision. As far as the Company is aware no other privately held coal projects in Tanzania progressed successfully through the process. The Company remains 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.

From February 2019, with limited funds available, 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 washed tonnes and 9,700 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 and started to make preparations to apply some of this funding to the Project development. The main areas to be targeted are opening up the pit in the Northern Mining Area and small upgrades on the plant and infrastructure, such as an improved water pumping system and installation of a coal sizer prior to the plant. Following the completion of the funding the Project is now well placed to move forward in 2019 to increase production and provide a quality product to its customers.

The target is to firstly reach a steady state of 6,000 tonnes per month of washed coal product, which we consider will make the Tanzania operations break even. Following this the second target is to reach 10,000 tonnes of washed coal produced per month which will provide positive cash flow for the Company.

The fine coal is effectively produced as a by-product and to that end we are continuing discussions with the previously outlined buyers of fine coal. Other opportunities available to the Company with regards to sales of fine coal are also being assessed. These include briquetting or the introduction of secondary processing to beneficiate the coal and improve the calorific value, thereby enhancing the desirability of the product. Although this would require additional capital expenditure, the Company believes this to be modest with a short payback period. The Company's Directors expect to be able to fund any upgrades to infrastructure from free cash flow from future mining operations. As an immediate measure we are targeting areas of stockpiled fine coal that may contain economically recoverable coal to feed through the pre-screen. We also expect the pre-screen to increase the available tonnage from newly mined coal for subsequent processing through the wash plant.

The AFR RI-3A Tanzania - Zambia Transmission Interconnector project, which is being part financed by the World Bank, is continuing to move forward which we continue to believe could have positive implications for our planned coal to power project. 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.

Financing

The Company raised equity of £740,000 (before expenses) in April 2018, primarily for working capital and additional enhancements to the operations.

A further £586,000 was raised in November 2018 in the form of a convertible loan with Lind Partners. This was used primarily for expansion of the operation and the completion of the new items for the wash plant. Several new items of equipment were purchased including a new loader and second excavator. Land compensation for the Northern Mining Area was largely completed in 2018 using this funding.

Post period end in February 2019, the Company raised gross proceeds of £62,418 through the Open Offer, together with a further £15,000 following the issue of Director Subscription Shares to Jeffrey Malaihollo, the Company's Chairman. In April and May 2019 the Company raised a total of £510,000, before expenses in a placing to new and existing shareholders.

The Company also undertook certain cost saving measures, including the Directors only taking part of their salary entitlements in 2018 and the subsequent reduced salary arrangements and conversion of certain outstanding salaries to shares in the Company in May 2019 along with the waiving of portions of their outstanding salaries.

Corporate Social Responsibility

The Company has continued to take its corporate social responsibility very seriously and understands it social licence to operate in Tanzania is an essential part of making its projects viable in the long term. The construction of the mining Project 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.

Now that the Project is more established we plan to carry out projects for the local population, including establishment of water wells subject to the appropriate hydrological conditions.

Relinquishments

Following the completion of mapping work carried out over the area of exploration licence PL6098/2009 at Muze, the Company decided to relinquish this licence. After geological interpretation it was concluded that all the likely economic coal measures in the Muze area are contained within the Company's primary mining licences which lie approximately 2km to the south of PL6098/2009. Relinquishment of this licence will result in an annual saving to the Company of approximately US$30,000 for licence fees and work requirements.

Renewals

PL7799 expired in April 2019 but an application had been made and fees paid, prior to the expiry date, to renew the licence. Although there is some paperwork from the Tanzanian authorities outstanding the Company understands that the licence has been renewed. The Directors do not forsee any reason why the renewal process will not be completed. Should renewal not be granted it would not affect the coal resources available to the group which are all contained within its current mining licence. The area of PL 7799 would be used to put in place mining infrastructure at a later date. The loss of PL7799 may lead to a revision of infrastructure plans.

Summary

2018 was the Rukwa Coal Project's first year of full production following construction in 2017. During the year the Company built up a number of regular orders that resulted in three long term contracts for coal supply being signed. The mine was fully opened up and supplied approximately 75,000 tonnes of raw coal during the year. The Project faced challenges, amongst them the sizing of the raw coal which contained an excess of fine material. This resulted in lower than planned throughput in the plant with consequently lower volumes of washed coal products. The plant has since been modified to deal with any fine coal and this along with the opening up of the Northern Mining Area will underpin the planned increase in production to turn the project cash flow positive within the next 10 months.

