EDL.L Regulatory News (EDL)

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:

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

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

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

GROUP CASH FLOW STATEMENTS

Year Ended 31 December 2019

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:

*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:

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.

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.

6. Expenses by Nature

7. Auditors' Remuneration

8. Employees

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:

9. Directors' Remuneration

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:

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 £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:

13. Earnings Per Share

14. Property, Plant and Equipment

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

16. Intangible Assets

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

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