Edenville Energy Plc
Annual Report 2019

Plain-text annual report

Registered number: 05292528 EDENVILLE ENERGY PLC ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2019 EDENVILLE ENERGY PLC CONTENTS Company Information Chairman’s Report Chief Executive Officer’s Report Strategic Report Directors’ Report Statement of Directors’ Responsibilities Remuneration Report Corporate Governance Report Independent Auditor’s 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 Auditor’s Report – Company Only Company Statement of Financial Position Company Statement of Changes in Equity Company Cash Flow Statement Notes to the Company’s Financial Statements Page 1 2 4 7 14 16 17 19 26 31 32 33 34 35 68 73 74 75 76 EDENVILLE ENERGY PLC COMPANY INFORMATION Directors Alistair Muir– Chief Executive Officer Jeffrey Malaihollo – Non-Executive Chairman Nicolas Von Schirnding – Non -Executive Director Company Secretary Bernard Sumner Registered Office Nominated Adviser Broker Bankers Auditor Solicitors Registrars Aston House Cornwall Avenue London N3 1LF SP Angel Corporate Finance LLP Prince Frederick House 35-39 Maddox Street London, W1S 2PP Brandon Hill Capital Limited 1 Tudor Street London, EC4Y 0AH Barclays Bank Plc 9 High Street Stony Stratford Milton Keynes MK11 1HR PKF Littlejohn LLP Statutory Auditor 15 Westferry Circus Canary Wharf London E14 4HD Womble Bond Dickinson (UK) LLP 4 More London Riverside London SE1 2AU Link Asset Services The Registry 34 Beckenham Road Beckenham Kent BR3 4TU 1 EDENVILLE ENERGY PLC CHAIRMAN’S REPORT FOR THE YEAR ENDED 31 DECEMBER 2019 Dear Shareholder, 2019 was a challenging year for the Company, given a lack of capital and difficult market conditions against a requirement to repay project debt, open up a new northern mining area and also further capital upgrades to the mining fleet and plant to improve efficiencies. Throughout 2019 the Company had to balance its limited financial resources whilst continuing to advance the Rukwa Project. Consequently, during the year Company undertook two equity placings via its new broker Brandon Hill, who also became a significant shareholder themselves following direct participation in both fundraises. These capital raises enabled the Company to open up a new mining area to the north, which as expected has proven to have higher quality coal than previously mined, as well as upgrade the wash plant and improve efficiencies. These operational developments are outlined in more detail in the CEO’s report below. During the second half of 2019, following a thorough review of operations, the Board of Directors took the decision to align with a with a local Tanzanian businessman with a view of forming a strategic partnership which would address certain areas where the Company had historically fallen short. Discussions were held in the second half of 2019 and reference to the potential partnership was made in the Company’s announcement of 29 November 2019 . The Board of Directors was also strengthened in September 2019 with the introduction of Alistair Muir, an experienced coal geologist with substantial coal mining and utilisation experience. Following a short transition period, Alistair took over the role of CEO, with Rufus Short stepping down to become a non-executive director. Arun Srinistava also departed the Board in 2019. Post period 2020 has been dominated by the COVID-19 pandemic (the “Pandemic”) throughout the world and unsurprisingly operations at Rukwa have naturally been affected. During the countrywide lockdown during the second quarter the Company was forced to suspend mine operations, leaving just a skeleton security force at the site. The pandemic also caused a delay in finalising all agreements with our strategic partnership. However the third quarter saw a recommencement of mining, processing and sales of coal from Rukwa and also the signing of the intended three related agreements with the strategic partner, designed to address mining, sales and the Company’s capital position. As previously reported, these agreements ensure that operational costs will now be borne by the strategic partner and that the partner will purchase a minimum of 3,000 tonnes of washed coal per month, at a healthy profit margin to the Company. In addition, the strategic partner intends to utilise its extensive network within Tanzania and nearby markets to further boost sales, as the Company looks to bring monthly washed coal sales to an initial 10,000 tonnes per month, with further expansion targeted thereafter. In the current ramp up phase, a loan agreement with the strategic partners is expected to provide the Company with additional working capital. In June 2020, the Board further changed with the appointment of Nick von Schirnding as an Independent Non-Executive Director who replaced Rufus Short. Nick has 25 years of experience in coal mining and natural resources including strategic development, M&A, driving operational change. Looking ahead, the three agreements with the strategic partner, the renegotiation of the Company’s debts, and the new Board, means that the Company is in now in a strong position to achieve its goals. In the longer term, given the significant size of the Rukwa deposit, we are still pursuing the coal to power project and have looked into opportunities of smaller power plants to supply local areas. In closing, I would like to thank all our stakeholders, including you the Shareholders, our partners, the local authorities and local communities, my fellow Directors, our employees and contractors who have collectively overcome the significant challenges of 2019. I would also like to thank Rufus Short for his hard work over the last few years. We look forward to reporting further progress from our Rukwa Mine in the coming months. 2 EDENVILLE ENERGY PLC CHAIRMAN’S REPORT FOR THE YEAR ENDED 31 DECEMBER 2019 Yours sincerely Dr Jeffrey Malaihollo Chairman 29 September 2020 3 EDENVILLE ENERGY PLC CHIEF EXECUTIVE OFFICER’S REPORT FOR THE YEAR ENDED 31 DECEMBER 2019 2019 Milestones My time as Edenville CEO started in in November 2019, towards the end of this reporting period. January 2019 got off to an encouraging start, with a second excavator being utilised in the mine alongside the existing machine. The Lamella water clarifier plant also became fully operational and the newly constructed pre-screen plant started processing test material in January 2019. An open offer was undertaken in January to provide the Company with sufficient funds for further plant upgrades and more importantly, to open up the new Northern Mining Area, which studies showed contained a better quality of coal. The open offer was poorly subscribed, with approximately 10% of the planned £620,000 being raised. Accordingly, from February 2019, the Company took measures to conserve capital and continue supply to key customers, whilst seeking alternative funding arrangements. The resulting lack of working capital to complete the mine upgrade meant that production was adversely impacted in H1 2019 with approximately 19,000 tonnes of ROM coal processed to produce 3,900 tonnes of washed tonnes and 9,700 tonnes fine coal tonnes between 1 January 2019 and 31 May 2019. On 29 April 2019 the Company announced a successful conditional fundraising of £510,000 (before expenses) and made preparations to apply some of this funding to the project development. The main areas targeted were opening up the pit in the Northern Mining Area and small upgrades on the plant and infrastructure. The Northern Mining Area was duly opened in June 2019 and has and continues to yield better quality coal than previously mined at Rukwa. Plant upgrades also took place and were completed in the third quarter. However, a lack of capital following debt service and repayment in Tanzania impacted the Company’s ability to increase production to targeted levels, which subsequently impacted the expected sales and revenue streams. In September 2019 commencement of the repayment of the outstanding Lind debt began and a further capital raise of £300,000 (before expenses) at 0.05p was announced on 6 September 2019. I also joined the Board at that time initially as a non-executive director, bringing experience as a coal geologist with strong coal mining and utilisation experience. On 1 November, having grown increasingly comfortable with the investment potential Edenville offered, I replaced Rufus Short as CEO. Following several weeks in Tanzania the historic issues the Company had faced became apparent and in November 2019, the Board elected to restructure the business to ensure profitability at the Rukwa Coal Project. On 29 November 2019, the Company announced initial discussions with a Strategic Investor had commenced which were later formalised in a Heads of Terms Agreement. Whilst the actual agreements outlined in the Heads of Terms wouldn’t be finalised until 2020, the revised operational model ensured the Company was no longer liable for costs related to increasing production. This had continually hampered the Company’s working capital position and thereby its ability to operate efficiently. A Contract Coal Mining Agreement, a Sales & Marketing Agreement and a Loan Agreement have all now been entered into and are covered in more detail below. Industrial Consumers Following the various upgrades to the plant, capacity is currently circa 12,500tpm of washed coal. At the present this should be achievable at a technical level, although prior to these upgrades the plant had historically peaked at around 3,000tpm. Total coal sales in the year of 2019 were 5,650 tonnes. The lack of washed coal in stockpiles, given liquidity and thereby mining constraints, made it difficult to establish the Company as a reliable producer in the region in 2019, nor for it to take advantage of the substantial contracts available in the neighbouring countries of Rwanda, Uganda, Burundi or the DRC. In December 2019 the company announced 2 contracts totalling 9,000tpm. The execution under these was impacted by the Pandemic. However, with the agreements now in place with the strategic investor, who has also committed for a further up to 5,000tpm, the Company hopes they can be satisfied when sufficient stockpiles have been established and combined with additional orders expected to be generated under the Sales & Marketing Agreement. 4 EDENVILLE ENERGY PLC CHIEF EXECUTIVE OFFICER’S REPORT FOR THE YEAR ENDED 31 DECEMBER 2019 As a by-product a significant amount of fine coal product is also produced. Whilst this has a lower heating value than the Company’s principal product (and is therefore better suited to on or near site utilisation) the Company continues to explore a number of avenues to monetise this. The reprocessing of fines or applying different technologies would also potentially create a higher quality and more desirable and saleable product. If the Company is successful in identifying a market for its fines production, it expects that revenue would fall to the bottom line and boost profitability. Coal to Power On 14 February 2019 Tanesco informed the Company that it had been unsuccessful in moving through the Request for Qualification process to supply power to Tanesco. To date no clear explanation has been given for this decision and as far as the Company is aware no other privately held coal projects in Tanzania progressed successfully through the process. The Company’s Directors remain confident that if and when the transmission line infrastructure is built to Sumbawanga, the opportunity for a power plant development at the Rukwa Coal Project will continue to move forward. Edenville is also seeking to advance discussions on smaller plant options to satisfy local electricity demand and possible export options into Zambia. The AFR RI-3A Tanzania – Zambia Transmission Interconnector project, which is being part financed by the World Bank, is continuing to move forward and could have positive implications for Edenville’s planned coal to power business model. The financing agreement for credit is now in place and the procurement plan is continuing to progress. As previously stated, the Company’s long term plan is to provide electricity to this transmission grid once it is completed and we are continuing to work towards this goal. Currently completion is stated as being in 2024. Post period (1st January 2020 to 31st August 2020) The post reporting period has been characterised by: - A restructuring of the operation of the Rukwa Project and closing of three agreements with a strategic partner. - The impact of the Pandemic