The coal to power project has faced challenges to its progress in the decision by Tanesco to reject it in the RFQ process. However, the Company considers the opportunity still exists to develop a power plant at the Project site as the catalyst for development, the AFR RI-3A Tanzania - Zambia Transmission Interconnector, is proceeding through its pre-construction stages with finance in place and the procurement plan moving forward. When this transmission line, which will run from Sumbawanga to Tunduma in the south, is operational it will enable power from a project at the Rukwa coal deposit to be distributed not only throughout Tanzania but also the region as a whole.

Rufus Short

Chief Executive Officer

Group Statement of Comprehensive Income

Year Ended 31 December 2018

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 2018 

The financial statements were approved by the board of directors and authorised for issue on 21 June 2019 and signed on its behalf by:

Rufus Short

Director

Company registration number: 05292528

Group Statement of Changes in Equity

Year Ended 31 December 2018

.

Group Cash Flow Statements

Year Ended 31 December 2018

Notes to the Group Financial Statements

Year Ended 31 December 2018

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 companyÕs 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 GroupÕs 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, as modified by the revaluation of available for sale investments.

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.

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 2018 the Group had cash balances totalling £160,042. 

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

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:

*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.

The Group has applied IFRS 15 and IFRS 9 from 1 January 2018. As a result of the adoption of these standards, there has been a change to the significant accounting policies.

Due to the transition methods adopted by the Group in applying these standards, comparative information throughout these financial statements has not been restated to reflect the requirements of the new standards.

Both of the standards did not have a significant impact on the Group's financial statements.

(i) IFRS 15 Revenue from Contracts with Customers

IFRS 15 establishes a comprehensive framework for determining , how much and when revenue is recognised. Under IFRS 15, revenue is recognised when a customer obtains control of the goods or services. Determining the timing of the transfer of control at either a point in time or over a period of time requires judgement.

The Group has adopted IFRS 15 using the cumulative effect method (without practical expedients), with effect on initially applying this standard on 1 January 2018. Accordingly, the information presented in 2017 has not been restated.

Revenue is measured based on the consideration specified in a contract with a customer. The Group recognises revenue when it transfers control over goods to a customer.

The following table provides information about the nature and timing of the satisfaction of performance obligations in contracts with customers, including significant payment terms and related revenue recognition policies.

(i) IFRS 9 Financial Instruments

Classification and measurement of financial instruments

IFRS 9 contains three principal classification categories for financial assets measured at amortised costs, FVOCI and FVTPL. The classification of financial assets under IFRS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. IFRS 9 eliminates the previous IAS 39 categories of held to maturity, loans and receivables and available for sale.

The following table and the accompanying notes below explain the original measurement categories under IAS 39 and the new measurement categories under IFRS 9 for each class of the Group's financial assets and financial liabilities as at 1 January 2018.

Impairment of financial assets

IFRS 9 replaces the "incurred loss" model in IAS 39 with the "expected credit loss" model. The new impairment model applies to financial assets measured at amortised cost, contract assets and debt investments at FVOCI, but not investments in equity instruments. Under IFRS 9, credit losses are recognised earlier than under IAS 39.

There has not been a significant impact on the Group as at 1 January 2018 as a result of adopting IFRS 9.

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:

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 2018. 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

Revenue from the sale of energy commodities is recognised upon delivery of goods to the customers.

The Group recognises sales revenue related to the transfer of goods when control of the goods passes to the customer. The amount of revenue recognised reflects the consideration to which the Group is or expects to be entitled in exchange of those goods.

Sales revenue is recognised on individual sales when control transfers to the customer. In most cases, control passes and sales revenue is recognised when goods leave the entity's premises after being checked at the weighbridge for verification of coal tonnage.

Interest income is recognised on a proportional basis taking into account the effective interest rates applicable to the financial assets.

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

The Group has elected to apply the limited exemption in IFRS 9 relating to classification, measurement and impairing requirements for financial instruments, and accordingly comparative periods have not been restated and remain in line with the previous standard IAS 39 "Financial Instruments: Recognition and Measurement"; For further understanding of the impact of the transition to IFRS 9, refer to note 2.

