Edenville Energy Plc
Annual Report 2013

Plain-text annual report

Annual Report & Accounts Annual Report & Accounts For the year ended 31 December 2013 For the year ended 31 December 2013 Contents for the year ending 31 March 2008 Company Information Chairman’s Statement Strategic Report Review of Operations Directors’ Biographies Directors’ Report Statement of Directors’ Responsibilities Remuneration Report Corporate Governance Report Independent Auditors’ Report – Group Group Statement of Comprehensive Income Group Statement of Financial Position Group Statement of Changes in Equity Group Cash Flow Statement Notes to the Group Financial Statements Independent Auditors’ Report – Company Company Statement of Financial Position Company Statement of Changes in Equity Company Cash Flow Statement Notes to the Company Financial Statements Notice of Annual General Meeting 2 3 5 10 12 14 15 16 17 20 22 23 24 25 26 43 45 46 47 48 61 Annual Report and Financial Statements 2013 1 Company Information for the year ending 31 March 2008 Directors Sally Joy Schofield Executive Chairman Rufus Victor Short Chief Executive Officer Mark Jonathan Pryor Non Executive Director Rakesh Ramesh Patel Finance Director Simon Rollason Non Executive Director Company Secretary David Venus and Company LLP Registered Office Nominated Adviser and Broker Bankers Auditors Solicitors Registrars Aston House Cornwall Avenue London N3 1LF Cantor Fitzgerald Europe 1 Churchill Place Canary Wharf London, E14 5RB Barclays Bank plc 9 High Street Stony Stratford Milton Keynes MK11 1HR HW Fisher & Company Acre House 11-15 William Road London NW1 3ER Harbottle & Lewis Hanover House 14 Hanover Square London W1S 1HP Capita Asset Services The Registry 34 Beckenham Road Beckenham Kent BR3 4TU 2 Edenville Energy plc Annual Report and Financial Statements 2013 2 Chairman’s Statement for the year ended 31 December 2013 I am pleased to present to shareholders the results for the year ended 31 December 2013. This has been my first complete year as Chairman of the Company. During the past year Edenville has progressed from an exploration to an early stage development company. 2013 marked the end of the high cost exploration and resource definition drilling and saw a move into the first phase of project development, the focus of which is firmly on assessing the potential options for monetising the Company’s assets. The Company’s prime focus is the Rukwa Coal Deposit; the release of the JORC Resource Report in September 2013 provided an upgraded Measured and Indicated resource of 171 million tonnes of raw coal, with an additional 2 million tonnes in the Inferred category. The Board is confident that at this stage we have sufficiently detailed knowledge of the coal deposit, supported by a robust geological model. Accordingly, we do not anticipate further drilling on the Rukwa Coal Deposit in the coming year. The tonnage and quality of the coal is believed to be capable of supporting a 100MW power station capable of providing electricity over a significant time period. This transition from exploration to early stage development prompted the Board’s decision to appoint Rufus Short as Non Executive Director in February 2013 followed by his move into the CEO’s position in September 2013, replacing Mark Pryor. Mark’s work during the exploration phase provided the fundamental building blocks for the Rukwa Coal Project and we are delighted to retain his services and knowledge as Non Executive Director. The Company announced its development strategy to the market in November 2013. We aim to monetise the Rukwa Coal Deposit by partnering with a power provider to build a coal-fired power station which would supply Tanzania’s proposed new power grid. Of specific interest for Edenville and its shareholders is the ‘Western Power Line’ which is planned to run close to the Rukwa Coal Deposit. Once constructed, this power grid will link existing and future power generation sources in the south and southwest of Tanzania to load centres in the Mwanza and Arusha regions in the north of the country. Edenville’s Rukwa Coal Deposit is ideally located and well placed from a development perspective to play a significant part in the Government of Tanzania’s national electrification plan. The Government’s intention is to increase installed generation capacity from 1,438MW to 2,780MW by 2015, providing access to electricity to an additional 4 million people, representing nine per cent of the population. The Tanzanian Government’s stated strategy of attracting foreign investment into the energy sector, has given international power producers the opportunity to have a presence in mainland Tanzania. As a result of this, in late 2013, the Board began early stage discussions with potential development partners. The Board of Edenville has signed Confidentiality Agreements with a number of groups that have the relevant experience and expertise to develop the proposed coal-to-power project. Financing On 27 March 2013, in order to provide the Company with sufficient working capital, the Company entered into an equity financing facility agreement (“EFF”) with Darwin and Henderson Volantis (“Darwin”), an existing shareholder. It provides Edenville with a facility of up to £5 million which (subject to certain limited restrictions) can be drawn down at any time over the next three years. The timing and minimum subscription price of any draw down is always at the complete control and sole discretion of the Company. There are no penalty fees payable for not using the facility. Edenville is under no obligation to make a draw down and may make drawdowns at its discretion, up to the total value of the EFF, by way of issuing subscription notices to Darwin. Following delivery of a subscription notice, Darwin will subscribe and the Company will allot to Darwin new ordinary shares of 0.02 pence each in Edenville. The subscription price will be the average of the three lowest Closing Bid Prices of the Ordinary Shares over the 15 trading days following the date of the subscription notice. The ability of the Company to raise equity under this facility depends on the liquidity of the market for the Company’s shares at the time of the drawdown request. During the year, the Company made two drawdowns: on 22 April 2013, the Company drew down £106,895 under the facility by way of a subscription of 53,000,000 new ordinary shares of 0.02p each, with the issue price being at a premium to the then market price and on 17 September 2013, the Company made a further drawdown of £390,000 through the subscription of 210,069,392 new ordinary shares of 0.02p each at a price of 0.186 pence per share. On 31 December 2013, the Company had a cash balance of approximately £300,000. On 17 January 2014, the Company completed a placing of 1,428,571,428 new ordinary shares raising gross proceeds of £1 million (the “Placing”). 3 Edenville Energy plc Annual Report and Financial Statements 2013 3 Chairman’s Statement for the year ended 31 December 2013 The Directors recognise that the Placing was at a significant discount to the prevailing share price at the time. The terms of the Placing illustrate the challenges that pre-production junior mining companies, such as Edenville, face raising finance. The Directors did not undertake the Placing without significant thought or exploration of financing alternatives. It is a fact that raising capital for the Company was and remains a significant challenge. The Directors will continue to ensure that the Company is adequately funded to continue its development. The Placing enabled the Company to progress its development and strategic partnership plans for the proposed 100MW plus power station. In addition to developing opportunities with potential strategic partners, the funds raised from the Placing, and a stronger balance sheet, will be utilised to develop the Rukwa coal-to-power project, cover working capital requirements and to continue negotiations with potential partners. As the Company moves away from the era of high cost exploration drilling into detailed development discussions, we took the opportunity to rationalise our portfolio of landholdings in Tanzania. Every hectare of ground held by the company incurs a cost, both from License Fees and associated work commitments, which can be significant. The relinquishment of four non-core Prospecting Licenses in March 2014, with a projected twelve month saving of over more than US$1 million dollars of committed spend, is a demonstration of the Board’s commitment to focus financial, managerial and technical resources on the development of the Rukwa Coal Deposit. The combination of a stronger balance sheet, with available cash of £850,000 at May 2014 and a focus on the Company’s key asset, better positions Edenville in continuing discussions with multiple power partners and technology providers as we seek the best outcome for shareholders. Edenville is regularly in discussions with local and national stakeholders in Tanzania. Rufus Short has taken responsibility for managing the Company’s operations in-country, building relationships with all stakeholders and engaging with potential partners. These negotiations have moved forward and are ongoing and I would like to take this opportunity to reassure shareholders that we continue to make good progress. The Board understands shareholder concerns over Company communications and the impact this may have on share price. However, due to the confidential and complex nature of the discussions underway communication between the Company and its shareholders has been limited. It takes time to identify the right partners and outcomes, and we look forward to updating shareholders when appropriate and in due course. The Board commits to a full strategic review in 6 months time should these discussions fail to provide an outcome for the Rukwa Coal Project which represents best value for our shareholders. The Board believes the coal-to-power opportunity represents the best route to commercialising the Rukwa Coal Deposit. It is a potential source of energy for a country and region undergoing significant, long term development of its power industry over a timescale of several years. The Board will continue discussions with potential partners whilst seeking opportunities and strategies to enhance shareholder value. Sally Schofield Chairman 3 June 2014 4 Edenville Energy plc Annual Report and Financial Statements 2012 4 Strategic Report for the year ended 31 December 2013 The directors present their strategic report for the year ended 31 December 2013. Principal activity The principal activity of the Group is the exploration and development of energy commodities predominantly coal and uranium in Africa. Business review and future developments The purpose of this review is to show how the Group assesses and manages risk and uncertainty and adopts appropriate policy targets. Further details of the Group’s business and expected future developments are also set out in the Chairman’s Statement on pages 3 and 4 and the Review of Operations on pages 10 and 11. Exploration approach The Group actively manages geological exploration on its licences by implementing a phased strategy that progressively increases the level of geological understanding for each licence to facilitate more focused exploration and resource development in the longer term. All field work is conducted by citizens of Tanzania under the direct supervision of the directors of Edenville International (Tanzania) Limited, who in return report directly to the Board of the Group. The Group also engages internationally recognised consultants to provide further guidance to the Board of the Group. Initial work consists of a desk-top review involving the collection, collation and re-interpretation of all available historical data, supplemented by regional-scale geological reconnaissance mapping and sampling. This will define the host geological units for mineralisation and allow for progressively more focused and detailed exploration that will potentially lead into a drilling campaign and ultimately ore body delineation and subsequent mineral resource estimations. Financial and performance review The results of the Group for the year ended 31 December 2013 are set out on page 23. Principal risks and uncertainties and risk management The principal risks facing the Group are those relating to the volatility of the commodities markets, reliance on the expertise of key Group personnel, risks connected with uncertainties of Tanzanian political, fiscal and legal systems, including taxation and currency fluctuations, as well as those regimes in which the Group has direct or indirect interests. The Board and senior management regularly monitor and report on all areas of risk, through formal reports on a monthly basis as well as through ad hoc communications. Senior management regularly visits operations to understand site-specific risks as well as to assess local political, fiscal and legal risks. In this regard, the Group maintains a strict policy of compliance with local laws and regulations, and community issues (including health and safety, community development, and environmental responsibility) are at the forefront of strategic and operational decision-making. The following are the key risks that face the Group: Exploration and development risk The exploration for and development of mineral deposits involves significant risks which no combination of careful evaluation, experience and knowledge can entirely eliminate. While the discovery of an ore body may result in substantial rewards, few properties which are explored are ultimately developed into producing mines. There is no certainty that the exploration programmes described in this document will result in the discovery of ore in commercial quantity and quality, or result in profitable commercial mining operations. Significant capital investment is required to achieve commercial production from successful exploration efforts and there can be no certainty that the Company will be able to obtain the financing required to continue operations and meet its commitments for the exploration and development programme. 5 Edenville Energy plc Annual Report and Financial Statements 2013 5 Strategic Report for the year ended 31 December 2013 The commercial viability of a mineral deposit is dependent upon a number of factors. These include the attributes of the deposit such as size, grade and proximity to infrastructures; current and future mineral prices which can be cyclical; and government regulations, including those relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental protection. The effect of these factors, either alone or in combination, cannot be entirely predicted and their impact may result in the Group not receiving an adequate return on invested capital. Conclusions drawn during mineral exploration are subject to the uncertainties associated with all sampling techniques and to the risk of incorrect interpretation of geological, geochemical, geophysical, drilling and other data. The Group may carry out some of its exploration activities through joint ventures with others to spread the exploration risk and to decrease the Group’s financial exposure to individual projects. There can be no guarantee that these partners will not withdraw for their own reasons. Operational risks Mineral exploration operations generally involve a degree of physical risk. The Group’s operations are and will be subject to all the hazards and risks normally encountered in the exploration of minerals. These include climatic conditions, hazards of operating vehicles and plant, risks associated with operating in remote areas and security and health risks associated with work in developing countries. The exploration activities of the Group are subject to various federal, provincial and local laws governing prospecting, development, production, taxes, labour standards and occupational health, mine safety, toxic substances and other matters. Exploration activities are also subject to various federal, provincial and local laws and regulations relating to the protection of the environment. These laws mandate, among other things, the maintenance of air and water quality standards, and land reclamation. These laws also set forth limitations on the generation, transportation, storage and disposal of solid and hazardous waste. Although the Group’s exploration activities are currently carried out in accordance with all applicable rules and regulations, no assurance can be given that new rules and regulations will not be enacted or that existing rules and regulations will not be applied in a manner which could limit or curtail future production or development. Amendments to current laws and regulations governing operations and activities of exploration, or future mining and milling, or more stringent implementation thereof, could have a material adverse effect on the value of the Group’s assets. The operational risks are mitigated, where possible, as follows: l l l l l the executive directors visit each operation regularly, when these key risks are reviewed and actions taken as necessary; control procedures have been communicated to operations’ management who review local procedures for Group compliance; the in-country operations team submit monthly reports to head office which cover operational progress and analysis of technical data. Results obtained from testing of mineral samples by independent laboratories are sent to the operational team and copied directly to the UK head office. A strict quality assurance/quality control procedure, designed by a leading independent consultancy group, is in place covering all aspects of geological exploration and sample collection with local staff trained to standards set by the UK head office; the executive directors visit each operation regularly to review local operational and technical procedures and controls and compliance with Group procedures and report to the Board; the head office finance function visits each operation to review local financial controls and compliance with Group procedures and report to the board. Human resources The Group is reliant on a small team of experienced mining professionals for their success and is more than usually vulnerable to the adverse effects of losing key personnel. 