Annual Report 2019
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
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
africanenergyresources.com
Chief Executive’s Letter
Sese Joint Venture
Mmamabula West Power Project
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
Additional Shareholder Information
01
02
06
09
10
11
12
20
21
26
27
28
29
30
48
Chief Executive’s Letter
Dear Shareholder,
Your Company, African Energy, remains focused on its Botswana coal portfolio and developing the Sese JV as a low-cost integrated
coal mine and power station. First Quantum Minerals Ltd continued to invest in the Sese JV Project, increasing their stake to 66.7%.
Key negotiations for grid connection, power sales and transmission agreements are being actively pursued. Interest in developing
new sources of power generation in the region remains very high, with significant infrastructure investment planned through China’s
Belt and Road Initiative. The Sese JV has is engaged with potential development partners to explore avenues for project funding and
technical and construction expertise relevant to such major power investments.
Last year we reported that the supply and demand for power in southern Africa was moving towards a period of delicate balance after
a period of market destabilization caused by low cost exports from South Africa. Since then the power supply situation in the region
has rapidly deteriorated, particularly in the three largest markets, South Africa, Zambia and Zimbabwe. In South Africa the widely
publicised fiscal and technical issues at Eskom have resulted in a major reduction in power generation with associated tariff increases
to the point that Eskom is now unable to export large volumes of power over extended periods.
In Zambia and Zimbabwe, intense drought conditions and over extraction of shared water resources have led to dramatic falls in water
levels in Kariba Dam and significant reductions in hydro-electric power generation. This has resulted in widespread load shedding
in both countries, with most parts of Zimbabwe receiving power for only 6 hours during the night. Zambia, Zimbabwe and Botswana
all relied heavily on imports of electricity during the year, and with the reduced supply available from South Africa there has been
significant upward pressure on electricity tariffs.
The power utilities in most of these countries are under severe financial hardship and are unable to finance new power generation, so
attention is turning to private sector funding. This provides an opportunity for new, low-cost power generators to replace older, less
efficient and unreliable state-owned power stations. The model being pursued by African Energy, of an independent power producer
with direct credit support from end users, is the most likely way new generation can be built and financed. And it may be a significant
advantage to have that generation located in a country such as Botswana which is widely recognised as a favourable investment
jurisdiction.
Power generation from coal remains a controversial issue in the developed economies around the world. However, the region
we operate within remains heavily dependent on traditional fuels such as wood and charcoal. In Zambia for example, charcoal
remains the primary cooking fuel for 90% of households. The issues arising from making and using charcoal, including widespread
deforestation and deadly respiratory diseases, are well documented and rank among the major environmental and health problems
in the region. Whilst renewable power sources are slowly being introduced throughout the region, the urgent demand for low
cost, base load electricity can only be met using conventional coal-fired thermal generation. This will displace large amounts of
temporary diesel generation and allow more widespread and affordable power to replace traditional sources of fuel that have far
more significant and immediate negative impacts.
In addition to power generation projects, the Company continues to evaluate coal export opportunities into South Africa with positive
implications for the Company’s Mmamabula West project which could produce export quality coal at low prices. The Company is
currently re-evaluating this project and is updating the mining feasibility study to reflect current capital and operating costs and a
revised product specification suitable for Eskom power stations.
African Energy carries no debt and has very low corporate overheads. Coupled with a strong development partner at the Sese JV
Project, a high-quality portfolio, and a robust power market in southern Africa the Company remains well placed to develop major
power projects for the region.
Frazer Tabeart,
Executive Director and CEO
AfricanEnergy Annual Repor t 2019 01
Sese Joint Venture
INTRODUCTION
The Sese JV Project in Botswana is situated very close to the interconnected regional transmission grid (Figure 1),
and can produce and export secure, low cost base-load power.
Figure 1. Location of African Energy’s Botswana coal and power projects and the existing and planned regional transmission interconnectors
02 africanenergyresources.com
REGIONAL POWER MARKETS
The key power markets of relevance to African Energy are
Zambia, Botswana, Zimbabwe and South Africa. Currently
all four countries are experiencing supply side issues for a
variety of reasons:
emergency basis. The result is widespread load shedding
throughout the region, with power cuts ranging from 4
to 18 hours per day in Zambia and Zimbabwe, along with
relentless upward pressure on regional tariffs.
1. In the case of Zambia and Zimbabwe, declining inflows
and overallocation of water have resulted in a significant
fall in electricity generation from Kariba Dam (see Figure
2) and other hydro-electric schemes.
2. In the case of Botswana, the fall in power generation
has been due to continuing performance issues at the
Morupule B power station, resulting in widespread
reliance on expensive diesel generation and imported
power.
3. In the case of South Africa, widely publicised problems
with severe financial and technical issues at the huge
Kusile and Medupi power stations, management of
an ageing fleet, mounting debt, and numerous senior
management changes have resulted
in significant
reductions in generation to the extent that exports have
been severely restricted.
In the past few years, surplus supply from South Africa has
been available as low-cost imports to shore-up deficits in
neighbouring countries but given South Africa’s current
supply side concerns this is no longer the case except on an
In most cases average industrial tariffs are now well in
excess of USD 8.0c/kWh (Figure 3), with further tariff hikes
almost inevitable. South Africa, for example has a clearly
defined tariff increase over the next 3-5 years which will see
tariffs rise to well in excess of USD 10.0c/kWh. Zambia has
recently announced a six-month tariff hike of 200% to cover
the high import cost of 300MW of emergency power – it
remains to be seen whether the hike will be removed in six-
months’ time.
Figure 3. June 2019 industrial tariffs for power in southern Africa (green bars
represent requested but not yet approved tariff increases).
Figure 2. Lake Kariba reservoir
level decline to near record lows in
2018/19, the lowest September level
in almost 25 years
AfricanEnergy Annual Repor t 2019 03
Sese Joint Venture (continued)
First Quantum Minerals Ltd (FQML) became a majority equity
partner at the Sese Joint Venture in 2014 and have since
directly invested AUD $17m for a 67% project interest.
FQML is responsible for arranging the funds required to build
the Sese integrated power project and will loan carry African
Energy’s residual interest through to commercial production.
The Sese JV partners have completed several technical
studies covering mining, coal preparation and power
generation. A conceptual study of the proposed power
station layout and design along with power station fuel
specification development and coal combustion tests have
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 the development
of a power project in staged 225MW to 300MW increments.
Assessment of the associated coal mine and coal processing
facilities have demonstrated that power from Sese could be
delivered to the Zambian Copperbelt where FQML operates
a large copper mining and smelting business and to other
large power consumers in the region.
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.
Environmental approval for up to 500MW of power
generation and the associated coal mining and coal
processing volumes.
Land Rights and an associated 50-year Land Lease
Agreement.
Water extraction rights from Shashe Dam.
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 on power
generation.
A resettlement action plan (RAP), under which 31
households will have their grazing rights, water bores
and access trails relocated to outside the Sese Land
Rights Lease. This process is nearing completion under
joint monitoring by Sese JV staff and the Tonota Land
Board.
04 africanenergyresources.com
Figure 4. Sese JV license areas and main project elements
The Sese JV has now secured all licenses and permits
required to build an integrated coal and power project in
Botswana with only the Generation and Export Licences
required to commence operation and these are currently
being negotiated with Botswana’s energy regulator.
The advanced nature of the Sese JV and the robust market
for power sales in the region has attracted interest from
parties engaged in China’s Belt and Road Initiative, which
plans to invest up to US $30B in Africa and predominantly
into large scale infrastructure projects. The Sese JV has
commenced discussions with several parties who are
considering providing financial, technical and construction
assistance for the Project.
