Annual Report 2020
African Energy Resources Limited
Annual Report 2020
Corporate Directory
Directors
Alasdair Cooke
Charles (Frazer) Tabeart
Valentine Chitalu
Vincent Masterton-Hume
John Dean
Gregory Fry (Retired 15 July 2020)
Executive Chairman
Executive Director and CEO
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Company Secretary
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
Stock Exchange Listing
Auditor
Solicitors
Bankers
Link Market Services Limited
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Terrace
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Australian Securities Exchange (ASX:
AFR)
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38 Station Street
Subiaco, Western Australia, 6008
Fairweather Corporate Lawyers
595 Stirling Highway
Cottesloe, Western Australia, 6011
Westpac Banking Corporation
Level 6, 109 St Georges Terrace
Perth WA 6000
Website
www.africanenergyresources.com
Table of Contents
Chief Executive’s Letter………………………………………………………………………………………………………………………………………………
Sese Joint Venture……………………………………………………………………………………………………………………………………………………..
Mmamabula West and Mmamantswe Coal Projects…………………………………………………………………………………………………..
Tenement Schedule……………………………………………………………………………………………………………………………………………………
Annual Statement of Mineral Resources…………………………………………………………………………………………………………………….
Financial Report…………………………………………………………………………………………………………………………………………………………
3
4
6
7
8
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African Energy Resources Limited
Annual Report 2020
Chief Executive’s Letter
Dear Shareholder,
Your Company, African Energy, remains fully focused on its Botswana energy portfolio, with an emphasis on developing the Sese JV
as a low-cost integrated coal mine and power station. The Sese JV is jointly owned by First Quantum Minerals Ltd (FQML, 66.7%) and
African Energy (33.3%) and is managed by First Quantum. Negotiations for a Generation and Export Licence, power sales agreements
and grid connection and transmission agreements continued throughout the year, leading to significant progress in several key areas,
specifically:
•
•
Executed a cornerstone Power Sales Agreement for 100MW delivered to First Quantum’s copper operations in Zambia,
Signed a Terms Sheet for a power sales agreement delivering 150MW to Zimasco’s ferro-chrome operations in Zimbabwe,
and
• Was awarded a Generation Licence for an initial 225MW of power.
The award of the Generation Licence is a significant step as all key permits for the project have now been received. To meet the
requirements of the power sales agreements the project plans to install gross generation capacity of approximately 300MW (2 x
150MW units) as the first stage. The Company is seeking an amendment to the Generation Licence for an increase to 300MW to align
it with these power sales agreements.
With significant infrastructure investment available through China’s Belt and Road Initiative, the Sese JV remains engaged with
potential development partners to explore avenues for project funding and technical and construction expertise relevant to major
power investments.
In addition to the direct power sales agreements to industrial end-users such as those noted above, regional power utilities remain
unable to meet their domestic power demands due to a lack of generation capacity or poor availability of existing power plants. All
regional power utilities are under severe financial hardship and are thus unable to finance new power stations themselves: this
provides opportunities for new, low-cost independent power generators to sell power on a long-term basis. African Energy can
become such an independent power producer via its interest in the Sese JV, and is pursuing these opportunities as part of its business
development strategy.
In addition to the Company’s energy portfolio, African Energy continues to evaluate opportunities for diversification, particularly
around the battery metals/electric vehicles theme, building on its investment in ASX listed Caravel Minerals. African Energy is
currently the largest shareholder in Caravel which owns the Calingiri copper deposit in Western Australia and the Company remains
alert to further opportunities which may complement this investment.
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
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African Energy Resources Limited
Annual Report 2020
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. During the
year, the Sese JV made significant progress in completing
permitting requirements for the Sese Power Project and in
securing agreements related to power sales from the first stage
of the project.
Figure 1. Location of African Energy’s Botswana coal and power projects
and the existing and planned regional transmission interconnectors
Key regional power markets in Zambia, Botswana, Zimbabwe and
South Africa are also of relevance to African Energy. As reported
in 2019, all four countries are experiencing domestic supply
constraints for a variety of reasons, providing a robust market for
new energy projects.
In previous years, surplus power from South Africa was available
as low-cost imports to shore-up deficits in neighbouring
countries. South Africa’s current supply side concerns, causing
widespread and well-publicised unscheduled power cuts, mean
this is no longer the case except on an emergency, high-cost
basis. The result is widespread load shedding throughout the
region, with power cuts ranging from 4 to 18 hours per day,
along with continued upward pressure on power tariffs. This
provides opportunities for the See JV to offer reliable and
affordable power sales to affected utilities.
SESE JV PROJECT
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. During the
year African Energy agreed that its JV interest will remain at 33%
and it will contribute pro rata to ongoing development costs.
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.
in staged 225MW to 300MW
These studies have also established the operating costs, capital
costs and a robust financial model for the development of a
increments.
power project
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.
In the last year the Company has made significant progress with
power sales agreements related to Stage 1 (300MW):
•
•
A cornerstone Power Sales Agreement has been signed with
Zambian subsidiaries of FQML for the purchase of 100MW
of power delivered to their Zambian copper operations for a
period of 15 years. FQML is the largest consumer of power
in Zambia.
A Power Sales Term Sheet, as a precursor to a Power Sales
Agreement, has been executed between the Sese JV and
Zimasco (Pvt) Ltd (“Zimasco”) for the purchase of 150MW of
power for 15 years. Zimasco is Zimbabwe’s largest ferro-
chrome mining and smelting business and is 100% owned by
Sinosteel. It is the largest industrial consumer of power in
Zimbabwe.
The Sese Joint Venture is engaged with prospective partners for
financing and construction of the project and is progressing these
negotiations. Negotiations to date have focussed on an initial
installed capacity of 300MW gross (2 x 150MW units), which
would produce approximately 260MW of net power available for
sale. After allowing for transmission losses, the two power sales
agreements noted above will consume the full output of the first
300MW stage.
The Sese Project is receiving strong interest from other potential
energy buyers and is well placed to satisfy this demand and
provide a valuable addition to the southern African energy
market.
The project has secured the majority of licences, permits and
stakeholder approvals that are required for such an operation
(see Figure 2), including:
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
•
In 2020, the Botswana Energy Regulatory Authority issued
an electricity generation license (“Generation Licence”) for
the proposed 300MW Sese Coal and Power Project.
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•
•
•
•
•
•
The Generation Licence allows the Sese Power Project to
export and sell 225MW of power for 15 years to the Zambian
subsidiaries of FQML, Zimasco (Pvt) Limited in Zimbabwe
and residual/surplus power to members of the Southern
African Power Pool.
•
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.
The Generation Licence can be increased to 300MW upon
written application as per the Botswana Electricity
Regulatory Authority Act.
A large-scale mining licence has been granted for an initial
period of 25-years over an area of ~51 km2 which contains
650Mt of coal.
