Annual Report 2018
Corporate Directory
Table of Contents
DIRECTORS
Mr Alasdair Cooke
Executive Chairman
Dr Charles (Frazer) Tabeart
CEO/Executive Director
Mr Gregory (Bill) Fry
Executive Director
Mr Valentine Chitalu
Non-Executive Director
Mr Vincent (Ian) Masterton-Hume
Non-Executive Director
Mr John Dean
Non-Executive Director
Mr Philip Clark
Non-Executive Director
(retired 31 March 2018)
Mr Wayne Richard Trumble
Non-Executive Director
(retired 31 March 2018)
COMPANY SECRETARY
Mr Daniel Davis
REGISTERED OFFICE
Granite House
La Grande Rue
St Martin, Guernsey GY1 3RS
REPRESENTATIVE OFFICE
IN AUSTRALIA
Suite 1, 245 Churchill Avenue
Subiaco, Western Australia, 6008
SHARE REGISTER
Link Market Services Limited
Level 12, QV1 Building, 250 St Georges Terrace
Perth, Western Australia, 6000
STOCK EXCHANGE LISTINGS
Australian Securities Exchange (ASX: AFR)
AUDITOR
BDO Audit (WA) Pty Limited
38 Station Street
Subiaco, Western Australia, 6008
SOLICITORS
Fairweather Corporate Lawyers
595 Stirling Highway
Cottesloe, Western Australia, 6011
BANKERS
Westpac Banking Corporation
Level 6, 109 St Georges Terrace
Perth, Western Australia, 6000
WEBSITE
www.africanenergyresources.com
Chief Executive’s Letter
Sese Joint Venture
Mmamabula West Power Project
Other Projects
Tenement Schedule
Annual Statement of Mineral Resources
Financial Report
Directors’ Report
Directors’ Declaration
Independent Audit Report
Consolidated Statement of Profit or Loss
& Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
africanenergyresources.com
Additional Shareholder Information
01
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05
07
08
09
10
11
20
21
26
27
28
29
30
47
Chief Executive’s Letter
Dear Shareholder
Your Company remains focused on the development of the Sese Power Project, to provide a reliable source of low-cost base-load
power into the Southern Africa Power Pool. First Quantum Minerals Ltd (FQM) continued to invest in the Sese JV Project, increasing
its stake to 65%. FQM must invest a further A$3 million to reach a 75% interest by 12 July 2019, following which African Energy’s
25% interest in any coal-to-power project developed at the site will be loan carried by First Quantum through to production.
Progress at Sese included;
Environmental approvals for Sese were increased to 500MW of power generation (up from 300MW) plus associated
increases in coal mining volumes and coal processing activities.
The resettlement action plan (RAP) was implemented at Sese to re-settle 28 households that had grazing rights and minor
property within the Land Rights area leased by the project.
The Southern Africa power market continues to be volatile, as evidenced by recent widespread power cuts throughout southern
Africa during industrial action at several South African power stations. Eskom’s situation remains the main variable in this market.
The financial crisis within Eskom continues to dominate both the political and economic agendas with South Africa, with far
reaching implications for the regional power market. With planned closures of older power stations as they reach the end of their
lives, the supply side is likely to remain stretched for several years, providing opportunities for new projects to enter the market.
The urgent requirement to stop ongoing losses at Eskom is also expected to see continued rapid increases in electricity tariffs.
The increasing uncertainty over the future of Eskom has raised the interest in Zambia and Botswana to obtain alternatives for
secure, low-cost generation. Both countries continued to net importers of electricity during the year, putting upward pressure on
local retail electricity tariffs. In Zambia an inquiry is underway into the cost of service and is expected to recommend an increase
in tariffs to reflects the cost of new generation, to ensure the financial viability of the local utility Zesco and prevent continued
subsidies from government.
These ongoing problems with loss making utilities are unsustainable and steep increases in electricity tariffs seem inevitable. The
increasing risk of higher prices and certainty of supply have improved the fundamentals for the development of Sese. Negotiations
are in progress for the sale of power and associated transmission agreements.
In addition to power generation projects, the Company continues to evaluate coal export opportunities. Global coal price increases
have led to the re-emergence of South Africa as a potential market for coal exports with positive implications for the Company’s
Mmamabula West project which can produce export quality coal at low prices once developed.
African Energy remains well funded, carries no debt and has low corporate overheads. Coupled with a strong development partner
at the Sese JV Project, and a high-quality portfolio, the Company is well placed to develop major power projects for the region and
develop an export coal business.
Frazer Tabeart,
Chief Executive Officer
AfricanEnergy Annual Repor t 2018 01
Sese Joint Venture
INTRODUCTION
African Energy’s large coal projects in Botswana are situated close to the interconnected regional transmission grid
(Figure 1), and are all capable of providing secure, low cost fuel for large-scale base-load power projects.
Figure 1. Location of African Energy’s Botswana coal and power projects and the existing and planned regional transmission interconnectors
02 africanenergyresources.com
Sese Joint Venture
REGIONAL POWER MARKETS
SESE JV PROJECT
The key power markets of relevance to African Energy are
Zambia, Botswana and South Africa (Figure 2). The current
installed capacity in Zambia appears to exceed demand but
given that some 80% of Zambia’s capacity is from hydro-
electric plants which are not always available, Zambia has
become a net importer of power from South Africa and
Mozambique.
UTILITY
OPERATING
CAPACITY
(MVW)
PEAK
DEMAND
(MW)
PEAK PLUS
RESERVE
MARGIN (MW)
BALANCE
(MW)
ESKOM
48,463
38,897
44,732
ZESKO
PBC
2,734
489
2,194
610
2.523
702
+3,731
+211
-243
Figure 2. Capacity vs demand for key utilities (SAPP published data 2017)
Botswana has also become a net importer of power from
South Africa and frequently needs to run its diesel peaking
plants at great cost. Botswana’s forecast operating capacity
includes the yet to be fully refurbished Morupule-A plant,
100MW of solar and solar storage which has yet to be
awarded and continued use of expensive diesel emergency
plants (Figure 3).
BPC Forecast Supply & Demand
Figure 3. BPC Forecast supply and demand (BPC Annual Report 2017)
Eskom’s current surplus is being sold to regional utilities
including Zambia, Botswana and Namibia, but is coming
under increasing pressure due to Eskom’s financial
position. This is likely to lead to significant short-term tariff
increases and much lower availability of power for export,
placing severe pressure on Zambia and Botswana to meet
domestic demand, and providing an opportunity for new,
low-cost generation to enter the market.
First Quantum Minerals Ltd (FQML) became a majority
equity partner at the Sese Joint Venture in 2014 and have
since directly invested AUD $15m for a 65% project interest
and committed to invest a further AUD $3m to increase
its stake to 75%. Once this 75% interest has been earned,
FQML is responsible for arranging the funds required to
build the Sese integrated power project and will loan
carry African Energy’s residual 25% interest through to
commercial production.
Over the last few years, AFR and FQML have completed
several technical studies covering mining, coal preparation
and power generation. A conceptual study of the proposed
power station layout and design has determined that Sese
coal is a suitable fuel for all common power station boiler
technologies and can readily meet the required air quality
and emissions standards set in the environmental approvals
for the project.
These studies have also established the operating costs,
capital costs and a robust financial model for a 450MW
power project and the associated coal mine and coal
processing facilities and have demonstrated that power
from Sese could be delivered to the Zambian Copperbelt
where FQML operates a large copper mining and smelting
business.
The project has secured the majority of licences, permits
and stakeholder approvals that are required for such an
operation (see Figure 4), including:
A large-scale mining licence has been granted for an
initial period of 25-years over an area of approximately
51 km2 which contains 650Mt of coal in Block-C.
A Development Approval Order which sets the fiscal
framework for the project, including a 5-year tax
holiday from the commencement of commercial
operations followed by a 15% corporate tax rate.
Land Rights and an associated 50-year Land Lease
Agreement.
Water extraction rights from Shashe Dam.
Environmental approval for the project, which was
recently increased to 500MW of power generation
and the associated coal mining and coal processing
volumes.
AfricanEnergy Annual Repor t 2018 03
Sese Joint Venture
Implementation of the resettlement action plan (RAP)
around Sese, under which 25 households have to
date had their grazing rights, water bores and access
trails relocated to outside the Land Rights Lease.
Resettlement of a further 3 households is required
to complete this process, which has been jointly
monitored by Sese JV staff and the Tonota Land Board.
The Sese JV has now secured most of the licenses and
permits required to develop an integrated coal and power
project in Botswana, with the one major exception being
a Generation and Export Licence, which is currently being
negotiated with Botswana’s energy regulator.
The current project development plan contemplates an
initial 225MW Unit which will deliver 100MW of electricity
into Zambia for use by FQML, with the balance sold to a
credit worthy third party or parties. This will require at least
two Power Purchase Agreements (PPA’s), one with FQML
for 100MW, and one for the balance.
A draft PPA between the Sese JV and FQML has been
drawn up, and the project is in discussions with several
parties for one or more PPA’s to cover the residual balance.
A second 225MW Unit can be considered if suitable
demand and an associated PPA can be established.
In addition to securing the PPA’s, the main remaining
commercial documents required for the project include Grid
Connection, Transmission, and Use of System agreements
with the power utilities in Botswana, Zimbabwe and
Zambia.
04 africanenergyresources.com
Figure 4.
Sese JV license
areas and main
project elements
Mmamabula West Coal
Power Project
The 2,443Mt Mmamabula West project contains some of
the best quality coal in Botswana in two 4m to 6m thick
seams (A-Seam and K-Seam) which lie 100m to 150m
below the surface. The project is situated some 65km west
of the main railway line in Botswana which provides access
to local and regional coal markets (Figure 5).
Figure 5. Location of the Mmamabula West project, some 65km west of the main
railway line in Botswana. Existing and future rail routes to regional markets for
coal are shown in this figure.
A prefeasibility study on the extraction of the high-quality
lower A-Seam (Figure 6) was completed for the project in
2015 and determined that conventional underground mining
could produce a variety of products for coal export or power
generation at highly competitive prices, and that this coal
could be readily trucked to a rail loading station on the
main Botswana railway line. African Energy has developed
coal specifications for several different coal products,
including high quality export coals and coal suitable for use
in South African power stations.
Figure 6. High quality thermal coal in large diameter core from the
Mmamabula West A-Seam
During the last twelve months there has been an increase
in the global price for thermal coal which has caused prices
in southern Africa to rise significantly (refer to Figure 7).
With some of South Africa’s coal mines having either
exhausted their reserves of high quality coal or become
increasingly inefficient due to the depth of mining or their
small scale of operations, there is an opportunity for new,
efficient and high-quality coal mines in Botswana to be
developed as new supply.
globalCOAL Weekly Indices: Last 12 Months
Figure 7. Global coal prices have steadily increased in the last year, providing a
new opportunity for coal exports from Botswana.
African Energy is currently seeking a South African project
partner for Mmamabula West to assist the Company find
buyers for future coal products in the large South African
market.
African Energy continues to develop this project with a
renewed emphasis on the potential for an export coal mine:
An updated mineral resource will be completed using
information from infill drilling along the planned
decline and initial years of the mine schedule (Figure
8 and 9). This would place a portion of the resource in
the Measured Resource category and would provide
the basis for a detailed feasibility study for an export
operation.
An Environmental and Social Impact Assessment (ESIA)
for the project has been submitted to the Department
of Environmental Affairs in Botswana. Various
consultative meetings were held with stakeholder
groups during the year and an approval is expected by
year end.
An application for Land Rights over the area to be
developed has been submitted. Follow-up meetings
with the local Land Board will occur in the remainder of
2018, and once this and the ESIA have been approved,
an application for a mining licence will be submitted.
Monitoring of groundwater levels and groundwater
chemistry continued. The Company now has three
years of continuous baseline data.
AfricanEnergy Annual Repor t 2018 05
Mmamabula West Coal
Power Project
06 africanenergyresources.com
Figure 8. Drill hole status
map for Mmamabula
West showing Land
Rights application area,
water monitoring stations
and extent of potential
underground coal mining.
Figure 9. Life of Mine
plot for Mmamabula
West showing mine
scheduling for a 4.4Mtpa
underground coal mine on
the high-quality A-Seam.
Other Projects
MMAMANTSWE COAL PROJECT
ZAMBIAN PROJECTS
The Mmamantswe Project contains approximately 1,243Mt
of thermal coal in Measured and Indicated Resources
which is suitable for power generation in a captive power
station. Several studies on coal preparation and power
station design were completed by the previous project
owner, including grid integration studies for power sales
into the South African grid. The project is only 20km from
the South African border and is close to the regional power
transmission grid and planned grid expansions into South
Africa (refer to Figure 10). African Energy has applied for
Land Rights over the project area, access corridor and grid
connection corridor.
The Company notes that the recently released draft of
South Africa’s Integrated Resource Plan no longer explicitly
lists the importation of coal-fired power and is seeking
clarification of this position prior to determining the
optimum project development plan.
During the year the Company completed the sale of its
Zambian Uranium projects to GoviEx Uranium Inc. for 3.0M
GoviEx shares and 1.6M common share purchase warrants
priced at US $0.23 per warrant, and which are valid for
three years.
The Company has also allowed its remaining coal
prospecting licenses in Zambia to lapse at the end of their
exploration periods.
The company no longer has any exploration assets in
Zambia and is solely focused on Botswana.