on Rukwa and Tanzania as a whole. - Adverse weather events that impacted production in the early part of the year. On the restructuring side the Company now has in place three new contracts. These agreements have been reached with 2 different companies, although both have the same principle shareholder, a Dubai-based Tanzanian with extensive experience in logistics in east Africa. The three contracts include the Coal Mining Agreement and a US$1million Loan Agreement with Infrastructure and Logistics Tanzania Ltd (“ILTL”), and a Sales and Marketing agreement with MarTek Ltd. It has been difficult to assess the impact of the Pandemic as Tanzania has not tested or reported details on cases in the country. The Company understands that the virus peaked at the same time as Europe with some lockdown and social distancing practices in place. Although the President announced a return to “business as usual” in mid-May 2020, logistically the movement of people in and out of Tanzania remained very difficult until the late summer. Rukwa and the complete Western Highlands region experienced an extended weather event during the 2019-20 wet season with extensive rains from December to April. This again impacted production in January to March, before the temporary closure of the mine due to the Pandemic. Some production was taken from the southern pit during the first half of the year, but access to the northern pit became problematic due to road conditions. These were resolved post the Covid-19 enforced lockdown as advised in the Company’s announcement of 20 August 2020. With the assistance of two rounds of funding the Company is in an improved financial position with its existing legacy UK debt also settled. The significantly smaller outstanding Tanzanian debt will be settled with some of the proceeds from the loan facility of US$1M from ILTL. The equity funding rounds were as follows: - £700,000 was raised in January 2020 at a price of 0.04p per share and was subscribed for by existing major shareholders and one new major investor. 5 EDENVILLE ENERGY PLC CHIEF EXECUTIVE OFFICER’S REPORT FOR THE YEAR ENDED 31 DECEMBER 2019 - £500,000 was raised in June 2020 also at a price of 0.04p all the funds coming from the same existing major shareholders. Lind Partners LLC In 2018, Edenville entered into a loan facility with Lind Partners LLC (“Lind”) for principal of US$750,000 to fund the final construction parts of the mine at Rukwa. Repayment of the loan commenced in September 2019 with cash payments of approximately US51,000 per month, though Edenville does have the option of payment through shares. Payments were made on a regular basis to Lind between September 2019 to March 2020 inclusive, before a payment holiday was agreed with Lind as a result of the disruption related to the Pandemic. Currently Edenville’s outstanding debt to Lind totals US$580,000. Corporate social responsibility The Company has continued to take its corporate and social responsibility very seriously. We understand that Edenville must meet the social requirements of an operator in Tanzania. The construction of a mining operation at Rukwa has already provided several opportunities to improve infrastructure for the local community, the most visible being the construction of the road from Kipandi, past Mkomolo village and beyond, to the mine. This has opened up a major artery in the area which services farmers, the local population and communications as well as the mine itself. Wherever possible we have sought to employ local people from surrounding villages. Many of the operators and management are local and are proving to be highly competent and skilled employees. The positive social benefits also overflow into the general community where enterprising individuals are providing services such as food supply for workers. Relinquishment of licences There has been no new relinquishment. PL6098/2009 Muze which was identified for relinquishment last year has been released however Government records still indicate that it is held by Edenville. Summary In summary 2019 was a difficult year, primarily given liquidity constraints. However, despite clear headwinds the Company did still reach a number of milestones in terms of upgrades to the wash plant and opening the more attractive Northern Mining Area. It also identified a strategic partner moving forward, which we expect to address previous issues that arose in the investment case. Accordingly, following the closing of these three agreements with the strategic partner over the summer, I believe the Company is now well placed to take a major step forward through the adoption of this new operational structure that ensures Edenville draws revenue from every tonne of washed coal sold. On the operational side the Company is looking forward to seeing production increase at Rukwa and we have set ourselves an aspirational target of securing 25% of the local market. If that can be achieved, we will be pleased to tackle the problem of boosting production from the current wash plant or investing in additional capacity. Further with the completion of the Presidential elections the Company will look forward to engaging with the government on potential power scenarios. Alistair Muir Chief Executive Officer 6 EDENVILLE ENERGY PLC STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2019 The directors present their strategic report for the year ended 31 December 2019. Principal activity The principal activity of the Group is the production of energy commodities, predominantly coal, 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 and a review of operations are also set out in the Chief Executive Officer’s Report on pages 4 to 6. Development Approach The Group’s principal operation is the mining of coal. Its operations are subject to all of the hazards and risks normally encountered in mining and processing coal. The Group follows all necessary laws and regulations and believes it has adopted world best practice standards and is not aware of any present material issues in this regard. As is common with all mining operations, there is uncertainty and therefore risk associated with the Group’s operating parameters and costs. These can be difficult to predict and are often affected by factors outside the Group’s control. . Financial and performance review The results of the Group for the year ended 31 December 2019 are set out on page 31. Principal risks and uncertainties and risk management The principal risks facing the Group are those relating to the nature of the resources, risk of new entrants, those inherent and associated with mining,, 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 all areas of risk, through regular meeting. reporting 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: Operational risks Mineral extraction 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 production and extraction 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 and mining 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 7 EDENVILLE ENERGY PLC STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2019 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 mining and 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. We should note that to date, no substantial adverse changes to our operations, legal, or financial status has materialised due to recent documented changes in Tanzanian mining legislation. We continue to have regular dialogue with the authorities on how the law is applied and will report any material areas as they occur. The operational risks are mitigated, where possible, as follows: - - - - - the executive director and managements 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 mining and exploration and sample collection with local staff trained to standards set by the UK head office; the executive director and management visit each operation regularly to review local operational and technical procedures and controls and compliance with Group procedures and report to the Board; and the head office finance function regularly reviews local financial controls and compliance with Group procedures and report to the board. Production risks The Rukwa Project is now in production supplying coal to various customers in Tanzania and the region as a whole. Any mining operation which is producing it has all of the hazards and risks normally encountered in mining and processing coal. These include unusual and unexpected geological formations, flooding and other conditions involved in the extraction of material, any of which could result in damage to the mine and other producing facilities, damage to life or property. Key considerations include geological risk, mining risk, processing risk and also employee risk and governance risk. Customer risk also exists in relation to the ability of the customer to collect the product and to pay for it. All these areas are managed on a daily basis by qualified professionals experienced in their particular fields. In broad terms geological risk is covered by having well drilled out and the coal resource professionally reviewed. Mining risk is covered by having mine plan and appropriate equipment available to mine it supervised by mining engineers. Processing risk is covered by having a proven method of processing the coal through a system that is controlled and monitored by process plant professionals. Employee risk is managed by having an adequately trained staff whilst governance risk is managed by following government procedures and rules on all aspects of the operation Environment, health and safety The Groups operations in these areas are Government regulated by a range of legislative, regulation and policy requirements alongside Group reporting requirements and regular official and spot mine visits. Compliance to the set of rules and regulations underpins our approach to risk management. In support the Group adopts best practice with on-site and corporate level policies and procedures. It has specific personnel on site to manage this area, employee focused handbooks and daily toolbox meetings. 8 EDENVILLE ENERGY PLC STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2019 In regard to environmental management it engages third party consulting services that have an intimate knowledge of the regulatory framework to advise on mining activities. Despite all this structure the Group’s mining activities may result in pollution, accident or loss of life due to systems or equipment failure. 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. Currently the focus of the Rukwa project is in mining and development with only some effort put into exploration. There is no certainty that the operation described in this document will result in profitable commercial mining operations or result in the discovery of ore in commercial quantity and quality. Significant capital investment and working capital 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. 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. Currently the Group is undertaking limited exploration, this being primarily focused on development within the existing mining area and surrounding prospecting licences. Reserve and resource estimates The Group’s reported reserves and resources are only estimates based on JORC reports prepared in March 2013. No assurance can be given that the estimated reserves and resources will be recovered or that they will be recovered at the rates estimated. Reserve and resource estimates are based on sampling, interpretation and modelling and, consequently, are uncertain because the samples may not be representative. Reserve and resource estimates may require revision (either up or down) based on future actual production experience. 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. 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. 9 EDENVILLE ENERGY PLC STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2019 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. Changes or modifications to the Mining Act 2010 in 2017 and 2019 have had no adverse effect on the operation up to now. 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. Over time prices of all commodities rise and fall. 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 which include available supply and demand along with government policy. The principal commodity in Edenville’s portfolio is coal. Whilst global export coal prices are subject to price fluctuations depending on market conditions this does not affect our sales into the Tanzanian market because of the continuing Tanzanian ban on coal imports, it can affect our competitiveness in neighbouring countries markets. The impact of the price of coal on the economics of the Edenville project is kept under close review although local and regional factors play an important part in determining the coals economic viability. 