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.
A Water Supply Agreement relating to extraction rights from
Shashe Dam, and
The Sese JV now has all key licenses and permits required to
develop an integrated coal and power project in Botswana.
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.
The advanced nature of the Sese JV and the robust market for
power sales in the region make this a candidate for evaluation
under China’s Belt and Road Initiative which plans to invest up
to US $30B
large scale
infrastructure projects. The Sese JV has continued discussions
with several parties who may be able to provide financial,
technical and construction assistance for the Project.
in Africa, predominantly
into
Figure 2. Sese JV license areas and main project elements
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African Energy Resources Limited
Annual Report 2020
Mmamabula West and Mmamantswe Coal Projects
African Energy also owns
Mmamantswe coal projects in Botswana (Figure 3).
the Mmamabula West and
• Undertake a review the Life-of-Mine (LOM) schedule
and reserve statement for the A-Seam based on the
current resource statement.
Mmamabula West Project, Botswana (AFR 100%)
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 3).
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.
PL56/2005 (Mmamabula West Prospecting Licence) was valid
until 30 September 2019. An application for a two-year
extension was submitted on 10 September 2019. The license is
yet to be renewed, and the Company remains engaged with the
Botswana Dept. of Mines to seek a timely renewal of this licence.
Upon renewal of this licence, African Energy intends to:
to meet Eskom power
• Update the mining prefeasibility study to reflect a coal
station
specification
requirements, a revised LOM mining schedule and
current capital and operating cost estimates.
Continue negotiations with potential South African
BEE partners seeking to invest in the project.
Finalise
Impact
the Environmental and Social
Assessment submission for an integrated coal mine
and power station of up to 600MW
•
•
Mmamantswe Integrated Power Project, Botswana (AFR 100%)
Mmamantswe contains 1.24Bt of thermal coal close to the South
African border. 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. These studies indicated that the coal quality and
coal geometry is suitable for the development of a mine-mouth
power station and integrated coal mine but requires a large off-
taker for ~600MW to be viable. 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 3).
The Botswana Department of Mines
issued a three-year
extension of the Mmamantswe Prospecting Licence PL69/2007
in March 2019. The licence is valid until 31 December 2021.
Figure 3. Location of the Mmamabula West and Mmamantswe coal projects with respect to key
infrastructure elements in Botswana and northern South Africa.
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African Energy Resources Limited
Annual Report 2020
Tenement Schedule
Project Name
Tenement
Name
Tenement Holder
Licence
Number
Equity
Area
(sq km)
Date
Granted
Current
Expiry Date
Sese
Sese
Sese
Sese
Sese ML
Sese Power Subsidiary
ML2016/42L
33%
(Pty) Ltd
Sese
African Energy Resources
PL 96/2005
33%
Botswana (Pty) Ltd
51
95
22-Mar-17
31-Jan-42
26-Jul-05
30-Sep-21
Sese West
African Energy Resources
PL197/2007
33%
131
01-Oct-07
30-Sep-21
Botswana (Pty) Ltd
Foley North
African Energy Resources
PL004/2013
33%
774
01-Jan-13
30 Sep-20*
Botswana (Pty) Ltd
Mmamantswe
Mmamantswe
Mmamantswe Coal (Pty)
PL069/2007
100%
453
01-Jul-12
31-Dec 21
Ltd
Mmamabula West
Mmamabula West
Phokoje Power (Pty) Ltd
PL56/2005
100%
293
01-July-05
30-Sep-19*
*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.
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African Energy Resources Limited
Annual Report 2020
Annual Statement of Mineral Resources
Resource
Zone
MEASURED
(Bk-C)
MEASURED
(Bk-B)
INDICATED
INFERRED
TOTAL
Resource
Zone
MEASURED
INDICATED
INFERRED
TOTAL
Resource
Zone
MEASURED
INDICATED
INFERRED
TOTAL
Resource
Zone
MEASURED
INDICATED
INFERRED
Sese JV Project (AFR 33.3%, FQML 66.7%): Resource Summary (Raw coal on an air-dried basis)
In-Situ
Tonnes*
325 Mt
304 Mt
1,663 Mt
126 Mt
2,418 Mt
CV
(MJ/kg)
CV
(kcal/kg)
17.6
16.0
15.4
14.2
4,200
3,820
3,700
3,400
Ash
%
30.1
34.8
38.4
41.4
IM%
VM%
7.9
7.4
6.8
6.4
20.6
20.3
18.7
18.8
Sese West Project (AFR 33.3%, FQML 66.7%): Resource Summary (Raw coal on an air-dried basis)
In-Situ
Tonnes*
35 Mt
7 Mt
1,935 Mt
1,977 Mt
CV
(MJ/kg)
CV
(kcal/kg)
17.7
17.2
15.2
4,225
4,110
3,630
Ash
%
32.5
32.8
39.5
IM%
VM%
6.4
6.9
6.0
19.4
19.9
19.8
Mmamabula West Project (AFR 100%): Resource Summary (Raw coal on an air-dried basis)
In-Situ
Tonnes*
17 Mt
1,061 Mt
1,858 Mt
2,935 Mt
CV
(MJ/kg)
CV
(kcal/kg)
22.2
20.4
20.3
5,300
4,875
4,850
Ash
%
19.6
24.4
24.7
IM%
VM%
7.3
6.1
5.8
24.8
26.5
26.2
Mmamantswe Project (AFR 100%): Resource Summary (Raw coal on an air-dried basis)
In-Situ
Tonnes*
978 Mt
265 Mt
N/A
CV
(MJ/kg)
9.5
7.9
CV
(kcal/kg)
2,270
1,890
Ash
%
56.5
62.3
IM%
VM%
3.9
3.3
15.8
14.2
FC%
41.5
37.6
34.1
31.2
FC%
41.8
40.7
34.0
FC%
48.2
43.1
43.4
FC%
21.8
18.1
S %
2.1
1.6
2.0
2.2
S %
2.5
2.6
2.1
S %
1.6
1.5
1.6
S %
2.0
2.1
TOTAL
1,243 Mt
* In-Situ tonnes have been derived by removing volumes for modelled intrusions, burnt coal and weathered coal and then applying
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 Sese, Sese West and Mmamantswe resources since
they were first announced.
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.
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African Energy Resources Limited
ARBN 123 316 781
Financial Report
30 June 2020
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African Energy Resources Limited
Annual Report 2020
Directors’ Report
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 2020.
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
Caravel Minerals Limited
Special responsibilities
Executive Chairman
Former directorships in the last three years
Anova Metals Limited
Interests in shares and options
50,003,682 shares
Charles (Frazer) Tabeart PhD, BSc (Hons) ARSM, MAIG – Executive Director and CEO
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 and CEO
Former directorships in the last three years
none
Interests in shares and options
4,774,100 shares
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
nil
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African Energy Resources Limited
Annual Report 2020
Directors Report (continued)
Former directorships in the last three years
nil
Interests in shares and options
2,251,425 shares
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 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. 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
nil
Former directorships in the last three years
nil
Interests in shares and options
4,157,606 shares
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.