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 held at amortised cost

The classification applies to debt instruments which are held under a hold to collect business model and which have cash flows that meet the "solely payments of principal and interest" (SPPI) criteria.

At initial recognition, trade receivables that do not have a significant financing component, are recognised at their transaction price. Other financial assets are initially recognised at fair value plus related transaction costs, they are subsequently measured at amortised costs using the effective interest method. Any gain or loss on derecognition or modification of a financial asset held at amortised cost is recognised in the income statement

Financial Assets held at fair value through other comprehensive income (FVOCI)

The classification applies to the following financial assets:

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.

Financial liabilities

Borrowings and other financial liabilities (including trade payables but excluding derivative liabilities) are recognised initially at fair value, net of transaction costs incurred, and are subsequently measured at amortised costs.

Impairment of financial assets

A forward looking expected credit loss (ECL) review is required for: debt instruments measured at amortised costs are held at fair value through other comprehensive income: loan commitments and financial guarantees not measured at fair value through profit or loss; lease receivables and trade receivables that give rise to an unconditional right to consideration.

As permitted by IFRS9, the group applies the "simplified approach" to trade receivable balances and the "general approach" to all other financial assets. The general approach incorporates a review for any significant increase in counter party credit risk since inception. The ECL reviews including assumptions about the risk of default and expected loss rates. For trade receivables, the assessment takes into account the use of credit enhancements, for example, letters of credit. Impairments for undrawn loan commitments are reflected as a provision.

Inventories

Inventories are measured at the lower of costs and net realisable value. The cost of inventory is based on the average period over the relevant period of production and includes expenditure in accumulating the inventories, production costs and other costs incurred in bringing them to their existing location and condition. Stockpiles tonnages are verified by periodic surveys.

Cost is based on Average costing principle and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition plus appropriate share of overheads based on normal operating capacity.

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.

Trade and other receivables

Provision for impairment of trade receivables is made when there is objective evidence that the Group will not be able to collect all amounts due to it in accordance with the original terms of those receivables. The amount of the write-down is the difference between the receivables carrying amount and the present value of the estimated future cash flows.

An assessment for impairment is undertaken at least annually.

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 component parts of convertible loan notes issued by the Company are classified separately as financial liabilities and equity in accordance with the substance of contractual arrangements. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for a similar non-convertible instrument. This amount is recorded as a liability on an amortised cost basis using the effective interest method until extinguished upon conversion or at the instrument's maturity date. The equity component is determined be deducting the amount of the liability component from the fair value of the convertible loan notes as a whole. This is recognised and included in equity, net of income tax effects, and is not subsequently remeasured.

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:

Costs capitalised include the purchase price of an asset and any costs directly attributable to bringing it into working condition for its intended use.

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 GroupÕs 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.

Exploration and evaluation, Development and production assets

Capitalisation

Certain costs (other than payments to acquire the legal right to explore and costs which are directly attributable to those payments) incurred prior to acquiring the rights to explore are charged directly to the income statement. All costs incurred after the rights to explore an area have been obtained, such as geological and geophysical costs and other direct costs of exploration and appraisal are accumulated and capitalised as intangible exploration and evaluation ("E&E") assets. These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the areas or where activities in the areas have not yet reached a stage which permits reasonable assessment of the existence of economically recoverable reserves.

E&E costs are not amortised prior to the conclusion of appraisal activities.

At completion of appraisal activities, if technical feasibility is demonstrated and commercial reserves are discovered, then, following development sanction, the carrying value of the relevant E&E asset will be reclassified as a development and production ("D&P") asset, but only after the carrying value of the relevant E&E asset has been assessed for impairment, and where appropriate, its carrying value adjusted. If after completion of appraisal activities in the area, it is not possible to determine technical feasibility and commercial viability or if the legal right to explore expires or if the Company decides not to continue exploration and evaluation activity, then the costs of such unsuccessful exploration and evaluation are written off to the income statement in the period the relevant events occur.

Impairment

Management consider on a regular basis the geological resources and exploration and evaluation results of each licence and based on their analysis may relinquish or abandon a particular licence area. When this occurs, the costs related to the relinquished area are written off to the income statement.

Where the licences will be retained an impairment review is performed when facts and circumstances indicate that the carrying value of E&E assets may exceed its recoverable amount.