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 or may have 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. 10 EDENVILLE ENERGY PLC STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2019 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. 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. It is noted that there were changes and amendments in 2017 and 2019 to the Mining Act 2010. To date, no significant adverse changes to our operations, legal, or financial status has materialised due to recent documented changes in Tanzanian mining legislation. We are aware that we may in the future receive requests from the Tanzanian Government connected to legislation. We continue to have regular dialogue with the authorities and will report any material points as they occur. 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 sectors are competitive at each phase of a company’s development. The Group competes with 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. 11 EDENVILLE ENERGY PLC STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2019 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. Financial risks The Group’s multi-national operations expose it to a variety of financial risks: (i) Foreign exchange risk The majority of exploration and development costs are in United States dollars or Tanzanian schillings. Accordingly, foreign exchange fluctuations may adversely affect the Group’s financial position and operating results. (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 Board monitors the activities and performance of the Group on a regular basis. The Board uses both financial and non- financial indicators based on budget versus actual to assess the performance of the Group. The indicators set out below were used during the year to 31 December 2018 and will continue to be used by the Board to assess performance over the year to 31 December 2019. Financial KPIs  Total production 37,239 tonnes (2018: 75,442)  Sales £233,414 (2018: £337,125)  Total expenditure burn rates have reduced by 29% from £2,834,892 to £2,008,807  Corporate overheads as a percentage of total expenditure has decreased from 34% in 2018 to 33% in 2019. Non-financial KPIs  Health and safety –There were no reported health and safety incidents during the year.  Operational success – Relevant information is reported in the ‘Chief Executive Officer’s Report’ on page 4. Prior Year adjustment During April 2018 the groups mining activities moved into the production phase. Previously these costs continued to be classified within intangible assets. The 2018 figures have been restated to show the transfer to property, plant and equipment. Further details are in Note 32. 12 EDENVILLE ENERGY PLC STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2019 Section 172(1) Statement – Promotion of the Company for the benefit of members as a whole: The Directors believe they have acted in the way most likely to promote the success of the Company for the benefit of its members as a whole, as required by s172 of the Companies Act 2006. The requirements of s172 are for the Directors to:  Consider the likely consequences of any decision in the long term;  Act fairly between members of the Company;  Maintain a reputation for high standards of business conduct;  Consider the interest of the Company’s employees;  Foster the Company’s relationships with suppliers, customers and others; and  Consider the impact of the Company’s operations on the community and environment. The application of S172 requirements can be demonstrated in relation to some of the key decisions made during 2019:  Restructure Tanzanian operations to gain benefit from local expertise in logistics and marketing.  Optimising the production environment to reduce pressures on cash flow.  Continuing to engage with the Tanzanian Government in regard to electricity generating opportunities.  Restructuring of debt to reduce operational constraints.  Continuing evaluation of existing licence areas and assessment of the project.  Adding expertise at the Board level to enhance strategic elements of the project. As a mining exploration and development group operating in Tanzania, the Board takes seriously its ethical responsibilities to the communities and environment in which it works. We abide by the local and relevant UK and local laws on anti-corruption and bribery. Wherever possible, local communities are engaged in the operations and support activities providing much needed local employment opportunities and wider economic opportunities to the local communities. In addition, we follow both Tanzanian regulatory requirements and international best practice on environmental aspects of our work. Our goal is to meet or exceed standards, in order to ensure we maintain our social licence to operate from the communities with which we interact. The health and safety of our employees are a primary consideration for the Board. Alistair Muir Chief Executive Officer 29 September 2020 13 EDENVILLE ENERGY PLC DIRECTORS’ REPORT FOR THE YEAR ENDED 31 DECEMBER 2019 The Directors present their annual report and audited Group financial statements for the year ended 31 December 2019. Dividends The Directors do not recommend payment of a dividend for the year (2018 – nil). 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: Arun Srivastava (resigned 25 September 2019) Rufus Short Alistair Muir (appointed 25 September 2019) Jeffrey Malaihollo Ordinary shares of 0.02p held at 31 December 2019 Nil Deferred shares of 0.001p held at 31 December 2019 Nil Ordinary shares of 0.02p held at 31 December 2018 Nil Deferred shares of 0.001p held at 31 December 2018 Nil 85,021,961 844,480,460 3,333,428 844,480,460 Nil 153,125,000 Nil Nil Nil Nil Nil Nil Rufus Short resigned as a Director on 10 June 2020 The Directors’ interests in share options as at 31 December 2019 are as follows: Rufus Short Rufus Short Jeffrey Malaihollo Arun Srivastava Rufus Short Jeffrey Malaihollo Options at 31 December19 3,005,741 5,333,333 3,333,333 2,000,000 10,666,666* 6,666,666* Exercise Price Date of grant First date of exercise Final date of exercise 5.00p 1.08p 1.08p 1.08p 1.08p 1.08p 21.10.13 28.03.17 28.03.17 28.03.17 28.03.17 28.03.17 21.10.14 28.03.17 28.03.17 28.03.17 N/A N/A 20.10.23 27.03.22 27.03.22 27.03.22 27.03.22 27.03.22 *The vesting date of these share options is dependent on performance conditions being met. Rufus Short resigned as a Director on 10 June 2020 as a result of which 10,666,666 share options lapsed. Share capital Details of issues of Ordinary Share capital during the year are set out in note 22. 14 EDENVILLE ENERGY PLC DIRECTORS’ REPORT FOR THE YEAR ENDED 31 DECEMBER 2019 Substantial shareholdings The company has been notified of the following voting rights of shareholders of the company as at 22 September 2020. The Bank of New York (Nominees) Limited JIM Nominees Limited Spreadex Limited Vidacos Nominees Limited Interactive Investor Services Nominees Limited Pershing Nominees limited Barclays Direct Investing Nominees Limited BNY (OCS) Nominees Limited No of Ordinary Shares % of issued share capital 1,301,771,250 1,052,963,125 895,916,966 797,039,489 397,907,425 390,513,129 348,458,326 322,500,000 15.98% 12.93% 11.00% 9.78% 4.88% 4.79% 4.28% 3.96% *Nominee shareholders represent a number of investors shareholdings Financial instruments and other risks Details of the use of financial instruments by the Company and its subsidiary undertakings are contained in note 25 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 PKF Littlejohn LLP were appointed as auditors during 2020. They 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 29 September 2020 and signed on its behalf. Alistair Muir Chief Executive Officer 15 EDENVILLE ENERGY PLC STATEMENT OF DIRECTORS’ RESPONSIBILITIES FOR THE YEAR ENDED 31 DECEMBER 2019 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 and Company 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:     select suitable accounting policies and then apply them consistently; make judgements and estimates that are reasonable and prudent; 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 Group’s and Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and 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. 16 EDENVILLE ENERGY PLC REMUNERATION REPORT FOR THE YEAR ENDED 31 DECEMBER 2019 The remuneration committee comprised of Jeffrey Malaihollo and Alistair Muir. 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 has two non-Executive directors. 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. 17 EDENVILLE ENERGY PLC REMUNERATION REPORT FOR THE YEAR ENDED 31 DECEMBER 2019 Directors’ remuneration Details of remuneration of the directors of the Company who served in the year ended 31 December 2019 are set out below: Name Executive Rufus Short Alistair Muir Non-Executive J Malaihollo Arun Srivastava Fees and other remuneration £ Long term Pension £ 2019 Total 2018 Total £ £ 70,833 18,619 30,000 8,750 542 - 199 - 71,375 18,619 130,702 - 30,199 8,750 45,458 36,000 128,2020 741 128,943 212,160 At 31 December 2019 only one third of the options granted to the directors in March 2017 have vested. Included in the above are accrued salaries of £69,827 (2018: £51,042). Rufus Short resigned as director on 10 June 2020 and as part of his settlement, £12,750 of salaries accrued were waived. 18 EDENVILLE ENERGY PLC CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDED 31 DECEMBER 2019 Compliance with the UK Corporate Governance code The Quoted Companies Alliance has published a corporate governance code for small and mid-sized quoted companies, which includes a standard of minimum best practice for AIM companies, and recommendations for reporting corporate governance matters (the “QCA Code”). The QCA Code sets out 10 principles of Corporate Governance which should be applied in order to deliver long-term shareholder value through good communication and an efficient, effective and dynamic management framework. The Directors of Edenville Group Plc (‘Edenville’, the ‘Group’ or the ‘Company’) have adopted the QCA Code. The 10 principles of the QCA Code are listed below together with a short explanation of how the Group applies each of the principles and where the Group does not fully comply with each principle an explanation is provided as to why it does not currently do so. Delivering growth 1. Establish a strategy and business model which promote long-term value for shareholders Edenville’s growth strategy is focused on the continued development of its mining operations in Tanzania and the planned development of a mine mouth power plant at the project site which will sell electricity to Tanesco and the East Africa Power Pool. The near-term objectives are: To continue commercial mining and washing operations at the Rukwa coal field. Since the year end, the Company now has in place three new contracts. These agreements have been reached with 2 different companies, although both have the same principle shareholder, a Dubai-based Tanzanian with extensive experience in logistics in east Africa. The three contracts include the Coal Mining Agreement and a US$1million Loan Agreement with Infrastructure and Logistics Tanzania Ltd (“ILTL”), and a Sales and Marketing agreement with MarTek Ltd. 2020 has been dominated by the COVID-19 pandemic (the “Pandemic”) throughout the world and unsurprisingly operations at Rukwa have naturally been affected. During the countrywide lockdown during the second quarter the Company was forced to suspend mine operations, leaving just a skeleton security force at the site. The pandemic also caused a delay in finalising all agreements with our strategic partnership. However the third quarter saw a recommencement of mining, processing and sales of coal from Rukwa and also the signing of the intended three related agreements with the strategic partner, designed to address mining, sales and the Company’s capital position. As previously reported, these agreements ensure that operational costs will now be borne by the strategic partner and that the partner will purchase a minimum of 3,000 tonnes of washed coal per month, at a healthy profit margin to the Company. In addition, the strategic partner intends