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
Former directorships in the last three years
nil
Special responsibilities
nil
Interests in shares and options
nil
Gregory (Bill) Fry – (retired 15 July 2020)
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.
Other current directorships
EVE Investments Ltd
Special responsibilities
nil
Former directorships in the last three years
Anova Metals Ltd
Interests in shares and options
5,869,610 shares
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.
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African Energy Resources Limited
Annual Report 2020
Directors Report (continued)
1.1 Directors’ Meetings
There was one Director’s meeting during the Year which was attended by all Directors.
2. Remuneration Report - Audited
This Remuneration Report outlines the remuneration arrangements which were in place during the year and remain in place as at the date
of this report, for the Directors and key management personnel (“KMP”) of African Energy Resources Limited.
The information provided in this remuneration report has been Audited as required by section 308(3c) of the Corporations Act 2001.
3.1 Principles of Compensation
The objective of the Company’s executive reward framework is to ensure reward for performance is competitive and appropriate for the
results delivered. The framework aligns executive reward with achievement of strategic objectives and the creation of value for shareholders
and conforms with market practice for delivery of reward. The Board ensures that executive reward satisfies the following key criteria for
good reward governance practices:
•
•
•
•
•
competitiveness and reasonableness;
acceptability to shareholders;
performance linkage / alignment of executive compensation;
transparency; and
capital management.
Alignment to shareholders’ interests:
•
•
•
has economic profit as a core component of plan design;
focuses on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering constant
return on assets as well as focusing the executive on key non-financial drivers of value; and
attracts and retains high calibre executives.
Alignment to program participants’ interests:
rewards capability and experience;
reflects competitive reward for contribution to growth in shareholder wealth;
provides a clear structure for earning rewards; and
provides recognition for contribution.
•
•
•
•
The framework provides a mix of fixed and variable pay, and a blend of short and long-term incentives. As executives gain seniority with the
Company, the balance of this mix shifts to a higher proportion of ''at risk'' rewards.
The following table shows key performance indicators for the group over the last five years:
Profit / (loss) for the year attributable to owners
Basic earnings / (loss) per share (cents)
Dividend payments
Dividend payment ratio (%)
Increase / (decrease) in share price (%)
Total KMP incentives as percentage of profit / (loss)
for the year (%)
2020
2019
2018
(3,372,977)
(0.54)
-
-
(7%)
(927,792)
(0.15)
-
-
(187%)
(4,013,178)
(0.64)
-
-
(304%)
Restated (1)
2017
(1,618,702)
(0.27)
-
-
209%
Restated (1)
2016
(2,070,429)
(0.34)
-
-
(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.
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African Energy Resources Limited
Annual Report 2020
Directors Report (continued)
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 July 2020 and was set at US$17,168 (AU$25,000) per annum (2019:
US$24,545).
3.4 Executive Directors
Base Pay
Base pay is structured as a total employment cost package which may be delivered as a combination of cash and prescribed non-financial
benefits at the Remuneration Committee’s discretion.
Executives are offered a competitive base pay that comprises the fixed component of pay and rewards. Base pay for executives is reviewed
annually to ensure the executive’s pay is competitive with the market. There is no guaranteed base pay increases included in any executives’
contract.
Long-term incentives
The award of performance rights and options to Directors, provides an opportunity for Directors to participate in the Company's growth and
an incentive to contribute to that growth. The Remuneration Committee 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 2020.
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 Alasdair Cooke and Charles Tabeart. 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
Term: 2 years
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
Term: 2 years
Base annual salary is US$112,208 (AU$160,000)
Consulting Fee of US$1,402 (AU$2,000) per day when the executive works more than two and a half days per week
Termination payment is the equivalent of three months consulting fees
No other key management personnel have service contracts in place with the Consolidated Entity.
13 | P a g e
African Energy Resources Limited
Annual Report 2020
Directors Report (continued)
3.5 Comments made at the Company’s 2019 Annual General Meeting
The Company did not receive any specific feedback at the AGM held on 14 November 2019 or throughout the year on its remuneration
practices.
3.6 Directors and Executive Officers’ Remuneration (Consolidated Entity)
Details of the remuneration of the Directors of the Consolidated Entity (as defined in AASB 124 Related Party Disclosures) of the Consolidated
Entity are set out in the following tables.
The key management personnel of the Consolidated Entity are the Directors of African Energy Resources Limited.
The following tables set out remuneration paid to key management personnel of the Consolidated Entity during the year.
Key Management Personnel
remuneration - 2020
Non-Executive Directors
Valentine Chitalu
Vincent Masterton-Hume
John Dean
Total Non-Executive Directors
Executive Directors
Gregory Fry (2)
Charles Tabeart
Alasdair Cooke
Total Executive Directors
Total Key Management Personnel
Key Management Personnel
remuneration - 2019
Non-Executive Directors
Valentine Chitalu
Vincent Masterton-Hume
John Dean
Total Non-Executive Directors
Executive Directors
Gregory Fry
Charles Tabeart
Alasdair Cooke
Total Executive Directors
Total Key Management Personnel
Short term
employee
benefits
Cash salary &
fees
US$
Post-
employment
benefits
Share based
payments
Superannuation
Rights (1)
Performance
based
Total
US$
US$
%
US$
23,505
21,272
23,505
68,282
33,578
107,450
87,974
229,002
297,284
25,044
22,872
23,256
71,172
42,093
114,489
103,755
260,337
331,509
-
2,233
-
2,233
-
-
-
-
2,233
-
-
-
-
-
-
-
-
-
-
2,173
-
(15,262)
(3,815)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,173
(19,077)
0.0%
4,419
-
-
4,419
6,592
(29,879)
(36,864)
(26,386)
(93,129)
(112,206)
-
-
-
0.0%
0.0%
23,505
23,505
23,505
70,515
33,578
107,450
87,974
229,002
299,517
9,782
21,230
23,256
54,268
16,633
77,625
77,369
171,627
225,895
(1) Negative remuneration values in the prior period 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) Gregory Fry was an executive director from 1 July 2019 to 31 December 2019 and a non-executive director from 1 January
2020.
The Group did not engage a remuneration consultant during the year.
14 | P a g e
African Energy Resources Limited
Annual Report 2020
Directors Report (continued)
3.7 Share-based compensation
The Company did not issue share-based compensation during the year.
