EDL.L Regulatory News (EDL)

30 June 2022

Edenville Energy Plc

("Edenville" or the "Company")

Annual Results for the year ended 31 December 2021

Edenville Energy Plc (AIM: EDL), the AIM quoted company operating the Rukwa Coal Project in southwest Tanzania ("Rukwa"), announces its audited results for the year ended 31 December 2021.

The Company's Annual Report for the year ended 31 December 2021 (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.

For further information please contact: 

CHAIRMAN'S STATEMENT

The first half of 2021 was once again dominated by the impact of COVID across the world. The start of 2021 coincided with the re-emergence of lockdowns across much of the globe. Naturally this provided significant challenges to the Company with the reduced demand for coal seen in 2020 continuing and the logistical issues remaining. In light of this the Company took a number of steps to address both its financial position as well as its operational plans for the future.

In January 2021 we announced an oversubscribed placing raising £900,000. The placing was supported by Edenville's existing three largest shareholder groups and specialist mining investor RAB Capital. In May 2021 we announced a further placing to raise gross proceeds of nearly £2.5 million, including a £1 million participation from a new strategic investor, Tony Buckingham. The Company used part of the proceeds to repay the outstanding debt to Lind Partners LLC, leaving the majority to fund future operations.

In August 2021 Franco Caselli joined the Board as a Non-executive Director of the Company. Mr Caselli is a geologist with more than 40 years of international operational and market experience in the energy and mining sectors.

With the Company better capitalised, and with the support of new shareholders, our focus during the year was to both monitor the situation in Tanzania with respect to Rukwa and to look at various opportunities and new assets to inject into the Company. We continue to explore various options and look forward to updating shareholders as soon as appropriate.

Post period end, in February 2022, the Company entered into a contract mining agreement with Nextgen Coalmine Limited ("Nextgen") for the operation of the Company's Rukwa Coal Project. Shortly after that both the international and domestic coal price increased significantly. This resulted in significant demand for both Rukwa's washed and fine coal. Therefore, we were pleased that in May 2022 the Company reached an agreement with NextGen to terminate the contract and the Company is now again in full control of the operations at Rukwa.

Although the last few years have been difficult for the Company, we believe that the current trend of high coal prices and increased demand, combined with the fact that the Company is better capitalised, put us in a great position to move the Company forward significantly.

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 supported the Company throughout this difficult period.

I believe the Company is now better positioned than it has been for some considerable time and we look forward to reporting on the Company's progress in the coming months.

Dr Jeffrey Malaihollo

Chairman

29 June 2022

CHIEF EXECUTIVE OFFICER'S REPORT

2021 was a year in which there was a significant positive change in the prospects for the Company, both with regard to the Rukwa coal project and more widely with an improved cash position.

Funding

On 19 January 2021 we announced an oversubscribed placing raising gross proceeds of £900,000, supported by Edenville's existing three largest shareholder groups and specialist mining investor RAB Capital. On 5 May 2021 we announced a further placing to raise gross proceeds of £2.48 million, including a £1 million participation from a new strategic investor, Tony Buckingham.

Mr Buckingham is well known in the natural resources market, particularly in Africa, having been CEO and major shareholder of Heritage Oil Limited from 2006 until its acquisition by a wholly owned subsidiary of Qatari investment fund, Al Mirqab Capital SPC, in 2014 for a consideration of US$1.6 billion.

Additionally, following the £2.48 million fund raise, we announced on 22 June 2021 that the Company had fully repaid in cash the full outstanding amount owing to Lind Partners LLC ("Lind") under the Funding Agreement dated 6 November 2018. and the Company had no further outstanding obligations to Lind.

The fundings undertaken through the year ensured that the Company is well capitalised, with cash resources as at 31 December 2021 of £1,229,801 (31 December 2020: £25,690) and reduced borrowings of £18,258 (31 December 2021: £440,831).

As at 27 June 2022 the Company had cash balances of approximately £515,428. Whilst this is sufficient for the Company's current needs, at Rukwa, where it is expected the Company will become cashflow positive later this year as production ramps up.

Operational Review

Whilst the first half of 2021 was another period impacted by the Covid 19 pandemic and the resultant reduced demand, there were significant changes in the demand scenario and outlook as the year progressed as international coal prices rose and local Tanzanian producers started to switch to supplying the export market.