to utilise its extensive network within Tanzania and nearby markets to further boost sales, as the Company looks to bring monthly washed coal sales to an initial 10,000 tonnes per month, with further expansion targeted thereafter. In the current ramp up phase, a loan agreement with the strategic partners is expected to provide the Company with additional working capital. To advance the Rukwa Coal to Power Project through its pre-development phase and subsequently to a point where a decision on construction can be made. On 14 February 2019 Tanesco informed the Company that it had been unsuccessful in moving through the Request for Qualification process to supply power to Tanesco. To date no clear explanation has been given for this decision and as far as the Company is aware no other privately held coal projects in Tanzania progressed successfully through the process. The Company’s Directors remain confident that if and when the transmission line infrastructure is built to Sumbawanga, the opportunity for a power plant development at the Rukwa Coal Project will continue to move forward. Edenville is also seeking to advance discussions on smaller plant options to satisfy local electricity demand and possible export options into Zambia. The AFR RI-3A Tanzania – Zambia Transmission Interconnector project, which is being part financed by the World Bank, is continuing to move forward and could have positive implications for Edenville’s planned coal to power business model. The 19 EDENVILLE ENERGY PLC CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDED 31 DECEMBER 2019 financing agreement for credit is now in place and the procurement plan is continuing to progress. As previously stated, the Company’s long term plan is to provide electricity to this transmission grid once it is completed and we are continuing to work towards this goal. Currently completion is stated as being in 2024. The Group’s longer-term objective is to fully monetise the Rukwa coal deposit via development of a mine mouth coal-to- power project providing electricity to the Tanzanian grid system. Edenville is continuing in discussions with Tanesco on all options available to develop a coal-to-power project at the Rukwa mine site. 2. Seek to understand and meet shareholder needs and expectations The Board is committed to maintaining good communication and having constructive dialogue with its shareholders on a regular basis. All shareholders and analysts have the opportunity to discuss issues and provide feedback at meetings with the Company. In addition, all shareholders are encouraged to attend the Company’s Annual General Meeting and any other General Meetings that are held throughout the year. Investors have access to current information on the Company though its website, https://edenville-energy.com/, and the Company’s financial PR advisers, IFC Advisory Limited, are also available to liaise with shareholders. The Company intends to widen its investor base over time and already meets or talks 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. The Company also has held and intends to periodically hold Investor events (either in person or virtually)to meet with shareholders and provide updates on corporate developments; and at appropriate points in the future the Company will host analyst site visits. 3. Take into account wider stakeholder and social responsibilities and their implications for long-term success The Board recognises that the long-term success of Edenville is reliant upon the relationship and good communications with the Tanzanian authorities (the Ministries of Energy and Minerals, Tanesco, the national power company and other government authorities such as NEMC the environmental management council), our local partner in Tanzania, the local community and the efforts of the employees of the Group and its contractors, suppliers and regulators. Frequent and regular communications with the authorities and our local partner is ongoing. A designated employee and a local Tanzanian consultant is engaged to conduct regular communication with the local community. 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. 4. Embed effective risk management, considering both opportunities and threats, throughout the organisation Principal risks The principal risks facing the Group are those relating to the volatility of commodity prices, reliance on the expertise of key Group personnel, risks connected with uncertainties of Tanzanian political, fiscal and legal systems, including taxation and currency fluctuations, and meeting its financing requirements. 20 EDENVILLE ENERGY PLC CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDED 31 DECEMBER 2019 Risk Management 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. 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. Duties in relation to risk management that are conducted by the Directors include, but are not limited, to: Initiating action to prevent or reduce the adverse effects of key risks; • • Controlling further treatment of risks until the level of risk becomes acceptable; Identifying and recording any problems relating to the management of risk; • • Initiating, recommending or providing solutions through designated channels; • Verifying the implementation of solutions; • Communicating and consulting internally and externally as appropriate; and • Informing investors of material changes to the Group’s risk profile. Ongoing review of the overall risk management programme (inclusive of the review of adequacy of treatment plans) is conducted by external parties, such as specialist consultancy groups or individuals, where appropriate. During the mine start- up phase, the Company has regularly used consultants in both the mining and processing areas. 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. Conflicts of interest The Board 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. 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. The Strategic Report provides detailed analysis of the key risks that face the Group and how those risks are managed. 5. Maintain the board as a well-functioning, balanced team led by the chair The Board recognises that the Company‘s objective of delivering growth in long-term shareholder value requires an efficient, effective and dynamic management framework and should be accompanied by good communication which helps to promote confidence and trust. The Board currently comprises one full-time Executive Director (Alistair Muir) and two Non-Executive Directors (Jeffrey Malaihollo and Nicolas Von Schirnding). Details of the qualifications, background and responsibility of each director is provided on pages 21 and 22 with additional information in respect of directors’ record of attendance at meetings and the operation of the Audit Committee and Remuneration Committee provided in the Company’s annual report and accounts and below under Principle 9. The Board is also supported by Rakesh Patel, a partner at Adler Shine LLP, Chartered Accountants, who acts as Group financial controller and who, together with his team at Adler Shine LLP, provide accounting, financial and reporting support to the directors. 21 EDENVILLE ENERGY PLC CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDED 31 DECEMBER 2019 Nicolas Von Schirnding is considered by the Board to be an independent director. Given the size of the Company, the present level of its development and the number of directors currently, the Board considers it may be necessary for there to be an additional director, either non-executive role or in a senior executive role. The Board therefore does recognise that as the Company develops, the number of directors, including independent directors, may increase. 6. Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities The Board comprises of directors considered to possess the appropriate experience, skills, personal qualities and capabilities necessary to deliver the Company’s strategy for the benefit of its shareholders and is appropriate to its present size and stage of development. Dr Jeffrey Malaihollo – Non-Executive Chairman (Aged 54) Jeffrey has a PhD in Geology and over 22 years’ experience in varied roles within resource and finance having worked and consulted for Newcrest Mining, Rio Tinto, Billiton and Loeb Aron Financial Advisors. This was followed by several years of Chief Executive Officer and Managing Director roles with AIM-listed Central China Goldfields and Bullabulling Gold and ASX-listed Arc Exploration. He is a non-executive director of TSXV-listed Copper Lake Resources Ltd as well as several other private companies in the resources sector. He is a Fellow of the AusIMM, a Fellow of the Geological Society of London, a member of the Geological Society of America and a member of the Association of Mining Analysts. As a Chairman Jeff is responsible to lead the Board and determine the strategic direction of the Company, review performance of the management and ensure that the Company complies with the relevant rules and regulations. In addition, he is responsible to ensure that the Company complies with the QCA Code for Corporate Governance. Alistair Muir – Chief Executive Officer (formerly Non-Executive Director)(Aged 68) Alistair has a wealth of both operational and emerging markets experience, including significant on the ground experience in Tanzania. He has over 25 years operational experience mainly working in the coal (both thermal and coking), uranium and iron ore sectors. He has extensive expertise in open-pit mine development, project evaluation and exploration, particularly in the integrated coal and power generation setting. In recent times Alistair has predominantly operated in emerging markets, as well as Tanzania he has worked in Turkey and Central Asia. Previous roles include General Manager of UraniumSA; Managing Director and Director of Celsius Coal Ltd, an ASX listed Company where he participated in the restructuring of the company to Celsius Resources as it migrated its operations into the battery minerals sector; and Chief Representative for Europe & the Middle East of Azarga Resources Ltd where he led project teams to evaluate new projects within the region. Alistair is responsible for the daily operation and directing management of the company from 1st November 2019 Nicholas (Nick) von Schirnding – Non-Executive Director (Aged 58) Nick has over 25 years' experience in mining and natural resources, including strategic development, M&A, restructuring, driving operational change and the UK regulatory framework. Nick is Executive Chairman of Arc Minerals plc, a London listed mining group with interests in Africa. Nick is also Chairman of Fodere Group, a private company that has developed environmentally sustainable technology to extract high value minerals from ore. In addition, Nick is a Non-Executive Director of Jangada Mines plc, which is also listed in London. Previously Nick was CEO of Asia Resource Minerals plc (formerly Bumi plc), a FTSE listed mining company and was instrumental in successfully restructuring their 25mtpa open pit coal mining operations. Nick was also deputy chairman of Berau Coal, Indonesia's fourth largest listed coal company. Prior to this Nick held senior roles at both Anglo American plc and De Beers. 22 EDENVILLE ENERGY PLC CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDED 31 DECEMBER 2019 Nick has worked and lived in both developed and emerging markets including the UK, India, SE Asia, Africa and South America. 7. Evaluate board performance based on clear and relevant objectives, seeking continuous improvement Given the size of the Board and the stage of development, no formal assessment of the Board performance is taken. However, requests to attend seminars, courses, conferences to improve the effectiveness of the Board are encouraged. A yearly internal review of the performance of the Board is planned with inputs from employees and advisors. Board members are in frequent communication with each other and the Chairman and the Chief Executive officer are in a daily communication such that Board members are aware of the present status of the Company. The Board conduct weekly meetings either by telephone or in person to review their goals. The CEO gets regular feedback from operational employees on all issues. There are periodic discussions on the future direction of the Company, augmentation of senior management team, potential Board members and succession planning. 