African Energy Resources
Annual Report 2022

Plain-text annual report

African Energy Limited ABN 63 650 431 226 ACN 650 431 226 Annual Report 2022 AFRICAN ENERGY LIMITED Directors’ report 30 June 2022 The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'consolidated entity') consisting of African Energy Limited (referred to hereafter as the 'Company' or 'Parent Entity') and the entities it controlled at the end of, or during, the period from incorporation on 24 May 2021 to 30 June 2022 (“Period”). Directors The following persons were directors of African Energy Limited during the whole of the period and up to the date of this report, unless otherwise stated: Alasdair Cooke (appointed 24 May 2021) Charles (Frazer) Tabeart (appointed 24 May 2021) Valentine Chitalu (appointed 24 May 2021) Daniel Davis (appointed 24 May 2021) Principal activities The principal activity of the Consolidated Entity during the period was the development of power projects in southern Africa. Dividends No dividends have been paid or declared during the period. Review of operations The loss after tax for the consolidated entity amounted to $4,693,202; the net assets at 30 June 2022 were $154,659 and the cash outflows used in operating activities were $63,142 Significant changes in the state of affairs Nil Matters subsequent to the end of the financial year No matters or circumstances have arisen since the end of the financial period which have significantly affected or may significantly affect the operations, results, or state of affairs of the consolidated entity in future financial years. Likely developments and expected results of operations Information on likely developments in the operations of the consolidated entity and the expected results of operations have not been included in this report because the directors believe it would be likely to result in unreasonable prejudice to the consolidated entity. Environmental regulation The consolidated entity is not subject to any significant environmental regulation. 2 | P a g e AFRICAN ENERGY LIMITED Directors’ report 30 June 2022 Information on directors Name: Title: Alasdair Cooke Director Qualifications: BSc (Hons), MAIG Experience and expertise: 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. Special responsibilities: None Name: Title: Charles (Frazer) Tabeart Director Qualifications: PhD, BSc (Hons) ARSM, MAIG Experience and expertise: 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, and developing a particular expertise in porphyry copper mineralisation. Special responsibilities: None 3 | P a g e AFRICAN ENERGY LIMITED Directors’ report 30 June 2022 Name: Title: Valentine Chitalu Director Qualifications: MPhil, BAcc, FCCA Experience and expertise: 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. Special responsibilities: None Name: Title: Daniel Davis Director and Company Secretary Qualifications: CPA Experience and expertise: Mr Daniel 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. Special responsibilities: None Meetings of directors The number of meetings of the company's Board of Directors ('the Board') and of each Board committee held during the period, and the number of meetings attended by each director were: Alasdair Cooke Charles (Frazer) Tabeart Valentine Chitalu Daniel Davis Full board Attended 0 0 0 0 Held 0 0 0 0 Audit Committee Held Attended 0 0 0 0 0 0 0 0 Other Committee Held Attended 0 0 0 0 0 0 0 0 Shares issued on exercise of options No shares were issued on exercise of options during the period. Indemnity and insurance of officers The company has indemnified the directors and executives of the company for costs incurred, in their capacity as a director or executive, for which they may be held personally liable, except where there is a lack of good faith. 4 | P a g e AFRICAN ENERGY LIMITED Directors’ report 30 June 2022 During the financial period, the company paid a premium in respect of a contract to insure the directors and executives of the company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. Indemnity and insurance of auditors The company has not, during or since the end of the financial period, indemnified or agreed to indemnify the auditor of the company or any related entity against a liability incurred by the auditor. During the period, the company has not paid a premium in respect of a contract to insure the auditor of the company or any related entity. Proceedings on behalf of the company No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the company, or to intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or part of those proceedings. Auditor’s independence declaration A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out immediately after this directors' report. Auditor BDO Audit (WA) Pty Limited has been appointed the auditor in accordance with section 327A of the Corporations Act 2001. This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001. On behalf of the directors _________________________ Charles Tabeart Director 21 December 2022 Perth 5 | P a g e Tel: +61 8 6382 4600 Fax: +61 8 6382 4601 www.bdo.com.au Level 9, Mia Yellagonga Tower 2 5 Spring Street Perth WA 6000 PO Box 700 West Perth WA 6872 Australia DECLARATION OF INDEPENDENCE BY JARRAD PRUE TO THE DIRECTORS OF AFRICAN ENERGY LIMITED As lead auditor of African Energy Limited for the period ended 30 June 2022, 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 Limited and the entities it controlled during the period. Jarrad Prue Director BDO Audit (WA) Pty Ltd Perth 21 December 2022 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 LIMITED Contents 30 June 2022 Contents Statement of profit or loss and other comprehensive income ………………………………………………………… 8 Statement of financial position ………………………………………………………………………………………………………. 