The current project development plan contemplates an
initial 300MW stage which will deliver 100MW into Zambia
for use by FQML, with the balance sold to third parties. This
will require at least two Power Purchase Agreements (PPA’s),
one with FQML for 100MW, and one or more for the balance.
A draft PPA between the Sese JV and FQML has been
drawn up and is undergoing final legal review. Commercial
negotiations with several large power consumers in southern
Africa are currently underway for the balance of the output
of the first stage of the project. A second 200-300MW Stage
is being considered should suitable demand be established
from these negotiations.
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.
AfricanEnergy Annual Repor t 2019 05
Mmamabula West and Mmamantswe
Coal Projects
The 2,935Mt Mmamabula West project contains high quality
coal in two 4m to 6m thick seams (A-Seam and K-Seam)
which are 100-150m below surface and are amenable to
conventional underground mining. The project is situated
65km west of the main railway line in Botswana which
provides access to local and regional coal markets (Figure 5).
A prefeasibility study on the extraction of the high-quality
lower A-Seam was completed for the project in 2014 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.
African Energy continues to develop this project with an
emphasis on the potential for an underground mine exporting
coal for use in South African power stations:
An updated mineral resource has been completed using
information from infill drilling along the planned decline
covering the initial years of the mine schedule (Figure 6
and 7).
The portion of the resource in the Measured and Indicated
Resource category for A-Seam provides the basis for an
updated feasibility study for an export operation. This
updated feasibility study will commence in late 2019.
This study will review the proposed mining schedule
and coal washing plant requirements to produce a South
African power station product specification. Capital cost
and operating cost estimates will be updated to reflect
2019 prices.
The Company continues to evaluate proposals from
potential South African BEE partners who have
expressed interest in participating in this project.
Monitoring of groundwater levels and groundwater
chemistry continued. The Company now has four years
of continuous baseline data.
An Environmental and Social Impact Assessment (ESIA)
for the project has been submitted to the Department of
Environmental Affairs in Botswana.
An application for Land Rights over the area to be
developed has been submitted. Follow-up meetings
with the local Land Board have occurred, and once this
and the ESIA have been approved, an application for a
mining licence will be submitted.
06 africanenergyresources.com
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.
Figure 6. Drill hole status map
for Mmamabula West showing
Land Rights application area,
water monitoring stations
and extent of potential
underground coal mining.
Figure 7. Life of Mine plot for
Mmamabula West showing
mine scheduling for a 4.4Mtpa
underground coal mine on the
high-quality A-Seam
AfricanEnergy Annual Repor t 2019 07
Mmamabula West and Mmamantswe
Coal Projects (continued)
The nearby 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 8). African Energy has applied
for Land Rights over the project area, access corridor and
grid connection corridor. The Company continues to monitor
developments in South Africa’s Integrated Resource Plan
under which Mmamantswe may be a viable source of power
exports to South Africa.
Figure 10. Location of the Mmamantswe coal project, close to infrastructure corridors in eastern Botswana
08 africanenergyresources.com
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
33%
51 22-Mar-17
31-Jan-42
Sese
African Energy Resources Botswana (Pty) Ltd
PL 96/2005
33%
95
26-Jul-05
30-Sep-21
Sese West
African Energy Resources Botswana (Pty) Ltd
PL197/2007
33%
131
01-Oct-07
30-Sep-21
Foley North
African Energy Resources Botswana (Pty) Ltd
PL004/2013
33%
774
01-Jan-13
30-Sep-20
MMAMANTSWE
Mmamantswe
Mmamantswe Coal (Pty) Ltd
PL069/2007
100%
453
01-Jul-12
31-Dec-21
MMAMABULA WEST Mmamabula West
Phokoje Power (Pty) Ltd
PL56/2005
100%
293
01-July-05
30-Sep-19*
ZAMBIA
* Tenement renewal submitted to Botswana Department of Mines.
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.
AfricanEnergy Annual Repor t 2019 09
AfricanEnergy Annual Repor t 2019 09
Annual Statement of
Mineral Resources
Sese Project (AFR 33.3%, FQM 66.7%): Raw coal on an air-dried basis
Resource Zone
MEASURED (Bk-C)
MEASURED (Bk-B)
INDICATED
INFERRED
TOTAL
In-Situ
Tonnes*
325 Mt
304 Mt
1,663 Mt
126 Mt
2,418 Mt
CV (MJ/
kg)
CV (kcal/
kg)
Ash %
IM%
VM%
FC%
S%
17.6
16.0
15.4
14.2
4,200
3,820
3,700
3,400
30.1
34.8
38.4
41.4
7.9
7.4
6.8
6.4
20.6
20.3
18.7
18.8
41.5
37.6
34.1
31.2
2.1
1.6
2.0
2.2
Sese West Project (AFR 33.3%, FQM 66.7%): 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
MEASURED
INDICATED
INFERRED
TOTAL
In-Situ
Tonnes*
17 Mt
1,061 Mt
1,858 Mt
2,935 Mt
CV (MJ/
kg)
CV (kcal/
kg)
Ash %
IM%
VM%
FC%
S%
22.2
20.4
20.3
5,300
4,875
4,850
19.7
24.4
24.7
7.3
6.1
5.8
24.8
26.5
26.2
48.2
43.1
43.4
1.7
1.5
1.6
Mmamantswe Project (AFR 100%): Raw coal on an air-dried basis
MEASURED
INDICATED
INFERRED
TOTAL
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 Mmamantswe Project 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). The coal resources quoted for Sese, Sese West and Mmamabula West are reported as per the 2012 edition. There have been
no material changes to any of the resources since they were announced.
10 africanenergyresources.com
Financial Report
30 June 2019
African Energy Resources Limited
ARBN 123 316 781
AfricanEnergy Annual Repor t 2019 011
11
Directors’ Report
African Energy Resources Limited
Directors’ Report
Financial Report 30 June 2019
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 2019.
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.
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 30 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
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 30 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
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
Gregory (Bill) Fry – Executive Director
Mr Fry has more than 30 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.
12 africanenergyresources.com
12 africanenergyresources.com
4 | P a g e
African Energy Resources Limited
Financial Report 30 June 2019
Directors Report (continued)
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
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
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
Special responsibilities
Chairman of Remuneration Committee
Former directorships in the last three years
Silver City Mines Limited (retired 31 January
2017)
Interests in shares and options
4,157,606 shares
100,000 performance rights
500,000 options
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.
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AfricanEnergy Annual Repor t 2019 13
Directors’ Report (continued)
African Energy Resources Limited
Directors Report (continued)
Financial Report 30 June 2019
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 qualified accountant who has fifteen years‐experience in senior accounting and corporate roles for resources businesses
in all stages from exploration to development, construction and mining.
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
Vincent Masterton‐Hume
John Dean
Board of Directors
Held
1
1
1
1
1
1
Present
1
1
1
1
1
1
Remuneration Committee
Present
‐
‐
‐
‐
‐
‐
Held
‐
‐
‐
‐
‐
‐
Audit & Risk Committee
Present
‐
1
1
1
‐
‐
Held
‐
1
1
1
‐
‐
2. Review of Operations
African Energy is 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.
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;
Pursue development opportunities for its Mmamabula West coal project; 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.
14 africanenergyresources.com
6 | P a g e
African Energy Resources Limited
Financial Report 30 June 2019
Directors Report (continued)
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 (%)
2019
(927,792)
(0.15)
‐
‐
(187%)
2018
(4,013,178)
(0.64)
‐
‐
(304%)
Restated (1)
2017
(1,618,702)
(0.27)
‐
‐
209%
Restated (1)
2016
(2,070,429)
(0.34)
‐
‐
(4%)
Restated (1)
2015
(5,084,144)
(0.90)
‐
‐
(4%)
‐
‐
‐
‐
‐
(1)
Prior to 30 June 2017, 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 or the existence or economically recoverable reserves. From
1 July 2017, 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. The
result of this accounting change meant that the Group expensed exploration and evaluation expenditure as incurred in respect of
each Identifiable area of interest until a time where an asset Is In development.