8. Promote a corporate culture that is based on ethical values and behaviours 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: responsibilities to shareholders; compliance with the Tanzanian, Seychelles and UK laws and regulations; - - - Anti-corruption practices; - - - - relations with customers and suppliers; ethical responsibilities; employment practices; and responsibility to the environment and the community. Regular meetings and communications with management and employees are conducted throughout the year to ensure such corporate culture are instilled within the Company. Details of these are outlined in the Annual Report under the Corporate Social Responsibility and Corporate Governance sections. 9. Maintain governance structures and processes that are fit for purpose and support good decision-making by the board Board meetings The Board formally meet on average every three months, however the Chairman and the Chief Executive Officer communicate daily and meet up on average at least once a month. 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, changes in the Board / senior management, 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. 23 EDENVILLE ENERGY PLC CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDED 31 DECEMBER 2019 Board committees There are two board committees, namely the Audit and Remuneration committees both consisting of Jeffrey Malaihollo and Nicholas Von Schirnding. During the year ended 31 December 2019 the Audit Committee and the Remuneration Committee met with the Chief Executive Officer and all relevant matters were dealt with by the full Board. The functions of these committees are as follows: Audit committee The Committee provide a forum for reporting by the Group’s external auditors. Meetings will be held on average once a year and the executive Director(s) will also be invited to attend. The Audit Committee will be 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 will be 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 will determine the contract terms, remuneration and other benefits for the Executive Directors, including performance related bonus schemes, compensation payments and option schemes. At present, the Board itself determines the remuneration of the Non-Executive Directors. Nominations committee The directors consider that the Group is not currently of a size to warrant the need for a separate Nominations Committee or internal audit function although the board has put in place internal financial control procedures as summarised below. 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. 10. Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders In addition to the Chairman’s Statement and CEO report in the Company’s Annual Report and Interim Results, Shareholders are regularly advised of any significant developments in the Company and are encouraged to participate in the Annual General Meeting and any other General Meetings that may take place throughout the year. The Company intends to widen its investor base over time 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. Investors have access to current information on the Company though its website, https://edenville-energy.com/, and the Company’s financial PR advisers, IFC Advisory Limited, are also available to liaise with shareholders. The Company also intends to periodically hold Investor Evenings to meet with shareholders and provide updates on corporate developments; and at appropriate points in the future the Company will host analyst site visits. The Company has a twitter account https://twitter.com/edenvilleenergy?lang=en which contains photos and videos of the Company’s operation in Tanzania. The Managing Director also periodically promotes the Company’s activities, following the 24 EDENVILLE ENERGY PLC CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDED 31 DECEMBER 2019 publication of regulatory announcements, through various media platforms such as Directors Talk, VOX Markets and Proactive Investors. Going Concern The financial statements have been prepared on a going concern basis. The Company intends to operate within its cash resources. During the countrywide lockdown during the second quarter the Company was forced to suspend mine operations, leaving just a skeleton security force at the site. The pandemic also caused a delay in finalising all agreements with our strategic partnership. However the third quarter saw a recommencement of mining, processing and sales of coal from Rukwa and also the signing of the intended three related agreements with the strategic partner, designed to address mining, sales and the Company’s capital position. As previously reported, these agreements ensure that operational costs will now be borne by the strategic partner and that the partner will purchase a minimum of 3,000 tonnes of washed coal per month, at a healthy profit margin to the Company. In addition, the strategic partner will utilise its extensive network within Tanzania and nearby markets to further boost sales, as the Company looks to bring monthly washed coal sales to an initial 10,000 tonnes per month, with further expansion targeted thereafter. In the current ramp up phase, a loan agreement with the strategic partners is expected to provide the Company with sufficient working capital. Based on the current working capital forecast which includes the recent placing, the Group has sufficient funds in order to allow it to continue in production and implement planned project development and any upgrades. However, if there are delays in procuring orders, then the Group may require additional funds within twelve months of the date of approval of these financial statements. The ability of the Group to raise additional funds is dependent upon investor appetite. Expenditure on excavation is related to the level of orders and both head office costs and Tanzanian administration costs can be reduced if the additional funds cannot be raised and the Group therefore continues to adopt the going concern basis in preparing its consolidated financial statements. 25 EDENVILLE ENERGY PLC REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF EDENVILLE ENERGY PLC FOR THE YEAR ENDED 31 DECEMBER 2019 Qualified Opinion We have audited the financial statements of Edenville Energy plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the year ended 31 December 2019 which comprise the Group Statement of Comprehensive Income, Group Statement of Financial Position, the Group Statement of Changes in Equity, the Group Statements of Cash Flows and the notes to the financial statements, including a summary of significant accounting policies. 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 regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006. In our opinion, except for the possible effects of the matters described in the basis of the qualified opinion section of our report, the financial statements:    the financial statements give a true and fair view of the state of the group’s affairs as at 31 December 2019 and of the group’s loss for the period then ended; the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; and the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Basis for qualified opinion We were not appointed as auditors of the group until after 31 December 2019 and thus did not observe the counting of physical inventories at the end of the year. We were unable to satisfy ourselves by alternative means concerning the inventory quantities held at 31 December 2019, which are included in the statement of financial position at £247,538, by using other audit procedures. Consequently, we were unable to obtain sufficient appropriate audit evidence regarding the existence and condition of the inventory reported in the statement of financial position or to determine whether any adjustment to the reported amount was necessary. We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion. Emphasis of matter – Recoverability of VAT We draw your attention to Note 4 of the financial statements, which describes the group’s assessment over the VAT receivable balance of £317,129 in Tanzania. The Group have explained their assessment over the recoverability within critical accounting estimates and conclude this to be recoverable. The financial statements do not include the adjustments that would result if the Group was unable to fully recover this. Our opinion is not modified in this respect. Material uncertainty relating to going concern We draw attention to the disclosure made in Note 2 to the financial statements, under the heading “Going concern” concerning the ability of the Group to continue as a going concern. The Group’s forecasts and projections indicate that the Group has sufficient cash reserves to operate within the level of its current facilities. However, if there are any material variances to the forecast which it is unable to manage with cashflow management to continue in operation, the Group would be obliged to raise additional funds within twelve months of the date of the approval of these financial statements. The ability of the Group to raise additional funds is dependent upon investor appetite. These conditions, along with the other matters explained in that note, indicate the existence of a material uncertainty which may cast significant doubt over the Group’s ability to continue as a going concern. Our opinion is not modified in this matter. 26 EDENVILLE ENERGY PLC REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF EDENVILLE ENERGY PLC FOR THE YEAR ENDED 31 DECEMBER 2019 Our application of materiality Materiality The scope of our audit was influenced by our application of materiality. The quantitative and qualitative thresholds for materiality determine the scope of our audit and the nature, timing and extent of our audit procedures. The materiality applied to the financial statements as a whole was determined as follows: 2019 2018 Group £77,000 £74,000 Basis for materiality 1% of gross assets In our professional judgement, we consider gross assets to be the principal benchmark relevant to members of the group in assessing financial position and performance. Our calculated materiality levels were discussed and agreed with the audit committee. Whilst materiality for the group financial statements as a whole was £77,000, each significant component of the group was audited to a level of materiality ranging between £47,500 - £67,800. We agreed with the audit committee that we would report all individual audit differences identified during the course of our audit in excess of £3,850, in addition to other audit misstatements below that threshold that we believe warrant reporting on qualitative grounds. An overview of the scope of our audit In designing our audit, we assessed the risks of material misstatement in the group and parent company financial statements. In particular we considered areas involving significant accounting estimates and judgements by the directors and considered future events that are inherently uncertain like the carrying value of mining assets. We also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud. Of the 4 components of the group, an audit of the component financial information was performed on one component by a component auditor operating under our instruction. The remaining components were subject to group analytical review procedures on the basis that they were not material to the group nor was further audit evidence required for the purposes of our group opinion. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the Basis for qualified opinion section, we have determined the matters described below to be the key audit matters to be communicated in our report. . 