9 Statement of changes in equity ……………………………………………………………………………………………………… 10 Statement of cash flows ………………………………………………………………………………………………………………… 11 Notes to the financial statements ………………………………………………………………………………………………….. 12 Directors' declaration ……………………………………………………………………………………………………………….……. 26 Independent auditor's report to the members of African Energy Limited ……………………………………… 27 General information The financial statements cover African Energy Limited as a consolidated entity consisting of African Energy Limited and the entities it controlled at the end of, or during, the period. The financial statements are presented in Australian dollars, which is African Energy Limited 's functional and presentation currency. African Energy Limited is an unlisted public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business are: Registered office: Level 1,245 Churchill Avenue Subiaco WA 6008 Principal place of business: Level 1,245 Churchill Avenue Subiaco WA 6008 A description of the nature of the consolidated entity's operations and its principal activities are included in the directors' report, which is not part of the financial statements. The financial statements were authorised for issue, in accordance with a resolution of directors, on 21 December 2022. The directors have the power to amend and reissue the financial statements. 7 | P a g e AFRICAN ENERGY LIMITED Statement of profit or loss and other comprehensive income For the period ended 30 June 2022 Note 30-Jun-22 $ Personnel expenses Professional & administration expense Exploration & evaluation expensed Impairment expense Foreign currency gain / (loss) Loss before income tax expense Income tax expense Loss after income tax expense for the period Other comprehensive income Items that may be reclassified subsequently to profit or loss Foreign currency translation Comprehensive loss attributable to the owners of African Energy Limited 3 3 3 4 (7,000) (114,772) (30,000) (4,540,305) (1,125) (4,693,202) - (4,693,202) 7,456 (4,685,746) 8 | P a g e AFRICAN ENERGY LIMITED Statement of financial position As at 30 June 2022 Assets Current assets Cash and cash equivalents Trade and other receivables Total current assets Total assets Liabilities Current liabilities Trade and other payables Total current liabilities Total liabilities Net assets Equity Share capital Accumulated loss Reserves Total equity attributable to shareholders of the Company Note 30-Jun-22 $ 5 6 7 8 9 244,248 8,163 252,411 252,411 97,752 97,752 97,752 154,659 4,840,405 (4,693,202) 7,456 154,659 9 | P a g e  Contributed Accumulated losses Foreign Currency Translation Reserve $ - - - - Total equity $ 100 (4,693,202) - (4,693,202) $ - (4,693,202) - (4,693,202) equity $ 100 - - - - - - 7,456 7,456 (4,693,202) 7,456 (4,685,746) 4,840,305 4,840,305 4,840,405 - - (4,693,202) - - 7,456 4,840,305 4,840,305 154,659 AFRICAN ENERGY LIMITED Statement of changes in equity For the period ended 30 June 2022 At incorporation date 24 May 2021 Loss from continuing operations Loss from discontinued operations Loss for the period Other Comprehensive loss Effect of translation of foreign operations to group presentation currency Total comprehensive loss for the year Transactions with owners in their capacity as owners: In specie distribution from Alma Metals Limited As at 30 June 2022 10 | P a g e AFRICAN ENERGY LIMITED Statement of cash flows For the year ended 30 June 2022 Cash flows from operating activities Payments to suppliers and employees Payments for exploration and evaluation expenditure Net cash (outflow) from operating activities Cash flows from funding activities Received on in-species distribution Net cash inflow from funding activities Cash and cash equivalents at the beginning of the period Net increase/ (decrease) in cash and cash equivalents Effect of exchange rate fluctuations on cash held Cash and cash equivalents at the end of the period Note 30-Jun-22 $ (33,142) (30,000) (63,142) 307,319 307,319 - 244,177 71 244,248 15 5 11 | P a g e AFRICAN ENERGY LIMITED Notes to the financial statements 30 June 2022 Note 1. Significant accounting policies The principal accounting policies adopted in the preparation of the financial statements are set out below. As this is the first reporting period for the Company and the consolidated entity, there is no comparative information included in the financial report. Going concern The consolidated financial statements have been prepared on a going concern basis, which assumes that the Group will be able to realise its assets and extinguish its liabilities in the ordinary course of business. For the period ended 30 June 2022, the Group incurred a loss of $4,693,202 and had cash and cash equivalents of $244,248 as at that date, with net cash outflows from operations of $63,142 for the period. The ability of the Group to continue as a going concern is dependent on securing additional funding through debt or equity to continue to fund its operational. These conditions indicate a material uncertainty that may cast a significant doubt about the entity’s ability to continue as a going concern and, therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business. Management believes there are sufficient funds to meet the entity’s working capital requirements as at the date of this report. The financial statements have been prepared on the basis that the entity is a going concern, which contemplates