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.
The current base remuneration was last reviewed with effect from 1 April 2018 and was set at US$24,545 (AU$35,000) per annum (2018:
US$26,819).
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.
7 | P a g e
AfricanEnergy Annual Repor t 2019 15
Directors’ Report (continued)
African Energy Resources Limited
Directors Report (continued)
Financial Report 30 June 2019
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 determines performance hurdles that will apply to each
performance right and option issued. No new performance rights were issued during the year ended 30 June 2019.
Performance conditions attached to performance rights and options issued in the prior year are detailed in note 8.1.
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.
Alasdair Campbell Cooke ‐ Executive Chairman, the Company
Commencement date: 1 January 2019
Base annual salary is US$59,610 (AU$85,000)
Consulting Fee of US$1,402 (AU$2,000) per day when the executive works more than one day per week
Termination payment is the equivalent of three months consulting fees
Charles Frazer Tabeart ‐ Executive Director, the Company
Commencement date: 1 January 2019
Base annual salary is US$112,208 (AU$160,000)
Consulting Fee of US$1,402 (AU$2,000) per day when the executive works more than two and a half days per week
Termination payment is the equivalent of three months consulting fees
Gregory William Fry ‐ Executive Director, the Company
Commencement date: 1 January 2019
Base annual salary is US$45,584 (AU$65,000)
Termination payment is the equivalent of three months consulting fees
No other key management personnel have service contracts in place with the Consolidated Entity.
3.5 Comments made at the Company’s 2018 Annual General Meeting
The Company did not receive any specific feedback at the AGM held on 16 November 2018 or throughout the year on its
remuneration practices.
3.6 Directors and Executive Officers’ Remuneration (Consolidated Entity)
Details of the remuneration of the Directors of the Consolidated Entity (as defined in AASB 124 Related Party Disclosures) of the Consolidated
Entity are set out in the following tables.
The key management personnel of the Consolidated Entity are the Directors of African Energy Resources Limited.
16 africanenergyresources.com
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AfricanEnergy Annual Repor t 2019 17
African Energy Resources Limited Financial Report 30 June 2019 Directors Report (continued) 9 | Page The following tables set out remuneration paid to key management personnel of the Consolidated Entity during the year. Key Management Personnel remuneration ‐ 2019 Short term employee benefits Post‐employment benefits Share based payments (1) Performance based (2) Total Cash salary & fees Superannuation Rights US$ US$ US$ % US$ Non‐Executive Directors Valentine Chitalu 25,044 ‐ (15,262) ‐ 9,782 Vincent Masterton‐Hume 22,872 2,173 (3,815) ‐ 21,230 John Dean 23,256 ‐ ‐ ‐ 23,256 Total Non‐Executive Directors 71,172 2,173 (19,077) ‐ 54,268 Executive Directors ‐ Gregory Fry 42,093 4,419 (29,879) ‐ 16,633 Charles Tabeart 114,489 ‐ (36,864) ‐ 77,625 Alasdair Cooke 103,755 ‐ (26,386) ‐ 77,369 Total Executive Directors 260,337 4,419 (93,129) ‐ 171,627 Total Key Management Personnel 331,509 6,592 (112,206) ‐ 225,895 Key Management Personnel remuneration ‐ 2018 Non‐Executive Directors Valentine Chitalu 32,950 ‐ 1,455 4.2% 34,405 Philip Clark 23,896 2,270 364 1.4% 26,530 Vincent Masterton‐Hume 30,091 2,858 364 1.1% 33,313 Wayne Trumble 6,784 19,382 3,637 12.2% 29,803 John Dean 32,950 ‐ ‐ 0.0% 32,950 Total Non‐Executive Directors 126,671 24,510 5,820 3.7% 157,001 Executive Directors Gregory Fry 85,258 8,099 4,699 4.8% 98,056 Charles Tabeart 196,407 ‐ 7,215 3.5% 203,622 Alasdair Cooke 101,563 ‐ 3,441 3.3% 105,004 Total Key Management Personnel 383,228 8,099 15,355 3.8% 406,682 Total 509,899 32,609 21,175 3.8% 563,683 (1) Negative remuneration values are due to a reversal in share‐based payment expense as a result of a change in management estimates for the achievement of performance rights. Refer Note 8.1 for further details. (2) Where performance based remuneration is negative for the period, the percentage of performance based salary is noted as nil for the period. 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. Directors’ Report (continued)
African Energy Resources Limited
Financial Report 30 June 2019
Directors Report (continued)
3.8 Directors’ and Executives Interests
A. Shares
Non‐executive Directors
Valentine Chitalu
Vincent Masterton‐Hume
John Dean
Executive Directors
Alasdair Cooke
Charles Tabeart
Gregory Fry
B. Performance Rights
Non‐executive Directors
Valentine Chitalu
Vincent Masterton‐Hume
John Dean
Executive Directors
Alasdair Cooke
Charles Tabeart
Gregory Fry
C. Options
Non‐executive Directors
Valentine Chitalu
Vincent Masterton‐Hume
John Dean
Executive Directors
Alasdair Cooke
Charles Tabeart
Gregory Fry
Balance at
30/06/2018
Purchases
(Sales)
Balance at
30/06/2019
Balance at
Reporting
Date
2,251,425
4,157,606
‐
50,003,682
4,774,100
5,869,610
67,056,423
‐
‐
‐
‐
‐
‐
‐
2,251,425
4,157,606
‐
2,251,425
4,157,606
‐
50,003,682
4,774,100
5,869,610
67,056,423
50,003,682
4,774,100
5,869,610
67,056,423
Balance at
30/06/2018
Balance at
30/06/2019
Vested and
exercisable
Unvested
400,000
100,000
‐
766,667
1,266,667
933,333
3,466,667
400,000
100,000
‐
766,667
1,266,667
933,333
3,466,667
‐
‐
‐
‐
‐
‐
‐
400,000
100,000
‐
‐
766,667
1,266,667
933,333
3,466,667
Balance at
30/06/2018
Balance at
30/06/2019
Vested and
exercisable
Unvested
500,000
500,000
‐
500,000
500,000
‐
1,750,000
2,500,000
875,000
1,750,000
2,500,000
875,000
6,125,000
6,125,000
‐
‐
‐
‐
‐
‐
‐
500,000
500,000
‐
1,750,000
2,500,000
875,000
6,125,000
D. 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
Charges from
Charges to
2019
US$
52,851
2018
US$
102,458
2019
US$
2018
US$
‐
‐
At 30 June 2019 the company had a payable outstanding to Mitchell River Group of US$6,105 (30 June 2018: US$1,499).
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.
18 africanenergyresources.com
10 | P a g e
African Energy Resources Limited
Financial Report 30 June 2019
Directors Report (continued)
5. Events Subsequent to Reporting Date
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.
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
9.1 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.
9.2 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 (2018: nil).
12. Loans to key management personnel
No loans to key management personnel were provided during the period or up to the date of signing this report.
13. Lead Auditor’s Independence Declaration
The lead Auditor’s Independence Declaration is set out on page 18 and forms part of the Directors’ report for the financial year ended 30
June 2019.
Charles Frazer Tabeart
Executive Director
Perth, 27 September 2019
11 | P a g e
AfricanEnergy Annual Repor t 2019 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 2019
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 2019 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 2019
20 africanenergyresources.com
12 | 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 2019, 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 2019 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.