27 EDENVILLE ENERGY PLC REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF EDENVILLE ENERGY PLC FOR THE YEAR ENDED 31 DECEMBER 2019 Key Audit Matter Carrying Value Mining Assets The entity has capitalised mining assets of £5,234,295. (Note 14). Management are required to assess whether there is any indication of impairment of these assets. The significance of the intangible non-current assets on the group's statement of financial position and the significant management judgement involved in the determination and the assessment of the carrying values of these assets there is increased risk of material misstatement or that the values will not be recovered. How the scope of our audit responded to the key audit matter Our work in this area included but was not limited to:  Testing an appropriate sample of movements during the year to supporting documentation;  Ensuring reasonableness capitalization of the new additions; the of the  Considering whether there were indicators of impairment of the mining assets such as expiring concessions, rights, projections of declining coal prices and/or declining demand and projections of increased future capital costs or operating costs; licenses or  Reviewing management's assessment of the impairment of mining assets and challenging their assumptions and estimates used as a basis to value the intangible assets. We will also review the financial statements of the joint operator; and Our work indicated that the carrying value of mining assets are fairly stated in the financial statements. Other information The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The Directors are responsible for the other information. Our opinion on the group and parent company financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. As described in the Basis for qualified opinion section of our report, we were unable to obtain sufficient appropriate audit evidence to support the carrying value of inventories. Information on cost of sales and inventories are included in the annual report and accordingly we are unable to confirm the accuracy of that disclosure for the same reason. Opinions on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit:   the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements. 28 EDENVILLE ENERGY PLC REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF EDENVILLE ENERGY PLC FOR THE YEAR ENDED 31 DECEMBER 2019 Matters on which we are required to report by exception Except for the matter described in the Basis for qualified opinion section of our report, in the light of the knowledge and understanding of the group and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report. Arising solely from the limitation on the scope of our work relating to the carrying value of inventories referred to above:  we have not obtained all the information and explanations that we considered necessary for the purpose of our audit; and  we were unable to determine whether adequate accounting records have been kept by the group and parent company. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:    returns adequate for our audit have not been received from branches not visited by us; or the financial statements are not in agreement with the accounting records and returns; or certain disclosures of directors’ remuneration specified by law are not made Responsibilities of directors As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the group and parent company financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the group and parent company financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. 29 EDENVILLE ENERGY PLC REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF EDENVILLE ENERGY PLC FOR THE YEAR ENDED 31 DECEMBER 2019 Use of our report 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 auditor’s 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. Zahir Khaki (Senior Statutory Auditor) For and on behalf of PKF Littlejohn LLP Statutory Auditor 15 Westferry Circus Canary Wharf London E14 4HD 29 September 2020 30 EDENVILLE ENERGY PLC GROUP STATEMENT OF COMPREHENSIVE INCOME YEAR ENDED 31 DECEMBER 2019 Revenue Cost of sales Gross loss Administration expenses Share based payments Group operating loss Finance income Finance costs Loss on operations before taxation Income tax Loss for the year Other comprehensive (loss)/income Item that will or may be reclassified to the profit and loss: Loss/(gain) on translation of overseas subsidiary Total comprehensive loss for the year Attributable to: Equity holders of the Company Non-controlling interest Earnings per Share (pence) Basic and diluted loss per share Note 5 2019 £ 233,414 (982,261) 2018 £ 337,125 (1,191,312) 6 26 10 11 12 (748,847) (854,187) (904,410) (839,515) (16,077) (76,319) (1,669,334) (1,770,021) 113 (177,843) 529 (16,212) (1,847,064) (1,785,704) - - (1,847,064) (1,785,704) (235,401) 378,531 (2,082,465) (1,407,173) (2,079,997) (2,468) (1,404,725) (2,448) 13 (0.05) (0.12) 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. 31 EDENVILLE ENERGY PLC GROUP STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2019 Company Registered Number 05292528 Note 14 15 16 17 18 19 20 21 21 22 Non-current assets Property, plant and equipment Right of use assets Intangible assets Current assets Inventories Trade and other receivables Cash and cash equivalents Current liabilities Trade and other payables Borrowings Current assets less current liabilities Total assets less current liabilities Non-current liabilities Borrowings 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 31 December 2019 £ 6,085,403 97,727 321,368 31 December 2018 As restated £ 6,582,394 - 332,466 1 January 2018 1,059,583 - 5,071,318 6,504,498 6,914,860 6,130,901 247,538 365,541 41,110 256,082 396,671 160,042 - 299,666 951,078 654,189 812,795 1,250,744 (897,122) (520,820) (556,063) (288,118) (146,797) - (1,417,942 (844,181) (146,797) (763,753) (31,386) 1,1103,947) 5,740,745 6,883,474 7,234,848 (284,903) (282,076) - 5,455,842 6,601,398 7,234,848 3,414,935 18,811,157 281,502 698,095 (17,736,330) 2,722,036 18,566,642 275,463 933,496 (15,884,731) 2,679,750 17,910,928 309,943 554,965 (14,212,274) 5,649,359 (13,517) 6,612,906 (11,508) 7,243,312 (8,464) 5,455,842 6,601,398 7,234,848 The financial statements were approved by the board of directors and authorised for issue on 29 September 2020 and signed on its behalf by: Alistair Muir Director 32 EDENVILLE ENERGY PLC GROUP STATEMENT OF CHANGES IN EQUITY YEAR ENDED 31 DECEMBER 2019 --------------------------------------------------Equity Interests--------------------------------------- Share Capital Share Premium Retained Earnings Account Share Option Reserve At 1 January 2018 Issue of share capital Cost of issue Share options/warrants charge Cancellation of share options Foreign currency translation Loss for the year Non- controlling interest share of goodwill At 31 December 2018 Issue of share capital Share options/warrants charge Cancellation of share options Changes on initial application of IFRS 16 Foreign currency translation Loss for the year Non- controlling interest share of goodwill At 31 December 2019 Foreign Currency Translation Reserve £ Total £ - - - 740,000 (42,000) 76,319 Non- controlling interest £ - - - Total £ 740,000 (42,000) 76,319 - 378,531 - - - 378,531 (1,783,256) - - (746) (2,448) 150 - 377,785 (1,785,704) 150 £ - - 76,319 (110,799) - - - £ £ 42,286 - - 697,714 (42,000) - £ - - - - - - - 110,799 - (1,783,256) - - - - - _ 2,722,036 18,566,642 (15,884,731) 275,463 933,496 6,612,906 (11,508) 6,601,398 692,899 - 244,515 - - - - - - - - - - - - - 10,038 (17,042) - (1,844,595) - - 16,077 (10,038) - - - - - 937,414 16,077 - (17,042) - - - - 937,414 16,077 - (17,042) - - - (235,401) - - (235,401) (1,844,595) - - (2,468) 459 (235,401) (1,847,063) - _ 3,414,935 __ 18,811,157 ____ (17,736,330) __ 281,502 698,095 5,469,359 __ (13,517) __ 5,455,842 33 EDENVILLE ENERGY PLC GROUP CASH FLOW STATEMENTS YEAR ENDED 31 DECEMBER 2019 Cash flows from operating activities Operating loss Depreciation Amortisation Interest paid Expected credit losses Share based payments Increase in inventories Increase in trade and other receivables Increase in trade and other payables Foreign exchange differences Note Year ended 31 December 2019 £ Year ended 31 December 2018 £ (1,669,334) 234,290 44,204 (23,000) 26,804 16,077 8,544 26,741 476,883 (32,196) (1,770,021) 229,732 57,928 - - 76,319 (256,082) (77,196) 390,069 37,584 Net cash outflow from operating activities (890,987) (1,311,667) Cash flows from investing activities Purchase of exploration and evaluation assets Purchase of property, plant and equipment Finance income - (33,559) 113 (468,145) (259,601) 529 Net cash used in investing activities (924,433) (727,217) Cash flows from financing activities Borrowings Proceeds from issue of convertible loan notes Repayment of convertible loan notes Repayment of lease liabilities Lease interest Proceeds from issue of ordinary shares Share issue costs 100,000 - (198,644) (23,241) (10,016) 937,414 - - 548,853 740,000 (42,000) Net cash inflow from financing activities 805,513 1,246,853 Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Effect of foreign exchange rate changes on cash and cash equivalents (118,920) 160,042 (12) (792,031) 951,078 995 Cash and cash equivalents at end of year 19 41,110 160,042 34 EDENVILLE ENERGY PLC NOTES TO THE GROUP FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 1. General Information Edenville Energy Plc is a public limited company incorporated in England and Wales. 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, development and mining of energy commodities predominantly coal in Africa. 2. Group Accounting Policies Basis of preparation and statement of compliance 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, except for the measurement to fair value of assets and financial instruments as described in the accounting policies set out below. 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 of the 2019 Annual Report. 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 68. Going concern At 31 December 2019 the Group had cash balances totalling £41,110. Covid 19 resulted in a countrywide lockdown in Tanzania foring the Group to suspend its mining operations leaving just a skeleton security force at the site. The pandemic also caused a delay in finalising all agreements with our strategic partnership. Mining operations re-commenced on 3 August 2020. The Group subsidiary Edenville International (Tanzania) Limited has entered into three related agreements with the strategic partner, designed to address mining, sales and the groups’s capital position. These agreements ensure that operational costs will now be borne by the strategic partner and that the partner will purchase a minimum of 3,000 tonnes of washed coal per month, at a healthy profit margin to the Group. In addition, the strategic partner will utilise its extensive network within Tanzania and nearby markets to further boost sales, as the Group looks to bring monthly washed coal sales to an initial 10,000 tonnes per month, with further expansion targeted thereafter. In the current ramp up phase, a loan agreement of US$1,000,000 with the strategic partners is expected to provide the Company with sufficient working capital. The loan agreement remains undrawn at present. Following the year end the Group raised a further £500,000 before expenses by planning 1,250,000 ordinary share of 0.02p for 0.04p. The Group meets its day to day working capital requirements through the sale of its coal resource, and monies raised in follow- on offerings. The Group’s forecasts and projections indicate that the Group has sufficient cash reserves to operate within the level of its current facilities. These forecasts are based upon expected saleable levels of production. 35 EDENVILLE ENERGY PLC NOTES TO THE GROUP FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 2. Group Accounting Policies (continued) Expenditure on excavation is related to the level of orders and both head office costs and Tanzanian administration costs can be reduced if it is found that order levels together with available cash resources are insufficient to meet the Group’s working capital needs. Whilst it is the Group’s intention to rely on the available cash reserves, future income generated and if required reductions in its cost base, a negative variance in the forecasts and projections would make the Group’s ability to continue as a going concern dependent on an additional fund raise. If the Group’s forecasts are not achieved, the Directors would seek to raise the additional funds through equity issues which would be dependent upon investor appetite. After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Company therefore continues to adopt the going concern basis in preparing both its consolidated financial statements and for its own financial statements Adoption of new and revised standards and changes in accounting policies In the current year, the following new and revised standards and interpretations have been adopted by the Group. IFRS 9 IFRS 16 Prepayments features with negative compensation Leases Amendments to IFRS 9 has had not had a material impact on the Group. The impact of IFRS 16 is detailed in notes 15 and 21. 