Figure 10. Location of the Mmamantswe coal project, close to infrastructure corridors in eastern Botswana
AfricanEnergy Annual Repor t 2018 07
Tenement Schedule
Project Name
Tenement
Name
Tenement Holder
Licence
Number
African
Energy
Equity
Area
(sq km)
Date
Granted
Current
Expiry
Date
BOTSWANA
SESE
SESE
SESE
SESE
Sese Mining Licence Sese Power Subsidiary (Pty) Ltd
ML2016/42L
35%
51 22-Mar-17
31-Jan-42
Sese
African Energy Resources Botswana (Pty) Ltd
PL 96/2005
35%
287
26-Jul-05
31-Dec-18*
Sese West
African Energy Resources Botswana (Pty) Ltd
PL197/2007
35%
229
01-Oct-07
31-Dec-18*
Foley North
African Energy Resources Botswana (Pty) Ltd
PL004/2013
35%
774
01-Jan-13
30-Sep-20
MMAMANTSWE
Mmamantswe
Mmamantswe Coal (Pty) Ltd
PL069/2007
100%
453
01-Jul-12
31-Dec-18*
MMAMABULA WEST Mmamabula West
Phokoje Power (Pty) Ltd
PL56/2005
100%
293
01-July-05
30-Sep-19
ZAMBIA
*Tenement renewal submitted in September 2018
JORC Statement
The Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the ‘JORC Code’) sets out minimum standards,
recommendations and guidelines for Public Reporting in Australasia of Exploration Results, Mineral Resources and Ore Reserves. The information
contained in this announcement has been presented in accordance with the JORC Code (2012 edition) and references to “Measured, Indicated and
Inferred Resources” are to those terms as defined in the JORC Code (2012 edition).
Information in this report relating to Exploration results, Mineral Resources or Ore Reserves is based on information compiled
by Dr Frazer Tabeart (an employee of African Energy Resources Limited) who is a member of The Australian Institute of
Geoscientists. Dr Tabeart has sufficient experience which is relevant to the style of mineralisation and type of deposit
under consideration and to the activity which he is undertaking to qualify as a Competent Person under the 2012 Edition
of the Australasian Code for reporting of Exploration Results, Mineral Resources and Ore Reserves. Dr Tabeart
consents to the inclusion of the data in the form and context in which it appears.
08 africanenergyresources.com
Annual Statement of
Mineral Resources
Sese Project (AFR 35%, FQM 65%): Raw coal on an air-dried basis
Resource Zone
MEASURED (Bk-C)
MEASURED (Bk-B)
INDICATED
INFERRED
TOTAL
In-Situ
Tonnes*
333 Mt
318 Mt
1,714 Mt
152 Mt
2,517 Mt
CV (MJ/
kg)
CV (kcal/
kg)
Ash %
IM%
VM%
FC%
S%
17.6
16.0
15.3
15.0
4,200
3,820
3,650
3,600
30.2
34.8
38.9
39.1
7.9
7.4
6.6
6.4
20.6
20.4
18.7
19.5
41.4
37.4
35.8
34.9
2.1
1.7
2.0
2.2
Sese West Project (AFR 35%, FQM 65%): Raw coal on an air-dried basis
Resource Zone
INFERRED
TOTAL
In-Situ
Tonnes*
CV (MJ/
kg)
CV (kcal/
kg)
Ash %
IM%
VM%
FC%
S%
2,501 Mt
14.6
3,500
40.2
6.1
19.8
31.9
2.0
2,501 Mt
Mmamabula West Project (AFR 100%): Raw coal on an air-dried basis
Resource Zone
INDICATED
INFERRED
TOTAL
In-Situ
Tonnes*
892 Mt
1,541 Mt
2,433 Mt
CV (MJ/
kg)
CV (kcal/
kg)
Ash %
IM%
VM%
FC%
S%
20.2
20.0
4,825
4,775
25.5
25.5
6.0
5.7
26.0
25.9
41.0
41.2
1.5
1.7
Mmamantswe Project (AFR 100%): Raw coal on an air-dried basis
Resource Zone
MEASURED
INDICATED
INFERRED
TOTAL
In-Situ
Tonnes*
978 Mt
265 Mt
N/A
1,243 Mt
CV (MJ/
kg)
CV (kcal/
kg)
Ash %
IM%
VM%
FC%
S%
9.5
7.9
2,270
1,890
56.5
62.3
3.9
3.3
15.8
14.2
21.8
18.1
2.0
2.1
Mineral Resources & Ore Reserve Governance A summary of the governance and internal controls applicable to African Energy’s Mineral Resources and Ore Reserves
processes are as follows:
• Review and validation of drilling and sampling methodology and data spacing, geological logging, data collection and storage, sampling and analytical quality control;
• Geological interpretation – review of known and interpreted structure, lithology and weathering controls;
• Estimation methodology – relevant to mineralisation style and proposed mining methodology;
• Comparison of estimation results with previous mineral resource models, and with results using alternate modelling methodologies;
• Statistical and visual validation of block model against raw composite data; and
• Use of external Competent Persons to assist in the preparation of JORC Mineral Resources updates.
*In-Situ Tonnes have been derived by removing volumes for modeled intrusions, burnt coal and weathered coal and then applying appropriate geological loss factors to the
remaining Gross In-Situ Tonnes.
The Coal Resources quoted for the Sese, Mmamabula West and Mmamantswe Projects in the table above have been defined in accordance with the practices
recommended by the Joint Ore Reserves Committee (2004 edition of the JORC Code), with the exception of Sese West which is reported as per the 2012 edition.
There have been no material changes to any of the resources since they were first announced.
AfricanEnergy Annual Repor t 2018 09
Financial Report
30 June 2018
African Energy Resources Limited
ARBN 123 316 781
10 africanenergyresources.com
10 africanenergyresources.com
Directors’ Report
African Energy Resources Limited
Directors’ Report
Financial Report 30 June 2018
Your Directors present their report on the Consolidated Entity consisting of African Energy Resources Limited (Company) and its controlled
entities for the financial year ended 30 June 2018.
1. Directors and Company Secretary
The Directors and the Company Secretary of the Company at any time during or since the end of the financial year are as follows.
Mr Alasdair Cooke BSc (Hons), MAIG – Executive Chairman
Mr Cooke has served as Chairman of the Board since its incorporation. Mr Cooke is a geologist with over 25 years’ experience in the
resource exploration industry throughout Australia and internationally. For the past 20 years Mr Cooke has been involved in mine
development through various private and public resource companies, prior to which he held senior positions in BHP Billiton plc’s
international new business and reconnaissance group.
Mr Cooke is a founding director of Mitchell River Group, which over the past seventeen years has established a number of successful ASX
listed resources companies, including Panoramic Resources, operating the Savannah and Lanfranchi nickel projects in Australia; Albidon,
operating the Munali Nickel Mine in Zambia, Mirabela Nickel, operating the Santa Rita nickel project in Brazil; Exco Resources, developing
copper and gold resources in Australia; and EVE Investments.
Other current directorships
EVE Investments Limited
Anova Metals Limited
Caravel Minerals Limited
Former directorships in the last three years
none
Special responsibilities
Executive Chairman
Member of the remuneration committee
Interests in shares and options
50,003,682 shares
766,667 performance rights
1,750,000 options
Dr Charles (Frazer) Tabeart PhD, BSc (Hons) ARSM, MAIG – Executive Director
Dr Tabeart is a graduate of the Royal School of Mines with a PhD and Honours in Mining Geology. He has over 25 years’ experience in
international exploration and mining projects, including 16 years with WMC Resources. Whilst at WMC, Dr Tabeart managed exploration
portfolios in the Philippines, Mongolia and Africa, gaining considerable experience in a wide variety of commodities and operating with
staff from diverse cultural backgrounds.
Dr Tabeart was appointed Managing Director of the Company in November 2007 after serving two years as General Manager. Under his
stewardship the Company discovered and delineated the coal resource at the Sese Coal & Power Project and has since managed the
strategic direction of company to focus upon the delivery of multiple coal‐fired power stations, captive coal‐mines and an export coal
mine. He has overseen the acquisition of Mmamantswe and Mmamabula West Coal Projects that has grown the resource inventory of
the Company to 8.7Bt of thermal coal.
Other current directorships
PolarX Limited
Arrow Minerals Ltd (formerly Segue Resources)
Special responsibilities
Executive Director
Member of the audit and risk committee
Former directorships in the last three years
none
Interests in shares and options
4,774,100 shares
1,266,667 performance rights
2,500,000 options
Mr Gregory (Bill) Fry – Executive Director
Mr Fry has more than 25 years corporate experience in the mining and resources industry, specialising in accounting, management,
business development and general corporate activities. He has vast experience in project evaluation and development, project funding,
management, finance and operations.
Over the past 15 years, Mr Fry has been a Director of several private and public companies with activities ranging from funds
management, minerals exploration, mining and quarrying. He has been an Executive Director of African Energy Resources since listing
and is responsible for the Company’s commercial and financial business programs.
4 | P a g e
AfricanEnergy Annual Repor t 2018 11
Directors’ Report (continued)
African Energy Resources Limited
Directors Report (continued)
Financial Report 30 June 2018
Other current directorships
EVE Investments Ltd
Anova Metals Ltd
Former directorships in the last three years
nil
Special responsibilities
Member of the audit and risk committee
Interests in shares and options
5,869,610 shares
933,333 performance rights
875,000 options
Mr Valentine Chitalu MPhil, BAcc, FCCA – Non‐Executive Director
Mr Chitalu, a Zambian national and resident, is a Chartered Certified Accountant, Fellow of the Association of Chartered Certified
Accountants (UK) and holds a practicing certificate from the Zambia Institute of Certified Accountants. He also holds a Masters Degree in
Economics, Finance and Politics of Development and a Bachelor’s Degree in Accounting and Finance.
Mr Chitalu has been a Non‐Executive Director of African Energy Resources since listing and has assisted African Energy through his
extensive business and Government contacts in the region.
Other current directorships
CDC Group
Special responsibilities
Chairman of the audit and risk committee
Former directorships in the last three years
nil
Interests in shares and options
2,251,425 shares
400,000 performance rights
500,000 options
Mr Vincent Ian Masterton‐Hume ‐ Non‐Executive Director
Mr Hume's career in the resources industry stretches back several decades, primarily in the fields of managed fund investments, capital
raising and project development. He currently sits on the boards of Silver City Mines; TSX‐listed Golden Minerals; and ASX‐listed Iron
Road. He is a former Director of ASX and TSX‐listed Marengo Mining.
Mr Hume was a Founding Partner of The Sentient Group (“Sentient”), an independent private equity investment firm that specialises in
the global resource industry. He remains an independent advisor to Sentient, following his retirement from the fund in 2008. Sentient
manages in excess of US $2.3 billion in the development of metal, mineral and energy assets across the globe. Sentient’s current
investment portfolio includes projects in power generation, energy storage, potash, and base, precious and ferrous metals mining,
covering countries as diverse as China, Brazil, Canada, Papua New Guinea, Finland, Australia, Kenya and Botswana.
Prior to the founding of Sentient, Mr Hume was a consultant to AMP’s Private Capital Division, working on the development of a number
of Chilean mining investment joint ventures, as well as advising on a number of specific investments across a range of commodities and
locations.
Other current directorships
Golden Minerals Limited
Iron Road Limited
Former directorships in the last three years
Silver City Mines Limited
Special responsibilities
Chairman of Remuneration Committee
Interests in shares and options
4,157,606 shares
100,000 performance rights
500,000 options
Mr John Dean ‐ Non‐Executive Director
Mr Dean is an employee of First Quantum Minerals (FQM). Since joining FQM in 2011 he has fulfilled various roles within their mining
operations including at FQM’s Sentinel Copper Mine, its new flagship mine in Zambia. Prior to joining FQM, Mr Dean worked as an analyst
in the energy and natural resource industries, possessing expertise in the valuation and commercial analysis of upstream oil and gas
projects, as well as experience in electricity, natural gas, and crude oil markets.
Mr Dean graduated with honours from the University of Louisville in the United States with a Bachelor of Science in Business
Administration, and was later awarded a Masters of Business Administration with distinction from the University of Oxford.
12 africanenergyresources.com
5 | P a g e
African Energy Resources Limited
Financial Report 30 June 2018
Directors Report (continued)
In addition to the Directorship, Mr Dean is a part of the team responsible for the development of power generation projects at the Sese
Coal & Power Project under the joint venture with FQM.
Current directorships
nil
Special responsibilities
Member of Remuneration Committee
Former directorships in the last three years
nil
Interests in shares and options
nil
Daniel Davis – Company Secretary
Mr Davis is a member of CPA Australia who has worked in the resources sector for the past twelve years specialising in African based
explorers and producers. Mr Davis has been Company Secretary since 2009.
1.1 Directors’ Meetings
The number of Directors’ meetings and number of meetings attended by each of the Directors of the Company during the financial year
were:
Director
Alasdair Cooke
Charles Tabeart
Gregory Fry
Valentine Chitalu
Philip Clark
Vincent Masterton‐Hume
Wayne Trumble
John Dean
2. Review of Operations
Board of Directors
Held
4
4
4
4
4
4
4
4
Present
4
4
4
2
2
3
4
3
Remuneration Committee
Present
1
‐
‐
‐
1
1
‐
‐
Held
1
‐
‐
‐
1
1
‐
‐
Audit & Risk Committee
Present
‐
‐
2
‐
2
‐
2
‐
Held
‐
‐
2
‐
2
‐
2
‐
African Energy streamlined its interests during the year through the sale of its Zambian uranium assets and expiry of its Zambian coal prospecting
licenses.
The Company is now fully focused on its Botswana coal portfolio, with an emphasis on developing the Sese JV as an integrated coal mine and
power station, and on progressing the Mmamabula West project as an export coal mine.