the continuity of normal business activity, realisation of assets and settlement of liabilities in the normal course of business for the following reasons: The Directors are of the opinion that the Group’s exploration and development assets will attract further capital investment when required; and The Directors expect the Group to be successful in securing additional fund through debt or equity issues, when and if required. Should the Company 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. New or amended Accounting Standards and Interpretations adopted The consolidated entity 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. Basis of preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') and the Corporations Act 2001, as appropriate for for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board ('IASB'). Historical cost convention The financial statements have been prepared under the historical cost convention, except for, where applicable, the revaluation of financial assets and liabilities at fair value through profit or loss, financial 12 | P a g e AFRICAN ENERGY LIMITED Notes to the financial statements 30 June 2022 assets at fair value through other comprehensive income, investment properties, certain classes of property, plant and equipment and derivative financial instruments. Critical accounting estimates The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the consolidated entity's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 2. Parent entity information In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity only. Supplementary information about the parent entity is disclosed in note 13. Principles of consolidation The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of African Energy Limited ('company' or 'parent entity') as at 30 June 2022 and the results of all subsidiaries for the period then ended. African Energy Limited and its subsidiaries together are referred to in these financial statements as the 'consolidated entity' or the ‘group’. Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls an entity when the consolidated entity 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 consolidated entity. They are de-consolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated entity are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the consolidated entity. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent. Non-controlling interest in the results and equity of subsidiaries are shown separately in the statement of profit or loss and other comprehensive income, statement of financial position and statement of changes in equity of the consolidated entity. Losses incurred by the consolidated entity are attributed to the non-controlling interest in full, even if that results in a deficit balance. Where the consolidated entity loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The consolidated entity recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss. Foreign currency translation The financial statements are presented in Australian dollars (“A$"), which is African Energy Limited's functional and presentation currency. Functional currency of subsidiaries is US Dollar (“USD”). Foreign currency transactions Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Foreign operations 13 | P a g e AFRICAN ENERGY LIMITED Notes to the financial statements 30 June 2022 The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the reporting date. The revenues and expenses of foreign operations are translated into Australian dollars using the average exchange rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange differences are recognised in other comprehensive income through the foreign currency reserve in equity. The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of. Revenue recognition The consolidated entity recognises revenue as follows: Interest Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. Other revenue Other revenue is recognised when it is received or when the right to receive payment is established. Government grants 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. Income tax The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for: ● When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or ● When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset. Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entities which intend to settle simultaneously. 14 | P a g e AFRICAN ENERGY LIMITED Notes to the financial statements 30 June 2022 Current and non-current classification Assets and liabilities are presented in the statement of financial position based on current and non- current classification. An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the consolidated entity's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current. A liability is classified as current when: it is either expected to be settled in the consolidated entity's normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current. Deferred tax assets and liabilities are always classified as non-current. Cash and cash equivalents Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For the statement of cash flows presentation purposes, cash and cash equivalents also includes bank overdrafts, which are shown within borrowings in current liabilities on the statement of financial position. Trade and other receivables Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 30 days. The consolidated entity has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue. Other receivables are recognised at amortised cost, less any allowance for expected credit losses. Associates