6 Edenville Energy plc Annual Report and Financial Statements 2013 6 Strategic Report for the year ended 31 December 2013 Licences While the Directors have no reason to believe that the existence and extent of any of the Group’s properties are in doubt, title to mining properties is subject to potential litigation by third parties claiming an interest in them. The failure to comply with all applicable laws and regulations, including failures to pay taxes, meet minimum expenditure requirements, or carry out and report assessment work, may invalidate title to portions of the properties where the mineral rights are held by the Group. The Group might not be able to retain its licence interests when they come up for renewal, despite a possibility of discovering ore bodies. Under the Mining Act 2010, at the end of the initial licence term and on renewal, a company must relinquish 50% of the land area held under licence. The dropped portion may be re-applied for; however, relinquishing 50% of the licence area does not necessarily devalue the licence. Mineral deposits may cover areas of only a few Km2 and the process of relinquishment is such that a company will retain the part of the licence that is considered most prospective for a mineral discovery. If the original licence covers 40km2 the retained ground after relinquishment is more than sufficient for the discovery of a world class deposit and does not detract from the value of the property. While the Group has undertaken all the customary due diligence in the verification of title to its material mineral properties, this should not be construed as a guarantee of title. The Group’s management team has been operating in Tanzania for a number of years and have experience in managing the title to its properties. It maintains professional relationships with the relevant government bodies responsible for the issue and renewal of licences but if there was an indication of an issue over the title to any of its properties it would seek advice from the Group’s lawyers. Economic risks The value of the Group’s properties may be affected by changes in the market price of minerals which fluctuate according to numerous factors beyond the Group’s control. Changes in interest rates and exchange rates, the rate of inflation and world supply of and demand for mineral commodities all cause fluctuations in such prices. Such external economic factors are in turn influenced by changes in international investment patterns, monetary systems and political conditions. Future mineral price declines could have an adverse effect on the value of the Group’s assets and its ability to raise further funds. Certain of the Group’s payments, in order to earn or maintain property interests, are to be made in the local currency in the jurisdiction where the applicable property is located. As a result, fluctuations in the US dollar against the pound and each of those currencies against local currencies in jurisdictions where properties of the Group are located could have an adverse effect on the Group’s financial position which is denominated and reported in sterling. The Group has not insured against any risks. Risks not insured against and for which the Group may become subject to liability include environmental pollution, political risk and other hazards against which the Group cannot insure or which it may elect not to insure. The payment of such liabilities may have a material adverse effect on Group’s results of operation and financial condition. The market price of commodities is volatile and is affected by numerous factors beyond the Group’s control. There is the risk that the price earned for minerals will fall to a point where it becomes uneconomic to extract them from the ground. The prices of these commodities are affected by a number of factors beyond Edenville’s control The principal commodities in Edenville’s portfolio are uranium and coal. During 2013 the price of uranium dropped 19% over the year starting January 2013. The price of coal has also fallen 9% (Australian Thermal Coal) over the year starting January 2013. Subsequent to the year end the price of both commodities has continued to decrease. The impact of the price of uranium and coal on the economics of Edenville project is kept under close review. Political risks A substantial portion of the assets of the Group are located in non-UK jurisdictions. As a result, it may be difficult for investors to enforce judgments obtained against the Company if the damages awarded exceed the realisable value of the Company’s UK assets. The political situations in African countries may introduce a degree of risk with respect to the Group’s activities. In the countries where the Group has exploration activities, governments exercise control over such matters as exploration and mining licensing, permitting, exporting and taxation. Changes of policy by such governments may adversely impact the Group’s ability to carry out exploration activities. Edenville minimises political risk by operating in countries considered to have relatively stable political systems, established fiscal and mining codes and a respect for the rule of law. 7 Edenville Energy plc Annual Report and Financial Statements 2013 7 Strategic Report for the year ended 31 December 2013 Impact of law and Governmental regulations The Group’s investments may be subject to the foreign exchange and other laws of various countries that may prevent, materially delay or at least require governmental approval for, the full or partial repatriation of the Group’s investments. Foreign investment in companies in emerging countries may be restricted or controlled to varying degrees. These restrictions may, at times, limit or preclude foreign investment and increase the costs and expenses of the Group. Additionally, under certain circumstances a country may impose restrictions on capital remittances abroad. The Group could be adversely affected by delays in, or refusal to grant any required governmental approval for, repatriation of capital or dividends held by the Group or their conversion into foreign currency. In addition, gains from the disposal of such securities may be subject to withholding taxes, income tax and capital gains tax. The Group must comply with, inter alia, the current and future Tanzanian regulations relating to mineral exploration and production. The institution and enforcement of such regulations could have the effect of increasing the expense and lowering the income or rate of return from, as well as adversely affecting the value of, the Group’s assets. Dependency on a single country The Group’s current exploration activities are situated entirely in Tanzania. The political situations in Africa may introduce a degree of risk with respect to the Group’s activities. Risks may include, among others, labour disputes, delays or invalidation of governmental orders and permits, corruption, uncertain political and economic environments, civil disturbances and terrorist actions, arbitrary changes in laws or policies, foreign taxation and exchange controls, opposition to mining from environmental or other non-governmental organisations, limitations on foreign ownership, limitations on the repatriation of earnings, infrastructure limitations and increased financing costs. In Tanzania, the government exercises control over exploration and mining licensing, permitting, exporting and taxation. The Board believes that the Government of Tanzania supports the development of natural resources. However, there is no assurance that future political and economic conditions in Tanzania will not result in the Government of Tanzania changing its political attitude towards mining and adopting different policies respecting the exploration, development and ownership of mineral resources. Any such changes in policy may result in changes in laws affecting ownership of assets, land tenure and mineral licences, taxation, royalties, rates of exchange, environmental protection, labour relations, repatriation of income and return of capital, which may affect the Group’s ability to undertake exploration and future mining operations in the properties in respect of which it has obtained exploration and mining rights to date and may adversely impact the Group’s ability to carry out its activities. Management is actively evaluating other coal projects in the African continent in order to expand the Group’s coal resource base and reduce dependency on Tanzania. Competition risks The mineral exploration and mining business is competitive in all of its phases. The Group competes and will compete with numerous other companies and individuals, including competitors with greater financial, technical and other resources, in the search for, and the acquisition of, attractive mineral properties. The Group’s ability to acquire properties in the future will depend not only on its ability to develop its present properties, but also on its ability to select and acquire promising properties or prospects for mineral exploration. There is no assurance that the Group will continue to be able to compete successfully with its competitors in acquiring such properties or prospects. Edenville is aware that it operates in an area considered highly prospective to competitive companies. The management monitor the activities of other operators and monitor their development and future plans from information available in the public domain, which allows the company to evaluate whether these competitors pose a threat to our market position. Financing The further development and exploration of the various mineral properties in which the Group holds interests is dependent upon the Group’s ability to obtain financing through joint venturing projects, debt financing, equity financing or other means. There is no assurance that the Group will be successful in obtaining the required financing. If the Group is unable to obtain additional financing as needed some interests may be relinquished and/or the scope of the operations reduced. 8 Edenville Energy plc Annual Report and Financial Statements 2013 8 Strategic Report for the year ended 31 December 2013 Financial risks The Group’s multi-national operations expose it to a variety of financial risks: (i) Foreign exchange risk The majority of exploration costs are in United States dollars or Tanzanian schillings. Accordingly, foreign exchange fluctuations may adversely affect the Group’s financial position and operating results. The Group utilises exchange rate hedging where appropriate. (ii) Liquidity risk Prudent liquidity risk management in the context of the Group implies maintaining sufficient cash in the necessary currencies to be able to pay creditors as and when they fall due. The Group has a comprehensive system for financial reporting. The board approves the annual budget which is revised through the year as necessary with the board’s approval. Monthly results are reported against budgets and variances analysed. Great importance is placed on the monitoring and control of cash flows, and cash forecasts are reported to the board; (iii) Credit risk Cash balances are deposited with banks with a high credit rating. Key performance indicators The Company is currently a resource exploration and development entity, and consequently its assets comprise predominantly early phase projects that are not yet at the production stage. As a result, no revenue would be generated from these projects in the short-term and therefore the key performance indicators for the Company are linked to the achievements of project milestones, the increase in overall enterprise value and cash position. The Board monitors relevant KPIs which are focused on managing the exploration and appraisal operations. The KPIs monitored by the Group on a monthly basis are as follows: Financial KPIs l Exploration expenditure. l Total expenditure burn rates. l Corporate overheads as a percentage of total expenditure. Non financial KPIs l Health and safety –There were no reported health and safety incidents during the year. l Operational success – Relevant information is reported in the ‘Review of Operations’ on pages 10 and 11. Rufus V Short Chief Executive Officer 3 June 2014 9 Edenville Energy plc Annual Report and Financial Statements 2013 9 Review of Operations for the year ended 31 December 2013 In September 2013, I was delighted to be appointed as CEO of Edenville Energy, this was following my appointment to the Board as Non-Executive Director in February last year. The completion of the upgraded JORC Resource Report, published March 2013, for the Rukwa coal project, and centred on the Namwele, Mkomolo and Muze deposits, got the year off to a good start. This was a result of a robust model and resource calculation by Sound Mining Solutions (SMS) of South Africa which resulted in 61.5 million tonnes of measured, 109.6 million tonnes indicated and 2 million tonnes of inferred raw coal. The conclusions of a follow up Scoping Study, also generated by SMS, demonstrated that there was a viable commercial opportunity for Edenville to become a power producer, utilising a small scale, coal to power scenario, which would supply energy to the local area. During this period, we commissioned a Tanzanian consultancy, RAFCO group, to assist in dialogue with the Tanzanian Government and commercial organizations. The project and the power plant concept were received very favourably. Consequently, we decided to also review and develop options for scaling up to a larger overall project that could deliver a +100MW power facility. This gave Edenville the opportunity to move towards the development of a larger power station, utilising our entire coal resource, and would feed directly into the proposed new grid infrastructure which is projected to run just a few kilometres from the Rukwa Coal Deposit. In late 2013, the Management team entered into early stage discussion with potential partners from Asia, with the relevant experience to develop the project. We consider it crucial to have explored options for the project with potential partners before committing to major expenditure on feasibility study work. Their ability to both manage and construct a large power project, as well as giving security to investors and financial institutions is vital. To enable rapid progress various consultancy tenders have been reviewed, the consultants ready to carry out feasibility work once partners are established. Feasibility work will likely include some trial mining from the project area to gain a better understanding of the coal characteristics and the mining environment. We have submitted an Environmental Impact Assessment (‘EIA’) to the regulatory authorities to gain a permit to commence a starter pit operation at the site. We expect these permissions to be in place in mid 2014. To gain understanding of the projects potential we have visited power producers and development companies with a track record of building power stations in the 100-250 MW size, utilizing coal of a similar quality to that seen in the Rukwa Coal Deposit. From a technical perspective, we engaged an independent UK based power consultant who visited Rukwa and assessed the project site for the key factors for power generation and distribution namely, fuel feedstock, water supply and infrastructure. The view from all areas is that coal from Rukwa is suitable for use in a coal fired power plant that utlilizes off the shelf technology to meet or exceed all current emissions regulations and guidelines. Through direct dialogue with engineering groups and power producers we have been able to gain a greater clarity on Rukwa’s potential and are confident moving ahead into the feasibility process, once a suitable partner has been identified. Following a review of the Company’s portfolio of license interests, the Board’s decision to relinquish some of its non-core licenses will free up both capital and resources which we will be able to put into the Rukwa coal-power project, and which the Board believes represents the best value for shareholders. Outlook We believe we are now near to a point where the project can move to the next phase of detailed feasibility with the assistance and involvement of suitable engineering and financing groups. And Edenville employees, be they in Tanzania or in the UK, are continuing to work towards this goal. These advancements would see Edenville holding a significant position in what will be a large contributor to Tanzania’s domestic power supply. I look forward to updating shareholders of our progression in the coming months. 10 Edenville Energy plc Annual Report and Financial Statements 2013 10 Review of Operations for the year ended 31 December 2013 CSR We have an active Corporate Responsibility (CSR) programme which has been in place since 2010. Edenville implemented a training program for locals who were interested in working with the Company and we subsequently employed several local people to work on the exploration programme at Mkomolo, Namwele and Muze since early 2011. At the same time, the Company are involved directly in the general improvement of the local communities. During the drill campaigns in 2013, for example, Edenville donated 500 sheets of aluminum to the Lau and Muze communities to assist in the building of new clinics and schools; we remain actively engaged with the local population providing assistance and support where appropriate. R V Short Chief Executive Officer 3 June 2014 11 Edenville Energy plc Annual Report and Financial Statements 2013 11 Directors’ Biographies for the year ended 31 December 2012 Sally Schofield BEng (Hons) Industrial Geology, ACSM, FGS, MIMMM, Aged 42 Executive Chairman Rufus Victor Short Aged 50 Chief Executive Officer Rakesh Patel BA (Hons) Economics, FCCA, CF, Aged 50 Finance Director Sally holds a First Class B.Eng (hons) in Industrial Geology from Camborne School of Mines, University of Exeter. She has 19 years experience in commercial, technical and operational capacities in geographically and politically diverse regions including Kazakhstan, Albania, Central America, Brazil and Chile. She has held senior positions in the technical, corporate and investor relations functions of both the mining business and with RMC, now part of CEMEX, the global building materials giant. Her business skills have been recognised by several external parties, including Management Today, Courvoisier Future 500 and HM The Queen. She is a Fellow of the Geological Society (FGS) and a Member of the Institute of Directors (MIoD). Rufus is a qualified surveyor and also holds an MSc in Mineral Economics from Curtin University Western Australia. He has 25 years experience in the resources industry having worked in engineering and management positions in Australia, South East Asia and the FSU with companies such as PanAust, Newcrest and Aurora Gold. A large part of his experience has been on development of projects in remote locations such as Borneo and Laos and he has worked to build coal, gold, silver and copper mines in such locations. Rufus has also spent several years working for various Australian mining consultancies such as AMC. Rufus is currently an independent mining consultant having previously worked at Investec plc for 6 years as an Investment Banker in the resources space. He is a member of the Association of Mining Analysts and a Member of the Insitute of Directors (MIoD). Rakesh Patel qualified as a chartered certified accountant in 1991. From 1992, he led the corporate finance division of Gerald Edelman, chartered accountants, dealing with acquisitions, disposals, mergers, private placings and stock market flotations. Rakesh was involved in the acquisition of Ryman the Stationer and left the firm in 1996 to become group financial controller of Chancerealm Limited, a group including Ryman Limited where he was involved in the acquisition and integration of Contessa Ladieswear Limited. Rakesh returned to Gerald Edelman in 1997 until leaving in March 2003 to join Adler Shine LLP, chartered accountants, where he heads the firm’s corporate finance division. Rakesh has acted in over 35 AIM transactions as Reporting Accountant and has also acted as interim or part-time director to a number of private and public companies. Rakesh is a Member of the Institute of Directors (MIoD). 