During the year ended June 2018, the Company:
Extended the deadline for FQM to complete the JV earn‐in to 12 July 2019. In connection with the extension of the Sese JV earn‐
in period FQM subscribed for 17,692,308 new African Energy shares at a price of A$0.078 per share, for total proceeds of A$1.38
million and transferred 5,985,886 shares in ASX‐listed Caravel Minerals to the Company (“Caravel Shares”);
Continued to assist FQM with a number of commercial and permitting activities related to the development of Sese as an exporter
of power to FQM’s Zambian copper operations;
Environmental approval for the Sese JV was increased to 500MW of power generation (up from 300MW) plus associated
increases in coal mining volumes and coal processing activities;
Implemented a resettlement action plan at Sese, to re‐settle the 25 households that had grazing rights and minor property within
the Land Rights area leased by the project;
Completed the sale of its Zambian uranium portfolio to TSX Venture Exchange listed GoviEx Uranium for scrip consideration of
US$503,477; and
The Group initiated a number of changes to board composition and roles that will result in annual savings of US$400,000.
The Company’s focus is to:
Secure access to transmission systems to transmit power from Sese to FQM’s Zambian operations in the Copperbelt;
Continue negotiations with other credit‐worthy off‐takers for the balance of power available from Sese;
Complete amendments to the approved Sese ESIA seeking to increase power output from 300MW to up to 500MW;
Implement a resettlement action plan around Sese, under which 25 households will have their grazing rights, water bores and
access trails relocated to outside the Land Rights Lease;
AfricanEnergy Annual Repor t 2018 13
6 | P a g e
Directors’ Report (continued)
African Energy Resources Limited
Directors Report (continued)
Financial Report 30 June 2018
Pursue development opportunities for its Mmamabula West coal project and continues to support TM Consulting as the potential
developer and buyer of the Mmamantswe coal to power project, both of which are suitable for supply into South Africa’s
3,750MW Coal‐Fired Independent Power Project Procurement Program; and
Evaluate new project opportunities for base and precious metals projects that are deemed to have the potential to add to
shareholder value.
3. Remuneration Report ‐ Audited
This Remuneration Report outlines the remuneration arrangements which were in place during the year, and remain in place as at the date of
this report, for the Directors and key management personnel (“KMP”) of African Energy Resources Limited.
The information provided in this remuneration report has been Audited as required by section 308(3c) of the Corporations Act 2001.
3.1 Principles of Compensation
The objective of the Company’s executive reward framework is to ensure reward for performance is competitive and appropriate for the results
delivered. The framework aligns executive reward with achievement of strategic objectives and the creation of value for shareholders, and
conforms with market practice for delivery of reward. The Board ensures that executive reward satisfies the following key criteria for good reward
governance practices:
competitiveness and reasonableness;
acceptability to shareholders;
performance linkage / alignment of executive compensation;
transparency; and
capital management.
Alignment to shareholders’ interests:
has economic profit as a core component of plan design;
focuses on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering constant return
on assets as well as focusing the executive on key non‐financial drivers of value; and
attracts and retains high calibre executives.
Alignment to program participants’ interests:
rewards capability and experience;
reflects competitive reward for contribution to growth in shareholder wealth;
provides a clear structure for earning rewards; and
provides recognition for contribution.
The framework provides a mix of fixed and variable pay, and a blend of short and long‐term incentives. As executives gain seniority with the
Company, the balance of this mix shifts to a higher proportion of ''at risk'' rewards.
The following table shows key performance indicators for the group over the last five years:
Profit / (loss) for the year attributable to
owners
Basic earnings / (loss) per share (cents)
Dividend payments
Dividend payment ratio (%)
Increase / (decrease) in share price (%)
Total KMP incentives as percentage of
profit / (loss) for the year (%)
2018
Restated(1)
2017
Restated(1)
2016
Restated(1)
2015
Restated(1)
2014
(4,013,178)
(0.64)
‐
‐
(304%)
(1,618,702)
(0.27)
‐
‐
209%
(2,070,429)
(0.34)
‐
‐
(4%)
(5,084,144)
(0.90)
‐
‐
‐4%
(7,151,015)
(1.63)
‐
‐
3%
‐
‐
‐
‐
‐
(1)
Refer Note 2.1 for details regarding the restatement as a result of a change in accounting policy.
3.2 Remuneration governance
The Remuneration Committee provides advice on remuneration and incentive policies and practices and specific recommendations on
remuneration packages and other terms of employment for Executive Directors, other senior executives and Non‐Executive Directors. The
Corporate Governance Statement provides further information on the role of the Board.
3.3 Non‐Executive Directors
Fees and payments to Non‐Executive Directors reflect the demands which are made on, and the responsibilities of, the Directors. Non‐Executive
Directors’ fees and payments are reviewed annually by the Board.
14 africanenergyresources.com
7 | P a g e
African Energy Resources Limited
Financial Report 30 June 2018
Directors Report (continued)
The current base remuneration was last reviewed with effect from 1 April 2018 and was set at US$26,819 (AU$35,000) per annum.
3.4 Executive Directors
The executive pay and reward framework has two components:
base pay; and
long‐term incentive through issue of performance rights and options
Base Pay
Base pay is structured as a total employment cost package which may be delivered as a combination of cash and prescribed non‐financial benefits
at the Remuneration Committee’s discretion.
Executives are offered a competitive base pay that comprises the fixed component of pay and rewards. Base pay for executives is reviewed
annually to ensure the executive’s pay is competitive with the market. There is no guaranteed base pay increases included in any executives’
contract.
Long‐term incentives
The award of performance rights and options to Directors, provides an opportunity for Directors to participate in the Company's growth and an
incentive to contribute to that growth. The Remuneration Committee has determined performance hurdles that will apply to each performance
right and option issued.
Performance conditions attached to performance rights and options are detailed in note 8.
Service Contracts
On appointment to the Board, Executive Directors enter into an executive service agreement with the Company. The agreement details the
Board policies and terms, including compensation, relevant to the office of Director.
The Company currently has service contracts in place with the following three Board members. All contracts with Executive Directors are for a
two year term but can be terminated by either party with three months’ notice. Details of the service agreements are listed below.
Mr Alasdair Campbell Cooke ‐ Executive Chairman, the Company
Commencement date: 1 January 2017
Base salary is US$62,774 (AU$85,000)
Termination payment is the equivalent of three months consulting fees
Dr Charles Frazer Tabeart ‐ Executive Director, the Company
Commencement date: 1 February 2018
Base salary is US$118,163 (AU$160,000)
Termination payment is the equivalent of three months consulting fees
Mr Gregory William Fry ‐ Executive Director, the Company
Commencement date: 1 February 2018
Base salary is US$48,004 (AU$65,000)
Termination payment is the equivalent of three months consulting fees
No other key management personnel have service contracts in place with the Consolidated Entity.
3.5 Comments made at the Company’s 2017 Annual General Meeting
The Company did not receive any specific feedback at the AGM held on 23 November 2017 or throughout the year on its remuneration
practices.
3.6 Directors and Executive Officers’ Remuneration (Consolidated Entity)
Details of the remuneration of the Directors of the Consolidated Entity (as defined in AASB 124 Related Party Disclosures) of the Consolidated
Entity are set out in the following tables.
The key management personnel of the Consolidated Entity are the Directors of African Energy Resources Limited.
8 | P a g e
AfricanEnergy Annual Repor t 2018 15
Directors’ Report (continued)
African Energy Resources Limited
Directors Report (continued)
Financial Report 30 June 2018
The following tables set out remuneration paid to key management personnel of the Consolidated Entity during the year.
Key Management Personnel
remuneration ‐ 2018
Non‐Executive Directors
Valentine Chitalu
Philip Clark
Vincent Masterton‐Hume
Wayne Trumble
John Dean
Total Non‐Executive Directors
Executive Directors
Gregory Fry
Charles Tabeart
Alasdair Cooke
Total Executive Directors
Total Key Management Personnel
Key Management Personnel
remuneration ‐ 2017
Non‐Executive Directors
Valentine Chitalu
Philip Clark
Vincent Masterton‐Hume
Wayne Trumble
John Dean
Total Non‐Executive Directors
Executive Directors
Gregory Fry
Charles Tabeart
Alasdair Cooke
Total Key Management Personnel
Total
Short term
employee benefits
Cash salary & fees
US$
Post‐employment
benefits
Superannuation
US$
Share based
payments
Rights
US$
Total
US$
32,950
23,896
30,091
6,784
32,950
126,671
85,258
196,407
101,563
383,228
509,899
33,920
33,920
33,920
33,920
33,920
169,600
120,606
241,211
82,163
443,980
613,580
‐
2,270
2,858
19,382
‐
24,510
8,099
‐
‐
8,099
32,609
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
1,455
364
364
3,637
‐
5,820
4,699
7,215
3,441
15,355
21,175
3,537
(12,388)
884
6,629
‐
(1,338)
(31,095)
(67,497)
(12,895)
(111,487)
(112,825)
34,405
26,530
33,313
29,803
32,950
157,001
98,056
203,622
105,004
406,682
563,683
37,457
21,532
34,804
40,549
33,920
168,262
89,511
173,714
69,268
332,493
500,755
Negative remuneration values in the prior period comparative was due to a reversal in share‐based payment expense as a result of a
change in management estimates for the achievement of performance rights.
The Group did not engage a remuneration consultant during the year.
3.7 Share‐based compensation
The Company did not issue share‐based compensation during the year.
16 africanenergyresources.com
9 | P a g e
African Energy Resources Limited
Financial Report 30 June 2018
Directors Report (continued)
3.8 Directors’ and Executives Interests
A. Shares
Non‐executive Directors
Valentine Chitalu
Philip Clark*
Vincent Masterton‐Hume
Wayne Trumble*
John Dean
Executive Directors
Alasdair Cooke
Charles Tabeart
Gregory Fry
B. Performance Rights
Non‐executive Directors
Valentine Chitalu
Philip Clark*
Vincent Masterton‐Hume
Wayne Trumble*
John Dean
Executive Directors
Alasdair Cooke
Charles Tabeart
Gregory Fry
C. Options
Non‐executive Directors
Valentine Chitalu
Philip Clark*
Vincent Masterton‐Hume
Wayne Trumble*
John Dean
Executive Directors
Alasdair Cooke
Charles Tabeart
Gregory Fry
Balance at
30/06/2017
Purchases
(Sales)
Other
Changes
Balance at
30/06/2018
2,251,425
2,495,470
4,157,606
327,273
‐
50,003,682
4,774,100
5,869,610
69,869,088
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
(2,495,470)
‐
(327,273)
‐
2,251,425
‐
4,157,606
‐
‐
‐
‐
‐
2,822,743
50,003,682
4,774,100
5,869,610
67,056,423
Balance at
30/06/2017
Expired
during the
year
Other
Changes
Balance at
30/06/2018
Vested and
exercisable
Unvested
400,000
300,000
100,000
1,000,000
‐
1,100,000
2,600,000
1,600,000
7,100,000
‐
(100,000)
‐
‐
-
(200,000)
-
(1,000,000)
-
400,000
‐
100,000
‐
‐
(333,333)
(1,333,333)
(666,667)
(2,433,333)
‐
‐
‐
(1,200,000)
766,667
1,266,667
933,333
3,466,667
‐
‐
‐
‐
‐
‐
‐
‐
‐
400,000
‐
100,000
‐
‐
‐
766,667
1,266,667
933,333
3,466,667
Balance at
30/06/2017
Other
Changes
Balance at
30/06/2018
Vested and
exercisable
Unvested
500,000
500,000
500,000
500,000
‐
1,750,000
2,500,000
875,000
(500,000)
(500,000)
‐
500,000
‐
500,000
‐
‐
‐
‐
‐
1,750,000
2,500,000
875,000
7,125,000
(1,000,000)
6,125,000
‐
‐
‐
‐
‐
‐
‐
‐
‐
500,000
‐
500,000
‐
‐
1,750,000
2,500,000
875,000
6,125,000
*Mr Clark and Mr Trumble resigned on 31 March 2018, and “Other Changes” reflects balance held at date of resignation.
10 | P a g e
AfricanEnergy Annual Repor t 2018 17
Directors’ Report (continued)
African Energy Resources Limited
Directors Report (continued)
D. Other related party transactions
Financial Report 30 June 2018
The terms and conditions of the transactions with Directors, key executives and associates and their related entities were no more favourable
than those available, or which might reasonably be expected to be available, on similar transactions to non‐Director related entities on an arm’s
length basis.
Mitchell River Group Pty Ltd
EVE Investments Limited
Charges from
Charges to
2018
US$
102,458
‐
2017
US$
111,668
‐
2018
US$
‐
‐
2017
US$
‐
40,611
At 30 June 2018 the company had a payable outstanding to Mitchell River Group of US$1,499 (30 June 2017: US$2,962).
This is the end of the Audited remuneration report.
4. Principal Activities
The principal activity of the Consolidated Entity during the course of the financial year was the development of power projects in southern Africa.
5. Events Subsequent to Reporting Date
No other matters or circumstances have arisen since the end of the financial year which have significantly affected or may significantly affect the
operations, results or state of affairs of the Group in future financial years which have not been disclosed publicly at the date of this report.
6. Likely Developments and Expected Results
The Group will continue to pursue activities within its corporate objectives. Further information about likely developments in the operations of
the Group and the expected results of those operations in the future financial years has not been included in this report because disclosure would
likely result in unreasonable prejudice to the Group.
7. Significant Changes in the State of Affairs
In the opinion of the Directors, other than stated under Review of Operations, and Events Subsequent to Reporting Date, there were no
significant changes in the state of affairs of the Group that occurred during the financial year under review and subsequent to the year end.
8. Environmental Regulations
The Consolidated Entity’s operations are not subject to any significant environmental regulations under the legislation of countries in which it
operates. However, the Board believes there are adequate systems in place for the management of its environmental requirements and is not
aware of any breach of those environmental requirements as they apply.