AfricanEnergy Annual Repor t 2019 21
Independent Audit Report (continued)
Recoverability 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 2019.
The Company is required to assess whether any
impairment indicators are present in accordance with
AASB 128 Investments in Associates and Joint Ventures
(“AASB 128”) which may indicate the Group’s
investment in associate is impaired.
·
·
Considering the existence of any indicators
of impairment of the investment in
accordance with AASB 128;
Reviewing ASX announcements, Board of
Directors meetings minutes, joint venture
minutes and considering management’s
We have determined this is a key audit matter given its
assessment of impairment indicators; and
financial significance to the Group and the judgements
and estimates required in assessing the carrying value
of the investment.
·
Assessing the adequacy of related disclosures
in Note 2.2 and Note 1.6 to the Financial
Statements.
Recoverability of 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 2019.
As the carrying value of the exploration and evaluation
asset represents a significant asset of the Group, we
considered it necessary to assess whether any facts or
circumstances exist to suggest that the carrying
amount of this asset may exceed its recoverable
amount.
In accordance with AASB 6 Exploration for and
Evaluation of Mineral Resources (“AASB 6”), the
recoverability of exploration and evaluation
expenditure requires significant judgment by
management in determining whether there are any
facts or circumstances that exist to suggest that the
carrying amount of this asset may exceed its
recoverable amount. As a result, this is considered a
key audit matter.
·
·
Assessing whether rights to tenure of the
identified area of interest remained current
at balance date;
Holding discussions with management as to
the status of ongoing exploration
programmes in the respective area of
interest;
·
Considering whether any such area of
interest had reached a stage where a
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 and Note 1.6 to the
Financial Statements.
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 2019, 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.
AfricanEnergy Annual Repor t 2019 23
Independent Audit Report (continued)
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.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 6 to 10 of the directors’ report for the
year ended 30 June 2019.
In our opinion, the Remuneration Report of African Energy Resources Limited, for the year ended 30
June 2019, 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 2019
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 2019, 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 2019
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.
AfricanEnergy Annual Repor t 2019 25
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
African Energy Resources Limited
Financial Report 30 June 2019
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the year ended 30 June 2019
For the year ended 30 June 2019
Gain on sale of Zambian Uranium Project
Gain / (loss) on derivative
(Loss) on Sale of Listed Investments
Share based payment (expense) / reversal
Interest received
Personnel expenses
Professional & administration expense
Exploration & evaluation expensed
Share of Loss in Sese JV
Impairment of Mmamantswe
Foreign currency gain / (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
Changes in the fair value of financial assets at fair value through other
comprehensive income (FVOCI)
Foreign currency translation reserve
Total other comprehensive income / (loss) for the year
Note
2019
US$
‐
(128,867)
‐
226,291
46,161
(276,270)
(187,423)
(116,038)
(376,918)
‐
(114,728)
(927,792)
‐
(927,792)
8.3
3.2
3.3
3.3
2.2
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)
(927,792)
(927,792)
(4,013,178)
(4,013,178)
(191,598)
(38,378)
(229,976)
(9,223)
(139,242)
(148,465)
Total comprehensive loss attributable to the ordinary equity holders of the
Company:
Total comprehensive loss for the year
(1,157,768)
(4,161,643)
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
(0.15)
(0.64)
The Consolidated Statement of Profit or Loss and Other Comprehensive Income is to be read in conjunction with the accompanying
notes
26 africanenergyresources.com
18 | P a g e
Consolidated Statement
of Financial Position
African Energy Resources Limited
Consolidated Statement of Financial Position
As at 30 June 2019
As at 30 June 2019
Assets
Current assets
Cash & cash equivalents
Financial assets at FVOCI
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 2019
Note
2019
US$
2018
US$
4.1
4.6
4.7
4.3
2.2
2.1
4.4
5.1
1,941,739
630,610
53,120
51,482
2,676,951
6,924,616
‐
2,500,000
9,424,616
12,101,567
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
100,541
100,541
100,541
83,889
83,889
83,889
12,001,026
13,385,084
64,134,977
(412,635)
(51,721,316)
12,001,026
64,134,977
25,852
(50,775,745)
13,385,084
The consolidated statement of financial position is to be read in conjunction with the accompanying notes
19 | P a g e
AfricanEnergy Annual Repor t 2019 27
Consolidated Statement
of Changes in Equity
African Energy Resources Limited
Consolidated Statement of Changes in Equity
For the year ended 30 June 2019
for the year ended 30 June 2019
Financial Report 30 June 2019
For the twelve months ended 30
June 2019
Contributed
equity
Accumulated
losses
Foreign
Currency
Translation
Reserve
Other
Comprehensive
Income Reserve
(FVOCI)
Share‐
Based
Payments
Reserve
Total
equity
At 30 June 2018
Net earnings for the year
Effect of translation of foreign
operations to group presentation
currency
Movement in fair value of financial
assets at FVOCI
Total comprehensive income for
the year
Transactions with owners in their
capacity as owners:
Share based payments
At 30 June 2019
For the twelve months ended 30
June 2018
At 30 June 2017
Net earnings for the year
Effect of translation of foreign
operations to group presentation
currency
Movement in fair value of financial
assets at FVOCI
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
US$
64,134,977
‐
US$
(50,775,745)
(927,792)
US$
(5,180,211)
‐
US$
(9,223)
‐
US$
5,215,287
‐
US$
13,385,085
(927,792)
‐
‐
‐
‐
(38,378)
‐
(17,779)
‐
(173,819)
(945,571)
(38,378)
(173,819)
‐
‐
‐
(38,378)
(191,598)
(1,157,768)
‐
64,134,977
‐
(51,721,316)
‐
(5,218,589)
‐
(183,042)
(226,291)
4,988,996
(226,291)
12,001,026
63,109,911
‐
(46,762,567)
(4,013,178)
(5,040,969)
‐
‐
‐
‐
‐
‐
(139,242)
‐
(4,013,178)
(139,242)
‐
‐
‐
(9,223)
(9,223)
5,292,988
‐
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
The consolidated statements of changes in equity are to be read in conjunction with the accompanying notes
28 africanenergyresources.com
20 | P a g e
Consolidated Statement
of Cash Flows
African Energy Resources Limited
Consolidated Statement of Cash Flows
As at 30 June 2019
for the year ended 30 June 2019
Cash flows from operating activities
Interest received
Payment for exploration and evaluation
Payment to suppliers and employees
Net cash (outflow) from operating activities
Cash flows from investing activities
Receipts from sale of listed investments
Acquisitions of Shares in Caravel Minerals
Net cash inflow/(outflow) from investing activities
Cash flows from financing activities
Issue of Shares
Buyback of shares
Net cash inflow/(outflow) from financing activities
Cash and cash equivalents at the beginning of the year
Net (decrease) / increase in cash and cash equivalents
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at the end of the year
Financial Report 30 June 2019
Note
2019
US$
2018
US$
49,177
(121,414)
(460,510)
(532,747)
459,086
(111,135)
347,951
‐
‐
‐
2,300,244
(184,796)
(173,709)
1,941,739
87,222
(97,022)
(824,709)
(834,509)
48,800
(420,174)
(371,374)
1,089,179
(64,113)
1,025,066
2,621,783
(180,817)
(140,721)
2,300,244
4.2
4.1
4.1
The consolidated statements of cash flows are to be read in conjunction with the accompanying notes
21 | P a g e
AfricanEnergy Annual Repor t 2019 29
Notes to the Consolidated
Financial Statements
African Energy Resources Limited
2019
Notes to the Consolidated Financial Statements
1.