Associates are entities over which the consolidated entity has significant influence but not control or joint control. Investments in associates are accounted for using the equity method. Under the equity method, the share of the profits or losses of the associate is recognised in profit or loss and the share of the movements in equity is recognised in other comprehensive income. Investments in associates are carried in the statement of financial position at cost plus post-acquisition changes in the consolidated entity's share of net assets of the associate. Goodwill relating to the associate is included in the carrying amount of the investment and is neither amortised nor individually tested for impairment. Dividends received or receivable from associates reduce the carrying amount of the investment. When the consolidated entity's share of losses in an associate equals or exceeds its interest in the associate, including any unsecured long-term receivables, the consolidated entity does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. The consolidated entity discontinues the use of the equity method upon the loss of significant influence over the associate and recognises any retained investment at its fair value. Any difference between the associate's carrying amount, fair value of the retained investment and proceeds from disposal is recognised in profit or loss. 15 | P a g e AFRICAN ENERGY LIMITED Notes to the financial statements 30 June 2022 Intangible assets Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible assets are not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in profit or loss arising from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the carrying amount of the intangible asset. The method and useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or period. Impairment of non-financial assets Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit. Trade and other payables These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition. Finance costs Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in the period in which they are incurred. Employee benefits Short-term employee benefits Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled. Other long-term employee benefits The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are measured at the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. Defined contribution superannuation expense Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred. 16 | P a g e AFRICAN ENERGY LIMITED Notes to the financial statements 30 June 2022 Share-based payments Equity-settled and cash-settled share-based compensation benefits are provided to employees. Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the rendering of services. Cash-settled transactions are awards of cash for the exchange of services, where the amount of cash is determined by reference to the share price. The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using either the Binomial or Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option, together with non-vesting conditions that do not determine whether the consolidated entity receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions. The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods. The cost of cash-settled transactions is initially, and at each reporting date until vested, determined by applying either the Binomial or Black-Scholes option pricing model, taking into consideration the terms and conditions on which the award was granted. The cumulative charge to profit or loss until settlement of the liability is calculated as follows: ● ● during the vesting period, the liability at each reporting date is the fair value of the award at that date multiplied by the expired portion of the vesting period. from the end of the vesting period until settlement of the award, the liability is the full fair value of the liability at the reporting date. All changes in the liability are recognised in profit or loss. The ultimate cost of cash-settled transactions is the cash paid to settle the liability. Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market conditions are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are satisfied. If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value of the share-based compensation benefit as at the date of modification. If the non-vesting condition is within the control of the consolidated entity or employee, the failure to satisfy the condition is treated as a cancellation. If the condition is not within the control of the consolidated entity or employee and is not satisfied during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited. If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is treated as if they were a modification. 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 17 | P a g e AFRICAN ENERGY LIMITED Notes to the financial statements 30 June 2022 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. For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison, where applicable, with external sources of data. Issued capital 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. Dividends Dividends are recognised when declared during the financial year and no longer at the discretion of the company. Goods and Services Tax ('GST') and other similar taxes Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority. New Accounting Standards and Interpretations not yet mandatory or early 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 consolidated entity for the annual reporting period ended 30 June 2022. The consolidated entity has not yet assessed the impact of these new or amended Accounting Standards and Interpretations. 