The Company is not subject to the reporting requirements of both the Energy Efficiency Opportunities Act 2006 and the National Greenhouse
and Energy Reporting Act 2007.
9. Indemnification and Insurance of Officers and Auditors
11.1 Indemnification
An indemnity agreement has been entered into with each of the Directors and Company Secretary of the Company named earlier in this
report. Under the agreement, the Company has agreed to indemnify those officers against any claim or for any expenses or costs which may
arise as a result of work performed in their respective capacities to the extent permitted by law. There is no monetary limit to the extent of
this indemnity.
11.2 Insurance
During the financial year, the Company has taken out an insurance policy in respect of Directors’ and officers’ liability and legal expenses’ for
Directors and officers.
10. Corporate Structure
African Energy Resources Limited is a Company limited by shares that is incorporated and domiciled in Guernsey. The Company is listed on the
Australian Securities Exchange and Botswana Stock Exchange under code AFR.
11. Non‐Audit Services
During the year, there were no non‐Audit services provided by BDO Audit (WA) Pty Limited (2017: nil).
18 africanenergyresources.com
11 | P a g e
African Energy Resources Limited
Directors Report (continued)
12. Lead Auditor’s Independence Declaration
Financial Report 30 June 2018
The lead Auditor’s Independence Declaration is set out on page 25 and forms part of the Directors’ report for the financial year ended 30
June 2018.
Charles Frazer Tabeart
Executive Director
Perth, 27 September 2018
12 | P a g e
AfricanEnergy Annual Repor t 2018 19
Directors’ Declaration
African Energy Resources Limited
Directors’ Declaration
African Energy Resources Limited and its Controlled Entities
The Directors of the Company declare that:
Financial Report 30 June 2018
1
The financial statements, comprising the consolidated statement of profit or loss and other comprehensive income, consolidated
statement of financial position, consolidated statement of cash flows, consolidated statement of changes in equity and
accompanying notes, are in accordance with the Corporations Act 2001; and
(a) comply with Accounting Standards and the Corporations Regulations 2001 and other mandatory professional reporting
requirements; and
(b) give a true and fair view of the financial position as at 30 June 2018 and of the performance for the year ended on that date of
the Consolidated Entity.
2
3
4
In the Directors opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable.
The Consolidated Entity has included in the notes to the financial statements an explicit and unreserved statement of compliance
with International Financial Reporting Standards.
The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by section 295A
of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Board of Directors and is signed on behalf of the Directors by:
Charles Frazer Tabeart
Executive Director
Perth, 27 September 2018
20 africanenergyresources.com
13 | P a g e
Independent Audit Report
Tel: +61 8 6382 4600
Fax: +61 8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
INDEPENDENT AUDITOR'S REPORT
To the members of African Energy Resources Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of African Energy Resources Limited (the Company) and its
subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30
June 2018, the consolidated statement of profit or loss and other comprehensive income, the
consolidated statement of changes in equity and the consolidated statement of cash flows for the year
then ended, and notes to the financial report, including a summary of significant accounting policies
and the directors’ declaration.
In our opinion the accompanying financial report of the Group, is in accordance with the Corporations
Act 2001, including:
(i)
Giving a true and fair view of the Group’s financial position as at 30 June 2018 and of its
financial performance for the year ended on that date; and
(ii)
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the Financial
Report section of our report. We are independent of the Group in accordance with the Corporations
Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s
APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance
with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of the Company, would be in the same terms if given to the directors as at the
time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current period. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275,
an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and
form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation other than for
the acts or omissions of financial services licensees
AfricanEnergy Annual Repor t 2018 21
Independent Audit Report (continued)
Carrying value of investment in associate
Key audit matter
How the matter was addressed in our audit
As disclosed in Note 2.2, the Group’s investment in
Our procedures included, but were not limited to the
associate (Sese Power Project) has a significant
following:
carrying value as at 30 June 2018.
The Company is required to assess whether any
impairment indicators are present which may indicate
the Group’s investment in associate may be impaired.
We have determined this is a key audit matter given is
financial significance to the Group and the judgements
(cid:120)
(cid:120)
Considering the existence of any indicators
of impairment of the investment;
Reviewing ASX announcements, Board of
Directors meetings minutes, joint venture
minutes and considering management’s
assessment of impairment indicators; and
and estimates required in assessing the carrying value
(cid:120)
Assessing the appropriateness of the
of the investment.
Company’s disclosures in respect of the
investment in associate (refer to Note 2.2).
Accounting for exploration and evaluation assets
Key audit matter
How the matter was addressed in our audit
As disclosed in Note 2.1, the capitalised exploration
Our procedures included, but were not limited to:
and evaluation asset has a significant carrying value as
at 30 June 2018.
(cid:120)
Obtaining from management a schedule of
areas of interest held by the Group and
As the carrying value of the exploration and evaluation
assessing whether rights to tenure of those
asset represents a significant asset of the Group, we
areas of interest remained current at
considered it necessary to assess whether any facts or
balance date;
circumstances exist to suggest that the carrying
amount of this asset may exceed its recoverable
amount.
(cid:120)
Holding discussions with management as to
the status of ongoing exploration
programmes in the respective areas of
Judgement is applied in determining the treatment of
interest;
exploration and evaluation expenditure in accordance
(cid:120)
Considering whether any such areas of
with AASB 6: Exploration for and Evaluation of Mineral
interest had reached a stage where a
Resources. In particular:
(cid:120) Whether the conditions for capitalisation are
satisfied;
(cid:120) Which elements of exploration and evaluation
expenditures qualify for recognition; and
(cid:120) Whether facts and circumstances indicate that
reasonable assessment of economically
recoverable reserves existed;
Considering whether any facts or
circumstances existed to suggest impairment
testing was required; and
Assessing the adequacy of the related
disclosures in Note 2.1 to the Financial
(cid:120)
(cid:120)
the exploration and expenditure assets should
Statements.
be tested for impairment.
22 africanenergyresources.com
Other information
The directors are responsible for the other information. The other information comprises the
information contained in the Group’s annual report for the year ended 30 June 2018, but does not
include the financial report and our auditor’s report thereon, which we obtained prior to the date of
this auditor’s report, and the annual report, which is expected to be made available to us after that
date.
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent
with the financial report or our knowledge obtained in the audit or otherwise appears to be materially
misstated.
If, based on the work we have performed on the other information that we obtained prior to the date
of this auditor’s report, 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.
When we read the annual report, if we conclude that there is a material misstatement therein, we are
required to communicate the matter to the directors and will request that it is corrected. If it is not
corrected, we will seek to have the matter appropriately brought to the attention of users for whom
our report is prepared.
Responsibilities of the directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the group 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 or to cease
operations, or has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is 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 the Australian Auditing Standards 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 this financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf
This description forms part of our auditor’s report.
AfricanEnergy Annual Repor t 2018 23
Independent Audit Report (continued)
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 14 to 18 of the directors’ report for the
year ended 30 June 2018.
In our opinion, the Remuneration Report of African Energy Resources Limited, for the year ended 30
June 2018, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with
Australian Auditing Standards.
BDO Audit (WA) Pty Ltd
Jarrad Prue
Director
Perth, 27 September 2018
24 africanenergyresources.com
Tel: +61 8 6382 4600
Fax: +61 8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
DECLARATION OF INDEPENDENCE BY JARRAD PRUE TO THE DIRECTORS OF AFRICAN ENERGY
RESOURCES LIMITED
As lead auditor of African Energy Resources Limited for the year ended 30 June 2018, I declare that, to
the best of my knowledge and belief, there have been:
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
2. No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of African Energy Resources Limited and the entities it controlled during
the period.
Jarrad Prue
Director
BDO Audit (WA) Pty Ltd
Perth, 27 September 2018
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275,
an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and
form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation other than for
the acts or omissions of financial services licensees
AfricanEnergy Annual Repor t 2018 25
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
African Energy Resources Limited
Financial Report 30 June 2018
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the year ended 30 June 2018
For the year ended 30 June 2018
Gain on sale of Zambian Uranium Project
Gain on Derivative
(Loss) on Sale of Listed Investments
Reversal of share based payment expense
Interest received
Personnel expenses
Professional & administration expense
Exploration & evaluation expensed
Share of Loss in Sese JV
Impairment of Mmamantswe
Foreign currency loss
Loss before tax
Income tax expense
Loss after income tax for the year
Attributable to:
Equity holders of the Company
Loss for the year
Other comprehensive items that may be reclassified to profit or loss
Movement in fair value of available for sale financial assets
Foreign currency translation reserve
Total other comprehensive income / (loss) for the year
Total comprehensive loss attributable to the ordinary equity holders of the
Company:
Note
3.6
8.4
3.2
3.3
3.3
2.1
3.4
2018
US$
503,477
181,987
(1,537)
77,701
60,130
(536,684)
(343,040)
(85,037)
(471,527)
(3,396,842)
(1,806)
(4,013,178)
‐
(4,013,178)
Restated(1)
2017
US$
‐
‐
‐
130,993
73,773
(475,003)
(432,895)
(457,632)
(458,346)
‐
408
(1,618,702)
(1,618,702)
(4,013,178)
(4,013,178)
(1,618,702)
(1,618,702)
(9,223)
(139,242)
(148,465)
‐
61,673
61,673
Total comprehensive loss for the year
(4,161,643)
(1,557,029)
Loss per share for loss attributable to the ordinary equity holders of the
Company:
Basic and diluted loss per share (cents per share)
3.5
(0.64)
(0.27)
(1)
Refer Note 2.1 for details regarding the restatement as a result of a change in accounting policy.
The Consolidated Statement of Profit or Loss and Other Comprehensive Income is to be read in conjunction with the accompanying
notes
26 africanenergyresources.com
19 | P a g e
Consolidated Statement
of Financial Position
African Energy Resources Limited
Consolidated Statement of Financial Position
As at 30 June 2018
As at 30 June 2018
Assets
Current assets
Cash & cash equivalents
Available for sale financial assets
Derivative Asset
Trade & other receivables
Total current assets
Non‐current assets
Investment in Sese Joint Venture
Property, plant & equipment
Exploration & evaluation
Total non‐current assets
Total assets
Liabilities
Current liabilities
Trade & other payables
Total current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained Earnings/(Accumulated losses)
Total equity attributable to shareholders of the Company
Financial Report 30 June 2018
Note
2018
US$
Restated (1)
2017
US$
Restated (1)
2016
US$
4.1
4.6
4.7
4.3
2.2
2.1
4.4
5.1
2,300,244
1,147,930
181,987
37,252
3,667,413
7,301,534
26
2,500,000
9,801,560
13,468,973
2,621,783
‐
‐
138,786
2,760,569
8,056,900
398
5,900,172
13,957,470
16,718,039
3,942,840
‐
‐
129,360
4,072,200
8,515,246
1,940
5,895,304
14,412,490
18,484,690
83,889
83,889
83,889
118,675
118,675
118,675
197,305
197,305
197,305
13,385,084
16,599,364
18,287,385
64,134,977
25,852
(50,775,745)
13,385,084
63,109,911
252,019
(46,762,567)
16,599,363
63,109,911
321,339
(45,143,865)
18,287,385
(1)
Refer Note 2.1 for details regarding the restatement as a result of a change in accounting policy.
The consolidated statement of financial position is to be read in conjunction with the accompanying notes
20 | P a g e
AfricanEnergy Annual Repor t 2018 27
Consolidated Statement
of Changes in Equity
African Energy Resources Limited
Consolidated Statement of Changes in Equity
for the year ended 30 June 2018
For the year ended 30 June 2018
Financial Report 30 June 2018
For the year ended 30 June 2018
At 30 June 2017 ‐ Restated(1)
Net earnings for the year
Effect of translation of foreign operations
to group presentation currency
Movement in fair value of available for
sale financial assets
Total comprehensive income for the
year
Transactions with owners in their
capacity as owners:
Issue of new shares
Share buyback
Share based payments
At 30 June 2018
For the year ended 30 June 2017 ‐
Restated
At 30 June 2016 ‐ Restated(1)
Net earnings for the year
Effect of translation of foreign operations
to group presentation currency
Change of accounting policy adjustment
Total comprehensive income for the
year
Transactions with owners in their
capacity as owners:
Share based payments
At 30 June 2017 – Restated(1)
Contributed
equity
Accumulated
losses
Foreign
Currency
Translation
Reserve
US$
63,109,911
‐
US$
(46,762,567)
(4,013,178)
US$
(5,040,969)
‐
‐
‐
‐
(139,242)
‐
‐
‐
(9,223)
(4,013,178)
(139,242)
(9,223)
Fair value
of available
for sale
financial
assets
US$
‐
‐
‐
Share‐
Based
Payments
Reserve
Total
equity
US$
5,292,988
‐
US$
16,599,363
(4,013,178)
‐
‐
‐
(139,242)
(9,223)
(4,161,643)
1,089,179
(64,113)
‐
1,025,066
64,134,977
‐
‐
‐
‐
(50,775,745)
‐
‐
‐
‐
(5,180,211)
‐
‐
‐
‐
(9,223)
‐
‐
(77,701)
(77,701)
5,215,287
1,089,179
(64,113)
(77,701)
947,365
13,385,085
63,109,911
‐
(45,143,865)
(1,241,774)
(5,102,642)
‐
‐
‐
‐
‐
(376,928)
71,540
(9,867)
(1,618,702)
61,673
‐
‐
63,109,911
‐
‐
(46,762,567)
‐
‐
(5,040,969)
‐
‐
‐
‐
‐
‐
‐
5,423,981
‐
18,287,385
(1,241,774)
‐
71,540
(386,795)
‐
(1,557,029)
(130,993)
(130,993)
5,292,988
(130,993)
(130,993)
16,599,363
(1)
Refer Note 2.1 for details regarding the restatement as a result of a change in accounting policy.