1.1
Basis of Preparation
Statement of Compliance
Financial Report 30 June
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 2019.
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 or 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 2019 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 Group assesses the carrying amount of investment in associates at each
reporting period in accordance with AASB 128. If impairment indicators are identified, the Group tests the
investments for impairment in accordance with AASB 136. In assessing the recoverability of investments in associates,
management applies their estimates and judgements as to the recoverability.
Note 8 – Share‐based payments arrangements ‐ The Group values options issued at fair value at the grant date using
the black scholes 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
22 | P a g e
30 africanenergyresources.com
African Energy Resources Limited
Financial Report 30 June 2019
Notes to the Consolidated Financial Statements (continued)
rights where applicable 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.
2.1
Non‐Current Assets
Exploration and evaluation expenditure
(a) Exploration and Evaluation Carrying Values
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.
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)(i)
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.
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
Carrying amount of exploration and evaluation
(b) Exploration and Evaluation movement reconciliation
Balance at the beginning of the year
Impairments
Effect of movements in foreign exchange
Carrying amount at 30 June
2019
US$
2,500,000
2,500,000
2018
US$
2,500,000
2,500,000
2019
US$
2,500,000
‐
‐
2,500,000
2018
US$
5,900,172
(3,396,842)
(3,330)
2,500,000
23 | P a g e
AfricanEnergy Annual Repor t 2019 31
Notes to the Consolidated
Financial Statements (continued)
African Energy Resources Limited
Financial Report 30 June 2019
Notes to the Consolidated Financial Statements (continued)
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.
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 power to direct the activities of the entity. Where the group loses control of a subsidiary but retains significant
influence, the retained interest is re‐measured to fair value at the date that control is lost and the difference between fair value
and the carrying 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
Balance at the beginning of the year
Share of Losses after income tax
Movement on renegotiation of Sese JV terms
Carrying amount at 30 June
2019
US$
7,301,534
(376,918)
‐
6,924,616
2018
US$
8,056,900
(471,527)
(283,839)
7,301,534
(b) Share of the results of its associates
The groups share of the results of its associates and its aggregated assets and liabilities are as follows.
Ownership
Interest %
African Energy Holdings SRL
33
Company's share of:
Assets
Liabilities
Revenues
US$
4,877,096
US$
105,865
US$
‐
(Loss)
US$
(376,918)
(c) Summarised financial information of associate ‐ African Energy Holdings SRL
Summarised statement of financial position
Current Assets
Cash and cash equivalents
Trade and other receivables
Total current assets
Non‐current Assets
Exploration & evaluation
Property, plant & equipment
Total non‐current assets
Total assets
Current Liabilities
Trade and other payables
Total current liabilities
Non‐current Liabilities
Rehabilitation Provision
Total non‐current liabilities
Total liabilities
Net assets
32 africanenergyresources.com
24 | P a g e
2019
US$
2018
US$
59,922
119,105
179,027
14,574,666
25,386
14,600,052
14,779,079
159,648
92,780
252,428
14,378,556
64,770
14,443,326
14,695,754
70,803
70,803
54,439
54,439
250,000
250,000
320,803
14,458,276
250,000
250,000
304,439
14,391,315
African Energy Resources Limited
Financial Report 30 June 2019
Notes to the Consolidated Financial Statements (continued)
Summarised statement of comprehensive income
Total Operating Expense
Loss from operating activities
Other comprehensive income
Total comprehensive income
2019
US$
1,090,614
1,090,614
5,140
1,095,754
2018
US$
1,245,307
1,245,307
13,493
1,258,800
There were no contingent assets or liabilities in African Energy Holdings SRL at 30 June 2019. There were no commitments at
30 June 2019.
3.
3.1
Financial Performance
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 2019
Coal‐fired
Power
Development
Projects
Power
Investments
All other
segments
Consolidated
US$
US$
US$
US$
Total segment revenue
Profit (loss) before income tax
‐
(116,038)
‐
(376,918)
46,161
(434,836)
46,161
(927,792)
Segment Assets
Investment in Sese JV
Exploration and evaluation expenditure
Cash and short term receivable
Total Segment Assets
Segment Liabilities
Trade & other payables
Total Segment Liabilities
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
25 | P a g e
‐
2,500,000
‐
2,500,000
6,924,616
‐
‐
6,924,616
‐
‐
2,676,951
2,676,951
6,924,616
2,500,000
2,676,951
12,101,567
‐
‐
‐
‐
100,541
100,541
100,541
100,541
‐
(3,481,879)
‐
(471,527)
563,607
(59,772)
563,607
(4,013,178)
‐
2,500,000
‐
‐
2,500,000
7,301,534
‐
‐
‐
7,301,534
‐
‐
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
AfricanEnergy Annual Repor t 2019 33
Notes to the Consolidated
Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
African Energy Resources Limited
Financial Report 30 June 2019
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
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.
2019
US$
46,161
46,161
2018
US$
60,130
60,130
2019
US$
89,097
10,224
338,177
(161,228)
‐
276,270
71,932
68,554
(17,808)
37,529
14,028
1,402
29
11,757
187,423
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
2019
US$
2018
US$
‐
‐
‐
‐
‐
‐
‐
‐
Interest received
3.3
Expenses
Personnel expenses
Employee salaries
Superannuation
Directors fees
Recharge of director fees and employee salaries
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
26 | P a g e
34 africanenergyresources.com
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 2019
(b) Reconciliation of income tax expense to prima facie tax payable:
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
power to direct the activities of the entity. Where the group loses control of a subsidiary but retains significant influence, the
retained interest is re‐measured to fair value at the date that control is lost and the difference between fair value and the carrying
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.
Loss before income tax
Prima facie income tax at 27.5% (2018: 30%)
Tax effect of amounts not deductible in calculating taxable income:
(a) Movements in carrying amounts
(4,013,178)
(1,203,953)
(927,792)
(255,143)
2018
US$
2019
US$
Sundry items
Other
Balance at the beginning of the year
Share of Losses after income tax
Movement on renegotiation of Sese JV terms
Difference in overseas tax rates
Tax loss not recognised
Income tax expense/(benefit)
Carrying amount at 30 June
(c) Tax losses:
67
2018
82,091
US$
(172,985)
8,056,900
3,552
(471,527)
169,433
(283,839)
‐
7,301,534
(b) Share of the results of its associates
2019
US$
The groups share of the results of its associates and its aggregated assets and liabilities are as follows.
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit @ 27.5% (2018: 30%)
Difference in overseas tax rates 10%
Potential tax benefit
African Energy Holdings SRL
Ownership
Interest %
US$
5,143,514
US$
106,554
Liabilities
Assets
Company's share of:
35%
(408,073)
(112,220)
Revenues
3,552
US$
(108,668)
‐
262
2017
137,011
US$
(1,066,680)
8,515,246
4,654
(458,346)
1,062,026
‐
‐
8,056,900
2018
US$
(739,055)
(221,717)
(Loss)
4,654
US$
(217,063)
(471,526)
(d) Unrecognised deferred tax assets arising on timing differences and losses
(c) Summarised financial information of associate ‐ African Energy Holdings SRL
Summarised statement of financial position
Current Assets
Timing
Losses ‐ Revenue
Cash and cash equivalents
Trade and other receivables
Total current assets
Non‐current Assets
2019
US$
2018
US$
2018
US$
2017
US$
70,666
159,648
4,498,803
92,780
4,569,469
252,428
12,753
79,649
4,390,135
92,344
4,402,888
171,993
The tax benefits of the above deferred tax assets will only be obtained if:
Exploration & evaluation
Property, plant & equipment
i.