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
30/06/2019
Purchases
(Sales)
Balance at
30/06/2020
2,251,425
4,157,606
-
50,003,682
4,774,100
5,869,610
67,056,423
-
-
-
-
-
-
-
2,251,425
4,157,606
-
50,003,682
4,774,100
5,869,610
67,056,423
Balance at
30/06/2019
Forfeited / Expired
During Period
Balance at
30/06/2020
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
30/06/2019
Forfeited / Expired
During Period
Balance at
30/06/2020
500,000
500,000
-
1,750,000
2,500,000
875,000
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
2020
US$
2019
US$
2020
US$
2019
US$
70,475
52,851
-
-
At 30 June 2020 the company had a payable outstanding to Mitchell River Group of US$2,184 (30 June 2019: US$6,105).
This is the end of the Audited remuneration report.
15 | P a g e
African Energy Resources Limited
Annual Report 2020
Directors Report (continued)
3. 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.
4. Events Subsequent to Reporting Date
On 20 July 2020, the Company issued 31,124,532 options exercisable at AUD$0.02 (2 cents) to a consultant. These options will vest upon the
successful completion of an agreement that results in a new party becoming a majority shareholder in the Sese Joint Venture and expire on
20 July 2022.
The impact of the Coronavirus (COVID-19) pandemic is ongoing and while it has not significantly impacted the entity up to 30 June 2020, it
is not practicable to estimate the potential impact, positive or negative, after the reporting date. The situation is rapidly developing and is
dependent on measures imposed by the Australian Government and other countries, such as maintaining social distancing requirements,
quarantine, travel restrictions and any economic stimulus that may be provided.
No other matter or circumstance has arisen since 30 June 2020 that has significantly affected, or may significantly affect the entity's
operations, the results of those operations, or the entity's state of affairs in future financial years.
5. 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.
6. 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.
7. 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.
8. Indemnification and Insurance of Officers and Auditors
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.
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.
9. 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.
10. Non-Audit Services
During the year, there were no non-Audit services provided by BDO Audit (WA) Pty Limited (2019: nil).
11. Loans to key management personnel
16 | P a g e
African Energy Resources Limited
Annual Report 2020
Directors Report (continued)
No loans to key management personnel were provided during the period or up to the date of signing this report.
12. Lead Auditor’s Independence Declaration
The lead Auditor’s Independence Declaration is set out on page 23 and forms part of the Directors’ report for the financial year ended 30
June 2020.
Charles Frazer Tabeart
Managing Director
Perth, 30 September 2020
17 | P a g e
African Energy Resources Limited
Annual Report 2020
Directors’ Report
African Energy Resources Limited and its Controlled Entities
The Directors of the Company declare that:
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 2020 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
Managing Director
Perth, 30 September 2020.
18 | P a g e
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 2020, 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 2020 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 (including Independence Standards) (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.
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.
Material uncertainty related to going concern
We draw attention to Note 1.4 in the financial report which describes the events and/or conditions
which give rise to the existence of a material uncertainty that may cast significant doubt about the
group’s ability to continue as a going concern and therefore the group may be unable to realise its
assets and discharge its liabilities in the normal course of business. Our opinion is not modified in
respect of this matter.
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. In addition to the matter described in the Material uncertainty
related to going concern section, we have determined the matters described below to be the key audit
matters to be communicated in our report.
Carrying Value of Investment in Associate
Key audit matter
How the matter was addressed in our audit
As disclosed in Note 2.1, the Group’s investment
in associate (Sese Power Project) has a significant
carrying value as at 30 June 2020.
The company is required to assess whether any
impairment indicators are present in accordance
with ASAB 128 Investments in Associates and
Joint Ventures (“AASB 128”) which may indicate
the Group’s investment in associate is impaired.
We have determined this is a key audit matter
given its financial significance to the Group and
the judgements and estimates required in
assessing the carrying value of the investment.
Our procedures included, but were not limited to
the following:
(cid:127)
(cid:127)
(cid:127)
Considering the existence of any indicators
of impairment in accordance with AASB 128;
Reviewing ASX Announcements, Board of
Directors meetings minutes, joint venture
minutes and considering management’s
assessment of impairment indicators; and
Assessing the adequacy of related
disclosures in Note 2.1 and Note 1.6 to the
Financial Statements.
2
Other information
The directors are responsible for the other information. The other information comprises the
information in the Group’s annual report for the year ended 30 June 2020, but does not include the
financial report and the auditor’s report thereon.
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
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, 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.
Responsibilities of the directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf
This description forms part of our auditor’s report.
3
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 12 to 15 of the directors’ report for the
year ended 30 June 2020.
In our opinion, the Remuneration Report of African Energy Resources Limited, for the year ended
30 June 2020, 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, 30 September 2020
4
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 2020, 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, 30 September 2020
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.
African Energy Resources Limited
Annual Report 2020
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the year ended 30 June 2020
Government grants
Interest received
Share based payment expense / reversal
Gain / (loss) on derivative
Personnel expenses
Professional & administration expense
Exploration & evaluation expensed
Share of Loss in Sese JV
Impairment of Mmamabula West
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
Gain in financial assets
Foreign currency translation reserve
Total other comprehensive income / (loss) for the year
Note
3.2
3.3
3.3
3.4
2020
US$
24,783
18,814
9,699
(53,120)
(150,552)
(192,161)
(91,372)
(408,704)
(2,500,000)
(30,364)
(3,372,977)
-
(3,372,977)
2019
US$
-
46,161
226,291
(128,867)
(276,270)
(187,423)
(116,038)
(376,918)
-
(114,728)
(927,792)
-
(927,792)
(3,372,977)
(3,372,977)
(927,792)
(927,792)
12,535
(36,718)
(24,183)
(191,598)
(38,378)
(229,976)
Total comprehensive loss attributable to the ordinary equity holders of the
Company:
Total comprehensive loss for the year
(3,397,160)
(1,157,768)
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
(0.54)
(0.15)
The Consolidated Statement of Profit or Loss and Other Comprehensive Income is to be read in conjunction with the accompanying
notes.
24 | P a g e
African Energy Resources Limited
Consolidated Statement of Financial Position
As at 30 June 2020
Annual Report 2020
Assets
Current assets
Cash & cash equivalents
Financial assets at FVOCI
Trade & other receivables
Derivative asset
Total current assets
Non-current assets
Investment in Sese Joint Venture
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
Note
2020
US$
2019
US$
4.1
4.3
4.4
2.1
2.2
4.5
5.1
1,013,017
631,257
19,229
-
1,663,503
7,077,471
-
7,077,471
8,740,974
146,808
146,808
146,808
1,941,739
630,610
51,482
53,120
2,676,951
6,924,616
2,500,000
9,424,616
12,101,567
100,541
100,541
100,541
8,594,166
12,001,026
64,134,977
(5,425,814)
(50,114,997)
8,594,166
64,134,977
(412,635)
(51,721,316)
12,001,026
The consolidated statement of financial position is to be read in conjunction with the accompanying notes.