The consolidated statements of changes in equity are to be read in conjunction with the accompanying notes
28 africanenergyresources.com
21 | P a g e
Consolidated Statement
of Cash Flows
African Energy Resources Limited
Consolidated Statement of Cash Flows
For the year ended 30 June 2018
for the year ended 30 June 2018
Cash flows from opera n
i
s
Interest received
Payment for expl
Payment to suppliers and employees
n
Net cash
es
Cash flows from inves
g ac vi es
Receipts from sale of listed investments
Ac
in Caravel Minerals
Net cash inflow/(ou low) from inves
c vi es
Cash flows from financin
i
s
Issue of Shares
Buyback of shares
Net cash inflow/(ou low) from financing ac vi es
Cash and cash equivalents at the beginning of the year
Net (decrease) / increase in cash and cash equivalents
Effect of exchange rate fl
held
Cash and cash equivalents at the end of the year
Financial Report 30 June 2018
Note
2018
US$
Restated(1)
2017
US$
87,222
(97,022)
(824,709)
(834,509)
76,351
(461,333)
(997,191)
(1,382,173)
48,800
(420,174)
(371,374)
1,089,179
(64,113)
1,025,066
2,621,783
(180,817)
(140,722)
2,300,244
-
-
-
-
-
-
3,942,840
(1,382,173)
61,116
2,621,783
4.2
4.1
4.1
(1)
Refer Note 2.1 for details regarding the restatement as a result of a change in accoun ng policy.
The consolidated statements of cash flows are to be read in conj
e accompanying notes
22 | P a g e
AfricanEnergy Annual Repor t 2018 29
Notes to the Consolidated
Financial Statements
African Energy Resources Limited
Notes to the Consolidated Financial Statements
1. Basis of Preparation
1.1 Statement of Compliance
Financial Report 30 June 2018
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards (‘AASBs’)
(including Australian Interpretations) adopted by the Australian Accounting Standards Board (‘AASB’) and the Corporations Act
2001. The financial report of the Consolidated Entity also complies with IFRSs and interpretations as issued by the International
Accounting Standards Board. African Energy Resources Limited is a for‐profit entity for the purposes of preparing financial
statements.
The financial report was authorised for issue by the Directors on 27 September 2018.
1.2 Basis of measurement
The financial report is prepared under the historical cost convention.
1.3 Functional and presentation currency
These consolidated financial statements are presented in US dollars (‘US$’).
The functional currency of the Company and each of the operating subsidiaries is US$ which represents the currency of the primary
economic environment in which the Company and each of the operating subsidiaries operates.
Subsidiaries denominated in Australian dollars (‘AU$’) are translated at the closing rate on reporting date. Profit and loss items are
translated on the prevailing rate on the date of transaction.
1.4 Going concern
The financial report has been prepared on a going concern basis, which contemplates the continuity of normal business activity
and the realisation of assets and the settlement of liabilities in the normal course of business.
1.5 Reporting entity
African Energy Resources Limited (referred to as the ‘Parent Entity’ or the ‘Company’) is a company domiciled in Guernsey. The
consolidated financial statements of the Company as at and for the year ended 30 June 2018 comprise the Company and its
subsidiaries (together referred to as the ‘Consolidated Entity’ or the ‘Group’). The Group is primarily involved in power and coal
development in southern Africa.
1.6 Use of estimates and judgments
The preparation of a financial report in conformity with Australian Accounting Standards requires management to make judgments,
estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and
expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed
to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of
assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. These
accounting policies have been consistently applied by each entity in the Consolidated Entity.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods
if the revision affects both current and future periods. In particular, information about significant areas of estimation uncertainty
and critical judgments in applying accounting policies that have the most significant effect on the amount recognised in the financial
statements are described in the following notes:
Note 2.1 – Exploration & evaluation expenditure ‐ If, after having capitalised expenditure under this policy, the Directors
conclude that the Group is unlikely to recover the expenditure by future exploration or sale, then the relevant capitalised
amount will be written off to the Statement of Profit or Loss and other Comprehensive Income.
Note 2.2 – Investments in Associates – The carrying amount of the investment is tested for impairment indicators at least
annually in accordance with AASB 139 Financial Instruments: Recognition and Measurement. Where there are indicators
present the group compares its recoverable amount (fair value less costs to sell) with its carrying amount.
Note 8 – Share‐based payments arrangements ‐ The Group values options issued at fair value at the grant date using the
binomial option pricing model taking into account the exercise price, the term of the option, the impact of dilution, the
share price at grant date, the expected volatility of the underlying share, the expected dividend yield and risk free interest
rate for the term of the option. Performance rights are valued at face value of the share on the date of issue. At each
reporting period management assess the probability of the vesting of options and performance rights where applicable
23 | P a g e
30 africanenergyresources.com
African Energy Resources Limited
Financial Report 30 June 2018
Notes to the Consolidated Financial Statements (continued)
in accordance with AASB 2 – Share based payments (non‐market conditions). The probability is assessed to either be less
likely or more likely (0% or 100%) and a vesting expense is recorded accordingly.
2. Non‐Current Assets
2.1 Exploration and evaluation expenditure
(a) Change of Accounting policy
The financial report has been prepared on the basis of retrospective application of a voluntary change in accounting policy relating
to exploration and evaluation expenditure in accordance with standard AASB 6: Exploration for and Evaluation of Mineral
Resources.
Previously, the Group capitalised, accumulated exploration and evaluation expenditure and carried forward to the extent that they
were expected to be recouped through the successful development of the area or where activities in the area have not yet reached
a stage which permits reasonable assessment of the existence of economically recoverable reserves. Going forward the Group will
elect by Area of Interest to adopt one of the following policies:
(i)
Exploration and evaluation expenditure is stated at cost and is accumulated and carried forward to the extent that they
are expected to be recouped through the successful development of the area or where activities in the area have not yet
reached a stage which permits reasonable assessment of the existence of economically recoverable reserves; or
Exploration and evaluation costs are expenses as incurred as an operating cost of the Group. Costs related to the
acquisition of properties that contain mining resources are capitalised and allocated separately to specific areas of
interest. These costs are capitalised until the viability of the area of interest is determined.
(ii)
The Board has determined to apply this policy to an area of interest on a case by case basis and has applied the policy change as
follows:
Area of Interest
Mmamabula West project
Mmamantswe Coal Project
African Energy Holdings SRL (Sese JV)
Accounting
Policy Election
2.1(a)(ii)
2.1(a)(i)
2.1(a)(ii)
The Board have determined that the change in accounting policy will result in more relevant and no less reliable information as the
policy is more transparent and less subjective. Recognition criteria of exploration and evaluation assets are inherently uncertain
and expensing as incurred results in a more transparent Consolidated Statement of Financial Position and Consolidated Statement
of Profit or Loss and Other Comprehensive Income. Furthermore, the change in policy aids in accountability of line management’s
expenditures and the newly adopted policy is consistent with industry practice.
The effects on the Consolidated Statement of Profit or Loss and Other Comprehensive Income and to the Consolidated Statement
of Financial Position on implementation of the new accounting policy, were as follows:
Balances at 1 July 2016, as previously reported
Impact of the change in accounting policy
Restated balances at 1 July 2016
Exploration
expenditure
US$
6,610,155
(714,851)
5,895,304
Foreign
exchange
reserve
US$
(5,148,800)
46,158
(5,102,642)
Retained
earnings
US$
(44,382,856)
(761,009)
(45,143,865)
Balances at 30 June 2017, as previously reported
Impact of the change in accounting policy at 1 July 2016
Impact of the change in accounting policy during 2017
Restated balance at 30 June 2017
7,001,817
(714,851)
(386,794)
5,900,172
(5,077,260)
46,158
(9,867)
(45,624,630)
(761,009)
(376,928)
(5,040,969)
(46,762,567)
The effects on the Consolidated Statement of Profit or Loss and Other Comprehensive Income were as follows:
Increase in loss for the year
24 | P a g e
For the year
ended
30 June 2017
US$
(376,928)
AfricanEnergy Annual Repor t 2018 31
Notes to the Consolidated
Financial Statements (continued)
African Energy Resources Limited
Financial Report 30 June 2018
Notes to the Consolidated Financial Statements (continued)
The table below summarises the impact on the loss per share for the comparative period:
Loss per share
Previously reported – basic and diluted loss per share
Restated – basic and diluted loss per share
2017
US$
(0.20)
(0.27)
Exploration and evaluation activity involves the search for energy resources, the determination of technical feasibility and the
assessment of commercial viability of an identified resource.
Exploration and evaluation assets are only recognised if the rights of the area of interest are current and either:
a)
b)
the expenditures are expected to be recouped through successful development and exploitation of the area of interest; or
activities in the area of interest have not at the reporting date, reached a stage which permits a reasonable assessment of
the existence or other wise of economically recoverable reserves and active and significant operations in, or in relation to,
the area of interest are continuing.
(b) Exploration and Evaluation Carrying Values
Exploration and evaluation assets are assessed for impairment if sufficient data exists to determine technical feasibility and
commercial viability and facts and circumstances suggest that the carrying amount exceeds the recoverable amount. For the
purposes of impairment testing, exploration and evaluation assets are allocated to cash‐generating units to which the exploration
activity relates. The cash generating unit shall not be larger than the area of interest. Once the technical feasibility and commercial
viability of the extraction of mineral resources in an area of interest are demonstrable, exploration and evaluation assets
attributable to that area of interest are first tested for impairment and then reclassified from intangible assets to mineral property
and development assets within property, plant and equipment.
The recoverability of the carrying amounts of exploration and evaluation assets is dependent on the successful development and
commercial exploitation or sale of the respective area of interest.
Mmamabula West Coal Project
Mmamantswe Coal Project
Carrying amount of exploration and evaluation
(1)
Refer Note 2.1 for details regarding the restatement as a result of a change in accounting policy.
(c) Exploration and Evaluation movement reconciliation
Balance at the beginning of the year
Additions
Impairments(2)
Effect of movements in foreign exchange
Carrying amount at 30 June
2018
US$
2,500,000
‐
2,500,000
Restated(1)
2017
US$
2,500,000
3,400,172
5,900,172
2018
US$
5,900,172
‐
(3,396,842)
(3,330)
2,500,000
Restated(1)
2017
US$
5,895,304
‐
‐
4,868
5,900,172
(1)
(2)
Refer Note 2.1 for details regarding the restatement as a result of a change in accounting policy.
The Directors determined that an impairment of Mmamantswe Coal Project was necessary due to uncertainty surrounding the recently
released draft IRP in South Africa which no longer contemplates cross border imports of coal fired power.
2.2
Investments in Associates
Associates are entities over which the Group has significant influence but not control or joint control. Associates are accounted for
in the parent entity financial statements at cost and the consolidated financial statements using the equity method of accounting.
Under the equity method of accounting, the group's share of post‐acquisition profits or losses of associates is recognised in
consolidated profit or loss and the group's share of post‐acquisition other comprehensive income of associates is recognised in
consolidated other comprehensive income. The cumulative post‐acquisition movements are adjusted against the carrying amount
of the investment. Dividends received from associates are recognised in the parent entity's profit or loss, while they reduce the
carrying amount of the investment in the consolidated financial statements.
32 africanenergyresources.com
25 | P a g e
African Energy Resources Limited
African Energy Resources Limited
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
Financial Report 30 June 2018
Financial Report 30 June 2018
Subsidiaries are all entities over which the group has control. Control is determined with reference to whether 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
Subsidiaries are all entities over which the group has control. Control is determined with reference to whether the group is exposed
power to direct the activities of the entity. Where the group loses control of a subsidiary but retains significant influence, the
to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its
retained interest is re‐measured to fair value at the date that control is lost and the difference between fair value and the carrying
power to direct the activities of the entity. Where the group loses control of a subsidiary but retains significant influence, the
amount is recognised in profit or loss. There is judgement involved in determining whether control has been lost and determining
retained interest is re‐measured to fair value at the date that control is lost and the difference between fair value and the carrying
the fair value of the investment held.
amount is recognised in profit or loss. There is judgement involved in determining whether control has been lost and determining
the fair value of the investment held.
(a) Movements in carrying amounts
(a) Movements in carrying amounts
Balance at the beginning of the year
Balance at the beginning of the year
Share of Losses after income tax
Share of Losses after income tax
Movement on renegotiation of Sese JV terms
Movement on renegotiation of Sese JV terms
Carrying amount at 30 June
Carrying amount at 30 June
(b) Share of the results of its associates
(b) Share of the results of its associates
2018
2018
US$
US$
8,056,900
8,056,900
(471,527)
(471,527)
(283,839)
(283,839)
7,301,534
7,301,534
2017
2017
US$
US$
8,515,246
8,515,246
(458,346)
(458,346)
‐
‐
8,056,900
8,056,900
The groups share of the results of its associates and its aggregated assets and liabilities are as follows.
The groups share of the results of its associates and its aggregated assets and liabilities are as follows.