18 | P a g e AFRICAN ENERGY LIMITED Notes to the financial statements 30 June 2022 Note 2. Critical accounting judgements, estimates and assumptions The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below. Coronavirus (COVID-19) pandemic Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) pandemic has had, or may have, on the consolidated entity 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 consolidated entity 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 consolidated entity unfavourably as at the reporting date or subsequently as a result of the Coronavirus (COVID-19) pandemic. Impairment of non-financial assets other than goodwill and other indefinite life intangible assets The consolidated entity assesses impairment of non-financial assets other than goodwill and other indefinite life intangible assets at each reporting date by evaluating conditions specific to the consolidated entity and to the particular asset that may lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less costs of disposal or value-in-use calculations, which incorporate a number of key estimates and assumptions. Impairment of Exploration and evaluation assets 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. 19 | P a g e AFRICAN ENERGY LIMITED Notes to the financial statements 30 June 2022 Note 3. Expenses Administration services Corporate costs Other administration costs Employee expenses Directors Fees Impairment expense (1) 30-Jun-22 A$ 104,306 10,466 114,772 7,000 7,000 (4,540,305) (4,540,305) (1) During the period the Company impaired its investment in Sese to nil given the current economic environment and progress regarding the project. Note 4. Income tax expense At incorporation date 24 May 2021 Loss from continuing operations Loss from discontinued operations Loss for the period Other Comprehensive loss Effect of translation of foreign operations to group presentation currency Total comprehensive loss for the year Transactions with owners in their capacity as owners: In specie distribution from Alma Metals Limited As at 30 June 2022 At incorporation date 24 May 2021 Loss from continuing operations Loss from discontinued operations Loss for the period Other Comprehensive loss Effect of translation of foreign operations to group presentation currency Note 5. Cash and cash equivalents A-1+ FNB Botswana (not rated) 20 | P a g e 30-Jun-22 A$ 240,090 4,158 244,248 30-Jun-22 $ 100 - - - - - 4,840,305 4,840,305 4,840,405 100 - - - - AFRICAN ENERGY LIMITED Notes to the financial statements 30 June 2022 Note 6. Trade and other receivables GST and VAT receivable Other receivable Note 7. Trade and other payables Trade creditors Accrued expenses Note 8. Share capital Contributed equity 30-Jun-22 A$ 678 7,485 8,163 30-Jun-22 A$ 5,002 92,750 97,752 30-Jun-22 A$ 4,840,405 4,840,405 Date Number of shares Issue price $ A$ Balance on incorporation 100 100 Share Issue Balance at 30 June 2022 14/10/2021 632,960,530 692,960,630 $0.000485 4,840,305 4,840,405 Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the company does not have a limited amount of authorised capital. On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. Capital risk management The consolidated entity's objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital. Capital is regarded as total equity, as recognised in the statement of financial position. 21 | P a g e AFRICAN ENERGY LIMITED Notes to the financial statements 30 June 2022 Note 9. Reserves Foreign Currency Translation Reserve Opening Movement Closing Foreign currency reserve 30-Jun-22 A$ - 7,456 7,456 The reserve is used to recognise exchange differences arising from the translation of the financial statements of foreign operations to Australian dollars. It is also used to recognise gains and losses on hedges of the net investments in foreign operations. Note 10. Financial instruments Financial risk management objectives The consolidated entity’s activities expose it primarily to market and liquidity financial risks. The consolidated entity’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 consolidated entity. Risk management is carried out by the Board of Directors (‘the Board’). The Board identifies, evaluates and hedges financial risks within the consolidated entity. Market risk Foreign currency risk The consolidated entity undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk through foreign exchange rate fluctuations. Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities denominated in a currency that is not the entity’s functional currency. The risk is measured using sensitivity analysis and cash flow forecasting. At 30 June 2022, with the foreign currency denominated cash balance of $4,158 and the trade creditors balance of $875, both denominated in US Dollars (“US$”), the consolidated entity was not exposed to a significant foreign currency risk. Price risk The consolidated entity is not exposed to any significant price risk. Interest rate risk The consolidated entity is not exposed to any significant interest rate risk. Liquidity risk Vigilant liquidity risk management requires the consolidated entity to maintain sufficient liquid assets (mainly cash and cash equivalents) to be able to pay debts as and when they become due and payable. The consolidated entity manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities. Fair value of financial instruments Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value. 