12 Edenville Energy plc Annual Report and Financial Statements 2013 12 Directors’ Biographies for the year ended 31 March 2012 Mark Pryor BSc (Hons) Geology & Mineralogy, FGS, FSEG, Pr.Sci.Nat, Aged 54 Non Executive Director Simon Rollason BSc (Hons) Geology, MIMMM, FGS, Aged 47 Non Executive Director Mark Pryor is an Independent Geological Consultant working with private mining and exploration groups, based out of the United Kingdom and holds a BSc (Hons) degree from the University of Aberdeen. He has 25 years of management experience in advanced stage exploration and mine development projects worldwide. He is a ‘Qualified Person’ as defined by the Securities Commission and regularly submits Independent Technical Reports for companies wishing to list on the Stock Exchange as well as Independent Technical Reports and press releases for quoted companies. Mark has worked for major and mid-tier mining companies and has many contacts within the venture capital sector of the mining industry. Mark has extensive global experience having worked in Mexico, EurAsia, China, Southern Africa and South America, holding management positions in recognised companies in the industry including Placer Dome, Minefinders, Monarch Resources and Anglo American. Mark is an associate of SRK (UK) Ltd and is a Fellow of the Geological Society, Society of Economic Geologists and is a registered Natural Scientist (Pr. Sci. Nat). Simon graduated from the University of the Witwatersrand, South Africa in 1990 with a BSc (Hons) degree in Geology. He has gained over 20 years international experience working in both mining and geological exploration. During this time, Simon has worked in Africa, the Middle East, Central Asia and the Far East with both multi-nationals and junior resources companies. Simon has worked on gold, nickel, coal, copper, base metals, uranium and precious stone projects, ranging from grassroots to producing assets. He has been involved with and managed operations that have varied from exploration and evaluation projects to successful feasibility studies. Simon is a Fellow of the Geological Society and a Member of the Institute of Materials, Minerals and Mining, the Society of Economic Geologists and the Society of Mining, Metallurgy and Exploration. 13 Edenville Energy plc Annual Report and Financial Statements 2013 13 Directors’ Report for the year ended 31 December 2013 The Directors present their annual report and audited Group financial statements for the year ended 31 December 2013. Dividends The Directors do not recommend payment of a dividend for the year (2012: nil). The loss is transferred to reserves. Directors and Directors’ interests The Directors at the date of these financial statements who served during the year and their interests in the Ordinary Shares in the Company are as follows: Ordinary shares of 0.02p held at 31 December 2013 Ordinary shares of 0.02p held at 31 December 2012 Simon Rollason Mark Pryor Rakesh Patel Sally Schofield 2,660,603 Nil Nil 1,319,261 The Directors’ interests in share options as at 31 December 2013 are as follows: Simon Rollason Mark Pryor Rakesh Patel Sally Schofield Rufus Short Options at 31 December 2013 23,121,082 23,121,082 60,114,813 60,114,813 60,114,813 Exercise price 0.25p 0.25p 0.25p 0.25p 0.25p Date of grant 21.10.13 21.10.13 21.10.13 21.10.13 21.10.13 First date of exercise 21.10.14 21.10.14 21.10.14 21.10.14 21.10.14 Share capital Details of issues of Ordinary Share capital during the year are set out in note 20. 2,660,603 Nil Nil 1,319,261 Final date of exercise 20.10.23 20.10.23 20.10.23 20.10.23 20.10.23 Financial instruments and other risks Details of the use of financial instruments by the Company and its subsidiary undertakings are contained in note 23 of the financial statements. Details of risks and uncertainties that affect the Group’s business are given in the Strategic Report. Provision of information to auditors So far as each Director at the date of approval of this report is aware, there is no relevant audit information of which the Company’s auditors are unaware and each Director has taken all steps that he ought to have taken to make himself aware of any relevant audit information and to establish that the auditors are aware of that information. Auditors H.W. Fisher & Company have expressed their willingness to continue in office as auditors and a resolution to re-appoint them will be proposed at the next Annual General meeting. This report was approved by the board on 3 June 2014 and signed on its behalf. Rufus V Short Chief Executive Officer 14 Edenville Energy plc Annual Report and Financial Statements 2013 14 Statement of Directors’ Responsibilities for the year ended 31 December 2013 The Directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law the directors have prepared the Group financial statements in accordance with International Financial Reporting Standards (‘IFRSs’) as adopted by the European Union. Under company law, the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of the Group for that year. The Directors are also required to prepare financial statements in accordance with the rules of the London Stock Exchange for companies trading securities on the AIM market. In preparing these financial statements the directors are required to: l select suitable accounting policies and then apply them consistently; l make judgements and estimates that are reasonable and prudent; l l state whether they have been prepared in accordance with IFRSs as adopted by the European Union, subject to any material departures disclosed and explained in the financial statements; and prepare the financial statements on the going concern basis, unless it is inappropriate to presume that the Group and Company will continue in business. The Directors confirm that they have complied with the above requirements in preparing the financial statements. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the requirements of the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and the Group, and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Website publication The Directors are responsible for ensuring the annual report and the financial statements are made available on a website. Financial statements are published on the Company’s website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company’s website is the responsibility of the Directors. The Directors’ responsibility also extends to the on-going integrity of the financial statements contained therein. 15 Edenville Energy plc Annual Report and Financial Statements 2013 15 Remuneration Report for the year ended 31 December 2013 The remuneration committee comprised the Company’s chairman, Sally Schofield, who was the sole member of the committee until 5 March 2013. Upon Sally Schofield’s appointment to the Executive Board, Rufus Short was appointed to the remuneration committee. The committee is, within the agreed terms of reference, responsible for making recommendations to the directors on matters relating to the Group’s remuneration structure, including pension rights, the policy on compensation of executive directors and their terms of employment, with the objective of attracting, motivating and retaining high quality individuals who will contribute fully to the success of the Group’s businesses. As the scope of operations expands the Company intend to increase the number and scope of the non-executive directors. The Company now has two non-Executive directors up from one in the previous period. During the year, the Remuneration Committee did not operate and all relevant matters were dealt with by the full Board. Remuneration policy Salaries are reviewed annually on the basis of market comparisons with positions of similar responsibility and scope in comparable industries. The full Board takes into account both Group and personal performance in reviewing directors’ salaries. Non-executive directors’ remuneration Fees for non-executive directors are determined by the full Board on the basis of market comparisons with positions of similar responsibility and scope in companies of a similar size in comparable industries. Non-executive directors do not have service contracts, are not eligible for pension scheme membership and do not participate in any of the Group’s bonus schemes. They have letters of engagement with the Company and their appointments are terminable on one month’s or three months’ written notice on either side. Service agreements The full Board has adopted current best practice in respect of service agreements issued on all new appointments. Executive Directors are employed under six month rolling service contracts. Share options Details of share options granted to directors are included in the Directors’ Report. Directors’ remuneration Details of remuneration of the directors of the Company who served in the year ended 31 December 2013 are set out below: Name Executive Rakesh Patel Sally Joy Schofield (moved to Chairman 5 March 2013 from Non Executive) Rufus Short (appointed Non Executive 18 February 2013 – moved to CEO 1 September 2013) Non-Executive Mark Pryor (moved from CEO 1 September 2013) Simon Rollason (moved to Non Executive 5 March 2013 from Executive Chairman) Fees and other remuneration £ Taxable benefits £ 2013 Total £ 2012 Total £ 65,000 57,500 47,359 61,250 27,500 258,609 – – – – – – 65,000 62,500 57,500 20,000 47,359 – 61,250 62,500 27,500 62,500 258,609 207,500 The Directors have been and continue to be paid substantially less than their peers on the boards of AIM listed mining companies as indicated in Directors’ Pay on AIM 2014, Vitesse Media Research Report. Share based payment charge in respect of share options granted to directors amounted to £ 39,797 (2012: £39,999 ). 16 Edenville Energy plc Annual Report and Financial Statements 2013 16 Corporate Governance Report for the year ended 31 December 2013 Compliance with the UK Corporate Governance code Under the AIM Rules, the Company is not formally required to comply with the UK Corporate Governance Code. Nevertheless the Company has taken steps to comply with the Code in so far as it can be applied practically, given the size of the Company and the nature of its operations. The Company has complied with the provisions set out in Section 1 of the FRC code as annexed to the listing rules of the Financial Services Authority since its admission to the AIM market of the London Stock Exchange in August 2003, to the extent that they are practical for a Group of its size and resources. The directors consider that the Group is not of a size to warrant the need for a separate nominations committee or internal audit function. Board of directors The Board currently comprises an Executive Chairman (Sally Schofield), two further Executive Directors (Rakesh Patel and Rufus Short) and two Non-Executive Directors (Simon Rollason and Mark Pryor). An agreed procedure exists for Directors in the furtherance of their duties to take independent professional advice. With the prior approval of the Chairman, all Directors have the right to seek independent legal and other professional advice at the company’s expense concerning any aspect of the company’s operations or undertakings in order to fulfil their duties and responsibilities as Directors. If the Chairman is unable or unwilling to give approval, Board approval will be sufficient. Newly appointed Directors are made aware of their responsibilities through the Company Secretary. The Company does not make any provision for formal training of new Directors. Conflicts of interest The Board confirms that it has instituted a process for reporting and managing any conflicts of interest held by Directors. Under the Company’s Articles of Association, the Board has the authority to approve such conflicts. Company materiality threshold The Board acknowledges that assessment on materiality and subsequent appropriate thresholds are subjective and open to change. As well as the applicable laws and recommendations, the Board has considered quantitative, qualitative and cumulative factors when determining the materiality of a specific relationship of Directors. Ethical standards As part of the Board’s commitment to the highest standard of conduct, the Company adopts a code of conduct to guide executives, management and employees in carrying out their duties and responsibilities. The code of conduct covers such matters as: l l l l l l responsibilities to shareholders compliance with laws and regulations relations with customers and suppliers ethical responsibilities employment practices responsibility to the environment and the community. 17 Edenville Energy plc Annual Report and Financial Statements 2013 17 Corporate Governance Report for the year ended 31 December 2013 Board meetings The Board meets on average every two months. Decisions concerning the direction and control of the business are made by the Board, and a formal schedule of matters specifically reserved for the Board is in place. Generally, the powers and obligations of the Board are governed by the UK Companies Act 2006, and the other laws of the jurisdictions in which it operates. The Board is responsible, inter alia, for setting and monitoring Group strategy, reviewing trading performance, ensuring adequate funding, examining major acquisition opportunities, formulating policy on key issues and reporting to the shareholders. These areas are set out in more detail in a formal Schedule of Matters Reserved for the Board. Board committees There are two board committees, namely the Audit and Remuneration committees consisting of Simon Rollason and Rufus Short. During the year the audit committee and the remuneration committee did not operate and all relevant matters were dealt with by the full Board. Moving forward, the intention is for these two committees to operate as follows: Audit committee The Committee provides a forum for reporting by the Group’s external auditors. Meetings are held on average once a year and are also attended, by invitation, by the executive Directors. The Audit Committee is responsible for reviewing a wide range of financial matters including the annual and half year results, financial statements and accompanying reports before their submission to the Board and monitoring the controls which ensure the integrity of the financial information reported to the shareholders. Remuneration committee The Committee is responsible for making recommendations to the Board, within agreed terms of reference, on the Company’s framework of executive remuneration and its cost. The Remuneration Committee determines the contract terms, remuneration and other benefits for the Executive Directors, including performance related bonus schemes, compensation payments and option schemes. The Board itself determines the remuneration of the Non-Executive Directors. Relations with shareholders Investors are encouraged to participate in the Annual General Meeting and are regularly advised of any significant developments in the Company. The Company expects to widen its investor base and then meet regularly with any significant institutional shareholders, fund managers and analysts as part of an active investor relations programme to discuss long term issues and obtain feedback. Internal financial control The Board is responsible for establishing and maintaining the Group’s system of internal financial controls. Internal financial control systems are designed to meet the particular needs of the Group and the risk to which it is exposed, and by its very nature can provide reasonable, but not absolute, assurance against material misstatement or loss. The Directors are conscious of the need to keep effective internal financial control, particularly in view of the cash resources of the Group. Due to the relatively small size of the Group’s operations, the Directors are very closely involved in the day-to-day running of the business and as such have less need for a detailed formal system of internal financial control. The Directors have reviewed the effectiveness of the procedures presently in place and consider that they are still appropriate to the nature and scale of the operations of the Group. 18 Edenville Energy plc Annual Report and Financial Statements 2013 18 Corporate Governance Report for the year ended 31 December 2013 Managing business risk The Board constantly monitors the operational and financial aspects of the company’s activities and is responsible for the implementation and ongoing review of business risks that could affect the Company. Duties in relation to risk management that are conducted by the Directors include but are not limited to: l Initiate action to prevent or reduce the adverse effects of risk l Control further treatment of risks until the level of risk becomes acceptable l l Identify and record any problems relating to the management of risk Initiate, recommend or provide solutions through designated channels l Verify the implementation of solutions l Communicate and consult internally and externally as appropriate l Inform investors of material changes to the company’s risk profile. Ongoing review of the overall risk management program (inclusive of the review of adequacy of treatment plans) is conducted by external parties where appropriate. The Board ensures that recommendations made by the external parties are investigated and, where considered necessary, appropriate action is taken to ensure that the Company has an appropriate internal control environment in place to manage the key risks identified. Going concern During the year the Company raised approximately £427,274 net of expenses through a placing and, at 31 December 2013, the Group had cash balances totalling £303,908. These funds along with the £1m raised post year end and the £5m equity financing facility announced on 27 March 2013 are considered sufficient for the Group to operate for the foreseeable future. Accordingly the financial statements have been prepared on a going concern basis. The Company intends to operate within its cash resources. 