Company's share of:
Company's share of:
Liabilities
US$
Liabilities
106,554
US$
106,554
Ownership
Interest %
Ownership
Interest %
35%
35%
African Energy Holdings SRL
African Energy Holdings SRL
US$
5,143,514
US$
5,143,514
Assets
Assets
US$
‐
US$
‐
Revenues
Revenues
(c) Summarised financial information of associate ‐ African Energy Holdings SRL
(c) Summarised financial information of associate ‐ African Energy Holdings SRL
Summarised statement of financial position
Summarised statement of financial position
Current Assets
Current Assets
Cash and cash equivalents
Cash and cash equivalents
Trade and other receivables
Trade and other receivables
Total current assets
Total current assets
Non‐current Assets
Non‐current Assets
Exploration & evaluation
Exploration & evaluation
Property, plant & equipment
Property, plant & equipment
Total non‐current assets
Total non‐current assets
Total assets
Total assets
Current Liabilities
Current Liabilities
Trade and other payables
Trade and other payables
Total current liabilities
Total current liabilities
Non‐current Liabilities
Non‐current Liabilities
Rehabilitation Provision
Rehabilitation Provision
Total non‐current liabilities
Total non‐current liabilities
Total liabilities
Total liabilities
Net assets
Net assets
Summarised statement of comprehensive income
Summarised statement of comprehensive income
Total Operating Expense
Total Operating Expense
Loss from operating activities
Loss from operating activities
Other comprehensive income
Other comprehensive income
Total comprehensive income
Total comprehensive income
26 | P a g e
26 | P a g e
(Loss)
US$
(Loss)
(471,526)
US$
(471,526)
2017
2017
US$
US$
79,649
79,649
92,344
92,344
171,993
171,993
14,112,860
14,112,860
125,085
125,085
14,237,945
14,237,945
14,409,937
14,409,937
38,476
38,476
38,476
38,476
‐
‐
‐
‐
‐
‐
14,371,462
14,371,462
2017
2017
US$
US$
(1,098,124)
(1,098,124)
(1,098,124)
(1,098,124)
‐
‐
(1,098,124)
(1,098,124)
2018
2018
US$
US$
159,648
159,648
92,780
92,780
252,428
252,428
14,378,556
14,378,556
64,770
64,770
14,443,326
14,443,326
14,695,754
14,695,754
54,439
54,439
54,439
54,439
250,000
250,000
250,000
250,000
304,439
304,439
14,391,315
14,391,315
2018
2018
US$
US$
(1,245,307)
(1,245,307)
(1,245,307)
(1,245,307)
(13,493)
(13,493)
(1,258,800)
(1,258,800)
AfricanEnergy Annual Repor t 2018 33
Notes to the Consolidated
Financial Statements (continued)
African Energy Resources Limited
Financial Report 30 June 2018
Notes to the Consolidated Financial Statements (continued)
3. Financial Performance
3.1 Segment information
AASB 8 Operating Segments requires a ‘management approach’, under which segment information is presented on the same basis
as that used for internal reporting purposes. The segments are reported in a manner that is consistent with the internal reporting
provided to the chief operating decision maker.
(a) Description of Segments
The Company’s Board receives financial information across three reportable segments. These are Coal‐fired Power Projects; Power
Investments and Unallocated.
(b) Segment Information
For the year ended 30 June 2018
Total segment revenue
Profit (loss) before income tax
Segment Assets
Investment in Sese JV
Exploration and evaluation expenditure
Property, plant and equipment
Cash and short term receivable
Total Segment Assets
Segment Liabilities
Trade & other payables
Total Segment Liabilities
For the year ended 30 June 2017 – Restated(1)
Total segment revenue
Profit (loss) before income tax
Segment Assets
Investment in Sese JV
Exploration and evaluation expenditure
Property, plant and equipment
Cash and short term receivable
Total Segment Assets
Segment Liabilities
Trade & other payables
Total Segment Liabilities
Coal‐fired
Power
Development
Projects
US$
‐
(3,481,879)
‐
2,500,000
‐
‐
2,500,000
Power
Investments
All other
segments
Consolidated
US$
‐
(471,527)
7,301,534
‐
‐
‐
7,301,534
US$
563,607
(59,772)
US$
563,607
(4,013,178)
‐
‐
26
3,667,413
3,667,439
7,301,534
2,500,000
26
3,667,413
13,468,973
‐
‐
‐
‐
83,889
83,889
83,889
83,889
‐
(376,928)
‐
(539,050)
73,773
(702,724)
‐
5,900,172
‐
‐
5,900,172
8,056,900
‐
‐
‐
8,056,900
‐
‐
398
2,760,569
2,760,967
73,773
(1,618,702)
‐
‐
8,056,900
5,900,172
398
2,760,569
16,718,039
‐
‐
‐
‐
118,675
118,675
118,675
118,675
(2)
Refer Note 2.1 for details regarding the restatement as a result of a change in accounting policy.
3.2 Revenue
(a) Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be
reliably measured.
(b) Net financial income
34 africanenergyresources.com
27 | P a g e
African Energy Resources Limited
Financial Report 30 June 2018
Notes to the Consolidated Financial Statements (continued)
Net financial income comprises interest payable on borrowings calculated using the effective interest method, interest receivable
on funds invested, dividend income and foreign exchange gains and losses.
Interest income is recognised in the profit or loss as it accrues, using the effective interest method. Management fees are
recognised in the profit or loss as the right to a fee accrues, in accordance with contractual rights.
Interest received
3.3 Expenses
Personnel expenses
Employee salaries
Superannuation
Directors fees
Recharge of director fees and employee salaries to JV partner
Payroll tax
Professional & administration expense
Audit Tax and Accounting
Compliance & Insurance
Occupancy
Travel
Marketing
Legal fees
Depreciation and Impairment of PP&E
Other
3.4
Income Taxes
(a) Income tax expense:
Current tax
Deferred tax
Overprovision in respect to prior years
(b) Reconciliation of income tax expense to prima facie tax payable:
Loss before income tax
Prima facie income tax at 30%
Tax effect of amounts not deductible in calculating taxable income:
Sundry items
Other
Difference in overseas tax rates
Tax loss not recognised
Income tax expense/(benefit)
2018
US$
60,130
60,130
2017
US$
73,773
73,773
2018
US$
147,596
15,008
544,463
(170,898)
515
536,684
53,634
91,347
70,344
29,925
15,740
53,789
395
27,866
343,040
2017
US$
177,290
16,120
614,229
(342,137)
9,501
475,003
60,921
96,496
103,147
73,604
38,857
24,594
917
34,359
432,895
2018
US$
2017
US$
‐
‐
‐
‐
‐
‐
‐
‐
2018
US$
Restated(1)
2017
US$
(4,013,178)
(1,203,953)
(1,618,702)
(485,611)
262
137,011
(1,066,680)
4,654
1,062,026
‐
283
(29,245)
(514,573)
6,284
508,289
‐
(1) Refer Note 2.1 for details regarding the restatement as a result of a change in accounting policy.
AfricanEnergy Annual Repor t 2018 35
28 | P a g e
Notes to the Consolidated
Financial Statements (continued)
African Energy Resources Limited
Notes to the Consolidated Financial Statements (continued)
Tax losses:
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit @ 30%
Difference in overseas tax rates 10%
Potential tax benefit
(c) Unrecognised deferred tax assets arising on timing differences and losses
Timing
Losses ‐ Revenue
Financial Report 30 June 2018
2018
US$
2017
US$
(739,055)
(221,717)
4,654
(217,063)
(752,507)
(225,752)
6,284
(219,468)
2018
US$
2017
US$
12,753
4,390,135
4,402,888
152,805
4,173,072
4,325,877
The tax benefits of the above deferred tax assets will only be obtained if:
i.
The Consolidated Entity derives future assessable income of a nature and of an amount sufficient to enable the benefits
to be utilised;
ii.
The Consolidated Entity continues to comply with the conditions for deductibility imposed by law;
iii. No changes in income tax legislation adversely affect the Consolidated Entity from utilising the benefits.
Income tax on the Statement of Profit or Loss and other Comprehensive Income for the periods presented comprises current and
deferred tax. Income tax is recognised in the Statement of Profit or Loss and other Comprehensive Income except to the extent
that it relates to items recognised directly in equity, in which case it is recognised in equity.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting
period in the countries where the Company’s subsidiaries and associates operate and generate taxable income. Management
periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to
interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred tax is provided using the liability method, providing for temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for taxation purposes.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which
the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will
be realised, or to the extent that the Group has deferred tax liabilities with the same taxation authority. Additional income taxes
that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend.
3.5 Earnings per share
(d) Basic loss per share
The calculation of basic loss per share at 30 June 2018 was based on the losses attributable to ordinary shareholders of
US$4,013,178 (2017 Restated: US$1,618,702) and a weighted average number of ordinary shares outstanding during the financial
year ended 30 June 2018 of 624,007,780 (2017: 606,946,983) calculated as follows:
Gain (Loss) attributable to ordinary shareholders
Issued number of ordinary shares at 1 July
Effect of shares issued during the period
Weighted average number of shares for year to 30 June
2018
US$
(4,013,178)
Restated(1)
2017
US$
(1,618,702)
608,496,715
15,511,065
624,007,780
606,646,983
300,000
606,946,983
Basic loss per share (cents per share)
(0.64)
(0.27)
36 africanenergyresources.com
29 | P a g e
African Energy Resources Limited
Financial Report 30 June 2018
Notes to the Consolidated Financial Statements (continued)
(1)
Refer Note 2.1 for details regarding the restatement as a result of a change in accounting policy.
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company, excluding any costs of
servicing equity other than ordinary shares, by weighted average number of ordinary shares outstanding during the financial year,
adjusted for the bonus elements in ordinary shares issued during the year.
(e) Diluted loss per share
Potential ordinary shares are not considered dilutive, thus diluted loss per share is the same as basic loss per share.
3.6 Sale of Chirundu Uranium Project
On 30 October 2017, The Company completed the sale of its Zambian uranium portfolio to TSX Venture Exchange listed GoviEx
Uranium for consideration of 3.0M GoviEx shares and 1.6M warrants exercisable at US$0.23 per share.
The value of the consideration less transaction costs was valued at US$503,477 based upon the Goviex share price on 30 October
2017 and with the Zambian uranium portfolio having previously been impaired to nil the total consideration was recorded as
revenue.
4. Working Capital Management
4.1 Cash and Cash Equivalents
Cash and cash equivalents comprise cash balances, short term bills and call deposits. Bank overdrafts that are repayable on demand
and form an integral part of the Consolidated Entity’s cash management are included as a component of cash and cash equivalents
for the purpose of the statement of cash flows.
Cash at bank and in hand
Short‐term deposits
Refer to note 5.2 for risk exposure analysis.
4.2 Reconciliation of loss after income tax to net cash flows from operating activities
Cash flows from operating activities
(Loss) for the year
Adjustments for:
Gain on sale of Zambian Uranium Project
Gain on Derivative
Cost base of Goviex shares sold
Equity‐settled share‐based payment expenses
Share of Loss in Sese JV
Depreciation and amortisation expense
Impairment of Mmamantswe
Foreign exchange losses
Change in operating assets & liabilities
(Increase)/decrease in trade and other receivables
(Decrease)/increase in trade and other payables
Net cash used in operating activities
2018
US$
2,070,606
229,638
2,300,244
2017
US$
604,282
2,017,501
2,621,783
2018
US$
(4,013,178)
(503,477)
(181,987)
(1,537)
(77,701)
471,527
395
3,396,842
603
101,534
(27,530)
(834,509)
Restated(1)
2017
US$
(1,618,702)
‐
‐
‐
(130,993)
458,346
917
‐
(3,483)
(33,593)
(54,665)
(1,382,173)
(1)
Refer Note 2.1 for details regarding the restatement as a result of a change in accounting policy.
4.3 Trade and other receivables
The fair value of trade and other receivables, excluding construction work in progress, is estimated as the present value of future
cash flows, discounted at the market rate of interest at the reporting date.
30 | P a g e
AfricanEnergy Annual Repor t 2018 37
Notes to the Consolidated
Financial Statements (continued)
African Energy Resources Limited
Notes to the Consolidated Financial Statements (continued)
Financial Report 30 June 2018
Trade debtors
Interest receivable
GST and VAT receivable
2018
US$
14,770
4,759
17,723
37,252
2017
US$
75,747
31,851
31,188
138,786
Trade and other receivables are recorded at amounts due less any allowance for doubtful debts.
4.4 Trade and other payables
Trade and other payables are recognised when the related goods or services are received, at the amount of cash or cash equivalent
that will be required to discharge the obligation, gross of any settlement discount offered. Trade payables are non‐interest bearing
and are settled on normal terms and conditions.
Trade creditors
Accrued expenses
Payroll liabilities
2018
US$
26,393
23,079
34,417
83,889
2017
US$
49,939
15,325
53,411
118,675
Liabilities for employee benefits for wages, salaries and annual leave that are expected to be settled within 12 months of the
reporting date represent present obligations resulting from employees’ services provided to reporting date, are calculated at
undiscounted amounts based on remuneration wage and salary rates that the Consolidated Entity expects to pay as at reporting
date including related on‐costs, such as workers compensation insurance and payroll tax.
4.5
Impairment
The Group assesses at each reporting date whether there is objective evidence financial asset or group of financial assets is
impaired.
The Directors determined that an impairment of Mmamantswe Coal Project was necessary due to uncertainty surrounding the
recently released draft IRP in South Africa which no longer contemplates cross border imports of coal fired power.
4.6 Available for sale financial assets
The Company values available for sale assets at the closing share price on the balance date.
15.3M Shares held in Caravel Minerals
2.7M Shares held in Goviex Uranium
4.7 Derivatives
2018
US$
677,336
470,594
1,147,930
2017
US$
‐
‐
‐
2.75M Caravel options exercisable and 1.6M Goviex options were acquired during the period and at 30 June 2018 were valued at
$181,987 using a Black ‐Scholes option valuation model with the following inputs.
Black‐Scholes Inputs
Strike price
share price
Term
volatility of 100%
risk free rate 1.5%
Price per option
Number of Options
Total Value
Goviex
23c (USD)
17.5c (USD)
2.25 years
100%
1.5%
8.78c (USD)
1,600,000
$140,494
Caravel
7c (AUD)
6c (AUD)
2 years
100%
1.5%
2.04c (AUD)
2,750,000
$41,493
38 africanenergyresources.com
31 | P a g e
African Energy Resources Limited
Financial Report 30 June 2018
Notes to the Consolidated Financial Statements (continued)
5.