The Consolidated Entity derives future assessable income of a nature and of an amount sufficient to enable the
benefits to be utilised;
The Consolidated Entity continues to comply with the conditions for deductibility imposed by law;
ii.
iii. No changes in income tax legislation adversely affect the Consolidated Entity from utilising the benefits.
14,112,860
125,085
14,237,945
14,378,556
64,770
14,443,326
Total non‐current assets
Total assets
14,695,754
14,409,937
Current Liabilities
Trade and other payables
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.
54,439
54,439
38,476
38,476
Total current liabilities
Non‐current Liabilities
Rehabilitation Provision
Total non‐current liabilities
Total liabilities
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
Net assets
authorities.
14,391,315
14,371,462
250,000
250,000
304,439
‐
‐
‐
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.
Summarised statement of comprehensive income
Total Operating Expense
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.
Loss from operating activities
Other comprehensive income
2018
US$
(1,245,307)
(1,245,307)
(13,493)
2017
US$
(1,098,124)
(1,098,124)
‐
Total comprehensive income
(1,258,800)
(1,098,124)
26 | P a g e
27 | P a g e
AfricanEnergy Annual Repor t 2019 35
Notes to the Consolidated
Financial Statements (continued)
African Energy Resources Limited
Financial Report 30 June 2019
Notes to the Consolidated Financial Statements (continued)
3.5
Earnings per share
(a) Basic loss per share
The calculation of basic loss per share at 30 June 2019 was based on the losses attributable to ordinary shareholders of
US$927,792 (2018: US$4,013,178) and a weighted average number of ordinary shares outstanding during the financial year
ended 30 June 2019 of 622,960,630 (2018: 624,507,780) calculated as follows:
Gain (Loss) attributable to ordinary shareholders
Issued number of ordinary shares at 1 July
Effect of shares issued during the period
Weighted average number of shares for year to 30 June
2019
US$
(927,792)
2018
US$
(4,013,178)
622,960,630
‐
622,960,630
608,996,715
15,511,065
624,507,780
Basic loss per share (cents per share)
(0.15)
(0.64)
A share buyback during June 2018 is the reason the prior year weighted average number of shares exceeds the current year
opening balance.
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.
(b) Diluted loss per share
Potential ordinary shares are not considered dilutive, thus diluted loss per share is the same as basic loss per share.
4.
4.1
Working Capital Management
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/(Loss) 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
36 africanenergyresources.com
28 | P a g e
2019
US$
479,609
1,462,130
1,941,739
2018
US$
2,070,606
229,638
2,300,244
2019
US$
(927,792)
2018
US$
(4,013,178)
‐
128,867
‐
(226,291)
376,918
29
‐
113,099
(14,230)
16,653
(532,747)
(503,477)
(181,987)
(1,537)
(77,701)
471,527
395
3,396,842
603
101,534
(27,530)
(834,509)
African Energy Resources Limited
Financial Report 30 June 2019
Notes to the Consolidated Financial Statements (continued)
There was no non‐cash investing and financing activities during the year.
4.3
Trade and other receivables
The fair value of trade and other receivables, is estimated as the present value of future cash flows, discounted at the market
rate of interest at the reporting date.
Trade debtors
Interest receivable
GST and VAT receivable
2019
US$
2018
US$
31,546
1,743
18,193
51,482
14,770
4,759
17,723
37,252
Trade and other receivables are recorded at amounts due less any allowance for any expected credit losses.
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
2019
US$
63,711
32,403
4,427
100,541
2018
US$
26,393
23,079
34,417
83,889
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 in accordance with AASB 9. Refer to note 9.4(b)(i).
4.6
Financial Assets at FVOCI
Balance at 1 July 2017
Additions
Movement in Fair Value of Financial assets at FVOCI
Disposals
Carrying amount at 30 June 2018
Additions
Movement in Fair Value of Financial assets at FVOCI
Effect of movements in foreign exchange
Disposals
Carrying amount at 30 June 2019
Caravel Shares
‐
704,013
(26,667)
‐
677,346
Goviex Shares
‐
461,498
17,444
(8,358)
470,584
111,135
(156,278)
(1,593)
‐
630,610
‐
(35,310)
‐
(435,274)
‐
Total
‐
1,165,511
(9,223)
(8,358)
1,147,930
111,135
(191,598)
(1,583)
(435,274)
630,610
4.7
Derivatives
1.6M Goviex options were held at 30 June 2019 were valued at US$53,120 (2018: US$140,494) 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
29 | P a g e
US$0.23
US$0.95
2 years
100%
1.5%
AfricanEnergy Annual Repor t 2019 37
Notes to the Consolidated
Financial Statements (continued)
African Energy Resources Limited
Notes to the Consolidated Financial Statements (continued)
Financial Report 30 June 2019
Price per option
Number of Options
Total Value
US$0.033
1,600,000
US$53,120
5.
Funding and Risk Management
The Group's objectives when managing capital are to safeguard their ability to continue as a going concern, so that it can continue
to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the
cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in the proportion to
the number and amount paid on the shares held. Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from
the proceeds. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business are not
included in the cost of the acquisition as part of the purchase consideration.
If the entity reacquires its own equity instruments, for example as a result of a share buy‐back, those instruments are deducted
from equity and the associated shares are cancelled. No gain or loss is recognised in the profit or loss and the consideration paid
including any directly attributable incremental costs (net of income taxes) is recognised directly in equity.
5.1 Contributed equity
Movement in share capital
Balance 30 June 2017
Share Placement to First Quantum Minerals
Share Buyback
14 Aug 2017
30 Jun 2018
Balance 30 June 2018
Balance 30 June 2019
5.2 Financial risk management
Date
Number of
shares
Issue price
US$ cents
US$
608,996,716
17,692,308
(3,728,394)
622,960,630
622,960,630
6.2
1.7
63,109,911
1,089,179
(64,113)
64,134,977
64,134,977
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)
38 africanenergyresources.com
30 | P a g e
2019
US$
92,060
2,643
8,421
8,963
(840)
2018
US$
168,710
6,891
6,308
5,669
(2,634)
African Energy Resources Limited
Financial Report 30 June 2019
Notes to the Consolidated Financial Statements (continued)
ii. Price risk
The Group does holds shares in Caravel Minerals and is exposed to equity securities price risk.
30 June 2019
Financial assets at FVOCI
iii. Interest rate risk
Price risk
+10%
‐10%
Carrying
amount
Profit
US$
Equity
US$
Profit
US$
Equity
US$
630,610
63,061
63,061
(63,061)
(63,061)
The Group has significant interest‐bearing assets; however, a change in interest rates would not have a material impact on the
results.
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 2019
Financial assets
Cash & cash equivalents 1,941,739 19,417
Financial assets at
FVOCI
Trade & other
receivables
630,610
51,482
‐
‐
Financial liabilities
Trade and other
payables
100,541
‐
(19,417)
(19,417) 19,417
(194,174) 194,174
194,174
(194,174)
‐
‐
‐
‐
‐
‐
(63,061)
63,061
63,061
(63,061)
(5,148)
5,148
5,148
(5,148)
‐
(10,054)
10,054
10,054
(10,054)
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)
(b) Liquidity risk
2019
US$
2018
US$
1,930,675
8,421
2,643
1,941,739
2,287,045
6,308
6,891
2,300,244
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.
31 | P a g e
AfricanEnergy Annual Repor t 2019 39
Notes to the Consolidated
Financial Statements (continued)
African Energy Resources Limited
Notes to the Consolidated Financial Statements (continued)
Financial Report 30 June 2019
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.
2019
Trade Payables
2018
Trade Payables
(c) Fair value estimation
Less than 6
months
6 ‐ 12
months
100,541
100,541
83,889
83,889
Total
contractual
cash flows
100,541
100,541
83,889
83,889
‐
‐
‐
‐
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.