19 Edenville Energy plc Annual Report and Financial Statements 2013 19 Independent Auditors’ Report – Group to the members of Edenville Energy plc We have audited the group financial statements of Edenville Energy Plc for the year ended 31 December 2013 which comprise the Group Statement of Comprehensive Income, the Group Statement of Financial Position, the Group Statement of Changes in Equity, the Group Cash Flow Statement and related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. This report is made solely to the Group’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Group’s members those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Group and the Group’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors As explained more fully in the Statement of Directors’ Responsibilities set out on page 15, the Directors are responsible for the preparation of the group financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the group financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on or, materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent misstatements or inconsistencies we consider the implications for our report. Opinion on financial statements In our opinion the group financial statements: l l l give a true and fair view of the state of the Group’s affairs as at 31 December 2013 and of its loss for the year then ended; have been properly prepared in accordance with IFRSs as adopted by the European Union; and have been prepared in accordance with the requirements of the Companies Act 2006. Opinion on other matters prescribed by the Companies Act 2006 In our opinion the information given in the Strategic Report and the Directors’ Report for the financial year for which the group financial statements are prepared is consistent with the group financial statements. 20 Edenville Energy plc Annual Report and Financial Statements 2013 20 Independent Auditors’ Report – Group to the members of Edenville Energy plc Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you, if in our opinion: l certain disclosures of directors’ remuneration specified by law are not made; or l we have not received all the information and explanations we require for our audit. Other matters We have reported separately on the parent company financial statements of Edenville Energy Plc for the year ended 31 December 2013. Simon Mott -Cowan (Senior Statutory Auditor) for and on behalf of H W Fisher & Company Chartered Accountants Statutory Auditor Acre House 11-15 William Road London NW1 3ER United Kingdom Date: 3 June 2014 21 Edenville Energy plc Annual Report and Financial Statements 2013 21 Group Statement of Comprehensive Income for the year ended 31 December 2013 Administration expenses Share based payments Impairment of intangible asset Group operating loss Finance income Loss on operations before taxation Income tax Loss for the year Other comprehensive income/(loss) Loss on translation of overseas subsidiary Total comprehensive loss for the year Attributable to: Equity holders of the Company Non-controlling interest Loss per Share (pence) Basic and diluted loss per share Note 6 24 14 10 11 2013 £ (638,868) (39,797) (1,687,494) 2012 £ (598,415) (45,437) – (2,366,159) (643,852) 9 10 (2,366,150) (643,842) 284,111 – (2,082,039) (643,842) (143,057) (419,893) (2,225,096) (1,063,735) (2,220,883) (4,213) (1,063,381) (354) 12 (0.05p) (0.01p) All operating income and operating gains and losses relate to continuing activities. No separate statement of comprehensive income is provided as all income and expenditure is disclosed above. The accompanying notes form an integral part of these financial statements. 22 Edenville Energy plc Annual Report and Financial Statements 2013 22 Group Statement of Financial Position as at 31 December 2013 Non-current assets Property, plant and equipment Intangible assets Equity investments – available for sale Current assets Trade and other receivables Cash and cash equivalents Current liabilities Trade and other payables Current assets less current liabilities Total assets less current liabilities Non-current liabilities Provision for deferred tax Equity Called-up share capital Share premium account Share option reserve Foreign currency translation reserve Retained earnings Attributable to the equity shareholders of the company Non-controlling interests Total equity Note 2013 £ 2012 £ 13 14 15 16 17 18 38,538 8,828,849 – 68,047 10,379,827 – 8,867,387 10,447,874 176,277 303,908 480,185 258,623 784,072 1,042,695 (81,213) (164,567) 398,972 878,128 9,266,359 11,326,002 19 (930,167) (1,231,400) 8,336,192 10,094,602 20 1,019,680 12,286,868 39,797 (800,384) (4,224,915) 965,588 11,913,686 326,984 (657,327) (2,474,073) 8,321,046 10,074,858 15,146 19,744 8,336,192 10,094,602 The financial statements were approved by the board of directors and authorised for issue on 3 June 2014 and signed on its behalf by: S. Schofield Director Company registration number: 05292528 23 Edenville Energy plc Annual Report and Financial Statements 2013 23 Group Statement of Changes in Equity for the year ended 31 December 2013 Equity interests Share capital £ Share premium £ Retained earnings account £ Share option reserve £ Foreign currency reserve £ Non- controlling interest £ Total £ Total £ At 1 January 2012 740,588 9,707,686 (1,838,945) 289,907 (237,434) 8,661,802 21,055 8,682,857 At 31 December 2012 965,588 11,913,686 (2,474,073) 326,984 (657,327) 10,074,858 19,744 10,094,602 Issue of share capital Cost of issue Exercise of warrants Share based payment charge Foreign currency translation Loss for the year Issue of share capital Cost of issue Cancellation of share options Share based payment charge Foreign currency translation Loss for the year 200,000 – 25,000 2,300,000 (94,000) – – – 8,360 – – (8,360) – 45,437 – – – – 2,500,000 (94,000) 25,000 45,437 – – – – 2,500,000 (94,000) 25,000 45,437 – (643,488) – – (419,893) – (419,893) (643,488) (957) (354) (420,850) (643,842) – – – – – – 54,092 – 456,536 (83,354) – – – – – – 326,984 (326,984) – 39,797 – – – – 510,628 (83,354) – 39,797 – – – – 510,628 (83,354) – 39,797 – – – (2,077,826) – – (143,057) (143,057) – (2,077,826) (385) (143,442) (4,213) (2,082,039) – – – – At 31 December 2013 1,019,680 12,286,868 (4,224,915) 39,797 (800,384) 8,321,046 15,146 8,336,192 24 Edenville Energy plc Annual Report and Financial Statements 2013 24 Group Cash Flow Statement for the year ended 31 December 2013 Cash flows from operating activities Operating loss Impairment of tangible & intangible non-current assets Depreciation Share based payments Decrease/(increase) in trade and other receivables (Decrease)/increase in trade and other payables Foreign exchange differences Year ended 31 December 2013 £ Year ended 31 December 2012 £ Note (2,366,159) 1,704,644 12,258 39,797 78,422 (83,073) (3,457) (643,852) – 13,812 45,437 (153,537) 48,292 (34,803) Net cash outflow from operating activities (617,568) (724,651) Cash flows from investing activities Purchase of exploration and evaluation assets Purchase of fixed assets Finance income Net cash used in investing activities Cash flows from financing activities Proceeds from issue of ordinary shares Share issue costs Net cash inflow from financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of year Effect of foreign exchange rate changes on cash and cash equivalents Cash and cash equivalents at end of year 17 (289,889) (550) 9 (1,370,377) (64,288) 10 (290,430) (1,434,655) 510,628 (83,354) 2,525,000 (94,000) 427,274 2,431,000 (480,724) 784,072 560 303,908 271,694 511,538 840 784,072 25 Edenville Energy plc Annual Report and Financial Statements 2013 25 Notes to the Group Financial Statements for the year ended 31 December 2013 1 General information Edenville Energy Plc is a public limited company incorporated in the United Kingdom . The address of the registered office is Aston House, Cornwall Avenue, London, N3 1LF. The company’s shares are listed on AIM, a market operated by the London Stock Exchange. The principal activity of the Group is the exploration and mining of energy commodities predominantly coal and uranium in Africa. 2 Group accounting policies Basis of preparation of group financial statements The Group’s financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, IFRIC Interpretations and the parts of the Companies Act 2006 applicable to companies reporting under IFRS. The Group’s financial statements have also been prepared under the historical cost convention, as modified by the revaluation of available for sale investments. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Group’s financial statements are disclosed in Note 4. The Company’s financial statements continue to be prepared under IFRS. Therefore the Company’s financial statements and the associated notes, together with the auditors’ report on these financial statements, are presented separately from the Group, starting on page 43. Standards and interpretations in issue but not yet effective or not yet relevant At the date of authorisation of these financial statements the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective: IFRS 2,3,8, 16,24,36 IFRS 3,13, IAS 40 IFRS 7 IFRS 9 IFRS 10 IFRS 12 IAS 19 IAS 27 IAS 32 IAS 39 IFRIC 21 Amendments resulting from Annual Improvements 2010-2012 Cycle Amendments resulting from Annual Improvements 2011-2013 Cycle Deferral of mandatory effective date of IFRS 9 and amendments to transition disclosures Deferral of mandatory effective date of IFRS 9 and amendments to transition disclosures Amendments for investment entities Amendments for investment entities Employee Benefits – Amended to clarify the requirements that relate to how contributions from employees or third parties that re linked to service should be attributed to periods of service Amendments for investment entities Financial Instruments: Presentation – Amendments to application guidance on the offsetting of financial assets and financial liabilities Financial Instruments: Recognition and Measurement – Amendments for novation of derivatives 1 January 2014 Levies Effective date (period beginning on or after) 1 July 2014 1 July 2014 1 January 2015 1 January 2015 1 January 2014 1 January 2014 1 July 2014 1 January 2014 1 January 2014 1 January 2014 The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the Group’s financial statements. 26 Edenville Energy plc Annual Report and Financial Statements 2013 26 Notes to the Group Financial Statements for the year ended 31 December 2013 2 Group accounting policies continued Share based payments The Group operates a number of equity-settled, share-based compensation plans, under which the entity receives services from employees as consideration for equity instruments (options) of the Group. The fair value of the employee services received in exchange for the grant of options is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted: l l l including any market performance conditions; excluding the impact of any service and non-market performance vesting conditions (for example, profitability, sales growth targets and remaining an employee of the entity over a specified time period); and excluding the impact of any non-vesting conditions (for example, the requirement of employees to save). Assumptions about the number of options that are expected to vest include consideration of non-market vesting conditions. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each reporting period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity. When the options are exercised, the Group issues new shares. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised. Basis of consolidation The Group’s financial statements consolidate the financial statements of Edenville Energy Plc and all its subsidiary undertakings (GOA Tanzania Limited, Edenville International (Seychelles) Limited and Edenville International (Tanzania) Limited) made up to 31 December 2013. Profits and losses on intra-group transactions are eliminated on consolidation. Business combinations The Group adopts the acquisition method in accounting for the acquisition of subsidiaries. On acquisition the cost is measured at the fair value of the assets given, plus equity instruments issued and liabilities incurred or assumed at the date of exchange. The assets acquired and liabilities and contingent liabilities assumed in a business combination are measured at their fair value at the date of acquisition. Any excess of the fair value of the consideration over the fair value of the identifiable net assets acquired is recorded as goodwill. Any deficiency of the fair value of the consideration below the fair value of identifiable net assets acquired is credited to the income statement in the period of the acquisition. The results of subsidiary undertakings acquired or disposed of during the year are included in the group statement of comprehensive income statement from the effective date of acquisition or up to the effective date of disposal. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the group. Inter-company transactions and balances between group companies are eliminated. Revenue recognition Revenue from the sale of energy commodities is recognised upon delivery of goods to the customers. Interest income is recognised on a proportional basis taking into account the effective interest rates applicable to the financial assets. All revenue is stated net of the amount of sales tax. Currently the group does not generate any revenue. 27 Edenville Energy plc Annual Report and Financial Statements 2013 27 Notes to the Group Financial Statements continued 2 Group accounting policies continued Presentational and functional currency This financial information is presented in pounds sterling, which is the Group’s functional currency. In preparing the financial statements of individual entities, transaction in currencies other than the entity’s functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the balance sheet date. For the purposes of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations (including comparatives) are expressed in pounds sterling using exchange rates prevailing at the balance sheet date. Income and expense items are translated at the average exchange rate for the period. Exchange differences arising, if any, are classified as equity and transferred to the Group’s foreign currency translation reserve. Such translation differences are recognised in the income statement in the period in which the foreign operation is disposed of. Financial assets Financial assets comprise investments, cash and cash equivalents and receivables. Unless otherwise indicated, the carrying amounts of the Group’s financial assets are a reasonable approximation of their fair values. Recognition and measurement Investments are initially recognised at fair value plus transactions costs for all financial assets not carried at fair value through profit or loss. Financial assets are derecognised when rights to receive cash flows from investments have expired or the group has transferred substantially all the risks and rewards of ownership. Available for sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are subsequently carried at amortised cost. Equity investments available for sale Equity investments available for sale are non-derivatives that are either designated in this category or not classified in any of the other categories. Equity investments available for sale do not have a quoted market price in an active market. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date. Investments are initially classified at fair value. Gains and losses arising from changes in fair value are recognised directly in equity, until the security is disposed of or is determined to be impaired. The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. If any such evidence exists the cumulative loss, measured as the difference between the acquisition cost and the current fair value, less any impairment loss previously recognised in statement of comprehensive income, is removed from equity and recognised in the statement of comprehensive income. Where the fair value cannot be reliably measured as a result of a lack of an active market and/or reliable estimates could not be made the equity investments are measured at cost. Trade and other receivables Provision for impairment of trade receivables is made when there is objective evidence that the Group will not be able to collect all amounts due to it in accordance with the original terms of those receivables. The amount of the write-down is the difference between the receivables carrying amount and the present value of the estimated future cash flows. An assessment for impairment is undertaken at least annually. Cash and cash equivalents Cash and cash equivalents comprise cash at bank and in hand, demand deposits and other short term highly liquid investments that are readily convertible to a known amount of cash and are subject to insignificant risk of changes in value. 28 Edenville Energy plc Annual Report and Financial Statements 2013 28 Notes to the Group Financial Statements continued 2 Group accounting policies continued Property, plant and equipment Property, plant and equipment are stated at cost on acquisition less accumulated depreciation and accumulated impairment losses. Depreciation is provided on all property, plant and equipment categories at rates calculated to write off the cost, less estimated residual value on a reducing balance basis over their expected useful economic life. The depreciation rates are as follows: Fixtures and fittings Office equipment Motor vehicles Basis of depreciation 25% reducing balance 25% reducing balance 25% reducing balance Costs capitalised include the purchase price of an asset and any costs directly attributable to bringing it into working condition for its intended use. Financial liabilities Financial liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument. Financial liabilities comprise only trade and other payables. All financial liabilities are recorded at amortised cost, using the effective interest method, with interest-related charges being recognised as an expense under finance costs in the Income Statement. A financial liability is derecognised only when the obligation is extinguished, that is, when the obligation is discharged, is cancelled, or expires. Finance costs Finance costs of debt, including premiums payable on settlement and direct issue costs are charged to the income statement on an accruals basis over the term of the instrument, using the effective interest method. Income taxation The taxation charge represents the sum of current tax and deferred tax. The tax currently payable is based on the taxable profit for the period using the tax rates that have been enacted or substantially enacted by the balance sheet date. Taxable profit differs from the net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. Deferred taxation Deferred tax is recognised, using the liability method, in respect of temporary differences between the carrying amount of the Group’s assets and liabilities and their tax base. Deferred tax liabilities are offset against deferred tax assets within the same taxable entity or qualifying local tax group. Any remaining deferred tax asset is recognised only when, on the basis of all available evidence, it can be regarded as probable that there will be suitable taxable profits, within the same jurisdiction, in the foreseeable future against which the deductible temporary difference can be utilised. Deferred tax is determined using tax rates that are expected to apply in the periods in which the asset is realised or liability settled, based on tax rates and laws that have been enacted or substantially enacted by the balance sheet date. Deferred tax is recognised in the income statement, except when the tax relates to items charged or credited directly in equity, in which case the tax is also recognised in equity. Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as deduction, net of tax, from the proceeds. 29 Edenville Energy plc Annual Report and Financial Statements 2013 29 Notes to the Group Financial Statements for the year ended 31 December 2013 2 Group accounting policies continued Exploration and evaluation assets Capitalisation Certain costs (other than payments to acquire the legal right to explore and costs which are directly attributable to those payments) incurred prior to acquiring the rights to explore are charged directly to the income statement. All costs incurred after the rights to explore an area have been obtained, such as geological and geophysical costs and other direct costs of exploration and appraisal are accumulated and capitalised as intangible exploration and evaluation (“E&E”) assets. These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the areas or where activities in the areas have not yet reached a stage which permits reasonable assessment of the existence of economically recoverable reserves. E&E costs are not amortised prior to the conclusion of appraisal activities. At completion of appraisal activities, if technical feasibility is demonstrated and commercial reserves are discovered, then, following development sanction, the carrying value of the relevant E&E asset will be reclassified as a development and production (“D&P”) asset, but only after the carrying value of the relevant E&E asset has been assessed for impairment, and where appropriate, its carrying value adjusted. If after completion of appraisal activities in the area, it is not possible to determine technical feasibility and commercial viability or if the legal right to explore expires or if the Company decides not to continue exploration and evaluation activity, then the costs of such unsuccessful exploration and evaluation are written off to the income statement in the period the relevant events occur. Impairment Management consider on a regular basis the geological resources and exploration and evaluation results of each licence and based on their analysis may relinquish or abandon a particular licence area. When this occurs the costs related to the relinquished area are written off to the income statement. Where the licences will be retained an impairment review is performed when facts and circumstances indicate that the carrying value of E&E assets may exceed its recoverable amount. For E&E assets when there are such indications, an impairment test is carried out by grouping the E&E assets with the D&P assets belonging to the same geographic segment to form the Cash Generating Unit (“CGU”) for impairment testing. The equivalent combined carrying value of the CGU is compared against the CGU’s recoverable amount and any resulting impairment loss is written off to the income statement. The recoverable amount of the CGU is determined as the higher of its fair value less costs to sell and its value in use. Goodwill At the date of acquisition of a subsidiary undertaking, fair values are attributed to the acquired identifiable assets, liabilities and contingent liabilities. Goodwill represents the difference between the fair value of the purchase consideration and the acquired interest in the fair value of those net assets. Goodwill is initially recognised at fair value. Any negative goodwill is credited to the income statement in the year of acquisition. If an undertaking is subsequently sold, the amount of goodwill carried on the balance sheet at the date of disposal is charged to the income statement in the period of disposal as part of the gain or loss on disposal. Goodwill is associated with exploration and evaluation assets, the impairment of which is discussed in the accounting policy note for exploration and evaluation assets. Going concern The directors have reviewed the work programme for the mines and the estimated head office costs and consider that the group has adequate resources to continue in operational existence for the foreseeable future. The group therefore continues to adopt the going concern basis in preparing its consolidated financial statements. 30 Edenville Energy plc Annual Report and Financial Statements 2013 30 Notes to the Group Financial Statements continued 3 4 Financial risk management Fair value estimation The carrying value less impairment provision of trade receivables and payables is assumed to approximate their fair values, due to their short-term nature. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the group for similar financial instruments. Critical accounting estimates and areas of judgement The Group makes estimates and assumptions concerning the future, which by definition will seldom result in actual results that match the accounting estimate. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year are those in relation to: l l l the impairment of intangible exploration and evaluation assets; the fair value of intangible assets acquired on the acquisition of Edenville International Limited; Share based payments. Impairment – intangible exploration and evaluation assets The Group is required to perform an impairment review, for each CGU to which the asset relates, when facts and circumstances suggest that the carrying amount of the asset may exceed its recoverable amount. The recoverable amount is based upon the Directors’ judgements and are dependent upon the discovery of economically recoverable reserves, the ability of the Company to obtain necessary financing to complete the development and future profitable production or proceeds from the disposal until the technical feasibility and commercial viability of extracting a mineral resource becomes demonstrable, at which point the value is estimated based upon the present value of the discounted future cash flows. Fair value of intangible assets The Company holds Tanzanian prospecting licences through its subsidiary, Edenville International (Tanzania) Limited. The value of these intangible exploration assets acquired represents the fair value of the consideration paid by Edenville Energy plc at the time of the acquisition of Edenville International Limited. The outcome of ongoing exploration and evaluation, and therefore whether the carrying value of exploration and evaluation assets will ultimately be recovered, is inherently uncertain. The directors have assessed the value of exploration and evaluation expenditure carried as intangible assets. In their opinion there has been no impairment loss to intangible exploration and evaluation assets in the period, other than the amounts charged to the income statement. Share based payments The estimate of share based payments costs requires management to select an appropriate valuation model and make decisions about various inputs into the model including the volatility of its own share price, the probable life of the options and the risk free interest rate. Deferred taxation The deferred taxation liability is based on the fair value adjustment to the cost of the prospecting licences held by the Company’s subsidiary, Edenville International (Tanzania) Limited on the date of acquisition. The outcome of on going exploration and evaluation, and therefore whether the carrying value of exploration and evaluation assets will ultimately be recovered, is inherently uncertain. The directors have assessed the value of exploration and evaluation expenditure carried as intangible assets. In their opinion there has been no change to the fair value of the prospecting licenses originally acquired. Any change in the value of these prospecting licences will result in a change in the deferred tax liability. 31 Edenville Energy plc Annual Report and Financial Statements 2013 31 Notes to the Group Financial Statements continued 5 Segmental information The Board considers the business to have two reportable segments being Coal and Uranium exploration projects. Other represents unallocated expenses and assets held by the head office. Unallocated assets primarily consist of cash and cash equivalents. 2013 Consolidated Income Statement Impairment of intangible assets Impairment of property, plant and equipment Share based payments Other expenses Group operating loss Finance income Loss on operations before taxation Income tax expense Exploration Projects Uranium Coal £ £ Other £ Total £ 911,898 8,575 – 42,100 962,573 – 962,573 – 775,596 8,575 – 42,929 827,100 – 827,100 – – – 39,797 536,689 576,486 9 576,477 – 1,687,494 17,150 39,797 621,718 2,366,159 9 2,366,150 – Loss for the year 962,573 827,100 576,477 2,366,150 2012 Consolidated Income Statement Share based payments Other expenses Group operating loss Finance income Loss on operations before taxation Income tax expense Loss for the year – 29,691 (29,691) – (29,691) – – 41,083 (41,083) – (41,083) – 45,437 527,641 (573,078) 10 (573,068) – 45,437 598,415 (643,852) 10 (643,842) – (29,691) (41,083) (573,068) (643,842) By Business Segment Coal Uranium Other Carrying value of segment assets 2013 £ 2012 £ Additions to non-current assets and intangibles 2012 2013 £ £ 4,466,804 4,554,506 326,262 4,251,645 6,491,399 747,525 267,946 22,492 – 1,348,908 58,610 – Total liabilities 2013 £ 251,044 722,741 37,595 2012 £ 315,026 1,046,587 34,354 9,347,572 11,490,569 290,438 1,407,518 1,011,380 1,395,967 By Geographical Area £ £ £ £ £ £ Africa (Tanzania) Europe 9,021,310 326,262 10,743,044 747,525 290,438 – 1,407,518 – 973,785 37,595 1,361,613 34,354 9,347,572 11,490,569 290,438 1,407,518 1,011,380 1,395,967 32 Edenville Energy plc Annual Report and Financial Statements 2013 32 Notes to the Group Financial Statements continued 6 Administrative expenses Staff costs Other expenses Share based payment charge 7 Auditors’ remuneration Fees payable to the Company’s auditor for the audit of the parent company and consolidated accounts 8 Employees Wages and salaries Social security costs Share based payment charge The average number of employees and directors during the year was as follows: Administration 9 Directors’ remuneration Emoluments Share based payment charge 2013 £ 288,033 350,835 638,868 39,797 678,665 2012 £ 224,410 374,005 598,415 45,437 643,852 2013 £ 2012 £ 15,000 20,000 2013 £ 258,609 29,424 39,797 327,830 2013 9 2013 £ 258,609 39,797 298,406 2012 £ 207,500 16,910 39,999 264,409 2012 11 2012 £ 207,500 39,999 247,499 The highest paid director received remuneration of £65,000 (2012: £62,500). Directors’ interest in outstanding share options per director is disclosed in the directors’ report. 10 Finance income Interest income on short-term bank deposits 2013 £ 9 2012 £ 10 33 Edenville Energy plc Annual Report and Financial Statements 2013 33 Notes to the Group Financial Statements continued 11 Income tax expense Current tax: Current tax on loss for the year Total current tax Deferred tax: On impairment on intangible assets Tax charge for the year 2013 £ – – 284,111 284,111 2012 £ – – – – No corporation tax charge arises in respect of the year due to the trading losses incurred. The Group has Corporation Tax losses available to be carried forward and used against trading profits arising in future periods of £2,548,323 (2012: £2,050,009). A deferred tax asset of £507,666 (2012: £406,096) calculated at 20% (2012: 20%) has not been recognised in respect of the tax losses carried forward due to the uncertainty that profits will arise against which the losses can be offset. The tax assessed for the year differs from the standard rate of corporation tax in the UK as follows: Loss on ordinary activities before tax Expected tax credit at standard rate of Corporation Tax 20% (2012: 20%) Disallowable expenditure Depreciation in excess of capital allowances Other adjustments Tax losses carried forward Tax charge for the year 12 Earnings per share 2013 £ 2012 £ (2,366,150) (643,842) (473,230) 372,901 666 – 99,663 – (128,768) 9,341 888 – 118,539 – The basic loss per share is calculated by dividing the loss attributable to equity shareholders by the weighted average number of shares in issue. The loss attributable to equity shareholders and weighted average number of ordinary shares for the purposes of calculating diluted earnings per ordinary share are identical to those used for basic earnings per ordinary share. This is because the exercise of warrants would have the effect of reducing the loss per ordinary share and is therefore anti-dilutive. Net loss for the year attributable to ordinary shareholders (2,082,039) (643,488) Weighted average number of shares in issue Basic and diluted loss per share 4,670,657,112 4,380,642,635 (0.05p) (0.01p) 2013 £ 2012 £ 34 Edenville Energy plc Annual Report and Financial Statements 2013 34 Notes to the Group Financial Statements continued 13 Property, plant and equipment 2012 Cost As at 1 January 2012 Additions As at 31 December 2012 Depreciation As at 1 January 2012 Charge for the year Foreign exchange adjustment As at 31 December 2012 Net book value As at 31 December 2012 2013 Cost As at 1 January 2013 Additions Foreign exchange adjustment As at 31 December 2013 Depreciation As at 1 January 2013 Charge for the year Impairment in the year Foreign exchange adjustment As at 31 December 2013 Net book value As at 31 December 2013 Plant and machinery £ Fixtures, fittings and equipment £ 3,607 60,938 68,047 Plant and machinery £ Fixtures, fittings and equipment £ Motor vehicles £ 16,691 62,246 78,937 6,194 11,624 181 17,999 Total £ 28,315 64,288 92,603 10,553 13,812 191 24,556 Motor vehicles £ 78,937 – (2,081) 76,856 17,999 10,895 14,915 (1,402) 42,407 Total £ 92,603 550 (2,175) 90,978 24,556 12,254 17,150 (1,520) 52,440 4,153 2,042 6,195 1,558 1,020 10 2,588 6,195 550 (94) 6,651 2,588 483 2,235 (118) 5,188 1,463 34,449 38,538 7,471 – 7,471 2,801 1,168 – 3,969 3,502 7,471 – – 7,471 3,969 876 – – 4,845 2,626 14 Intangible assets Evaluation and Exploration Assets 2012 Cost or valuation As at 1 January 2012 Additions Foreign exchange adjustment At 31 December 2012 Accumulated amortisation and impairment As at 1 January 2012 and 31 December 2012 Net book value As at 31 December 2012 Javan Licenses £ 36,536 – – 36,536 36,536 Tanzanian Licenses £ Goodwill £ Total £ 8,144,976 1,370,387 (388,405) 1,309,631 – (56,762) 9,491,143 1,370,387 (445,167) 9,126,958 1,252,869 10,416,363 – – 36,536 – 9,126,958 1,252,869 10,379,827 35 Edenville Energy plc Annual Report and Financial Statements 2013 35 Notes to the Group Financial Statements continued 14 Intangible assets continued Evaluation and Exploration Assets 2013 Cost or valuation As at 1 January 2013 Additions Foreign exchange adjustment Written off At 31 December 2013 Accumulated amortisation and impairment As at 1 January 2013 Written off Net book value As at 31 December 2013 Javan Licenses £ 36,536 – – (36,536) Tanzanian Licenses £ 9,126,958 289,889 (135,021) – Goodwill £ Total £ 1,252,869 – (18,352) – 10,416,363 289,889 (153,373) (36,536) 36,536 9,281,826 1,234,517 10,516,343 (36,536) 36,536 – – – (1,687,494) (1,687,494) – – – (36,536) (1,650,958) (1,687,494) 7,594,332 1,234,517 8,828,849 Tanzanian Licences and Goodwill The Tanzanian licenses initially comprised six prospecting licences acquired on the acquisition of Edenville International (Tanzania) Limited in 2010. The Licenses covered 598km2 in Tanzania, located in a region displaying viable prospects for both uranium and coal and occur in a country where the government’s policy for development of the mineral sector aims at attracting and enabling the private sector to take the lead in exploration mining, development, mineral beneficiation and marketing. The value of the assets obtained on acquisition represents the fair value of the consideration paid to the vendors. The area covered by these original 6 licences has since decreased as the licence renewal process has focused on smaller areas with the best drill results. Edenville International (Tanzania) Limited has since acquired additional licences. At the year end a total of eight licences were held. The group has two CGUs: coal and uranium, as disclosed in note 5 segmental information, which are relevant for the purposes of evaluating licences and goodwill. Goodwill arose as a result of the valuation placed on the six Tanzanian licences acquired on the acquisition of Edenville (Tanzania) Limited. The allocation of the Goodwill was based on the valuation of the Group’s licences. In 2013 a programme of geographical mapping was completed over four licences held by the Group. The mapping identified that the licence areas comprised predominantly of volcanic rocks covering large portions of two of the licence areas. In the other two licence areas cretaceous sandstone/siltstone sequences were mapped. These volcanic rocks and cretaceous sandstone/slitsone sequences are not hosts to coal measures in East Africa and no Karoo age coal measures were seen in any of the licence areas mapped. Due to the absence of coal bearing sediments in the four licences the board has proposed to relinquish these licences and therefore have written off the exploration expenditure of £1,687,494 incurred to date on these four licences. The Directors have considered the status of the remaining projects at the year end and do not consider there are any facts or circumstances that would require an impairment review to be performed. 36 Edenville Energy plc Annual Report and Financial Statements 2013 36 Notes to the Group Financial Statements continued 15 Equity investments – available for sale Fair value As at 1 January Written off Impairment As at 1 January Written off As at 31 December Net book value As at 31 December 2013 £ 446,428 (446,428) – (446,428) 446,428 – – 2012 £ 446,428 – 446,428 (446,428) – (446,428) – On 13 March 2009, the Company entered into a collaboration and option agreement on a group of emerald mining licences in Tanzania, Africa, with Obtala Resouces Plc (“Obtala”) and Obtala’s subsidiary Mindex Invest Limited (“Mindex”). The Company’s focus is now on coal exploration and mining and the directors therefore consider it appropriate to impair the cost of these emerald mining licences, as the company does not intend to develop these assets. As at 31 December 2012, the Directors deemed this investment to be permanently impaired. 16 Trade and other receivables Receivables VAT receivable Prepayments 2013 £ 1,077 165,386 9,814 176,277 2012 £ 1,110 253,847 3,666 258,623 There was no provision for impairment of receivables at 31 December 2013 (2012: £nil). 17 Cash and cash equivalents Cash and cash equivalents include the following for the purposes of the cash flow statement: Cash at bank and in hand 2013 £ 2012 £ 303,908 784,072 The major non-cash transactions in the year relate to the share based payment expense detailed in note 23. 