Funding and Risk Management
The Group's objectives when managing capital are to safeguard their ability to continue as a going concern, so that it can continue to
provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of
capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return
capital to shareholders, issue new shares or sell assets to reduce debt.
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in the proportion to the
number and amount paid on the shares held. Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the
proceeds. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business are not included
in the cost of the acquisition as part of the purchase consideration.
If the entity reacquires its own equity instruments, for example as a result of a share buy‐back, those instruments are deducted from
equity and the associated shares are cancelled. No gain or loss is recognised in the profit or loss and the consideration paid including
any directly attributable incremental costs (net of income taxes) is recognised directly in equity.
5.1 Contributed equity
Movement in share capital
Date
Balance 30 June 2016
Conversion of performance rights
Balance 30 June 2017
Share Placement to First Quantum Minerals
Share Buyback
Balance 30 June 2018
01 Jul 2016
14 Aug 2017
30 Jun 2018
Number of
shares
608,196,715
300,000
608,496,715
17,692,308
(3,698,394)
622,490,629
Issue price
US$ cents
6.2
1.7
US$
63,109,911
‐
63,109,911
1,089,179
(64,113)
64,134,977
5.2 Financial risk management
The Group's activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk), credit
risk and liquidity risk. The Group's overall risk management program focuses on the unpredictability of financial markets and seeks to
minimise potential adverse effects on the financial performance of the Group. The Group uses different methods to measure different
types of risk to which it is exposed.
Risk management is carried out by the Audit & Risk Committee under a charter approved by the Board of Directors. The Audit & Risk
Committee identifies, evaluates and hedges foreign currency risks by holding cash in the currency that it is budgeted to be spent in.
(a) Market risk
i. Foreign currency risk
Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency
that is not the entity’s functional currency and net investments in foreign operations. Some exposure to foreign exchange risk exists
in respect to the Australian subsidiaries which provides administrative and technical support to the Group and have transactions
denominated in Australian Dollars. The risk is measured using sensitivity analysis and cash flow forecasting.
The Group’s exposure to foreign currency risk at the end of the reporting period, expressed in US$, was:
Cash held in US Dollars (US$)
Cash held in South African Rand (ZAR)
Cash held in Botswana Pula (BWP)
Trade and other receivables (BWP)
Trade and other payables (BWP)
2018
US$
168,710
6,891
6,308
5,669
(2,634)
2017
US$
250,976
12,268
46,596
17,787
(29,138)
ii. Price risk
The Group does not hold investments and therefore is not exposed to equity securities price risk.
iii. Interest rate risk
The Group has significant interest‐bearing assets; however a change in interest rates would not have a material impact on the results.
AfricanEnergy Annual Repor t 2018 39
32 | P a g e
Notes to the Consolidated
Financial Statements (continued)
African Energy Resources Limited
Financial Report 30 June 2018
Notes to the Consolidated Financial Statements (continued)
Interest rate risk
Foreign exchange risk
‐ 100 bps
+ 100 bps
‐10%
+10%
Carrying
amount
Profit
US$
Equity
US$
Profit
US$
Equity
US$
Profit US$
Equity
US$
Profit
US$
Equity
US$
30 June 2018
Financial assets
Cash & cash equivalents
2,300,244
23,002
(23,002)
(23,002)
23,002
(16,871)
16,871
16,871
(16,871)
Available for sale financial assets
1,147,930
Trade & other receivables
Financial liabilities
Trade and other payables
37,252
83,889
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
(114,793)
114,793
114,793
(114,793)
(3,725)
3,725
3,725
(3,725)
(8,389)
8,389
8,389
(8,389)
Interest rate volatility was chosen to reflect expected short term fluctuations in market interest rates.
Foreign exchange volatility was chosen to reflect expected short term fluctuations in the Australian Dollar.
iv. Credit risk
The carrying amount of cash and cash equivalents, trade and other receivables (excluding prepayments), represent the Group’s
maximum exposure to credit risk in relation to financial assets. Cash and short term liquid investment are placed with reputable
banks, so no significant credit risk is expected. The Group does not have any material exposure to any single debtor or group of
debtors, so no significant credit risk is expected. The credit quality of financial assets that are neither past due nor impaired can be
assessed by reference to external credit rates:
Cash at bank & short term bank deposits
A‐1+
FNB Botswana (not rated)
Standard Bank South Africa (not rated)
Cash on hand
(b) Liquidity risk
2018
US$
2017
US$
2,287,045
6,308
6,891
‐
2,300,244
2,560,821
46,596
12,268
2,098
2,621,783
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through
an adequate amount of committed credit facilities and the ability to close out market positions. The Group manages liquidity risk
by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Due
to the dynamic nature of the underlying businesses, management aims at maintaining flexibility in funding by keeping committed
credit lines available with a variety of counterparties. Surplus funds are only invested in instruments that are tradeable in highly
liquid markets.
The tables below analyse the Group’s financial liabilities into relevant maturity groupings. The amounts disclosed in the table are
the contractual undiscounted cash flows. Balances due within 12 months equal their carrying amounts as the impact of discounting
is not significant.
2018
Trade Payables
2017
Trade Payables
(c) Fair value estimation
Less than 6
months
6 ‐ 12
months
83,889
83,889
118,675
118,675
Total
contractual
cash flows
83,889
83,889
118,675
118,675
‐
‐
‐
‐
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure
purposes.
The fair value of financial instruments traded in active markets is based on quoted market prices at the reporting date. The quoted
market price used for financial assets held by the Group is the current bid price.
40 africanenergyresources.com
33 | P a g e
African Energy Resources Limited
Financial Report 30 June 2018
Notes to the Consolidated Financial Statements (continued)
The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. The Group
uses a variety of methods and makes assumptions that are based on market conditions existing at each reporting date. Quoted
market prices or dealer quotes for similar instruments are used for long‐term debt instruments held. Other techniques, such as
estimated discounted cash flows, are used to determine fair value for the remaining financial instruments.
The carrying value less impairment provision of trade receivables and payables are 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.
5.3 Fair value measurement
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes.
The following tables detail the consolidated entity's assets and liabilities, measured or disclosed at fair value, using a three level
hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
or indirectly
Level 3: Unobservable inputs for the asset or liability
30 June 2018
Available for sale financial assets
Financial derivative
Total assets
Level 1
US$
1,147,930
‐
1,147,930
Level 2
US$
Level 3
US$
‐
‐
‐
‐
181,987
181,987
Total
US$
1,147,930
181,987
1,329,917
There were no transfers between levels during the financial year.
Level 3 financial derivative unobservable inputs and sensitivity are as follows:
Description
Unobservable inputs
Financial derivative
Share price
Volatility
Sensitivity
Decease share price decrease fair value
Increase volatility significantly increase or
decrease fair value
Accounting policy for fair value measurement
When an asset or liability, financial or non‐financial, is measured at fair value for recognition or disclosure purposes, the fair value is
based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence
of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act
in their economic best interests. For non‐financial assets, the fair value measurement is based on its highest and best use. Valuation
techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used,
maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
Assets and liabilities measured at fair value are classified, into three levels, using a fair value hierarchy that reflects the significance of
the inputs used in making the measurements. Classifications are reviewed at each reporting date and transfers between levels are
determined based on a reassessment of the lowest level of input that is significant to the fair value measurement.
Fair value in active market (Level 1)
The fair value of financial assets and liabilities traded in active markets (such as publicly traded derivatives and listed equity securities)
are based on quoted market prices at the close of trading at the end of the reporting period without any deduction for estimated future
selling costs.
A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange,
dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market
transactions on an arm’s length basis.
Fair value in an inactive or unquoted market (Level 2 and Level 3)
34 | P a g e
AfricanEnergy Annual Repor t 2018 41
Notes to the Consolidated
Financial Statements (continued)
African Energy Resources Limited
Notes to the Consolidated Financial Statements (continued)
Financial Report 30 June 2018
The fair value of financial assets that are not traded in an active market is determined using valuation techniques. These include the
use of recent share price from capital raising and option pricing models that provides a reliable estimate of prices obtained in actual
market transactions.
For option pricing models, inputs are based on available market data. Fair values for unquoted equity investments are estimated, using
the latest share price from capital raising. Some of the inputs to these models may not be market observable and are therefore
estimated based on assumptions.
6.
Group Structure
6.1 Basis of consolidation
(a) Subsidiaries
Subsidiaries are all entities (including structured 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 to direct the activities of 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.
Investments in subsidiaries are carried at their cost of acquisition in the Company’s financial statements.
(b) Transactions eliminated on consolidation
Intragroup balances, and any unrealised gains and losses or income and expenses arising from intragroup transactions, are
eliminated in preparing the consolidated financial statements.
(c) Comparatives
Prior period comparatives are for the year from 1 July 2016 to 30 June 2017.
6.2 Foreign currency
(a) Foreign currency transactions
Transactions in foreign currencies are translated to the functional currency at the foreign exchange rate ruling at the date of the
transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to United States
dollars at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the
Statement of Profit or Loss and other Comprehensive Income. Non‐monetary assets and liabilities that are measured in terms of
historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non‐monetary assets and
liabilities denominated in foreign currencies that are stated at fair value are translated to US$ at foreign exchange rates ruling at
the dates the fair value was determined.
(b) Financial statements of foreign operations
The assets and liabilities of Australian subsidiaries, including goodwill and fair value adjustments arising on consolidation, are
translated to US dollars at foreign exchange rates ruling at the reporting date. The revenues and expenses of foreign operations,
excluding foreign operations in hyperinflationary economies, are translated to US dollars at rates approximating to the foreign
exchange rates ruling at the dates of the transactions.
Foreign exchange differences arising on translation are recognised directly in the foreign currency translation reserve (“FCTR”), as
a separate component of equity. When a foreign operation is disposed of, in part or in full, the relevant amount in the FCTR is
transferred to profit or loss, as part of the gain or loss on sale where applicable.
(c) Net investment in foreign operations
Exchange differences arising from the translation of the net investment in foreign operations, and of related effective hedges are
taken to translation reserve and released into profit or loss upon disposal.
42 africanenergyresources.com
35 | P a g e
African Energy Resources Limited
Financial Report 30 June 2018
Notes to the Consolidated Financial Statements (continued)
6.3 Parent Entity Disclosures
The parent entity within the Group is African Energy Resources Limited.
Current Assets
Non‐Current Assets
Total Assets
Current Liabilities
Total Liabilities
Contributed equity
Reserves
Accumulated losses
Total Equity
Gain (loss) for the year
Other comprehensive income / (loss) for the year
Total comprehensive income / (loss) for the year
2018
US$
2,859,054
10,526,030
13,385,084
2017
US$
6,296,418
11,404,591
17,701,009
‐
‐
‐
‐
64,134,977
5,168,779
(55,918,672)
13,385,084
(5,216,782)
‐
(5,216,782)
63,109,911
5,292,988
(50,701,890)
17,701,009
(1,170,238)
‐
(1,170,238)
There were no commitments, contingent liabilities or contingent assets at the parent level at 30 June 2018.
6.4 Subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following principal subsidiaries in
accordance with the accounting policy described in note 6.1(a).
Botswana Energy Solutions Limited
Mmamantswe Coal (Pty) Ltd*
African Energy Holdings SRL 2
Phokoje Power (Pty) Ltd
AFR Australia Pty Ltd
Country of incorporation
British Virgin Is.
Botswana
Barbados
Botswana
Australia
Ownership
interest
2018
100%
100%
100%
100%
100%
Ownership
interest
2017
100%
100%
100%
100%
100%
*Mmamantswe Coal (Pty) Ltd subject to conditional sale agreement to TM Consulting.
7. Related parties
7.1 Key Management Personnel
US$563,683 (2017: US$500,755) was paid to Directors of the Company during the year. Of this amount US$542,508 (2017:
US$613,580) was paid in cash with the balance paid in equity instruments. Disclosures relating to key management personnel are
set out in the Remuneration Report. During the prior year, there was a negative balance for equity compensation benefits due to
the reversal of share based payment expenses.
Short‐term employee benefits
Post‐employment benefits
Equity compensation benefits
2018
US$
509,899
32,609
21,175
563,683
2017
US$
613,580
‐
(112,825)
500,755
36 | P a g e
AfricanEnergy Annual Repor t 2018 43
Notes to the Consolidated
Financial Statements (continued)
African Energy Resources Limited
Notes to the Consolidated Financial Statements (continued)
7.2 Cash Bonus
Financial Report 30 June 2018
The board have resolved to set a bonus pool for Key Management Personnel and Employees of 5% of the total cash proceeds
realised from the sale of the Mmamantswe Project, capped at AU$1,000,000. The bonus is payable when the Consolidated Entity
receives the cash consideration from the sale of the Mmamantswe Project.
The following Key Management Personnel are entitled to a percentage of the total bonus pool as follows:
Frazer Tabeart
Alasdair Cooke
Gregory Fry
25%
10%
10%
7.3 Other related party transactions
The terms and conditions of the transactions with Directors, key executives and associates and their related entities were no more
favourable than those available, or which might reasonably be expected to be available, on similar transactions to non‐Director
related entities on an arm’s length basis.