Prior to this uptick in coal prices and demand duringthe later part of the year the Company successfully focused on preserving cash for possible further asset acquisitions and focussed on supplying existing customers. This translated into increasing production in the final quarter of the year and revenue for the year as a whole of £105,228 (2020: £33,852)

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 and the local population, as well as the mine itself.

At Rukwa, wherever possible, we have sought to employ local people from the 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.

Post Period Events

On 3 February 2022 we announced that the Company's subsidiary Edenville International (Tanzania) Limited had entered into a contract with Nextgen Coalmine Limited ("Nextgen") for the operation of the Company's Rukwa Coal Project. This superseded the Coal Mining Agreement with Infrastructure and Logistics Tanzania Limited and the Sales and Marketing Agreement with MarTek Global FZ-LLC, announced on 8 June 2020 and 26 August 2020 respectively. These agreements were terminated by Edenville due to lack of progress on implementation.

Subsequent to entering into the agreement with NextGen both the international and domestic coal price increased significantly. This coincided with heightened interest from potential customers to enter into offtake agreements for coal from Rukwa. Additionally, the implementation of the coal mining agreement with Nextgen was, for various reasons, problematic, resulting in very poor production figures over the period from February to May 2022 and no material revenue for the Company.

The lack of progress by Nextgen culminated in the announcement on 31 May 2022 that the Company had reached an agreement with NextGen to terminate the contract. Following the termination of the contract all mining equipment has been brought back into service by Edenville, whilst an additional pre-strip excavator has been added to the fleet. Up to three additional trucks have been sourced to rapidly scale production. Our initial goal is to satisfy existing demand from local customers of 1,500 tonnes of washed lump coal product and 500 tonnes of coal fines in the immediate future, targeting sales of 5,000 tonnes per month of washed coal late in Q3 2022, with coal fines sales also expected to continue and possibly expand. During the first half of 2022, 9,466 tonnes of ROM coal has been mined.

We believe there is sufficient demand based on the Company's order book and recent discussions with potential customers to sell any coal that is produced at Rukwa. The Company is also exploring the potential of exporting its coal for the first time, given margins would be expected to be even greater.

Much of 2021 and the first half of 2022 was spent pursuing reverse takeover and other opportunities to add assets to the Company. During this time the Company focused on reducing cash burn on its Tanzanian project whilst it has explored these potential new projects. One potential transaction progressed significantly, however was ultimately terminated by mutual consent. As part of the termination it was agreed that the transaction costs incurred by the Company would be re-imbursed in full by the potential take-over target.

Further to the Company announcements on 18 and 31 May 2022 that Upendo Group Ltd.'s current 10% economic interest in the joint venture, which holds the licences governing the Rukwa Project, had been transferred to a 10% direct holding on the principal production licence. The Company has sought legal advice and has been advised that the variation has been undertaken illegally and that the holding should be reversed by the Government, This reversal has been sought. The Company will provide a further update as appropriate.

Summary and Outlook

With Edenville now being in full control of the operations at Rukwa we are able to take advantage of the recent macro changes that have made the economics of our Rukwa project considerably more attractive. Edenville is determined to maximise cash returns in the current global coal environment, especially given the attractive pricing forecast over the coming years. To this end we have already started applying a modest proportion of our existing cash resources towards expanding the Rukwa operations to meet these heightened sales enquiries.

Additionally, with an improved cash position we continue to target additional asset acquisitions, leveraging the natural resources and capital markets expertise of the Board, and significant shareholders.

I look forward to the remainder of 2022 and beyond with confidence that there is a positive future for Edenville that can deliver shareholder value.

Alistair Muir

Chief Executive Officer

29 June 2022

REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF EDENVILLE ENERGY PLC

FOR THE YEAR ENDED 31 DECEMBER 2021

Opinion

We have audited the financial statements of Edenville energy plc (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2021 which comprise the group statement of comprehensive income, the group and company statement of financial position, the group and company statement of changes in equity, the group and company cash flow statements and notes to the group and company financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and UK-adopted international accounting standards and as regards the parent company financial statements, as applied in accordance with the provisions of the companies act 2006.

In our opinion:

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material uncertainty related to going concern

We draw attention to note 2 in the financial statements, under the heading 'Going concern' concerning the ability of the group and parent company to continue as a going concern. The group and parent company's forecasts and projections indicate that the group and parent company has sufficient cash reserves to operate within the level of its current facilities. However, if there are any material variances to the forecasts which it is unable to manage with cashflow management to continue in operation, the group and parent company would be obliged to raise additional funds within twelve months of the date of the approval of these financial statements. The ability of the group and parent company to raise additional funds is dependent upon investor appetite.