25 | P a g e
African Energy Resources Limited
Consolidated Statement of Changes in Equity
for the year ended 30 June 2020
Annual Report 2020
For the twelve months ended 30
June 2020
At 30 June 2019
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:
Contributed
equity
Accumulated
losses
US$
64,134,977
-
US$
(51,721,316)
(3,372,977)
Foreign
Currency
Translation
Reserve
US$
(5,218,589)
-
Other
Comprehensive
Income Reserve
(FVOCI)
Share-
Based
Payments
Reserve
Total
equity
US$
(183,042)
-
US$
4,988,996
-
US$
12,001,026
(3,372,977)
-
-
-
-
(36,718)
-
-
12,535
-
-
(36,718)
12,535
-
(3,372,977)
(36,718)
12,535
-
(3,397,161)
Cleanse SBP Reserve
-
4,979,297
-
-
(4,979,297)
-
Share based payments
-
-
-
-
(9,699)
(9,699)
At 30 June 2020
64,134,977
(50,114,997)
(5,255,307)
(170,507)
-
8,594,166
For the twelve months ended 30
June 2019
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
64,134,977
-
(50,775,745)
(927,792)
(5,180,211)
-
(9,223)
-
5,215,287
-
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
The consolidated statements of changes in equity are to be read in conjunction with the accompanying notes.
26 | P a g e
African Energy Resources Limited
Annual Report 2020
Notes to the Financial Statements (continued)
Note
2020
US$
2019
US$
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
Investment in Sese JV
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
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
20,302
(86,058)
(364,893)
(430,649)
(447,286)
-
-
(447,286)
-
-
1,941,739
(877,935)
(50,787)
1,013,017
49,177
(121,414)
(460,510)
(532,747)
-
459,086
(111,135)
347,951
-
-
2,300,244
(184,796)
(173,709)
1,941,739
4.2
4.1
4.1
The consolidated statements of cash flows are to be read in conjunction with the accompanying notes
27 | P a g e
African Energy Resources Limited
Notes to the Financial Statements
1.
Basis of Preparation
1.1
Statement of Compliance
Annual Report 2020
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 30 September 2020.
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
This report is prepared on the going concern basis which assumes the continuity of normal business activity and the realisation
of assets and settlement of liabilities in the normal course of business.
The Group incurred a net loss of $3,372,977 during the year ended 30 June 2020 (2019: $927,792) and as of that date the Group
had net current assets of $1,516,695 (30 June 2019: $2,576,410) including cash and cash equivalents of $1,013,057 (30 June
2019: $1,941,739). Net cash used in operating activities for the period was $430,649 (2019: $532,747).
These conditions indicate a material uncertainty that may cast doubt about the ability of the Group to continue as a going
concern. The ability of the Group to continue as a going concern is principally dependent upon its ability to secure funds by
raising capital from equity markets or by other means, and by managing cash flows in line with available funds, and/or the
successful development of its exploration assets.
The Directors are confident of the ability of the Company to potentially raise capital as and when required. The Directors are
satisfied there are sufficient funds to meet the Group’s working capital requirements as at the date of this report.
The directors are uncertain of the duration of the COVID-19 pandemic and of the potential consequential impact that may flow
through to the Group’s future operating costs and exploration activities. The directors believe there are reasonable prospects
the Group can continue operations through the COVID-19 pandemic and are committed to the long term development and
growth of the Company on behalf of its shareholders, employees and the communities in which it operates.
The Directors have reviewed the business outlook and the assets and liabilities of the Group and are of the opinion that the
going concern basis of accounting is appropriate as they believe the Group will continue to be successful in securing additional
funds as and when the need to raise funds arises. Should the Group not be able to continue as a going concern, it may be
required to realise its assets and discharge its liabilities other than in the ordinary course of business, and at amounts that differ
from those stated in the financial statements and that the financial report does not include any adjustments relating to the
recoverability and classification of recorded asset amounts or liabilities that might be necessary should the entity not continue
as a going concern.
28 | P a g e
African Energy Resources Limited
Annual Report 2020
Notes to the Financial Statements (continued)
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 2020 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 – 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 2.2 – 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 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
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.
Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) pandemic has had, or may have, on
the company based on known information. This consideration extends to the nature of the products and services offered,
customers, supply chain, staffing and geographic regions in which the company operates. Other than as addressed in specific
notes, there does not currently appear to be either any significant impact upon the financial statements or any significant
uncertainties with respect to events or conditions which may impact the company unfavourably as at the reporting date or
subsequently as a result of the Coronavirus (COVID-19) pandemic.
2.
Non-Current Assets
2.1
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
29 | P a g e
African Energy Resources Limited
Annual Report 2020
Notes to the Financial Statements (continued)
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
Investment in Sese JV
Share of Losses after income tax
Carrying amount at 30 June
(b) Share of the results of its associates
2020
US$
6,924,616
561,559
(408,704)
7,077,471
2019
US$
7,301,534
-
(376,918)
6,924,616
The groups share of the results of its associates and its aggregated assets and liabilities are as follows.
Company's share of:
Liabilities
US$
-
Ownership
Interest %
African Energy Holdings SRL
US$
4,990,946
Assets
US$
107,780
33
Revenues
(Loss)
US$
(408,704)
(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
Summarised statement of comprehensive income
Total Operating Expense
Loss from operating activities
Other comprehensive income
Total comprehensive income
2020
US$
2019
US$
119,720
32,152
151,872
14,972,208
-
14,972,208
15,124,080
59,922
119,105
179,027
14,574,666
25,387
14,600,053
14,779,079
76,607
76,607
70,803
70,803
250,000
250,000
326,607
14,797,473
2020
US$
1,216,335
1,216,335
9,777
1,226,112
250,000
250,000
320,803
14,458,276
2019
US$
1,090,614
1,090,614
5,140
1,095,754
There were no contingent assets or liabilities in African Energy Holdings SRL at 30 June 2020. There were no commitments at
30 June 2020.
30 | P a g e
African Energy Resources Limited
Annual Report 2020
Notes to the Financial Statements (continued)
2.2
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)
(ii)
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 expensed 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.
The Board has determined to apply this policy to an area of interest on a case by case basis.
Area of Interest
Mmamabula West Coal Project
Mmamantswe Coal Project
African Energy Holdings SRL (Sese JV)
Accounting
Policy Election
2.2(a)(ii)
2.2(a)(i)
2.2(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
Impairment due to delay in renewal of tenure
Carrying amount at 30 June
31 | P a g e
2020
US$
-
-
2020
US$
2,500,000
(2,500,000)
-
2019
US$
2,500,000
2,500,000
2019
US$
2,500,000
-
2,500,000
African Energy Resources Limited
Annual Report 2020
Notes to the Financial Statements (continued)
3.