Mitchell River Group Pty Ltd
EVE Investments Limited
Charges from
Charges to
2018
US$
102,458
‐
2017
US$
111,668
‐
2018
US$
‐
‐
2017
US$
‐
40,611
7.4 Assets and liabilities at 30 June arising from transactions with related parties
Trade and other receivables
Trade and other payables
8. Share based payments
8.1 Performance Rights
2018
US$
6,962
‐
2017
US$
16,571
2,962
The Company has granted performance rights to Directors and employees are as follows: Fair Value of performance rights is equal
to the market price on the date of issue
Issue Date
Expiry Date
Vesting
hurdle**
Unvested at
30 June 2017
01‐Oct‐12
01‐Oct‐12
01‐Oct‐12
01‐Oct‐12
24‐Oct‐13
24‐Oct‐13
28‐Nov‐14
28‐Nov‐14
28‐Nov‐14
31‐Mar‐15
22‐Nov‐16
22‐Nov‐16
15‐Aug‐17
30‐Sep‐17
30‐Sep‐17
30‐Sep‐17
30‐Sep‐17
23‐Oct‐18
23‐Oct‐18
27‐Nov‐19
27‐Nov‐19
27‐Nov‐19
30‐Mar‐20
31‐Dec‐19
31‐Dec‐19
31‐Dec‐19
BFS
COAL
GEO
PPA
PPA1
PQ
FC
PPA2
PPAZ
MMA
PPA3
BFS2
GEO2
100,000
1,166,666
300,000
1,166,667
833,333
833,333
4,500,000
666,667
300,000
500,000
1,166,667
100,000
‐
11,633,333
Issued in
Year
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
300,000*
300,000
Vested
in Year
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
-
‐
Forfeited
in Year
100,000
1,166,666
300,000
1,166,667
‐
‐
‐
‐
‐
‐
‐
‐
‐
2,733,333
Unvested at
30 June 2018
Fair Value
(AUD)
‐
‐
‐
‐
833,333
833,333
4,500,000
666,667
300,000
500,000
1,166,667
100,000
300,000
9,200,000
‐
‐
‐
‐
‐
‐
261,000
38,667
17,400
‐
45,500
3,900
16,200
382,667
* 300,000 performance rights have been issued to consultants during the period with non‐market vesting conditions (refer table
below). The value of services received from the consultants could not be reliably measured and as such the fair value of the rights
was determined using the share price at grant date and managements probability of vesting.
44 africanenergyresources.com
37 | P a g e
African Energy Resources Limited
Financial Report 30 June 2018
Notes to the Consolidated Financial Statements (continued)
PPAZ
PQ
FC
MMA
PPA
PPA1
PPA2
PPA3
BFS
BFS2
COAL
GEO
GEO2
* *Vesting hurdle
Formal execution of a PPA between the Sese JV company and
ZESCO for the full output of a 300MW IPP at Sese
Formal pre‐qualification of the joint bid for the 300MW tender, or
the commencement of direct negotiations with the Government of
Botswana for a 300MW project, or when FQM have made a formal
financial commitment to a 300MW power station at Sese
Financial close of a 300MW power station whereby all conditions
are satisfied by all parties and all agreements are executed, or
when FQM have made a formal financial commitment to a 300MW
power station at Sese
unconditional completion of binding SSA or successful award of SA
IPP tender to Mmamantswe
Formal execution of a 300MW Sese PPA or when FQM have made
a formal financial commitment to a 300MW power station at Sese
by 30/09/2017
Formal execution of a 300MW Sese PPA or when FQM have made
a formal financial commitment to a 300MW power station at Sese
by 23/10/2018
Formal execution of a 300MW Sese PPA or when FQM have made
a formal financial commitment to a 300MW power station at Sese
by 27/11/2019
Formal execution of a 300MW Sese PPA or when FQM have made
a formal financial commitment to a 300MW power station at Sese
by 31/12/2019
successful completion of a bankable feasibility study on Sese Coal
Project or when FQM have made a formal financial commitment to
a 300MW power station at Sese by 30/09/2017
successful completion of a bankable feasibility study on Sese Coal
Project or when FQM have made a formal financial commitment to
a 300MW power station at Sese from by 31/12/2019
Cumulative export coal sales from any AFR coal project exceeding
100,000t
100% upon sign off of Mining Reserve or when FQM have made a
formal financial commitment to a 300MW power station at Sese
100% upon sign off of Mining Reserve or when FQM have made a
formal financial commitment to a 300MW power station at Sese
Likelihood of hurdle being met (See
note 1.6)
more likely than less likely
more likely than less likely
more likely than less likely
less likely than more likely
expired
less likely than more likely
more likely than less likely
more likely than less likely
expired
more likely than less likely
expired
expired
more likely than less likely
8.2 Options
As at 30 June 2018 the group had the following options on issue.
Directors and Staff Options (6c strike expiring Sep 2019)
Number of
Options
10,875,000
10,875,000
8.3 Shares
The Company issued nil shares (2017: 300,000) to Directors and employees during the year as follows.
8.4 Expenses arising from share‐based payment transactions
Performance rights issued under AFR Performance Rights Plan
Total reversal of share based payment expense
38 | P a g e
2018
US$
(77,701)
(77,701)
2017
US$
(130,993)
(130,993)
AfricanEnergy Annual Repor t 2018 45
Notes to the Consolidated
Financial Statements (continued)
African Energy Resources Limited
Financial Report 30 June 2018
Notes to the Consolidated Financial Statements (continued)
The likelihood of various tranches of performance rights vesting changed from more than likely to less than likely during the year
resulting in a reversal of prior year expenses.
9. Other
9.1 Events occurring after the reporting period
No matters or circumstances have arisen since the end of the financial year which have significantly affected or may significantly
affect the operations, results or state of affairs of the Group in future financial years which have not been disclosed publicly at the
date of this report.
9.2 Contingencies and Commitments
Directors and staff are entitled to a cash bonus 5% of the total cash proceeds realised from the sale of the Mmamantswe Project,
capped at AU$1,000,000. The bonus is payable when the Consolidated Entity receives the cash consideration from the sale of the
Mmamantswe Project.
There were no contingent assets or liabilities in the Group at 30 June 2018. There were no commitments at 30 June 2018.
9.3 Remuneration of Auditors
BDO Audit (WA) Pty Ltd: Audit and review of financial reports
9.4 New standards and interpretations not yet adopted
2018
US$
30,624
30,624
2017
US$
29,315
29,315
Early adoption of accounting standards
The Group has not elected to apply any pronouncements before their operative date in the annual reporting year beginning 1
July 2017.
New and amended standards adopted by the Group
None of the new standards and amendments to standards that are mandatory for the first time for the financial year beginning 1
July 2017 affected any of the amounts recognised in the current year or any prior period and are not likely to affect future
periods.
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2018 reporting
year. The Group’s assessment of the impact of these new standards and interpretations that may have an impact on the Group is
set out below:
AASB 9 Financial Instruments
AASB 9 includes requirements for the classification and measurement of financial assets. There is no material impact for African
Energy. This standard is not applicable until the financial year commencing 1 July 2018 and management are still assessing the
impact of this standard.
AASB 15 Revenue from Contracts with Customers
AASB 15 deals with revenue recognition and establishes principles for reporting useful information to users of financial
statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with
customers. It also introduces new cost guidance which requires certain costs of obtaining and fulfilling contracts to be recognised
as separate assets when specified criteria are met. This standard is not applicable until the financial year commencing 1 July
2018, and there will be no material impact on the Group’s financial statements.
AASB 16 Leases
AASB 16 requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months. There is no
material impact for African Energy. This standard is not applicable until the financial year commencing 1 July 2019.
46 africanenergyresources.com
39 | P a g e
Additional Shareholder Information
The following additional information required by the ASX Listing Rules is current as at 19 September 2018.
African Energy Resources Limited shares are listed on the Australian Securities Exchange (ASX:AFR).
Securities
%
591,967,147
94.46
29,964,304
2,863,792
1,777,118
116,663
4.78
0.46
0.28
0.02
No. of
holders
400
836
368
581
452
%
15.17
31.70
13.96
22.03
17.14
626,689,024
100.00
2,637
100.00
10,611,551
1.69
1,774
67.27
Distribution of Shareholders
Range
100,001 and Over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
Unmarketable
Parcels
Largest 20 shareholders
Rank Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Sentient Group
First Quantum Minerals
Alasdair Cooke (and associated entities)
PS Consulting Pty Ltd
Stacey Radford
Henry Deburgh (and associated entities)
David Metford
CS Third Nominees Pty Ltd
Donal Windrim
Bill Fry (and associated entities)
General Advisory Pty Ltd
Helmet Nominees Pty Ltd
Marzec Family
Frazer Tabeart (and associated entities)
Raejan Pty Ltd
Brian McCubbing
Aurora Uranium Limited
Robert Cooke & Mrs Elizabeth Cooke
ZW 2 Pty Ltd
Ian Hume (and associated entities)
Total Top 20
Number Of
Shares
Held
141,404,786
86,692,308
50,003,683
22,000,000
19,237,334
16,325,186
12,338,585
7,502,500
6,871,914
5,869,610
5,645,926
5,000,000
4,900,000
4,774,100
4,700,000
4,563,000
4,551,797
4,500,000
4,500,000
4,157,606
415,538,335
%IC
22.56%
13.83%
7.98%
3.51%
3.07%
2.60%
1.97%
1.20%
1.10%
0.94%
0.90%
0.80%
0.78%
0.76%
0.75%
0.73%
0.73%
0.72%
0.72%
0.66%
65.56%
There were 2,637 holders of 626,689,024 ordinary fully paid shares of the Company. The voting rights
attaching to the ordinary shares are in accordance with the Company’s Memorandum & Articles
of Association.
Class of shares and voting rights
There were 2,637 holders of 626,689,024 ordinary fully paid shares of the Company. The voting rights
attaching to the ordinary shares are in accordance with the Company’s Memorandum & Articles of
Association being that:
AfricanEnergy Annual Repor t 2018 47
The following additional information required by the ASX Listing Rules is current as at 19 September 2018.
African Energy Resources Limited shares are listed on the Australian Securities Exchange (ASX:AFR).
Securities
%
591,967,147
94.46
29,964,304
2,863,792
1,777,118
116,663
4.78
0.46
0.28
0.02
No. of
holders
400
836
368
581
452
%
15.17
31.70
13.96
22.03
17.14
626,689,024
100.00
2,637
100.00
10,611,551
1.69
1,774
67.27
Distribution of Shareholders
Range
100,001 and Over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
Unmarketable
Parcels
Largest 20 shareholders
Rank Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Sentient Group
First Quantum Minerals
PS Consulting Pty Ltd
Stacey Radford
Alasdair Cooke (and associated entities)
Henry Deburgh (and associated entities)
David Metford
CS Third Nominees Pty Ltd
Donal Windrim
Bill Fry (and associated entities)
General Advisory Pty Ltd
Helmet Nominees Pty Ltd
Marzec Family
Frazer Tabeart (and associated entities)
Raejan Pty Ltd
Brian McCubbing
Aurora Uranium Limited
Robert Cooke & Mrs Elizabeth Cooke
ZW 2 Pty Ltd
Ian Hume (and associated entities)
Total Top 20
Number Of
Shares
Held
141,404,786
86,692,308
50,003,683
22,000,000
19,237,334
16,325,186
12,338,585
7,502,500
6,871,914
5,869,610
5,645,926
5,000,000
4,900,000
4,774,100
4,700,000
%IC
22.56%
13.83%
7.98%
3.51%
3.07%
2.60%
1.97%
1.20%
1.10%
0.94%
0.90%
0.80%
0.78%
0.76%
0.75%
4,563,000
4,551,797
4,500,000
4,500,000
4,157,606
415,538,335
0.73%
0.73%
0.72%
0.72%
0.66%
65.56%
Additional Shareholder Information
There were 2,637 holders of 626,689,024 ordinary fully paid shares of the Company. The voting rights
attaching to the ordinary shares are in accordance with the Company’s Memorandum & Articles
of Association.
Class of shares and voting rights
There were 2,637 holders of 626,689,024 ordinary fully paid shares of the Company. The voting rights
attaching to the ordinary shares are in accordance with the Company’s Memorandum & Articles of
Association being that:
a. each shareholder entitled to vote may vote in person or by proxy, attorney or Representative;
b. on a show of hands, every person present who is a shareholder or a proxy, attorney or representative of
a shareholder has one vote; and
c. on a poll, every person present who is a shareholder or a proxy, attorney or Representative of a
shareholder shall, in respect of each fully paid Share held by him, or in respect of which he is appointed
a proxy, attorney or Representative, have one vote for the Share, but in respect of partly paid Shares,
shall, have such number of votes as bears the proportion which the paid amount (not credited) is of the
total amounts paid and payable (excluding amounts credited).”
Substantial Holders
As notified to the Company
Name
Sentient Executive GP IV Limited
First Quantum Minerals (Australia) Pty Limited
Mr Alasdair Campbell Cooke (and associated entities)
Unquoted Equity Securities
Number Of
Shares Held
141,404,786
86,692,308
50,003,683
%IC
22.56%
13.83%
7.98%
Exercise
Price
Expiry
Date
Number
of
Holders
Names of Holders Holding More
Than 20%
Number Held
AU$0.06
30-Sep-
2019
13
Frazer Tabeart
23%
nil
various
12
nil
Number of
securities on
issue
Unlisted Options
10,875,000
Performance Rights
9,200,000
Other information
The Company commenced acquisitions under the shareholder approved on market share buyback plan on
12 June 2018. Between 12 June 2018 and 5 July 2018, 3,698,394 shares were acquired at an average price
of 2.3 cents per share
48 africanenergyresources.com
AfricanEnergy Annual Repor t 2018 49
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PERTH OFFICE Suite 1, 245 Churchill Avenue, Subiaco WA 6008 | PO Box 162, Subiaco WA 6904
Tel: +61 8 6465 5500 | Fax: +61 8 6465 5599 | Email: info@africanenergyresources.com
africanenergyresources.com
African Energy Resources Limited ARBN 123 316 781