As stated in note 2, these events or conditions, along with the other matters as set forth in note 2, indicate that a material uncertainty exists that may cast significant doubt on the group and company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

In auditing the financial statements, we have concluded that the director's use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors' assessment of the group and parent company's ability to continue to adopt the going concern basis of accounting included:

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Emphasis of matter - recoverability of value added tax

We draw attention to note 4 of the financial statements, which describes group's assessment over the VAT receivable balance of £279,157 in Tanzania. The group have explained their assessment over the recoverability within critical accounting estimates and conclude this to be recoverable. The financial statements do not include the adjustments that would result if the group was unable to fully recover this.

Our opinion is not modified in this respect.

Emphasis of matter - recoverability of inventory

We draw your attention to Note 4 of the financial statements, which describes the group's assessment over the inventory balance of £142,721 in Tanzania. The group have explained their assessment over the recoverability within the critical accounting estimates and conclude this to be recoverable. The financial statements do not include the adjustment that would result if the group was unable to fully recover this.

Our opinion is not modified in this respect.

Our application of materiality

The quantitative and qualitative thresholds for materiality determine the scope of our audit and the nature, timing and extent of our audit procedures. The materiality for the financial statements as a whole applied to the group financial statements was £74,700 (2020: £67,250) based on 1% of gross assets. We based the materiality on gross assets because we consider this to be the most relevant performance indicator for a mining group. The performance materiality for the group was £44,800 (2020: £40,350). The materiality for the financial statements as a whole applied to the parent company financial statements was £12,500 (2020: £37,100) based on 2% of the expenses. The performance materiality for the parent company was £7,500 (2020: £22,260). For the component in the scope of our group audit, we allocated a materiality that was less than our overall group materiality. We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes.

We agreed with those charged with governance that we would report all differences identified during the course of our audit in excess of £3,735 (2020: £3,363) for the group and £625 (£1,855) for the parent company.

Our approach to the audit

In designing our audit approach, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular we assessed the areas involving significant accounting estimates and judgements by the directors in respect of the carrying value of the mining assets and carrying values of the parent company's investments in and loans to subsidiaries and considered future events that are inherently uncertain. We also addressed the risk of management override of internal controls, including evaluation whether there was evidence of bias by the directors that represented a risk of material misstatement due to fraud.

Of the four components of the group, a full scope audit was performed on the complete financial information of the parent and its Tanzanian subsidiary that owns the asset. The remaining components were subject to analytical review only because they were not significant to the group.

Of the two reporting components of the group, one is located in Tanzania and audited by a component auditor operating under our instructions, and the audit of the remaining component was performed in London, conducted by PKF Littlejohn LLP using a team with specific experience of auditing mining entities and publicly listed entities. The Senior Statutory Auditor interacted regularly with the component audit team during all stages of the audit and was responsible for the scope and direction of the audit process. This, in conjunction with additional procedures performed, gave us appropriate evidence for our opinion on the group and parent company financial statements.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the Material uncertainty related to going concern section we have determined the matters described below to be the key audit matters to be communicated in our report.

Other information

The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the group and parent company financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

Responsibilities of directors

As explained more fully in the Statement of Directors' Responsibilities, the directors are responsible for the preparation of the group and parent company financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the group and parent company financial statements, the directors are responsible for assessing the group and the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group and parent company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the group and parent company financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Use of our report

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone, other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

GROUP STATEMENT OF COMPREHENSIVE INCOME

Year ended 31 December 2021

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 AND COMPANY STATEMENT OF FINANCIAL POSITION

As at 31 December 2021

The financial statements were approved by the board of directors and authorised for issue on 29 June 2022 and signed on its behalf by:

Alistair Muir, Director

GROUP AND COMPANY STATEMENT OF CHANGES IN EQUITY

Year ended 31 December 2021

GROUP AND COMPANY STATEMENT OF CHANGES IN EQUITY

Year ended 31 December 2021

GROUP AND COMPANY STATEMENT OF CHANGES IN EQUITY

Year ended 31 December 2021

GROUP AND COMPANY CASH FLOW STATEMENTS

Year ended 31 December 2020

NOTES TO THE COMPANY'S FINANCIAL STATEMENTS

Year ended 31 December 2021

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 and Company's financial statements have been prepared in accordance with UK-adopted international accounting standards, 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 UK-adopted international accounting standards 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 has elected to take the exemption under section 408 of the Companies Act 2006 from presenting the Parent Company Income Statement. The loss after tax for the Parent Company for the year was £555,041 (2020: £515,106)

Going concern

At 31 December 2021 the Group had cash balances totalling £1,229,801. 