Financial Performance
3.1
Segment information
AASB 8 Operating Segments requires a ‘management approach’, under which segment information is presented on the same
basis as that used for internal reporting purposes. The segments are reported in a manner that is consistent with the internal
reporting provided to the chief operating decision maker.
(a) Description of Segments
The Company’s Board receives financial information across three reportable segments. These are Coal-fired Power Projects;
Power Investments and Unallocated.
(b) Segment Information
For the year ended 30 June 2020
Coal-fired
Power
Development
Projects
Power
Investments
All other
segments
Consolidated
US$
US$
US$
US$
Total segment revenue
Profit (loss) before income tax
-
(2,591,372)
-
(408,704)
43,597
(372,901)
43,597
(3,372,977)
Segment Assets
Investment in Sese JV
Cash and short term receivable
Total Segment Assets
Segment Liabilities
Trade & other payables
Total Segment Liabilities
For the year ended 30 June 2019
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
3.2
Revenue
(a) Revenue recognition
-
-
-
-
-
7,077,471
-
7,077,471
-
1,663,503
1,663,503
7,077,471
1,663,503
8,740,974
114,273
114,273
32,535
32,535
146,808
146,808
-
(116,038)
-
(376,918)
46,161
(434,836)
46,161
(927,792)
-
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
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.
32 | P a g e
African Energy Resources Limited
Notes to the Financial Statements (continued)
(b) Government Grants
Annual Report 2020
Government grants relating to costs are deferred and recognised in profit or loss over the period necessary to match them with
the costs that they are intended to compensate. This includes Job Keeper income received due to COVID-19 during the year
which has been net off with the associated salaries this year.
(c) 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.
2020
US$
18,814
18,814
2019
US$
46,161
46,161
2020
US$
89,191
7,710
297,232
(243,581)
150,552
63,387
61,283
23,533
7,551
8,352
7,628
-
20,427
192,161
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
2020
US$
2019
US$
-
-
-
-
-
-
-
-
Interest received
3.3
Expenses
Personnel expenses
Employee salaries
Superannuation
Directors fees
Recharge of director fees and employee salaries
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
33 | P a g e
African Energy Resources Limited
Notes to the Financial Statements (continued)
Annual Report 2020
(b) Reconciliation of income tax expense to prima facie tax payable:
Loss before income tax
Prima facie income tax at 30% (2019: 27.5%)
Tax effect of amounts not deductible in calculating taxable income:
Sundry items
Other
Difference in overseas tax rates
Tax loss not recognised
Income tax expense/(benefit)
(c) Tax losses:
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit @ 30% (2019: 27.5%)
Difference in overseas tax rates 10%
Potential tax benefit
(d) Unrecognised deferred tax assets arising on timing differences and losses
Timing
Losses - Revenue
2020
US$
2019
US$
(3,372,977)
(1,011,893)
(7,387)
91,248
(928,032)
(4,321)
932,353
-
(927,792)
(255,143)
67
82,091
(172,985)
3,552
169,433
-
2020
US$
2019
US$
(511,187)
(153,356)
(4,321)
(157,677)
(408,073)
(112,220)
3,552
(108,668)
2020
US$
2019
US$
778,730
4,656,480
5,435,211
70,666
4,498,803
4,569,469
The tax benefits of the above deferred tax assets will only be obtained if:
i.
The Consolidated Entity derives future assessable income of a nature and of an amount sufficient to enable the
benefits to be utilised;
ii.
The Consolidated Entity continues to comply with the conditions for deductibility imposed by law;
iii. No changes in income tax legislation adversely affect the Consolidated Entity from utilising the benefits.
Income tax on the Statement of Profit or Loss and other Comprehensive Income for the periods presented comprises current
and deferred tax. Income tax is recognised in the Statement of Profit or Loss and other Comprehensive Income except to the
extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the
reporting period in the countries where the Company’s subsidiaries and associates operate and generate taxable income.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation
is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax
authorities.
Deferred tax is provided using the liability method, providing for temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for taxation purposes.
34 | P a g e
African Energy Resources Limited
Annual Report 2020
Notes to the Financial Statements (continued)
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which
the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit
will be realised, or to the extent that the Group has deferred tax liabilities with the same taxation authority. Additional income
taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend.
3.5
Earnings per share
(a) Basic loss per share
The calculation of basic loss per share at 30 June 2020 was based on the losses attributable to ordinary shareholders of
US$3,372,977 (2019: US$927,792) and a weighted average number of ordinary shares outstanding during the financial year
ended 30 June 2020 of 622,960,630 (2019: 622,960,630) calculated as follows:
Gain (Loss) attributable to ordinary shareholders
Issued number of ordinary shares at 1 July
Effect of shares issued during the period
Weighted average number of shares for year to 30 June
2020
US$
(3,372,977)
2019
US$
(927,792)
622,960,630
-
622,960,630
622,960,630
-
622,960,630
Basic loss per share (cents per share)
(0.54)
(0.15)
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.
Working Capital Management
4.1
Cash and Cash Equivalents
Cash and cash equivalents comprise cash balances, short term bills and call deposits. Bank overdrafts that are repayable on
demand and form an integral part of the Consolidated Entity’s cash management are included as a component of cash and cash
equivalents for the purpose of the statement of cash flows.
Cash at bank and in hand
Short-term deposits
Refer to note 5.2 for risk exposure analysis.
2020
US$
610,665
402,352
1,013,017
2019
US$
479,609
1,462,130
1,941,739
35 | P a g e
African Energy Resources Limited
Annual Report 2020
Notes to the Financial Statements (continued)
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/(Loss) on Derivative
Equity-settled share-based payment expenses
Share of Loss in Sese JV
Depreciation and amortisation expense
Impairment of Mmamabula West
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
2020
US$
(3,372,977)
2019
US$
(894,489)
53,120
(9,699)
408,704
-
2,500,000
28,774
29,222
(67,793)
(430,649)
128,867
(259,594)
376,918
29
-
113,099
(14,230)
16,653
(532,747)
Total
1,147,930
111,135
(191,588)
(1,593)
(435,274)
630,610
-
12,535
(11,888)
-
631,257
There was no non-cash investing and financing activities during the year.
4.3
Financial Assets at FVOCI
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
Additions
Movement in Fair Value of available for sale financial assets
Effect of movements in foreign exchange
Disposals
Carrying amount at 30 June 2020
Caravel Shares
677,346
111,135
(156,278)
(1,593)
-
630,610
Goviex Shares
470,584
-
(35,310)
-
(435,274)
-
-
12,535
(11,888)
-
631,257
-
-
-
-
-
4.4
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
2020
US$
2019
US$
-
255
18,974
19,229
31,546
1,743
18,193
51,482
Trade and other receivables are recorded at amounts due less any allowance for any expected credit losses.