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 3 IFRS 3 IFRS 7,9, IAS 39 IFRS 7,9,16 IFRS 16 Amendment to provide lessees with an exemption from assessing Amendments to clarify the definition of a business Amendments updating a reference to The Conceptual Framework Amendments regarding pre-replacement issues in the context of IBOR reform Amendments regarding replacement issues in the context of the IBOR reform IFRS 17 IFRS 17 IAS 1 IAS 8 IAS 16 IAS 37 whether a COVID-1+ related rent concession is a lease modification Insurance Contracts – new standard Amendments to address the implantation challenges that were identified after IFRS 17 was published Amendments regarding the classification of liabilities Amendments regarding the definition of material Amendments prohibiting a company from deducting the cost of property, plant and equipment amounts received from selling items produced while the company is preparing the asset for its intended use. Amendments regarding the costs to include when assessing whether a contract is onerous *Not yet endorsed by the European Union. Effective date for accounting period beginning on or after 1 January 2020 1 January 2022* 1 January 2020 1 January 2021* 1 June 2020* 1 January 2023* I January 2023* 1 January 2023* 1 January 2020 1 January 2022* 1 January 2022* 36 EDENVILLE ENERGY PLC NOTES TO THE GROUP FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 2. Group Accounting Policies (continued) 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. 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:    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 (Edenville International (Seychelles) Limited, Edenville International (Tanzania) Limited and Edenville Power (TZ) Limited) made up to 31 December 2019. Profits and losses on intra-group transactions are eliminated on consolidation. Subsidiaries are all entities over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases. 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. 37 EDENVILLE ENERGY PLC NOTES TO THE GROUP FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 2. Group Accounting Policies (continued) 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 consideration received or receivable, and represent amounts receivable for goods supplied, stated net of discounts, returns and value added taxes. Under IFRS 15 there is a five-step approach to revenue recognition which is adopted across all revenue streams. The process is: Step 1: Identify the contract(s) with a customer; Step 2: Identify the performance obligations in the contract; Step 3: Determine the transaction price; Step 4: Allocate the transaction price to the performance obligations in the contract; and Step 5: Recognise revenue as and when the entity satisfies the performance obligation. The Group has one revenue stream being the sale of coal and other aggregate bi-products produced by the Group. Sales are predominantly made at the Group’s premises as customers collect their quantities from the mine. Such revenue is recognised at the point of contact at a pre-agreed fixed price on a per tonnage basis. For deliveries made to customer premises, revenue is recognised at the point of which the products leave the Group’s premises 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. Financial instruments 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. Classification and measurement The Group classifies its financial assets into the following categories: those to be measured subsequently at fair value (either through other comprehensive income (FVOCI) or through the income statement (FVPL) and those to be held at amortised cost. 38 EDENVILLE ENERGY PLC NOTES TO THE GROUP FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 2. Group Accounting Policies (continued) Classification depends on the business model for managing the financial assets and the contractual terms of the cash flows. Management determines the classification of financial assets at initial recognition. The Group’s policy with regard to financial risk management is set out in note 3. Generally, the group does not acquire financial assets for the purpose of selling in the short term. The group’s business model is primarily that of “hold to collect” (where assets are held in order to collect contractual cash flows). When the group enters into derivative contracts, these transactions are designed to reduce exposures relating to assets and liabilities, firm commitments or anticipated transactions. Financial Assets The Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original EIR. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms. ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12- months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL). For trade receivables (not subject to provisional pricing) and other receivables due in less than 12 months, the Group applies the simplified approach in calculating ECLs, as permitted by IFRS 9. Therefore, the Group does not track changes in credit risk, but instead, recognises a loss allowance based on the financial asset’s lifetime ECL at each reporting date. The Group considers a financial asset in default when contractual payments are 90 days past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows and usually occurs when past due for more than one year and not subject to enforcement activity. At each reporting date, the Group assesses whether financial assets carried at amortised cost are credit impaired. A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Financial Assets held at fair value through other comprehensive income (FVOCI) The classification applies to the following financial assets: - Debt instruments that are held under a business model where they are held for the collection of contractual cash flows and also for sale (“collect and sale”) and which have cash flows that meet the SPPI criteria. An example would be where trade receivable invoices for certain customers were factored from time to time. All movements in the fair value of these financial assets are taken through comprehensive income , except for the recognition of impairment gains and losses, interest revenue (including transaction costs by applying the effective interest method), gains or losses arising on derecognition and foreign exchange gains and losses which are recognised in the income statement. When the financial asset is derecognised, the cumulative fair value gain or loss previously recognised in other comprehensive income is reclassified to the income statement. 39 EDENVILLE ENERGY PLC NOTES TO THE GROUP FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 2. Group Accounting Policies (continued) - Equity investments where the group has irrevocably elected to present fair value gains and losses on revaluation of such equity investments, including any foreign exchange component, are recognised in other comprehensive income. - When equity investment is derecognised, there is no reclassification of fair value gains or losses previously recognised in other comprehensive income to the income statement. Dividends are recognised in the income statement when the right to receive payment is established. Financial Assets held at fair value through profit or loss (FVPL) The classification applies to the following financial assets. In all cases, transaction costs are immediately expensed to the income statement. - Debt instruments that do not meet the criteria of amortised costs or fair value through other comprehensive income. - Equity investments which are held for trading or where the FVOCI election has not been applied. All fair value gains or losses and related dividend income are recognised in the income statement. - Derivatives which are not designated as a hedging instrument. All subsequent fair value gains or losses are recognised in the income statement. Derecognition The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. On derecognition of a financial asset measured at amortised cost, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognised in profit or loss. Financial Liabilities Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. The Group’s financial liabilities include trade and other payables and loans. Subsequent measurement The measurement of financial liabilities depends on their classification, as described below: Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by IFRS 9. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognised in the statement of profit or loss and other comprehensive income. 40 EDENVILLE ENERGY PLC NOTES TO THE GROUP FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 2. Group Accounting Policies (continued) Trade and other payables After initial recognition, trade and other payables are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in the statement of profit or loss and other comprehensive income when the liabilities are derecognised, as well as through the EIR amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss and other comprehensive income. Derecognition A financial liability is derecognised when the associated obligation is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in profit or loss and other comprehensive income. Liabilities within the scope of IFRS 9 are classified as financial liabilities at fair value through profit and loss or other liabilities, as appropriate. A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. Financial liabilities included in trade and other payables are recognised initially at fair value and subsequently at amortised cost. Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined using the average costing method. Components of inventories consist of coal, parts and supplies, net of allowance for obsolescence. Coal inventories represent coal contained in stockpiles, coal that has been mined and hauled to the wash plant (raw coal) for processing and coal that has been processed (crushed, washed and sized) and stockpiled for shipment to customers. The cost of raw and prepared coal comprises extraction costs, direct labour, other direct costs and related production overheads (based on normal operating capacity). It excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses The Company performs inventory obsolescence at each reporting date. In determining whether inventories are obsolete, the Company assesses the age at which inventories held in the store in order to make an assessment of the inventory write down to net realisable value. 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. Convertible loan notes The convertible loan notes issued by the Company are classified separately as financial liabilities in accordance with the substance of contractual arrangements. 41 EDENVILLE ENERGY PLC NOTES TO THE GROUP FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 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: Basis of depreciation Fixtures, fittings and equipment Plant and machinery Office equipment Motor vehicles 25% reducing balance 5 years straight line or 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. Production assets Coal land, mine development costs, which include directly attributable construction overheads, land and coal rights are recorded at cost. Coal land and mine development are depleted and amortised, respectively, using the units of production method, based on estimated recoverable tonnage. The depletion of coal rights and depreciation of restoration costs are expensed by reference to the estimated amount of coal to be recovered over the expected life of the operation. Coal Mine Reclamation Costs Future cost requirements for land reclamation are estimated where surface operations have been conducted, based on the Group’s interpretation of the technical standards of regulations enacted by the Government of Tanzania. These costs relate to reclaiming the pit and support acreage at surface mines and sealing portals at deep mines. Other costs include reclaiming refuse and slurry ponds as well as related termination/exit costs. The Group records asset retirement obligations that result from the acquisition, construction or operation of long-lived assets at fair value when the liability is incurred. Upon the initial recognition of a liability, that cost is capitalised as part of the related long-lived asset and expensed over the useful life of the asset. The asset retirement costs are recorded in Land, Coal Rights and Restoration Costs. The Group expenses reclamation costs prior to the mine closure. The establishment of the end of mine reclamation and closure liability is based upon permit requirements and requires significant estimates and assumptions, principally associated with regulatory requirements, costs and recoverable coal lands. Annually, the end of mine reclamation and closure liability is reviewed and necessary adjustments are made, including adjustments due to mine plan and permit changes and revisions of cost and production levels to optimize mining and reclamation efficiency. The amount of such adjustments is reflected in the year end reclamation provision calculation. 