Production through the later half of 2021 struggled to achieve target levels and as a result of this the company entered into a Coal Mining Agreement which failed to have impact on production rates despite the current high coal prices. This agreement was terminated in May 2022.

The high coal prices have resulted in:

As a result of this situation the company is receiving regular enquiries for coal supply from within Tanzania, East Africa and internationally, the company has therefore taken back control of the mining operations and is already investing to raise production levels to leverage off the current demand situation.  

Based on the current working capital forecast which includes previous placings, the Group has sufficient funds in order to allow it to continue in production and implement planned project development and any upgrades. However, if there are delays in procuring orders or if large export contracts are entered into then the Group may require additional funds within twelve months of the date of approval of these financial statements. The ability of the Group to raise additional funds is dependent upon investor appetite or the willingness of the banking sector to finance ongoing operations.

Expenditure on excavation is related to the level of orders and both head office costs and Tanzanian administration costs can be reduced if the additional funds cannot be raised and the Group therefore continues to adopt the going concern basis in preparing its consolidated financial statements.

Adoption of new and revised standards and changes in accounting policies

There were no new standards or interpretations impacting the Group that will be adopted in the annual financial statements for the year ended 31 December 2021, and which have given rise to changes in the Group's accounting policies.

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:

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 (Share options and Warrants)

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 (share 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 Group also , from time to time , issues warrants, primarily to advisors of the company in connection with placing of shares and/or other services. There fair value of these warrants is either recognised as an expense or as a share issue costs offset against share premium, depending on the nature of services.

The total amount to be expensed or offset against share premium in respect of share issue costs 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 2021 (Note 11). 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.

Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the statement of profit or loss and other comprehensive income from the date the Group gains control until the date the Group ceases to control the subsidiary. Where the Group's interest is less than 100 per cent, the interest attributable to outside shareholders is reflected in non-controlling interests (NCIs).

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 Company's functional currency.

The functional currency of the Groups subsidiaries is US Dollars. The financial statements are presented in pounds sterling.

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:

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. 

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. The convertible loan note ("CLN") is a compound financial instrument that cannot be converted to share capital at the option of the holder. As the CLN, and the accrued interest, can only be repaid as a loan, it has been recognised within liabilities. Interest is accounted for on an accruals basis and charged to the Consolidated Income Statement and added to the carrying amount of the liability component of the CLN.

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

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.

Intangible assets

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. The licences are amortised over the life of the production asset using rates of depletion.

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.

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 - coal production assets and intangible assets (notes 15 and 16)

The Group is required to perform an impairment review, on coal production assets, for each CGU to which the asset relates. Impairment review is also required to be performed 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 ability of the Company to obtain necessary financing to complete the development and future profitable production or proceeds from the disposal, at which point the value is estimated based upon the present value of the discounted future cash flows.

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 asset's 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 believe this rate to be appropriate as this is in line with the borrowing rates the Group are expected to receive if they were to obtain significant long term finance based on discussions between the Directors and prospective parties. The Directors acknowledge that the Group does have small short term finance arrangements which attract a higher rate but have chosen not to use these rates as they would not be financing the production asset using short term borrowing facilities. These short term loans were needed mostly for working capital needs and most have been paid off in 2021. 

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 27)

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 15)

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.

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 recovered by an offset against VAT payable on future sales.. The directors believe that the debtor is recoverable based on their knowledge of the market in Tanzania.

Recoverability of Inventory (Note 17)

The group considers the recoverability of the inventory to be a key area of judgement, and this is held at its realisable value. The directors believe the inventory to be in good condition and the main reason why the stock has remained high in the last two years is mainly because of the Covid-19 impact which necessitated the closure of the mine. The mine has now fully reopened in May 2021 and the directors are taking making concerted efforts to sell this excess stock. They have recently identified key customers and have sold 1,000 tonnes in June 2021 with an expected commitment to purchase at a rate of 1,200 tonnes per month thereafter. They are optimistic that the remainder of the stock will be sold over the next 1-3 years on the presumption that one of the key customers will sign a long term contract. As a result of this, they have concluded no impairment is required at this stage, based on the directors' judgement of the local market and estimates regarding the timeframe in which the goods can be sold. 

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 2021 or 2020.

6. Expenses by nature