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 2019
Financial assets at FVOCI
Derivative asset
Total assets
30 June 2018
Financial assets at FVOCI
Derivative asset
Total assets
Level 1
US$
Level 2
US$
Level 3
US$
630,610
‐
630,610
1,147,930
‐
1,147,930
‐
‐
‐
‐
‐
‐
‐
53,120
53,120
‐
181,987
181,987
Total
US$
630,610
53,120
683,730
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
Sensitivity
40 africanenergyresources.com
32 | P a g e
African Energy Resources Limited
Financial Report 30 June 2019
Notes to the Consolidated Financial Statements (continued)
Financial derivative
Share price
Volatility
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)
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
(d) 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.
(e) 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.
(f) Comparatives
Prior period comparative are for the year from 1 July 2017 to 30 June 2018.
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
33 | P a g e
AfricanEnergy Annual Repor t 2019 41
Notes to the Consolidated
Financial Statements (continued)
African Energy Resources Limited
Notes to the Consolidated Financial Statements (continued)
Financial Report 30 June 2019
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.
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
2019
US$
1,851,913
10,149,113
12,001,026
2018
US$
2,859,054
10,526,030
13,385,084
‐
‐
‐
‐
64,134,977
4,860,950
(56,994,901)
12,001,026
(1,076,229)
‐
(1,076,229)
64,134,977
5,168,779
(55,918,672)
13,385,084
(5,216,782)
‐
(5,216,782)
There were no commitments, contingent liabilities or contingent assets at the parent level at 30 June 2019.
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
2019
100%
100%
100%
100%
100%
Ownership
interest
2018
100%
100%
100%
100%
100%
42 africanenergyresources.com
34 | P a g e
African Energy Resources Limited
Financial Report 30 June 2019
Notes to the Consolidated Financial Statements (continued)
7.
7.1
Related parties
Key Management Personnel
US$225,895 (2018: US$563,683) was paid to Directors of the Company during the year. Of this amount US$338,101 (2018:
US$542,508) was paid in cash with the balance paid in equity instruments. Disclosures relating to key management personnel
are set out in the Remuneration Report. During the prior year, there was a negative balance for equity compensation benefits
due to the reversal of share‐based payment expenses.
Short‐term employee benefits
Post‐employment benefits
Equity compensation benefits
7.2
Cash Bonus
2019
US$
331,509
6,592
(112,206)
225,895
2018
US$
509,899
32,609
21,175
563,683
The board 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$1,000,000. The bonus is payable when the Consolidated Entity
receives the cash consideration from the sale of the Mmamantswe Project.
The following Key Management Personnel are entitled to a percentage of the total bonus pool as follows:
Frazer Tabeart
Alasdair Cooke
Gregory Fry
25%
10%
10%
7.3
Other related party transactions
The terms and conditions of the transactions with Directors, key executives and associates and their related entities were no
more favourable than those available, or which might reasonably be expected to be available, on similar transactions to non‐
Director related entities on an arm’s length basis.
Mitchell River Group Pty Ltd
Charges from
Charges to
2019
US$
52,851
2018
US$
102,458
2019
US$
2018
US$
‐
‐
Directors Mr Cooke, Mr Fry and Dr Tabeart are Directors and 20% shareholders of Mitchell River Group Pty Ltd which charges
the Group for provision of a serviced office and administration staff.
7.4
Assets and liabilities at 30 June arising from transactions with related parties
Trade and other receivables
Trade and other payables
8.
8.1
Share based payments
Performance Rights
2019
US$
‐
6,205
2018
US$
‐
6,962
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 2018
Issued in
Year
Vested
in Year
Forfeited
in Year
Unvested at
30 June 2019
Fair Value
(AUD)
24‐Oct‐13
24‐Oct‐13
28‐Nov‐14
28‐Nov‐14
23‐Oct‐18
23‐Oct‐18
27‐Nov‐19
27‐Nov‐19
PPA1
PQ
FC
PPA2
833,333
833,333
4,500,000
666,667
‐
‐
‐
‐
‐
‐
‐
‐
833,333
833,333
‐
‐
‐
‐
4,500,000
666,667
‐
‐
‐
‐
35 | P a g e
AfricanEnergy Annual Repor t 2019 43
Notes to the Consolidated
Financial Statements (continued)
African Energy Resources Limited
Notes to the Consolidated Financial Statements (continued)
Financial Report 30 June 2019
28‐Nov‐14
31‐Mar‐15
22‐Nov‐16
22‐Nov‐16
15‐Aug‐17
27‐Nov‐19
30‐Mar‐20
31‐Dec‐19
31‐Dec‐19
31‐Dec‐19
PPAZ
MMA2
PPA3
BFS2
GEO2
* *Vesting hurdle
300,000
500,000
1,166,667
100,000
300,000
9,200,000
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
1,666,666
300,000
500,000
1,166,667
100,000
300,000
7,533,334
‐
‐
‐
‐
4,500
4,500
PPAZ
FC
MMA2
PPA2
PPA3
BFS2
GEO2
Formal execution of a PPA between the Sese JV company and
ZESCO for the full output of a 300MW IPP 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 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 from 1 October 2018 to 31
December 2019
100% upon sign off of Mining Reserve or when FQM have made a
formal financial commitment to a 300MW power station at Sese
8.2
Options
As at 30 June 2019 the group had the following options on issue.
Directors and Staff Options (6c strike expiring 30 Sep 2019)
8.3
Expenses arising from share‐based payment transactions
Performance rights issued under AFR Performance Rights Plan
Total reversal of share‐based payment expense
Likelihood of hurdle being met
(See note 1.6)
less likely than more likely
less likely than more likely
less likely than more likely
less likely than more likely
less likely than more likely
less likely than more likely
more likely than less likely
Number of
Options
10,875,000
10,875,000
2019
US$
(226,291)
(226,291)
2018
US$
(77,701)
(77,701)
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.
9.1
Other
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
There were no contingent assets or liabilities in the Group at 30 June 2019. There were no commitments at 30 June 2019.
44 africanenergyresources.com
36 | P a g e
African Energy Resources Limited
Financial Report 30 June 2019
Notes to the Consolidated Financial Statements (continued)
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
(a) Early adoption of accounting standards
2019
US$
25,800
25,800
2018
US$
30,624
30,624
The Group has not elected to apply any pronouncements before their operative date in the annual reporting year beginning 1
July 2018.
(b) New and amended standards adopted by the Group
(i) AASB 9 Financial Instruments
AASB 9 Financial Instruments (“AASB 9”) replaces the provisions of AASB 139 Financial Instruments: Measurement and
Recognition (“AASB 139”) that relate to the recognition, classification and measurement of financial assets and liabilities,
recognition of financial instruments, impairment of financial assets and hedge accounting.
The adoption of AASB 9 resulted in minimal changes in accounting policies. The new accounting policies are set out below.
Transitional adjustments were however required, as set out below, which were recognised on 1 July 2018, in accordance with
the transitional provisions of AASB 9.
Impact of adoption
Classification and measurement of financial assets
On the date of initial application, 1 July 2018, the financial instruments of the Group were as follows, with any reclassifications
noted.
Measurement Category
Carrying Value
Financial Assets
Financial Assets at FVOCI
Derivative Asset
Trade & other receivables
Original (AASB 139) New (AASB 9)
Available‐for‐sale
FVPL
Amortised cost
FVOCI
FVPL
Amortised cost
Original
$
603,943
89,493
40,012
New
$
603,943
89,493
40,012
Difference
$
‐
‐
‐
Impact on statement of financial position (Financial Assets)
As a result of the adoption of AASB 9, assets with a fair value of $603,943 were reclassified from available‐for‐sale financial
assets, to financial assets at FVOCI in the statement of financial position.