22 | P a g e AFRICAN ENERGY LIMITED Notes to the financial statements 30 June 2022 Note 11. Remuneration of auditors BDO Audit (WA) Pty Ltd were paid $10,000 in the Period. Note 12. Contingencies and commitments Contingent assets and liabilities The consolidated entity had no contingent assets or liabilities at 30 June 2022. Commitments The consolidated entity had no capital or other commitments at 30 June 2022. Note 13. Parent entity information Current Assets Non-Current Assets Total Assets Current Liabilities Total Liabilities Contributed equity Accumulated losses Reserves Total Equity Loss for the period Other comprehensive income / (loss) for the period Total comprehensive loss for the period 30-Jun-22 A$ 242,752 8,784 251,536 96,877 96,877 4,840,405 -4,685,746 - 154,659 -4,685,746 - -4,685,746 There were no commitments, contingent liabilities or contingent assets at the parent level at 30 June 2022. Note 14. Related parties a) Group structure The consolidated entity consists of African Energy Limited, being the parent company, and its subsidiaries, as per the table below. Name of entity Botswana Energy Solutions Limited Mmamantswe Coal (Pty) Ltd African Energy Holdings SRL 2 Phokoje Power (Pty) Ltd Country of incorporation British Virgin Is. Botswana Barbados Botswana Ownership interest 30-Jun-22 100% 100% 100% 100% 23 | P a g e AFRICAN ENERGY LIMITED Notes to the financial statements 30 June 2022 b) Subsidiaries On 1 November the company acquired interests completed the in-specie distribution of subsidiary entity African Energy Limited (“parent entity”) under a Restructure Agreement. In the parent entity the value of the distributed net assets was recorded as an investment in subsidiaries and increase in share capital. Net assets transferred to the consolidated entity upon completion of the in-specie distribution were as follows: Cash Sese investment1 Liabilities Net assets 30-Jun-22 A$ 307,319 4,533,410 (425) 4,840,304 1 Sese investment was fully impaired during the period. c) Key management personnel disclosure Short term employee benefits The short-term benefits include directors’ fees. 30-Jun-22 A$ 7,000 7,000 d) Other related party transactions The terms and conditions of the transactions with directors 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. Alma Metals Limited1 Geological consultancy Unpaid at 30 June Mitchell River Group2 Geological consultancy Unpaid at 30 June 30-Jun-22 A$ 10,198 198 248 149 1 Alma Metals Limited is a company related by directors Alasdair Cooke, Frazer Tabeart and Valentine Chitalu. 2 Mitchell River Group is a company related by directors Alasdair Cooke and Frazer Tabeart. There were no other transactions with related parties during the year ended, or the outstanding balance at 30 June 2022. 24 | P a g e AFRICAN ENERGY LIMITED Notes to the financial statements 30 June 2022 Note 15. Reconciliation of profit after income tax to net cash from operating activities (Loss) for the period Change in operating assets & liabilities (Increase) / decrease in receivables Increase / (decrease) in payables Net cash used in operating activities 30-Jun-22 $ (152,897) (8,063) 97,818 (63,142) Note 16. Events after the reporting period No matters or circumstances have arisen since the end of the financial year which have significantly affected or may significantly affect the operations, results, or state of affairs of the consolidated entity in future financial years. 25 | P a g e AFRICAN ENERGY LIMITED Independent auditor's report to the members of African Energy Limited Directors’ declaration In the directors' opinion: ● the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; ● the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in note 1 to the financial statements; ● the attached financial statements and notes give a true and fair view of the consolidated entity's financial position as at 30 June 2022 and of its performance for the period ended on that date; ● there are reasonable grounds to believe that the company and its subsidiaries will be able to pay its debts as and when they become due and payable. Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001. On behalf of the directors _________________________ Charles Tabeart Director 21 December 2022 Perth 26 | P a g e Tel: +61 8 6382 4600 Fax: +61 8 6382 4601 www.bdo.com.au Level 9, Mia Yellagonga Tower 2 5 Spring Street Perth WA 6000 PO Box 700 West Perth WA 6872 Australia INDEPENDENT AUDITOR'S REPORT To the members of African Energy Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of African Energy Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2022, 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 period 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 African Energy Limited, 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 2022 and of its financial performance for the period 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 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. Other information The directors are responsible for the other information. The other information obtained at the date of this auditor’s report is information included in the Directors’ report, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly 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 on the other information obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s responsibilities for the audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at: http://www.auasb.gov.au/auditors_responsibilities/ar3.pdf This description forms part of our auditor’s report. BDO Audit (WA) Pty Ltd Jarrad Prue Director Perth 21 December 2022 

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