For E&E assets when there are such indications, an impairment test is carried out by grouping the E&E assets with the D&P assets belonging to the same geographic segment to form the Cash Generating Unit ("CGU") for impairment testing. The equivalent combined carrying value of the CGU is compared against the CGU's recoverable amount and any resulting

Impairment loss is written off to the income statement. The recoverable amount of the CGU is determined as the higher of its fair value less costs to sell and its value in use.

Depletion of Development and Production Assets

The net carrying amount of development and production assets is depleted using the unit of production method by reference to the ration of production in the year to the related proven and probable reserves, taking into account estimated future development costs necessary to bring those reserves into production. If he useful life of the asset is less than the reserve life, in which case the asset is depreciated over its estimate life using the straight line method.

Future development costs are estimated taking into account the level of development required to produce the reserves. These estimates are reviewed by independent reserve engineers. Changes in factors such as estimates of reserves that affect unit of production calculations are dealt with on a prospective basis. Capital costs for assets under construction included in development and production assets are excluded from depletion until the asset is available for use, that is, when it is in the location and condition necessary for it to be capable of operating in the manner intended by management.

Development assets

When the technical feasibility and commercial viability of extracting a mineral resource are demonstrable, the Group:

For Evaluation and Exploration assets reclassified to development assets, the Group classifies such assets either as tangible or intangible development assets. Intangible E&E assets may be reclassified into tangible development assets or intangible development assets and vice versa. Identifiable tangible assets that cease to be classified as E&E assets are generally classified as tangible development assets. Any costs incurred in testing the assets to determine if they are functioning as intended, are capitalised, net of any proceeds received from selling any product produced while testing. Identifiable intangible E&E assets may continue to be classified as an intangible asset, or may be reclassified as a tangible asset if the intangible asset is considered to be integral to the tangible development asset and the tangible element of the asset is more significant.

Amortisation

On reclassification of E&E assets, an entity depreciates (amortises) the resulting tangible development assets. Intangible development assets are not depreciated until the production stage is reached at which point both tangible and intangible development assets, are depreciated using the units-of-production method is used.

The net carrying amount of development or production assets is depleted using the unit of production method by reference to the ratio of production in the year to the related proven and probable reserves, taking into account estimated future development costs necessary to bring those reserves into production. If the useful life of the asset is less than the reserve life, in which case the asset is depreciated over its estimated useful life using the straight-line method.

Future development costs are estimated taking into account the level of development required to produce the reserves. These estimates are reviewed by independent reserve engineers. Changes in factors such as estimates of reserves that affect unit-of-production calculations are dealt with on a prospective basis. Capital costs for assets under construction included in development and production assets are excluded from depletion until the asset is available for use, that is, when it is in the location and condition necessary for it to be capable of operating in the manner intended by management.

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.

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 Group makes estimates and assumptions concerning the future, which by definition will seldom result in actual results that match the accounting estimate. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year are those in relation to:

Impairment Ð intangible assets

The Group is required to perform an impairment review, on reclassification of exploration and evaluation assets to development assets, for each CGU to which the asset relates. Impairment review is also required to be performed on goodwill annually and on other intangible assets when facts and circumstances suggest that the carrying amount of the asset may exceed its recoverable amount. The recoverable amount is based upon the Directors' judgements and are dependent upon the discovery of economically recoverable reserves, the ability of the Company to obtain necessary financing to complete the development and future profitable production or proceeds from the disposal until the technical feasibility and commercial viability of extracting a mineral resource becomes demonstrable, at which point the value is estimated based upon the present value of the discounted future cash flows.

The outcome of ongoing exploration and evaluation and development assets, and therefore whether the carrying value of exploration and evaluation and development assets will ultimately be recovered, is inherently uncertain.

In assessing whether an impairment is required for the carrying value of an asset, its carrying value is compared with its recoverable amount. The recoverable amount is the higher of the assetÕs fair value less costs to sell and value in use. Given the nature of the Group's activities, information on the fair value of an asset is usually difficult to obtain unless negotiations with potential purchasers or similar transactions are taking place. Consequently, unless indicated otherwise, the recoverable amount used in assessing the impairment charges described below is value in use.

The calculation of value in use is most sensitive to the following assumptions:

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 goodwill carried as 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.