36 | P a g e
African Energy Resources Limited
Annual Report 2020
Notes to the Financial Statements (continued)
4.5
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
2020
US$
11,018
132,623
3,167
146,808
2019
US$
63,711
32,403
4,427
100,541
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.
4.6
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.
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 2018
Balance 30 June 2019
Balance 30 June 2020
5.2 Financial risk management
Number of
shares
622,960,630
622,960,630
622,960,630
US$
64,134,977
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.
37 | P a g e
African Energy Resources Limited
Annual Report 2020
Notes to the Financial Statements (continued)
(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.
ii. Price risk
The Group holds shares in Caravel Minerals and is exposed to equity securities price risk.
Price risk
+10%
-10%
Carrying
amount
Profit
US$
Equity
US$
Profit
US$
Equity
US$
631,257
63,126
63,126
(63,126)
(63,126)
30 June 2020
Financial assets at FVOCI
iii. Interest rate risk
The Group has significant interest-bearing assets; however, a change in interest rates would not have a material impact on the
results.
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 2020
Financial assets
Cash & cash equivalents 1,013,017 10,130
(10,130)
(10,130) 10,130
(101,302) 101,302
101,302
(101,302)
Financial assets at
FVOCI
Trade & other
receivables
Financial liabilities
Trade and other
payables
631,257
19,229
146,808
-
-
-
-
-
-
-
-
-
(63,126)
63,126
63,126
(63,126)
(1,923)
1,923
1,923
(1,923)
-
(14,681)
14,681
14,681
(14,681)
•
•
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:
v. Liquidity risk
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
38 | P a g e
African Energy Resources Limited
Annual Report 2020
Notes to the Financial Statements (continued)
keeping committed credit lines available with a variety of counterparties. Surplus funds are only invested in instruments that are
tradeable in highly liquid markets.
The tables below analyse the Group’s financial liabilities into relevant maturity groupings. The amounts disclosed in the table are
the contractual undiscounted cash flows. Balances due within 12 months equal their carrying amounts as the impact of
discounting is not significant.
2020
Trade Payables
2019
Trade Payables
(b) Fair value estimation
Less than 6
months
6 - 12
months
146,808
146,808
100,541
100,541
Total
contractual
cash flows
146,808
146,808
100,541
100,541
-
-
-
-
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 2020
Financial assets at FVOCI
Derivative asset
Total assets
30 June 2019
Financial assets at FVOCI
Derivative asset
Total assets
39 | P a g e
Level 1
US$
Level 2
US$
Level 3
US$
Total
US$
631,257
-
631,257
630,610
-
630,610
-
-
-
-
-
-
-
-
-
-
53,120
53,120
631,257
-
631,257
630,610
53,120
683,730
African Energy Resources Limited
Annual Report 2020
Notes to the Financial Statements (continued)
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
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
(c) 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.
40 | P a g e
African Energy Resources Limited
Annual Report 2020
Notes to the Financial Statements (continued)
(d) 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.
(e) Comparatives
Prior period comparative are for the year from 1 July 2018 to 30 June 2019.
6.2 Foreign currency
(a) Foreign currency transactions
Transactions in foreign currencies are translated to the functional currency at the foreign exchange rate ruling at the date of
the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to United
States dollars at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised
in the Statement of Profit or Loss and other Comprehensive Income. Non-monetary assets and liabilities that are measured in
terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary
assets and liabilities denominated in foreign currencies that are stated at fair value are translated to US$ at foreign exchange
rates ruling at the dates the fair value was determined.
(b) Financial statements of foreign operations
The assets and liabilities of Australian subsidiaries, including goodwill and fair value adjustments arising on consolidation, are
translated to US dollars at foreign exchange rates ruling at the reporting date. The revenues and expenses of foreign operations,
excluding foreign operations in hyperinflationary economies, are translated to US dollars at rates approximating to the foreign
exchange rates ruling at the dates of the transactions.
Foreign exchange differences arising on translation are recognised directly in the foreign currency translation reserve (“FCTR”),
as a separate component of equity. When a foreign operation is disposed of, in part or in full, the relevant amount in the FCTR
is transferred to profit or loss, as part of the gain or loss on sale where applicable.
(c) Net investment in foreign operations
Exchange differences arising from the translation of the net investment in foreign operations, and of related effective hedges
are taken to translation reserve and released into profit or loss upon disposal.
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
41 | P a g e
2020
US$
1,406,373
7,187,793
8,594,166
-
-
64,134,977
(126,300)
(55,414,511)
8,594,166
(2,951,523)
-
(2,951,523)
2019
US$
1,851,913
10,149,113
12,001,026
-
-
64,134,977
4,860,950
(59,994,901)
12,001,026
(1,076,229)
-
(1,076,229)
African Energy Resources Limited
Annual Report 2020
Notes to the Financial Statements (continued)
There were no commitments, contingent liabilities or contingent assets at the parent level at 30 June 2020.
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).
Country of incorporation
British Virgin Is.
Botswana
Barbados
Botswana
Australia
Ownership
interest
2020
100%
100%
100%
100%
100%
Ownership
interest
2019
100%
100%
100%
100%
100%
Botswana Energy Solutions Limited
Mmamantswe Coal (Pty) Ltd
African Energy Holdings SRL 2
Phokoje Power (Pty) Ltd
AFR Australia Pty Ltd
7.
Related parties
7.1
Key Management Personnel
US$299,517 (2019: US$225,895) was paid to Directors of the Company during the year. Disclosures relating to key management
personnel are set out in the Remuneration Report. During the prior year, there was a negative balance for equity compensation
benefits due to the reversal of share-based payment expenses.
Short-term employee benefits
Post-employment benefits
Equity compensation benefits
7.2
Other related party transactions
2020
US$
297,284
2,233
-
299,517
2019
US$
331,509
6,592
(112,206)
225,895
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.
Charges from
Charges to
2020
US$
2019
US$
2020
US$
2019
US$
Mitchell River Group Pty Ltd
70,475
52,851
-
-
Directors Mr Cooke, Mr Fry and Dr Tabeart are Directors and 25% shareholders of Mitchell River Group Pty Ltd which charges
the Group for provision of a serviced office and administration staff.
7.3
Assets and liabilities at 30 June arising from transactions with related parties
Trade and other receivables
Trade and other payables
2020
US$
-
2,184
2019
US$
-
6,205
42 | P a g e
African Energy Resources Limited
Annual Report 2020
Notes to the Financial Statements (continued)
8.