18 Trade and other payables Trade and other payables Accruals and deferred income 2013 £ 11,648 69,565 81,213 2012 £ 97,020 67,547 164,567 37 Edenville Energy plc Annual Report and Financial Statements 2013 37 Notes to the Group Financial Statements continued 19 Deferred taxation A deferred tax liability of £930,167 (2012: £1,231,400) calculated at 30% (2012: 30%) has been provided in respect of the potential tax liability arising on licenses acquired on the acquisition of Edenville International (Tanzania) Limited. The deferred tax liability relate to a fair value adjustment made to the original six Tanzanian prospecting licences. During the year, one of these six licences was impaired resulting in the fair value adjustment relating to this licence being written off. As a consequence the deferred tax liability was reduced by £284,111. Provision brought forward Foreign exchange movement Released in the year Provision carried forward 20 Called-up share capital Issued and fully paid Ordinary shares of 0.02p each Deferred shares of 0.08p each Issued and fully paid Ordinary shares of 0.02p each Deferred shares of 0.08p each 2013 £ 1,231,400 (17,122) (284,111) 2012 £ 1,288,162 (56,762) – 930,167 1,231,400 2013 Number 2012 Number 4,841,683,110 64,179,932 4,571,216,405 64,179,932 4,905,863,042 4,635,396,337 2013 £ 968,336 51,344 1,019,680 2012 £ 914,244 51,344 965,588 On 19 April 2013 the company issued 53,000,000 new ordinary shares of 0.02p each for a consideration of 0.186p per share. On 17 September 2013 the company issued 217,466,705 new ordinary shares of 0.02p each for a consideration of 0.186p per share. Of the shares issued 7,397,313 were issued in settlement for services provided to the company. The rights attaching to the deferred shares are as follows: (a) (b) (c) (d) no dividend or other distribution shall be paid or made in respect of the deferred shares; the holders of deferred shares shall not be entitled to receive notice of, or to attend and vote at any general meeting of the Company; on a return of capital, whether on a winding-up or otherwise, the holders of deferred shares shall be entitled to receive only the amount credited as paid up on each share, but only after the holders of each ordinary share have received the amount paid up or credited as paid up on each share, together with a payment of £10,000 per share; the Company may transfer the shares without making any payment to the holders thereof, to such persons as the Company may determine, and acquire the same in accordance with the provisions of the Companies Acts at a price of 0.08p each. 38 Edenville Energy plc Annual Report and Financial Statements 2013 38 Notes to the Group Financial Statements continued 21 Capital and reserves attributable to shareholders Share capital Share premium Other reserves Retained deficit Total equity 2013 £ 1,019,680 12,286,868 (760,587) (4,224,915) 2012 £ 965,588 11,913,686 (330,343) (2,474,073) 8,321,046 10,074,858 There have been no significant changes to the Group’s capital management objectives or what is considered to be capital during the year. 22 Capital management policy The Group’s policy on capital management is to maintain a low level of gearing. The group funds its operation through equity funding. The Group defines the capital it manages as equity shareholders’ funds less cash and cash equivalents. The Group objectives when managing its capital are: l l l To safeguard the group’s ability to continue as a going concern. To provide adequate resources to fund its exploration activities with a view to providing returns to its investors. To maintain sufficient financial resources to mitigate against risk and unforeseen events. The group’s cash reserves are reported to the board and closely monitored against the planned work program and annual budget. Where additional cash resources are required the following factors are taken into account: l l The size and nature of the requirement. Preferred sources of finance. l Market conditions. l Opportunities to collaborate with third parties to reduce the cash requirement. 23 Financial instruments The Board of Directors determine, as required, the degree to which it is appropriate to use financial instruments to mitigate risk with the main risk affecting such instruments being foreign exchange risk, which is discussed below. Categories of financial instruments Financial assets Receivables at amortised cost including cash and cash equivalents: Cash and cash equivalents Trade and other receivables Total Financial liabilities Financial liabilities at amortised cost: Trade and other payables Net 2013 £ 2012 £ 303,908 176,277 480,185 81,213 398,972 784,072 258,623 1,042,695 164,567 878,128 39 Edenville Energy plc Annual Report and Financial Statements 2013 39 Notes to the Group Financial Statements continued 23 Financial instruments continued Cash and cash equivalents This comprises cash held by the Group and short-term deposits. The carrying amount of these assets approximates to their fair value. General risk management principles The Directors have an overall responsibility for the establishment of the Group’s risk management framework. A formal risk assessment and management framework for assessing, monitoring and managing the strategic, operational and financial risks of the Group is in place to ensure appropriate risk management of its operations. The following represent the key financial risks that the Group faces: Interest rate risk The Group is not exposed to significant interest rate risks as it does not have any interest bearing liabilities and its only interest-bearing asset is cash invested on a short-term basis which attracts interest at the bank’s variable interest rate. Credit risk Credit risk arises principally from the Group’s trade receivables and investments in cash deposits. It is the risk that the counterparty fails to discharge its obligation in respect of the instrument. The Group holds its cash balances with reputable financial institutions with strong credit ratings. There were no amounts past due at the balance sheet date. The maximum exposure to credit risk in respect of the above at 31 December 2013 is the carrying value of financial assets recorded in the financial statements. Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as and when they fall due. Liquidity risk is managed through an assessment of short, medium and long-term cash flow forecasts to ensure the adequacy of working capital. The Group’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. To achieve this aim, it seeks to maintain cash balances to meet expected requirements for a period of one year. Currency risk The Group is exposed to currency risk as the assets of its subsidiaries are denominated in US Dollars. The Group’s policy is, where possible, to allow group entities to settle liabilities denominated in their functional currency (primarily US Dollars) with cash. The Company transfers amounts in sterling or US dollars to its subsidiaries to fund its operations. Where this is not possible the parent company settles the liability on behalf of its subsidiaries and will therefore be exposed to currency risk. The Group has no formal policy is respect of foreign exchange risk; however, it reviews its currency exposure on a regular basis. Currency exposures relating to monetary assets held by foreign operations are included in the Group’s income statement. The Group also manages its currency exposure by retaining the majority of its cash balances in sterling, being a relatively stable currency. The effect of a 10% rise or fall in the US dollar/Sterling exchange rate would result in an increase or decrease in the net assets of the group of £680,295. Fair value of financial assets and liabilities Fair value is the amount at which a financial instrument could be exchanged in an arm’s length transaction between informed and willing parties, other than a forced or liquidation sale and excludes accrued interest. Where available, market values have been used to determine fair values. Where market values are not available, fair values have been calculated by discounting expected cash flows at prevailing interest rates and by applying year end exchange rates. The Directors consider that there is no significant difference between the book value and fair value of the Group’s financial assets and liabilities. 40 Edenville Energy plc Annual Report and Financial Statements 2013 40 Notes to the Group Financial Statements continued 24 Equity-settled share-based payments The following options over ordinary shares have been granted by the Company: Date 29 March 2010 21 February 2011 21 October 2013 Exercise price Exercise period 0.87p 1.80p 0.25p 10 Years 9 Years 9 Years Number of options/warrants 44,827,587 35,000,000 226,586,603 The options granted on 29 March 2010 and 21 February 2011 were cancelled and replaced by those granted on 21 October 2013. At the date of grant, the options were valued using the Black-Scholes option pricing model. The fair value per option granted and the assumptions used in the calculation were as follows: The options granted on 21 October 2013 are exercisable from 21 October 2014. The options are valid for a period of 10 years from the date of grant. There are no vesting conditions. Date of grant Expected volatility Expected life Risk-free interest rate Fair value per option 21 October 2013 85% 4 years 1.23% 0.09p The charge to the income statement for share based payments for the year ended 31 December 2013 was £39,797 (2012: £45,437). Movements in the number of options and warrants outstanding and their related weighted average exercise prices are as follows: At 1 January Granted Exercised Cancelled At 31 December 2013 2012 Number of options 79,827,587 226,586,603 – (79,827,587) 226,586,603 Weighted average exercise price per share pence Number of options Weighted average exercise price per share pence 1.28 0.25 – (1.28) 0.25 204,827,587 – (125,000,000) – 79,827,587 0.51 – 0.02 – 1.28 The average volatility is used in determining the share based payment expense to be recognised in the year. This was calculated by reference to the standard deviation of the Company share price. All of the above options are equity settled. The weighted average remaining contractual life of options as at 31 December 2013 was 9.81 years (2012: 7.6 years). 41 Edenville Energy plc Annual Report and Financial Statements 2013 41 Notes to the Group Financial Statements for the year ended 31 December 2012 25 Reserves The following describes the nature and purpose of each reserve: Share Capital Share Premium Share Option Reserve Foreign Currency Translation Reserve represents the nominal value of equity shares amount subscribed for share capital in excess of the nominal value fair value of the employee equity settled share option scheme as accrued at the balance sheet date gains/losses arising on retranslating the net assets of overseas operations into pounds sterling Retained Earnings Cumulative net gains and losses less distributions made 26 Related party transactions During the year ended 31 December 2013, the Group paid £65,000 (2012: £62,500) to Adler Shine LLP for the services of Rakesh Patel, director. Rakesh Patel is a partner in Adler Shine LLP. The Group also paid £18,303 (2012: £23,354) to Adler Shine LLP for accounting services provided in the year and £nil (2012: £20,000) for assistance in the share placing in January 2012. At the year end the Group owed the director, Simon Rollason £2,439 (2012: £2,523). During the year the Group paid £Nil (2012: £20,000) to Simon Rollason for assistance in the share placing in January 2012. During the year the Directors, Rufus Short, Sally Schofield and Rakesh Patel were each paid £15,000 in respect of the share issues. Key management personnel are those persons having authority and responsibility for planning, directing and controlling activities of the Group, and are all directors of the company. For details of their compensation please refer to the Remuneration report. 28 Events after the reporting date Subsequent to the year end, Edenville Plc completed a placing of 1,428,571,428 new ordinary shares at a price of 0.07p, raising gross proceeds of £1m. 29 Ultimate controlling party The Group considers that there is no ultimate controlling party. 42 Edenville Energy plc Annual Report and Financial Statements 2013 42 Independent Auditors’ Report – Company to the members of Edenville Energy plc We have audited the parent company financial statements of Edenville Energy Plc for the year ended 31 December 2013 which comprise the company Statement of Financial Position, company Statement of Changes in Equity, company Cash Flow Statement and related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006. This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors As explained more fully in the Directors’ Responsibilities Statement set out on page 15, the Directors are responsible for the preparation of the parent company financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the parent company financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Parent Company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent misstatements or inconsistencies we consider the implications for our report. Opinion on financial statements In our opinion the parent company financial statements: l l l give a true and fair view of the state of the Company’s affairs as at 31 December 2013; have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and have been properly prepared in accordance with the requirements of the Companies Act 2006. Opinion on other matters prescribed by the Companies Act 2006 In our opinion: l the information given in the Strategic Report and Directors’ Report for the financial year for which the financial statements are prepared is consistent with the parent financial statements. 43 Edenville Energy plc Annual Report and Financial Statements 2013 43 Independent Auditors’ Report – Company to the members of Edenville Energy plc Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: l l l adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or the parent company financial statements are not in agreement with the accounting records and returns; or certain disclosures of directors’ remuneration specified by law are not made; or l we have not received all the information and explanations we require for our audit. Other matters We have reported separately on the group financial statements of Edenville Energy Plc for the year ended 31 December 2013. Simon Mott-Cowan (Senior Statutory Auditor) for and on behalf of H W Fisher & Company Chartered Accountants Statutory Auditor Acre House 11-15 William Road London NW1 3ER United Kingdom Date: 3 June 2014 44 Edenville Energy plc Annual Report and Financial Statements 2013 44 Company Statement of Financial Position as at 31 December 2013 Non-current assets Intangible assets Investment in subsidiaries Equity investments – available for sale Property, plant & equipment Current assets Trade and other receivables Cash and cash equivalents Current liabilities Trade and other payables Current assets less current liabilities Total assets less current liabilities and net assets Equity Called-up share capital Share premium account Share option reserve Profit and loss account Total equity Note 2013 £ 2012 £ 4 5 6 7 8 9 10 11 – 10,483,337 – 9,991 – 10,164,907 – 13,321 10,493,328 10,178,228 23,376 302,882 326,258 37,592 288,666 5,985 741,541 747,526 34,354 713,172 10,781,994 10,891,400 1,019,680 12,286,868 39,797 (2,564,351) 965,588 11,913,686 326,984 (2,314,858) 10,781,994 10,891,400 The financial statements were approved by the board of directors and authorised for issue on 3 June 2014 and signed on its behalf by: S. Schofield Director Company registration number: 05292528 45 Edenville Energy plc Annual Report and Financial Statements 2013 45 Company Statement of Changes in Equity for the year ended 31 December 2013 At 1 January 2012 Issue of share capital Cost of issue Exercise of warrants Share based payment charge Total comprehensive loss for the year Share capital £ 740,588 200,000 – 25,000 – – Share premium £ Retained earnings account £ Share option reserve £ Total £ 9,707,686 (1,750,150) 289,907 8,988,031 2,300,000 (94,000) – – – – – 8,360 – (573,068) – – (8,360) 45,437 – 2,500,000 (94,000) 25,000 45,437 (573,068) At 31 December 2012 965,588 11,913,686 (2,314,858) 326,984 10,891,400 Issue of share capital Cost of issue Share based payment charge Cancellation of share options Total comprehensive loss for the year 54,092 – – – 456,536 (83,354) – – – – – – 326,984 (576,477) – – 39,797 (326,984) – 510,628 (83,354) 39,797 – (576,477) At 31 December 2013 1,019,680 12,286,868 (2,564,351) 39,797 10,781,994 46 Edenville Energy plc Annual Report and Financial Statements 2013 46 Company Cash Flow Statement for the year ended 31 December 2013 Cash flows from operating activities Operating loss Depreciation Share based payments (Increase)/decrease in trade and other receivables Increase/(decrease) in trade and other payables Net cash outflow from operating activities Cash flows from investing activities Finance income Net cash inflow from investing activities Cash flows from financing activities Proceeds from issue of ordinary shares Investment in subsidiary Share issue costs Net cash inflow from financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year 9 Year ended 31 December 2013 £ Year ended 31 December 2012 £ Note (576,486) 3,330 39,797 (17,391) 3,238 (573,078) 4,441 45,437 (212) (3,110) (547,512) (526,522) 9 9 10 10 510,628 (318,430) (83,354) 108,844 (438,659) 741,541 302,882 2,525,000 (1,674,437) (94,000) 756,563 230,051 511,490 741,541 47 Edenville Energy plc Annual Report and Financial Statements 2013 47 Notes to the Company Financial Statements for the year ended 31 December 2013 1 Accounting policies Basis of preparation of company financial statements The Company financial statements are prepared under the historical cost convention, as modified by the revaluation of available for sale investments, and in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, IFRC interpretations and the parts of the Companies Act 2006 applicable to companies reporting under IFRS. The Company has elected to take the exemption under section 408 of the Companies Act 2006 from presenting the Parent Company Income Statement. The loss after tax for the Parent Company for the year was £576,477 (2012: £573,068). Standards and interpretations in issue but not yet effective or not yet relevant At the date of authorisation of these financial statements the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective: IFRS 2,3,8, 16,24,36 IFRS 3,13, IAS 40 IFRS 7 IFRS 9 IFRS 10 IFRS 12 IAS 19 IAS 27 IAS 32 IAS 39 IFRIC 21 Amendments resulting from Annual Improvements 2010-2012 Cycle Amendments resulting from Annual Improvements 2011-2013 Cycle Deferral of mandatory effective date of IFRS 9 and amendments to transition disclosures Deferral of mandatory effective date of IFRS 9 and amendments to transition disclosures Amendments for investment entities Amendments for investment entities Employee Benefits – Amended to clarify the requirements that relate to how contributions from employees or third parties that re linked to service should be attributed to periods of service Amendments for investment entities Financial Instruments: Presentation – Amendments to application guidance on the offsetting of financial assets and financial liabilities Financial Instruments: Recognition and Measurement – Amendments for novation of derivatives Levies Effective date (period beginning on or after) 1 July 2014 1 July 2014 1 January 2015 1 January 2015 1 January 2014 1 January 2014 1 July 2014 1 January 2014 1 January 2014 1 January 2014 1 January 2014 The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the Company’s financial statements. Share based payments The Company operates a number of equity-settled, share-based compensation plans, under which the entity receives services from employees as consideration for equity instruments (options) of the Company. The fair value of the employee services received in exchange for the grant of options is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted: l l l including any market performance conditions; excluding the impact of any service and non-market performance vesting conditions (for example, profitability, sales growth targets and remaining an employee of the entity over a specified time period); and excluding the impact of any non-vesting conditions (for example, the requirement of employees to save). Assumptions about the number of options that are expected to vest include consideration of non-market vesting conditions. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each reporting period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity. When the options are exercised, the Company issues new shares. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised. 48 Edenville Energy plc Annual Report and Financial Statements 2013 48 Notes to the Company Financial Statements for the year ended 31 December 2013 1 Accounting policies continued Segmental reporting The Company does not have separately identifiable business or geographical segments which are material to disclose. Revenue recognition Revenue from the sale of energy commodities is recognised upon delivery of goods to the customers. Interest income is recognised on a proportional basis taking into account the effective interest rates applicable to the financial assets. All revenue is stated net of the amount of sales tax. Currently the Company does not generate any revenue. Presentational and functional currency This financial information is presented in pounds sterling, which is the Company’s functional currency. Financial assets Financial assets comprise investments, cash and cash equivalents and receivables. Unless otherwise indicated, the carrying amounts of the Company’s financial assets are a reasonable approximation of their fair values. Equity investments available for sale Equity investments available for sale are non-derivatives that are either designated in this category or not classified in any of the other categories. Equity investments available for sale do not have a quoted market price in an active market. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date. Investments are initially classified at fair value. Gains and losses arising from changes in fair value are recognised directly in equity, until the security is disposed of or is determined to be impaired. The Company assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. If any such evidence exists the cumulative loss, measured as the difference between the acquisition cost and the current fair value, less any impairment loss previously recognised in statement of comprehensive income, is removed from equity and recognised in the statement of comprehensive income. Where the fair value cannot be reliable measured as a result of a lack of an active market and/or reliable estimates could not be made the equity investments are measured at cost. Trade and other receivables Provision for impairment of trade receivables is made when there is objective evidence that the Company will not be able to collect all amounts due to it in accordance with the original terms of those receivables. The amount of the write-down is the difference between the receivables carrying amount and the present value of the estimated future cash flows. An assessment for impairment is undertaken at least annually. Cash and cash equivalents Cash and cash equivalents comprise cash at bank and in hand, demand deposits and other short term highly liquid investments that are readily convertible to a known amount of cash and are subject to insignificant risk of changes in value. 49 Edenville Energy plc Annual Report and Financial Statements 2013 49 Notes to the Company Financial Statements for the year ended 31 December 2013 1 Accounting policies continued Property, plant and equipment Property, plant and equipment are stated at cost on acquisition less accumulated depreciation and accumulated impairment losses. Depreciation is provided on all property, plant and equipment categories at rates calculated to write off the cost, less estimated residual value on a reducing balance basis over their expected useful economic life. The depreciation rates are as follows: Fixtures and fittings Office equipment Motor vehicles Basis of depreciation 25% reducing balance 25% reducing balance 25% reducing balance Costs capitalised include the purchase price of an asset and any costs directly attributable to bringing it into working condition for its intended use. Financial liabilities Financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument. Financial liabilities comprise only trade and other payables. All financial liabilities are recorded at amortised cost, using the effective interest method, with interest-related charges being recognised as an expense under finance costs in the Income Statement. A financial liability is derecognised only when the obligation is extinguished, that is, when the obligation is discharged, is cancelled, or expires. Finance costs Finance costs of debt, including premiums payable on settlement and direct issue costs are charged to the income statement on an accruals basis over the term of the instrument, using the effective interest method. The taxation charge represents the sum of current tax and deferred tax. Income taxation The tax currently payable is based on the taxable profit for the period using the tax rates that have been enacted or substantially enacted by the balance sheet date. Taxable profit differs from the net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. Deferred taxation Deferred tax is recognised, using the liability method, in respect of temporary differences between the carrying amount of the Company’s assets and liabilities and their tax base. Deferred tax liabilities are offset against deferred tax assets within the same taxable entity. Any remaining deferred tax asset is recognised only when, on the basis of all available evidence, it can be regarded as probable that there will be suitable taxable profits in the foreseeable future against which the deductible temporary difference can be utilised. Deferred tax is determined using tax rates that are expected to apply in the periods in which the asset is realised or liability settled, based on tax rates and laws that have been enacted or substantially enacted by the balance sheet date. Deferred tax is recognised in the income statement, except when the tax relates to items charged or credited directly in equity, in which case the tax is also recognised in equity. Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as deduction, net of tax, from the proceeds. 50 Edenville Energy plc Annual Report and Financial Statements 2013 50 Notes to the Company Financial Statements for the year ended 31 December 2013 1 Accounting policies continued Exploration and evaluation assets Capitalisation Certain costs (other than payments to acquire the legal right to explore and costs which are directly attributable to those payments) incurred prior to acquiring the rights to explore are charged directly to the income statement. All costs incurred after the rights to explore an area have been obtained, such as geological and geophysical costs and other direct costs of exploration and appraisal are accumulated and capitalised as intangible exploration and evaluation (“E&E”) assets. These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the areas or where activities in the areas have not yet reached a stage which permits reasonable assessment of the existence of economically recoverable reserves. E&E costs are not amortised prior to the conclusion of appraisal activities. At completion of appraisal activities, if technical feasibility is demonstrated and commercial reserves are discovered, then, following development sanction, the carrying value of the relevant E&E asset will be reclassified as a development and production (“D&P”) asset, but only after the carrying value of the relevant E&E asset has been assessed for impairment, and where appropriate, its carrying value adjusted. If after completion of appraisal activities in the area, it is not possible to determine technical feasibility and commercial viability or if the legal right to explore expires or if the Company decides not to continue exploration and evaluation activity, then the costs of such unsuccessful exploration and evaluation are written off to the income statement in the period the relevant events occur. Impairment If and when facts and circumstances indicate that the carrying value of an E&E asset may exceed its recoverable amount an impairment review is performed. For E&E assets when there are such indications, an impairment test is carried out by grouping the E&E assets with the D&P assets belonging to the same geographic segment to form the Cash Generating Unit (“CGU”) for impairment testing. The equivalent combined carrying value of the CGU is compared against the CGU’s recoverable amount and any resulting impairment loss is written off to the income statement. The recoverable amount of the CGU is determined as the higher of its fair value less costs to sell and its value in use. Investment in subsidiaries Fixed asset investments in subsidiary undertakings held by the company (see note 5) are shown at cost less provision for impairment. The cost of acquisition includes directly attributable professional fees and other expenses connected with the acquisition. In addition, investment in subsidiaries includes long term loans made to the subsidiaries where recovery of the loan is not probable. Impairment The carrying amounts of non-current assets are reviewed for impairment if events or changes in circumstances indicate the carrying value may not be recoverable. If there are indicators of impairment, an exercise is undertaken to determine whether the carrying values are in excess of their recoverable amount. Such a review is undertaken on an asset by asset basis, except where such assets do not generate cash flows independent of other assets, in which case the review is undertaken at the cash generating unit level. If the carrying amount of an asset or its cash generating unit exceeds the recoverable amount, a provision is recorded to reflect the asset or cash generating unit at the lower amount. 51 Edenville Energy plc Annual Report and Financial Statements 2013 51 Notes to the Company Financial Statements for the year ended 31 December 2013 1 Accounting policies continued Going concern During the year the Company raised approximately £427,274 net of expenses through a placing and, at 31 December 2013, the Group had cash balances totalling £303,908. These funds along with the post year end equity financing facility as detailed in the subsequent events note are sufficient for the Group to operate without the requirement to raise further capital in the foreseeable future. Accordingly the financial statements have been prepared on a going concern basis. The Company intends to operate within its cash resources. 2 Critical accounting estimates and areas of judgement The Company makes estimates and assumptions concerning the future, which by definition will seldom result in actual results that match the accounting estimate. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year are those in relation to: l l l the impairment of intangible exploration and evaluation assets; Investments; Share based payments. Impairment of intangible exploration and evaluation assets The Company is required to perform an impairment review, for each CGU to which the asset relates, when facts and circumstances suggest that the carrying amount of the asset may exceed its recoverable amount. The recoverable amount is based upon the Directors’ judgements and is dependent upon the discovery of economically recoverable reserves, the ability of the Company to obtain necessary financing to complete the development and future profitable production or proceeds from the disposal until the technical feasibility and commercial viability of extracting a mineral resource becomes demonstrable, at which point the value is estimated based upon the present value of the discounted future cash flows. The outcome of ongoing exploration and evaluation, and therefore whether the carrying value of exploration and evaluation assets will ultimately be recovered, is inherently uncertain. The directors have assessed the value of exploration and evaluation expenditure carried as intangible assets. In their opinion there has been no impairment loss to intangible exploration and evaluation assets in the period. Investments The company performs an impairment review on its subsidiary undertakings as a group. The company’s main subsidiary is Edenville (Tanzania) Limited who hold various mining licences in Tanzania. As such, the carrying amount of the investments is assessed on the same basis as that of exploration and evaluation assets described above. Share based payments The estimate of share based payments costs requires management to select an appropriate valuation model and make decisions about various inputs into the model including the volatility of its own share price, the probable life of the options and the risk free interest rate. 52 Edenville Energy plc Annual Report and Financial Statements 2013 52 Notes to the Company Financial Statements for the year ended 31 December 2013 3 Staff costs Wages and salaries Social security costs Share based payment charge The average number of employees and directors during the year was as follows: Administration 2013 £ 258,609 29,424 39,797 327,830 2012 £ 207,500 16,910 39,999 264,409 2013 5 2012 4 Directors’ remuneration The aggregate directors’ emoluments, including compensation for loss of office, in the year were: Emoluments Share based payments 2013 £ 258,609 39,797 298,406 2012 £ 207,500 39,999 247,499 The highest paid director received remuneration of £65,000 (2012: £62,500). Directors’ interest in outstanding share options per director is disclosed in the directors’ report. 4 Intangible exploration and evaluation assets Cost As at 1 January Written off Impairment As at 1 January Written off As at 31 December Net book value As at 31 December 2013 £ 36,536 (36,536) – (36,536) 36,536 – – 2012 £ 36,536 – 36,536 (36,536) – (36,536) – Licences On 27 May 2009, the Company signed an option agreement with Javan Investments Company Limited, a private Tanzanian registered company for two prospecting licences in Tanzania. Under the terms of the option agreement, the Company acquired an initial 25% interest in both licences for a consideration of US$15,000 per licence. In the opinion of the Directors these licences should be fully impaired in line with IAS 36 and IFRS 6 as at 31 December 2012. On the basis that the licences expired on 18 March 2012, three years after the date of grant and have not been renewed by the company and have therefore been written off in the year. 53 Edenville Energy plc Annual Report and Financial Statements 2013 53 Notes to the Company Financial Statements for the year ended 31 December 2013 5 Investment in subsidiaries Company Fair value At 1 January Additions At 31 December Accumulated impairment As at 1 January Impairment Net book value As at 31 December Shares in subsidiaries Loans to subsidiaries £ Total 2013 £ 2012 £ 7,033,558 – 3,131,349 318,430 10,164,907 318,430 8,490,470 1,674,437 7,033,558 3,449,779 10,483,337 10,164,907 – – – – – – – – – – – – 7,033,558 3,449,779 10,483,337 10,164,907 Investment in subsidiaries relates to the acquisition of Edenville International (Seychelles) Limited and its subsidiary Edenville International (Tanzania) Limited which holds prospecting licenses. The Tanzanian licenses initially comprised six prospecting licences acquired on the acquisition of Edenville International (Tanzania) Limited in 2010. The Licenses covered 598km2 in Tanzania, located in a region displaying viable prospects for both uranium and coal and occur in a country where the government’s policy for development of the mineral sector aims at attracting and enabling the private sector to take the lead in exploration mining, development, mineral beneficiation and marketing. The value of the assets obtained on acquisition represents the fair value of the consideration paid to the vendors. The area covered by these original 6 licences has since decreased as the licence renewal process has focused on smaller areas with the best drill results. Edenville International (Tanzania) Limited has since acquired additional licences. At the year end a total of eight licences were held. The group has two CGUs: coal and uranium, as disclosed in note 5 to the group financial statements, which are relevant for the purposes of evaluating licences and hence investment in subsidiaries. In 2013 a programme of geographical mapping was completed over four licences held by the Group. The mapping identified that the licence areas comprised predominantly of volcanic rocks covering large portions of two of the licence areas. In the other two licence areas cretaceous sandstone/siltstone sequences were mapped. These volcanic rocks and cretaceous sandstone/slitsone sequences are not hosts to coal measures in East Africa and no Karoo age coal measures were seen in any of the licence areas mapped. Due to the absence of coal bearing sediments in the four licences the board has proposed to relinquish these licences and therefore have written off the exploration expenditure of £1,687,494 incurred to date on these four licences. The Directors have considered the status of the remaining projects at the year end and do not consider there are any facts or circumstances that would require an impairment review to be performed on the investments held. Holdings of more than 20% The Company holds more than 20% of the share capital of the following companies: Subsidiary undertaking Country of incorporation Class Shares held GOA Tanzania Limited Edenville International (Seychelles) Limited Edenville International (Tanzania) Limited UK Seychelles Tanzania *These shares are held by Edenville International (Seychelles) Limited. Ordinary Ordinary Ordinary 100% 100% 99.5%* 54 Edenville Energy plc Annual Report and Financial Statements 2013 54 Notes to the Company Financial Statements for the year ended 31 December 2013 6 Equity investments – available for sale Fair value As at 1 January Written off Impairment As at 1 January Written off As at 31 December Net book value As at 31 December 2013 £ 446,428 (446,428) – (446,428) 446,428 – – 2012 £ 446,428 – 446,428 (446,428) – (446,428) – On 13 March 2009, the Company entered into a collaboration and option agreement on a group of emerald mining licences in Tanzania, Africa, with Obtala Resouces Plc (“Obtala”) and Obtala’s subsidiary Mindex Invest Limited (“Mindex”). The Company’s focus is now on coal exploration and mining and the directors therefore consider it appropriate to impair the cost of these emerald mining licences, as the company does not intend to develop these assets. As at 31 December 2012, the Directors deemed this investment to be permanently impaired. 