At the reporting date, the carrying value of evaluation expenditure and/or development assets is £5,443,363 (2017: £4,757,087) and the carrying value of goodwill is £332,466 (2017: £314,231).

Classification of exploration and evaluation, development and production assets

E&E assets are reclassified from Exploration and Evaluation, to development assets, when evaluation procedures have been completed and the Directors consider commercial viability has occurred. The Directors consider commercial viability occurs when the project development reaches a stage where the mining and processing of the mineral is at commissioning stage and the project has been successfully built or developed in such a way that cash flow can be received for the product in question. Critically this point shows the project has been able to be developed for a cost that can be both quantified and also sourced in some way to allow the project to reach this stage. Commissioning is generally defined in mineral exploitation as the point at which the project can deliver products in a regular and sustainable way, be that from the mine or a processing plant.

When the commissioning stage has completed, it is considered that the mine has moved into the production phase of its lifecycle. The Directors considered that this stage was reached in April 2018.

Share based payments

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.

Depletion of Development and Production Assets

The net carrying amount of development and production assets is depleted using the unit of production method by reference to the ratio of production in the year to the related measured and indicated resources. Measured and indicated resources are based on a JORC compliant resource estimate carried out in 2013.

5. Segmental information

The Board considers the business to have one reportable segment being Coal exploration and development projects.

Other represents unallocated expenses and assets held by the head office. Unallocated assets primarily consist of cash and cash equivalents.

Information about major customers

Included in revenues arising from the sale of coal are revenues of £220,558 (2017: £Nil) which arose from sales to the GroupÕs largest customer based in Tanzania. No other single customer contributed 10% or more to the Group's revenue in either 2018 or 2017.

6. Administration expenses

7. AuditorsÕ remuneration

8. Employees

Included within Development expenditure/Exploration and evaluation assets (note 15) are capitalised wages and salary costs of £241,458 (2017: £212,572).

The average number of employees and directors during the year was as follows:

9. Directors' remuneration

The highest paid director received remuneration of £130,702 (2017: £197,260).

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:

10. Finance income

11. Finance Costs

12. Income tax

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 £6,256,070 (2017: £5,550,871).

A deferred tax asset of £1,063,129 (2017: £943,110) calculated at 17% (2017: 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:

13. Earnings per share

14. Property, plant and equipment

Plant and machinery depreciation amounting to £226,343 is included within cost of sales as it relates to mining equipment.

15. Intangible assets

Tanzanian Licences and Goodwill

The Tanzanian licences comprise a mining licence and various prospecting licences. The licences are located in a region displaying viable prospects for both uranium and coal and occur in a country where the government's policy for development of the mineral sector aims at attracting and enabling the private sector to take the lead in exploration mining, development, mineral beneficiation and marketing.

Goodwill arose as a result of the valuation placed on the original six Tanzanian licences acquired on the acquisition of Edenville (Tanzania) Limited. The allocation of the Goodwill was based on the valuation of the Group's licences and has been allocated between coal and uranium licences.

In 2015 as the Group focused firmly on the development of the Rukwa Coal to Power Project the directors have looked at rationalisation of other licences which will allow available funds to be focussed on the development of the Group's core asset at Rukwa.

During 2016 the Group wrote off the last of its uranium licences and associated goodwill; the licence was subsequently relinquished in February 2017.

During 2017 the Company evolved from an exploration company to a development company, as a result its exploration and evaluation assets were transferred to development expenditure.

During 2018 the Company transitioned from development to production on its Mkomolo licence ML562/2016.

The Directors carried out an impairment review on reclassification of exploration and evaluation assets to development and production assets.

Development and production assets have a finite useful economic life. These assets are depleted on the unit of production method based on measured and indicated resources as described in note 2.

Goodwill has a finite life and is reviewed for impairment annually.

16. Inventories

The cost of inventories recognised as an expense during the year in was £853,388 (2017: £Nil).

Inventory of washed coal has been reduced by £8,492 as a result of write-downs to net realisable value. This write down is recognised as an expense during the year.

17. Trade and other receivables

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.

18. Cash and cash equivalents

Cash and cash equivalents include the following for the purposes of the cash flow statement:

19. Trade and other payables

20. Convertible loan notes

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.

21. Share capital