The adoption of AASB 9 on the Group’s trade and other receivables did not have a material impact.
The following tables show the above noted adjustments recognised for each individual line item. Line items that were not
affected by the changes have not been included.
Consolidated statement of financial position (condensed extract)
Financial Assets
Financial assets at fair value through other comprehensive income
Available‐for‐sale financial assets
Impact on statement of financial position (Equity)
30‐Jun‐18
$
AASB 9
$
01‐Jul‐18
$
‐
1,147,930
1,147,930
(1,147,930)
1,147,930
‐
There was no impact on the Group’s Accumulated Losses and Reserves as at 1 July 2018.
AASB 9 ‐ Accounting policies applied from 1 July 2018
37 | P a g e
AfricanEnergy Annual Repor t 2019 45
Notes to the Consolidated
Financial Statements (continued)
African Energy Resources Limited
Notes to the Consolidated Financial Statements (continued)
Investments and other financial assets
Financial Report 30 June 2019
Classification
From 1 July 2018, the Group classifies its financial assets in the following measurement categories:
‐ those to be measured subsequently at fair value (either through OCI, or through profit or loss), and
‐ those to be measured at amortised cost.
The classification depends on the entity's business model for managing the financial assets and the contractual terms of the
cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in equity
instruments that are not held for trading, this will depend on whether the group has made an irrevocable election at the time
of initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI). The group
reclassifies debt investments when and only when its business model for managing those assets changes.
Measurement
At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value
through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction
costs of financial assets carried at FVPL are expensed in profit or loss.
Equity instruments
The group subsequently measures all equity investments at fair value. Where the group's management has elected to present
fair value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to
profit or loss following the derecognition of the investment. Dividends from such investments continue to be recognised in
profit or loss as other income when the group's right to receive payments is established. Changes in the fair value of financial
assets at FVPL are recognised in other gains/(losses) in the statement of profit or loss as applicable. Impairment losses (and
reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in
fair value.
Impairment
From 1 July 2018, the group assesses on a forward‐looking basis the expected credit losses associated with its debt instruments
carried at amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a significant
increase in credit risk.
For trade receivables, the group applies the simplified approach permitted by AASB 9, which requires expected lifetime losses
to be recognised from initial recognition of the receivables.
(ii) AASB 15 Revenue from Contracts with Customers
This standard is applicable to annual reporting periods beginning on or after 1 January 2017. The standard provides a single
standard for revenue recognition. The core principle of the standard is that an entity will recognise revenue to depict the
transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects
to be entitled in exchange for those goods or services.
The standard will require: contracts (either written, verbal or implied) to be identified, together with the separate
performance obligations within the contract; determine the transaction price, adjusted for the time value of money excluding
credit risk; allocation of the transaction price to the separate performance obligations on a basis of relative stand‐alone
selling price of each distinct good or service, or estimation approach if no distinct observable prices exist; and recognition of
revenue when each performance obligation is satisfied.
Credit risk will be presented separately as an expense rather than adjusted to revenue. For goods, the performance
obligation would be satisfied when the customer obtains control of the goods. For services, the performance obligation is
satisfied when the service has been provided, typically for promises to transfer services to customers. For performance
obligations satisfied over time, an entity would select an appropriate measure of progress to determine how much revenue
should be recognised as the performance obligation is satisfied. Contracts with customers will be presented in an entity's
statement of financial position as a contract liability, a contract asset, or a receivable, depending on the relationship between
46 africanenergyresources.com
38 | P a g e
African Energy Resources Limited
Financial Report 30 June 2019
Notes to the Consolidated Financial Statements (continued)
the entity's performance and the customer's payment. Sufficient quantitative and qualitative disclosure is required to enable
users to understand the contracts with customers; the significant judgments made in applying the guidance to those
contracts; and any assets recognised from the costs to obtain or fulfil a contract with a customer.
The Group has adopted this standard from 1 July 2018 and the impact is not material to the group.
The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial
performance or position of the Group.
(c) New accounting standards and interpretations not yet adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory,
have not been early adopted by the Group for the annual reporting period ended 30 June 2019. The Group’s assessment of
the impact of these new or amended Accounting Standards and Interpretations, most relevant to the Group, are set out
below.
AASB 16: Leases (applicable to annual reporting periods beginning on or after 1 January 2019)
When effective, this Standard will replace the current accounting requirements applicable to leases in AASB 117: Leases and
related Interpretations. AASB 16 introduces a single lessee accounting model that eliminates the requirement for leases to be
classified as operating or finance leases.
The main changes introduced by the new Standard include:
Recognition of a right‐to‐use asset and liability for all leases (excluding short‐term leases with less than 12 months
of tenure and leases relating to low‐value assets);
Depreciation of right‐to‐use assets in line with AASB 116: Property, Plant and Equipment in profit or loss and
unwinding of the liability in principal and interest components;
Variable lease payments that depend on an index or a rate are included in the initial measurement of the lease
liability using the index or rate at the commencement date;
By applying a practical expedient, a lessee is permitted to elect not to separate non‐lease components and instead
account for all components as a lease; and
(d) Additional disclosure requirements.
AASB 16 is effective for annual reporting periods beginning on or after 1 January 2019 with early adoption permitted.
The impact on the Group’s financial assets and financial liabilities of the adoption of AASB 16 is expected to be immaterial to
the Group.
39 | P a g e
AfricanEnergy Annual Repor t 2019 47
Additional Shareholder Information
The following additional information required by the ASX Listing Rules is current as at 7 October 2019.
African Energy Resources Limited shares are listed on the Australian Securities Exchange (ASX:AFR).
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
Securities
%
593,892,130
94.46
28,373,742
2,638,261
1,672,470
112,421
4.78
0.46
0.28
0.02
No. of
holders
392
782
338
552
447
%
15.61
31.14
13.46
21.98
17.80
626,689,024
100.00
2,511
100.00
13,761,938
1.69
1,815
72.28
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)
Stacey Radford
PS Consulting Pty Ltd
STL Super Pty Ltd
CS Third Nominees Pty Ltd
J A Advisory Services Pty Ltd
Mr Miroslaw Jan Marzec & Mrs Barbara Anne Wiszniewski
Donal Windrim
Bill Fry (and associated entities)
General Advisory Pty Ltd
Helmet Nominees Pty Ltd
Frazer Tabeart (and associated entities)
Raejan Pty Ltd
Mr Brian Henry Mccubbing & Mrs Adriana Maria Mccubbing
Mr Robert Cooke & Mrs Elizabeth Cooke
ZW 2 Pty Ltd
Jolib Pty Ltd
Ian Hume (and associated entities)
Total Top 20
Number Of
Shares Held
141,404,786
86,692,308
50,003,683
19,237,334
17,000,000
10,338,585
7,502,500
7,000,000
6,300,000
6,871,914
5,869,610
5,645,926
5,000,000
4,774,100
4,700,000
4,563,000
4,500,000
4,500,000
4,435,625
4,157,606
400,496,977
%IC
22.56%
13.83%
7.98%
3.07%
2.71%
1.65%
1.20%
1.12%
1.01%
1.10%
0.94%
0.90%
0.80%
0.76%
0.75%
0.73%
0.72%
0.72%
0.71%
0.66%
63.91%
There were 2,511 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:
Class of shares and voting rights
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).”
48 africanenergyresources.com
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
nil
various
12
nil
Number of
securities on issue
Performance Rights
7,533,334
Other information
The company has not utilised a share buyback in the past 12 months
AfricanEnergy Annual Repor t 2019 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