7 Property, plant and equipment 2012 Cost As at 1 January 2012 and 31 December 2012 Depreciation As at 1 January 2012 Charge for the year As at 31 December 2012 Net book value As at 31 December 2012 2013 Cost As at 1 January 2013 and 31 December 2013 Depreciation As at 1 January 2013 Charge for the year As at 31 December 2013 Net book value As at 31 December 2013 Plant and machinery £ Fixtures, fittings and equipment £ Motor vehicles £ Total £ 4,153 16,691 28,315 7,471 2,801 1,168 3,969 3,502 1,558 649 2,207 1,946 Plant and machinery £ Fixtures, fittings and equipment £ 6,194 2,624 8,818 10,553 4,441 14,994 7,873 13,321 Motor vehicles £ Total £ 7,471 3,969 875 4,844 4,153 16,691 28,315 2,207 487 2,694 8,818 1,968 10,786 14,994 3,330 18,324 2,627 1,459 5,905 9,991 55 Edenville Energy plc Annual Report and Financial Statements 2013 55 Notes to the Company Financial Statements for the year ended 31 December 2013 8 Trade and other receivables Current Other receivables Prepayments 2013 £ 13,562 9,814 23,376 2012 £ 2,319 3,666 5,985 9 Cash and cash equivalents Cash and cash equivalents include the following for the purposes of the cash flow statement: Cash at bank and in hand 10 Trade and other payables Trade and other payables Social security costs and other taxes Accruals and deferred income 11 Share capital Issued and fully paid Ordinary shares of 0.02p each Deferred shares of 0.08p each Ordinary shares of 0.02p each Deferred shares of 0.08p each 2013 £ 2012 £ 302,882 741,541 2013 £ 11,648 5,459 20,485 37,592 2012 £ – – 34,354 34,354 2013 Number 2012 Number 4,841,683,110 64,179,932 4,571,216,405 64,179,932 4,905,863,042 4,635,396,337 2013 £ 968,336 51,344 1,019,680 2012 £ 914,244 51,344 965,588 On 19 April 2013 the company issued 53,000,000 new ordinary shares of 0.02p each for a consideration of 0.186p per share. On 17 September 2013 the company issued 217,466,705 new ordinary shares of 0.02p each for a consideration of 0.186p per share. Of the shares issued 7,397,313 were issued in settlement for services provided to the company. The only rights attached to the deferred shares are as follows: (a) no dividend or other distribution shall be paid or made in respect of the deferred shares; (b) the holders of deferred shares shall not be entitled to receive notice of, or to attend and vote at any general meeting of the Company; (c) on a return of capital, whether on a winding-up or otherwise, the holders of deferred shares shall be entitled to receive only the amount credited as paid up on each share, but only after the holders of each ordinary share have received the amount paid up or credited as paid up on such share, together with a payment of £10,000 per share; (d) the Company may transfer the shares without making any payment to the holders thereof, to such persons as the Company may determine, and acquire the same in accordance with the provisions of the Companies Acts at a price of 0.08p each. 56 Edenville Energy plc Annual Report and Financial Statements 2013 56 Notes to the Company Financial Statements for the year ended 31 December 2013 12 Deferred taxation A deferred tax asset of £507,666 (2012: £410,002) calculated at 20% (2012: 20%) has not been recognised in respect of the tax losses carried forward due to the uncertainty that profits will arise against which the losses can be offset. 13 Capital management policy The Company’s policy on capital management is to maintain a low level of gearing. The company funds its operation through equity funding. The Company defines the capital it manages as equity shareholders funds less cash and cash equivalents. The Company’s objectives when managing its capital are: l l l To safeguard the company’s ability to continue as a going concern. To provide adequate resources to fund its exploration activities with a view to providing returns to its investors. To maintain sufficient financial resources to mitigate against risk and unforeseen events. The company’s cash reserves are reported to the board and closely monitored against the planned work program and annual budget. Where additional cash resources are required the following factors are taken into account: l l The size and nature of the requirement. Preferred sources of finance. l Market conditions. l Opportunities to collaborate with third parties to reduce the cash requirement. 14 Financial instruments The Board of Directors determine, as required, the degree to which it is appropriate to use financial instruments to mitigate risks with the main risk affecting such instruments being foreign exchange risk, which is discussed below. Categories of financial instruments Financial assets Receivables at amortised cost including cash and cash equivalents: Cash and cash equivalents Other receivables Total Financial liabilities Financial liabilities at amortised cost: Trade and other payables Net 2013 £ 2012 £ 302,882 23,376 326,258 741,541 5,985 747,526 37,592 288,666 34,354 713,172 57 Edenville Energy plc Annual Report and Financial Statements 2013 57 Notes to the Company Financial Statements for the year ended 31 December 2013 14 Financial instruments continued Cash and cash equivalents This comprises cash held by the Company and short-term deposits. The carrying amount of these assets approximates to their fair value. General risk management principles The Directors have an overall responsibility for the establishment of the Company’s risk management framework. A formal risk assessment and management framework for assessing, monitoring and managing the strategic operational and financial risks of the Company’s is in place to ensure appropriate risk management of its operations. The following represent the key financial risks that the Company faces: Interest rate risk The Company is not exposed to significant interest rate risks as it does not have any interest bearing liabilities and its only interest-bearing asset is cash invested on a short-term basis which attract interest at the banks variable rate. Credit risk Credit risk is the risk that the counterparty will default on its contractual obligations, resulting in financial loss. Credit risk arises from cash and cash equivalents and credit exposures on outstanding receivables and committed transactions. There were no amounts past due at the balance sheet date. The maximum exposure to credit risk in respect of the above at 31 December 2013 is the carrying value of financial assets recorded in the financial statements. Liquidity risk Liquidity risk is the risk that the Company will not be able to meet its financial obligations as and when they fall due. Liquidity risk is managed through an assessment of short, medium and long-term cash flow forecasts to ensure the adequacy of working capital. The Company’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. To ensure this aim, it seeks to maintain cash balances to meet expected requirements for a period of one year. Fair value of financial assets and liabilities The directors consider that there is no significant difference between the book value and fair value of the Company’s financial assets and liabilities. 58 Edenville Energy plc Annual Report and Financial Statements 2013 58 Notes to the Company Financial Statements for the year ended 31 December 2013 15 Equity-settled share-based payments The following options over ordinary shares have been granted by the Company: Date 29 March 2010 21 February 2011 21 October 2013 Exercise price Exercise period 0.87p 1.80p 0.25p 10 Years 9 Years 9 Years Number of options 44,827,587 35,000,000 226,586,603 The options granted on 29 March 2010 and 21 February 2011 were cancelled and replaced by those granted on 21 October 2013. The options granted on 21 October 2013 are exercisable from 21 October 2014. The options are valid for a period of 10 years from the date of grant. There are no vesting conditions. At the date of grant, the options were valued using the Black-Scholes option pricing model. The fair value per option granted and the assumptions used in the calculation were as follows: Date of grant Expected volatility Expected life Risk-free interest rate Expected dividend yield Possibility of ceasing employment before vesting Fair value per option 21 October 2013 85% 4 years 1.23% – – 0.09p The charge to the income statement for share based payments for the year ended 31 December 2013 was £39,767 (2012: £45,437). Movements in the number of options and warrants outstanding and their related weighted average exercise prices are as follows: At 1 January Granted Exercised Cancelled At 31 December 2013 2012 Number of options 79,827,587 226,586,603 – (79,827,587) 226,586,603 Weighted average exercise price per share pence Number of options Weighted average exercise price per share pence 1.28 0.25 – (1.28) 0.25 204,827,587 – (125,000,000) – 79,827,587 0.51 – (0.02) – 1.28 The weighted average remaining contractual life of options as at 31 December 2013 was 9.81years (2012: 7.6 years). 59 Edenville Energy plc Annual Report and Financial Statements 2013 59 Notes to the Company Financial Statements for the year ended 31 December 2013 16 Reserves The following describes the nature and purpose of each reserve: Share Capital Share Premium Share Option Reserve represents the nominal value of equity shares amount subscribed for share capital in excess of the nominal value fair value of the employee equity settled share option scheme as accrued at the balance sheet date Retained Earnings cumulative net gains and losses less distributions made 17 Related party transactions During the year ended 31 December 2013, the Group paid £65,000 (2012: £62,500) to Adler Shine LLP for the services of Rakesh Patel, director. Rakesh Patel is a partner in Adler Shine LLP. The Group also paid £18,303 (2012: £23,354) to Adler Shine LLP for accounting services provided in the year. During the year the Directors, Rufus Short, Sally Schofield and Rakesh Patel were each paid £15,000 in respect of the share issues. At the year end the Group owed the director, Simon Rollason £2,439 (2012: £2,523). Key management personnel are those persons having authority and responsibility for planning, directing and controlling activities of the Group, and are all directors of the company. For details of their compensation please refer to the Remuneration report. During the year the company paid £318,430 to or on behalf of its wholly owned subsidiary, Edenville International (Tanzania) Limited. The amount due from Edenville International (Tanzania) Limited at year end was £3,446,067 (2012: £3,127,637). This amount has been included within investment in subsidiaries. At the year end the company was owed £3,712 (2012: £3,712) by its subsidiary Edenville International (Seychelles) Limited. 18 Events after the reporting date Subsequent to the year end, Edenville Plc completed a placing of 1,428,571,428 new ordinary shares at a price of 0.07p, raising gross proceeds of £1m. 60 Edenville Energy plc Annual Report and Financial Statements 2013 60 Notice of Annual General Meeting for the year ended 31 March 2012 NOTICE IS HEREBY GIVEN THAT the 2014 Annual General Meeting of the Company will be held at Acre House, 11-15 William Road, London NW1 3ER on 27 June 2014 at 9.30 a.m. to consider and, if deemed fit, to approve the following resolutions, of which 1 to 4 (inclusive) will be proposed as ordinary resolutions and 5 will be proposed as a special resolution: Ordinary Business 1. 2. 3. To receive the accounts of the Company for the year ended 31 December 2013 together with the reports thereon of the directors and the auditors of the Company. To reappoint Simon Rollason as a director who is retiring in accordance with article 91.1 of the Company’s articles and, being eligible, offers himself for re-appointment. To reappoint HW Fisher & Company as auditors of the Company in accordance with Section 489 of the Companies Act 2006, until the conclusion of the next general meeting of the Company at which audited accounts are laid before members and to authorise the directors to determine their remuneration. Special Business 4. That the directors of the Company be and they are hereby authorised generally and unconditionally pursuant to and in accordance with section 551 of the Companies Act 2006 (“the Act”) to exercise all the powers of the Company to allot equity securities (as defined by section 560 of the Act), up to an aggregate nominal amount of £400,000 provided that this authority shall expire at the conclusion of the Company’s next Annual General Meeting save that the Company may, pursuant to this authority, make offers or agreements before the expiry of this authority which would or might require relevant securities to be allotted after such expiry and the directors may allot relevant securities in pursuance of such offers or agreements as if the authority conferred by this resolution had not expired. 5. That: (a) the directors be and they are hereby empowered pursuant to section 570 of the Act to allot equity securities (within the meaning of section 560 of the Act) for cash pursuant to the authority conferred by resolution 4 above as if section 561(1) of the Act did not apply to such allotment, provided that this power shall be limited to the allotment of equity securities: (i) in connection with an offer of equity securities by way of rights to the holders of ordinary shares in proportion (as nearly as may be) to their respective holdings of ordinary shares on a record date fixed by the directors but subject to such exclusions or other arrangements as the directors may consider necessary or expedient to deal with problems under the laws of any territory or the requirements of any regulatory body or any stock exchange in any territory or in connection with fractional entitlements or otherwise howsoever; or (ii) (other than pursuant to paragraph (i) above) having (in the case of equity securities (as defined in section 560 Act)) a nominal amount or (in the case of any other equity securities) giving the right to subscribe for or convert into relevant shares having a nominal amount, not exceeding in aggregate £400,000; 61 Edenville Energy plc Annual Report and Financial Statements 2013 61 Notice of Annual General Meeting for the year ended 31 March 2012 The power conferred by paragraph (a) above shall expire at the conclusion of the Company’s next Annual General Meeting save that the Company may, before the expiry of such power, make offers or agreements which would or might require equity securities to be allotted in pursuance of such offers or agreements as if the power conferred hereby had not expired. By order of the board For and on behalf of David Venus & Company LLP Secretary Date: 3 June 2014 Registered Office Aston House Cornwall Avenue London N3 1LF Notes 1. A member entitled to attend and vote at the meeting is entitled to appoint more than one proxy, to exercise all or any of his rights to attend, speak and vote in his place on a show of hands or on a poll provided that each proxy is appointed to a different share or shares. Such proxy need not be a member of the Company. 2. 3. To be valid, the completed and signed form of proxy must be returned to the Company’s registrars Capita Asset Services at PXS, 34 Beckenham Road, Beckenham, BR3 4TU not less than 48 hours before the time fixed for the meeting. Lodging a form of proxy does not preclude a member from attending and voting at the meeting. Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, the Company specifies that only those shareholders of the Company on the register at 6.00p.m. on the 25 June 2014 be entitled to attend or vote at the meeting in respect of shares registered in their name at the time. Changes to the register after that time will be disregarded in determining the rights of any person to attend or vote at the meeting. 62 Edenville Energy plc Annual Report and Financial Statements 2013 62 Notice of Annual General Meeting continued Explanatory notes on the resolutions Resolution 1 The directors must present to members the accounts and the reports of the directors and auditors in respect of each financial year. Resolution 2 In accordance with Article 91.1 of the Company’s articles of association, any director who is still in office at the start of the annual general meeting which falls nearest to the third anniversary of the annual general meeting at which he was appointed or last re-appointed shall retire by rotation. Accordingly, Simon Rollason is retiring by rotation and standing for re-appointment. Resolution 3 HW Fisher & Company are being proposed as the auditors of the Company until the conclusion the next general meeting at which accounts are presented. The directors are to be given authority to fix their remuneration. Resolution 4 The Company’s power to issue additional securities is exercised by the directors. The directors must be authorised by ordinary resolution of the shareholders to exercise that power. Resolution 5 Under the Company’s articles of association any new shares to be issued must first be offered to existing shareholders in proportion to the number of shares already held by them. The shareholders may by special resolution waive this right and permit the directors to issue additional shares without first offering them to existing shareholders. Authority is being sought to allow the directors to issue up to an additional nominal amount of £400,000. This authority will lapse at the conclusion of the Company’s next Annual General Meeting. 63 Edenville Energy plc Annual Report and Financial Statements 2013 63 64 Edenville Energy plc Printed by Michael Searle & Son Limited 64 Aston House Cornwall Avenue London N3 1LF United Kingdom www.edenville-energy.com 

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