Share based payments
8.1
Performance Rights
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
28-Nov-14
28-Nov-14
28-Nov-14
31-Mar-15
22-Nov-16
22-Nov-16
15-Aug-17
27-Nov-19
27-Nov-19
27-Nov-19
30-Mar-20
31-Dec-19
31-Dec-19
31-Dec-19
Vesting
hurdle
FC
PPA2
PPAZ
MMA2
PPA3
BFS2
GEO2
Unvested at
30 June 2019
Issued in
Year
Vested
in Year
Expired in
Year*
Unvested at
30 June 2020
Fair Value
(AUD)
4,500,000
666,667
300,000
500,000
1,166,667
100,000
300,000
7,533,334
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,500,000
666,667
300,000
500,000
1,166,667
100,000
300,000
7,533,334
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
* All performance that expired during the year did because the expiry date of the performance right had passed
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
9.
Other
9.1
Events occurring after the reporting period
On 20 July 2020, the Company issued 31,124,532 options exercisable at AUD$0.02 (2 cents) to a consultant. These options will vest
upon the successful completion of an agreement that results in a new party becoming a majority shareholder in the Sese Joint Venture
and expire on 20 July 2022.
The impact of the Coronavirus (COVID-19) pandemic is ongoing and while it has not significantly impacted the entity up to 30 June
2020, it is not practicable to estimate the potential impact, positive or negative, after the reporting date. The situation is rapidly
developing and is dependent on measures imposed by the Australian Government and other countries, such as maintaining social
distancing requirements, quarantine, travel restrictions and any economic stimulus that may be provided.
No other matters or circumstances have arisen since the end of the financial year which have significantly affected or may
significantly affect the operations, results or state of affairs of the Group in future financial years which have not been disclosed
publicly at the date of this report.
9.2
Contingencies and Commitments
There were no contingent assets or liabilities in the Group at 30 June 2020. There were no commitments at 30 June 2020.
43 | P a g e
African Energy Resources Limited
Annual Report 2020
Notes to the Financial Statements (continued)
9.3
Remuneration of Auditors
BDO Audit (WA) Pty Ltd: Audit and review of financial reports
9.4
New standards and interpretations not yet adopted
Early adoption of accounting standards
2020
US$
30,848
30,848
2019
US$
25,800
25,800
The Group has not elected to apply any pronouncements before their operative date in the annual reporting year beginning
1 July 2019.
New or amended Accounting Standards and Interpretations adopted
The Group has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian
Accounting Standards Board ('AASB') that are mandatory for the current reporting period.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
The following Accounting Standards and Interpretations are most relevant to the Group:
AASB 16 Leases
The Group has adopted AASB 16 from 1 July 2019. The standard replaces AASB 117 'Leases' and for lessees eliminates the
classifications of operating leases and finance leases. Except for short-term leases and leases of low-value assets, right-of-
use assets and corresponding lease liabilities are recognised in the statement of financial position. Straight-line operating
lease expense recognition is replaced with a depreciation charge for the right-of-use assets (included in operating costs) and
an interest expense on the recognised lease liabilities (included in finance costs). In the earlier periods of the lease, the
expenses associated with the lease under AASB 16 will be higher when compared to lease expenses under AASB 117.
However, EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) results improve as the operating expense is
now replaced by interest expense and depreciation in profit or loss. For classification within the statement of cash flows, the
interest portion is disclosed in operating activities and the principal portion of the lease payments are separately disclosed in
financing activities. For lessor accounting, the standard does not substantially change how a lessor accounts for leases.
Impact of adoption
AASB 16 was adopted using the modified retrospective approach and as such the comparatives have not been restated. The
impact of adoption of AASB16 was not material to the financial statements.
When adopting AASB 16 from 1 July 2019, the Group has applied the following practical expedients:
•
•
•
Applying a single discount rate to the portfolio of leases with reasonably similar characteristics;
Accounting for leases with a remaining lease term of 12 months as at 1 July 2019 as short-term leases;
Excluding any initial direct costs from the measurement of right-of-use assets;
• Using hindsight in determining the lease term when the contract contains options to extend or terminate the
lease; and
• Not apply AASB 16 to contracts that were not previously identified as containing a lease.
Standards and Interpretations in use 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 2020. 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.
Conceptual Framework for Financial Reporting (Conceptual Framework)
The revised Conceptual Framework is applicable to annual reporting periods beginning on or after 1 January 2020 and early
adoption is permitted. The Conceptual Framework contains new definition and recognition criteria as well as new guidance
on measurement that affects several Accounting Standards. Where the Group has relied on the existing framework in
determining its accounting policies for transactions, events or conditions that are not otherwise dealt with under the
Australian Accounting Standards, the Group may need to review such policies under the revised framework. At this time, the
application of the Conceptual Framework is not expected to have a material impact on the Group's financial statements.
44 | P a g e
African Energy Resources Limited
Additional Shareholder Information
Annual Report 2020
The following additional information required by the ASX Listing Rules is current as at 25 September 2020.
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
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Sentient Group
First Quantum Minerals
Alasdair Cooke (and associated entities)
PS Consulting Pty Ltd
Stacey Radford
Bond Street Custodians Limited
CS Third Nominees Pty Ltd
Donal Windrim
Helmet Nominees Pty Ltd
Mr Miroslaw Jan Marzec & Mrs Barbara Anne Wiszniewski
General Advisory Pty Ltd
Mr Timothy John De Burgh
Mrs Helen Elizabeth Martin
Mr Brian Henry Mccubbing & Mrs Adriana Maria Mccubbing
A & J Scott Pty Limited
Frazer Tabeart (and associated entities)
Raejan Pty Ltd
Mr Robert Cooke & Mrs Elizabeth Cooke
ZW 2 Pty Ltd
Jolib Pty Ltd
Total Top 20
Securities
% No. of holders
591,579,373
94.96
27,295,899
2,381,282
1,594,269
109,807
622,960,630
9,160,041
4.38
0.38
0.26
0.02
100
1.47
370
741
308
526
446
2,391
1,597
%
15.47
30.99
12.88
22.00
18.65
100
66.79
%IC
22.70%
13.92%
8.03%
4.01%
3.09%
1.56%
1.20%
1.10%
1.01%
1.01%
0.93%
0.85%
0.85%
0.83%
0.80%
0.77%
0.75%
0.72%
0.72%
0.71%
65.56%
Number of
Shares Held
141,404,786
86,692,308
50,003,683
25,000,000
19,237,334
9,693,148
7,502,500
6,871,914
6,306,484
6,300,000
5,800,926
5,276,923
5,276,923
5,163,000
5,000,000
4,774,100
4,700,000
4,500,000
4,500,000
4,435,625
408,439,654
There were 2,391 holders of 622,960,630 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).”
45 | P a g e
African Energy Resources Limited
Annual Report 2020
Additional Shareholder Information (continued)
Substantial Holders
As notified to the Company
Name
Sentient Group
First Quantum Minerals
Alasdair Cooke (and associated entities)
Other information
The company has not utilised a share buyback in the past 12 months
Number Of
Shares Held
141,404,786
86,692,308
50,003,683
%IC
22.70%
13.92%
8.03%
46 | P a g e
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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