42 EDENVILLE ENERGY PLC NOTES TO THE GROUP FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 2. Group Accounting Policies (continued) Stripping (waste removal) costs As part of its mining operations, the Group incurs stripping (waste removal) costs both during the production phase of its operations. Stripping activities undertaken during the production phase of a surface mine (production stripping) are accounted for as set out below. After the commencement of production, further development of the mine may require a phase of unusually high stripping that is similar in nature to development phase stripping. The cost of such stripping is accounted for in the same way as development stripping (as outlined above). Production stripping is generally considered to create two benefits, being either the production of inventory or improved access to the ore to be mined in the future. Where the benefits are realised in the form of inventory produced in the period, the production stripping costs are accounted for as part of the cost of producing those inventories. Where the benefits are realised in the form of improved access to ore to be mined in the future, the costs are recognised as a non-current asset, referred to as a ‘stripping activity asset’, if the following criteria are met: a) Future economic benefits (being improved access to the ore body) are probable; b) The component of the ore body for which access will be improved can be accurately identified; and c) The costs associated with the improved access can be reliably measured If any of the criteria are not met, the production stripping costs are charged to profit or loss as operating costs as they are incurred. In identifying components of the ore body, the Group works closely with the mining operations personnel for each mining operation to analyse each of the mine plans. Generally, a component will be a subset of the total ore body, and a mine may have several components. The mine plans, and therefore the identification of components, can vary between mines for a number of reasons. These include, but are not limited to: the type of commodity, the geological characteristics of the ore body, the geographical location, and/or financial considerations. The stripping activity asset is initially measured at cost, which is the accumulation of costs directly incurred to perform the stripping activity that improves access to the identified component of ore, plus an allocation of directly attributable overhead costs. If incidental operations are occurring at the same time as the production stripping activity, but are not necessary for the production stripping activity to continue as planned, these costs are not included in the cost of the stripping activity asset. If the costs of the inventory produced and the stripping activity asset are not separately identifiable, a relevant production measure is used to allocate the production stripping costs between the inventory produced and the stripping activity asset. This production measure is calculated for the identified component of the ore body and is used as a benchmark to identify the extent to which the additional activity of creating a future benefit has taken place. The Group uses the expected volume of waste extracted compared with the actual volume for a given volume of ore production of each component. The stripping activity asset is accounted for as an addition to, or an enhancement of, an existing asset, being the mine asset, and is presented as part of ‘Intangible assets’ in the statement of financial position. This forms part of the total investment Right of use assets In the previous period, the Group only recognised lease assets and lease liabilities in relation to leases that were classified as “finance leases” under IAS 17 “Leases”. The assets were presented in property, plant and equipment and the liabilities as part of the Group’s borrowings. For adjustments recognised on adoption of IFRS 16 on 1 January 2019, please refer to note 15. Right-of-use assets are measured at cost, which is made up of the initial measurement of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the asset at the end of the lease, less any lease incentives received. The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. 43 EDENVILLE ENERGY PLC NOTES TO THE GROUP FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 2. Group Accounting Policies (continued) The Group also assesses the right-of-use asset for impairment when such indicators exist. The right-of-use assets are included in a separate line within non-current assets on the Consolidated Balance Sheet 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. 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 and development assets, the impairment of which is discussed in the accounting policy note for exploration and evaluation assets. 44 EDENVILLE ENERGY PLC NOTES TO THE GROUP FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 2. Group Accounting Policies (continued) Operating segments Operating segments are reported in a manner consistent with the internal reporting provided to the chief executive officer. The Board considers that the Group’s project activity constitutes one operating and reporting segment, as defined under IFRS 8. The total profit measures are operating profit and profit for the year, both disclosed on the face of the combined income statement. Share Capital The Group’s ordinary shares are classified as equity instruments. 3. 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 4. 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: the impairment of coal production assets and intangible assets; share based payments    Valuation of provision for restoration costs  Recoverability of VAT balance Impairment – coal production assets and intangible assets (notes 14 and 16) The Group is required to perform an impairment review, on coal production assets, for each CGU to which the asset relates. Impairment review is also required to be performed on other intangible assets 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 ability of the Company to obtain necessary financing to complete the development and future profitable production or proceeds from the disposal , at which point the value is estimated based upon the present value of the discounted future cash flows. In assessing whether an impairment is required for the carrying value of an asset, its carrying value is compared with its recoverable amount. The recoverable amount is the higher of the asset’s fair value less costs to sell and value in use. Given the nature of the Group’s activities, information on the fair value of an asset is usually difficult to obtain unless negotiations with potential purchasers or similar transactions are taking place. Consequently, unless indicated otherwise, the recoverable amount used in assessing the impairment charges described below is value in use. 45 EDENVILLE ENERGY PLC NOTES TO THE GROUP FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 4. Critical accounting estimates and areas of judgement (continued) The calculation of value in use is most sensitive to the following assumptions:  Production volumes  Sales volumes  Discount rates  Coal prices  Operating overheads Estimated production volumes are based on the production capability of the plant and estimated customer demand. The Group generally estimates value in use using a discounted cash flow model. The future cash flows are adjusted for risks specific to the asset and discounted using a pre-tax discount rate of 10%. The directors have assessed the value of exploration and evaluation expenditure and development assets and intangible assets. In their opinion there has been no impairment loss to these intangible assets in the period, other than the amounts charged to the income statement. Share based payments (note 26) 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, the vesting date of options where non-market performance conditions have been set and the risk free interest rate. Valuation of provision for restoration costs (note 14) The company makes full provision for the future cost of rehabilitating mine sites and related production facilities on a discounted basis at the time of developing the mines and installing and using those facilities. The rehabilitation provision represents the present value of rehabilitation costs relating to mine sites, which are expected to be incurred in the future, which is when the producing mine properties are expected to cease operations. These provisions have been created based on the company's internal estimates and a third party estimate from an independent consultant. Assumptions based on the current economic environment have been made, which management believes are a reasonable basis upon which to estimate the future liability. These estimates are reviewed regularly to take into account any material changes to the assumptions. However, actual rehabilitation costs will ultimately depend upon future market prices for the necessary rehabilitation works required that will reflect market conditions at the relevant time. Furthermore, the timing of rehabilitation is likely to depend on when the mines cease to produce at economically viable rates. This, in turn, will depend upon future coal prices, which are inherently uncertain. Management increases reclamation costs estimates at an annual inflation rate to the anticipated future mine closure date. This inflation rate is based on the historical rate for the industry for a comparable. Due to limited mining activity to date, management have assessed the liability to be $21,868 which has not been adjusted for as it is immaterial. Recoverability of VAT receivable (note 18) The group considers the recoverability of the VAT balance in Tanzania to be a key area of judgement, as the VAT can only be claimed backed when the Company turns profitable. The directors believe that the debtor is recoverable based on their knowledge of the market in Tanzania. 46 EDENVILLE ENERGY PLC NOTES TO THE GROUP FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 5. Segmental information The Board considers the business to have one reportable segment being Coal production assets. Other represents unallocated expenses and assets held by the head office. Unallocated assets primarily consist of cash and cash equivalents. Coal Production Assets 2019 Consolidated Income Statement Revenue - Tanzania Revenue - other Cost of sales (excluding depreciation and amortisation) Impairment of stock Depreciation Depletion of development assets Gross profit Administrative expenses Share based payment Depreciation Group operating loss Finance income Finance cost Loss on operations before taxation Income tax Loss for the year Coal £ 218,953 14,461 (781,840) - (173,073) (27,348) (748,847) (201,351) - (26,986) (977,184) - (10,018) Other £ - - - - - - (675,480) (16,077) (593) (692,150) 113 (167,825) Total £ 218,953 14,461 (781,840) - (173,073) (27,348) (748,847) (876,831) (16,077) (27,579) (1,669,334) 113 (177,843) (987,202) - (859,862) - (1,787,064) - (987,902) (859,862) (1,787,064) 47 EDENVILLE ENERGY PLC NOTES TO THE GROUP FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 5. Segmental information (continued) 2018 Consolidated Income Statement Revenue - Tanzania Revenue - other Cost of sales (excluding depreciation and amortisation) Impairment of stock Depreciation Depletion of development assets Gross profit Administrative expenses Share based payment Depreciation Group operating loss Finance income Finance cost Loss on operations before taxation Income tax Loss for the year Coal Production Assets 275,226 61,899 (868,549) (8,492) (226,343) (87,928) (854,187) (131,990) - (3,805) (989,982) - - - - - - - - (702,930) (76,319) (790) (780,039) 529 (16,212) 275,226 61,889 (868,549) (8,492) (226,343) (87,928) (854,187) (834,920) (76,319) (4,595) (1,770,021) 529 (16,212) (989,982) - (795,722) - (1,785,704) - (989,982) (795,722) (1,785,704) By Business Segment Carrying value of segment assets Additions to non-current assets and intangibles Total liabilities Coal Other By Geographical Area Africa (Tanzania) Europe 2019 £ 7,067,652 91,035 2018 £ 7.568,618 159,037 2019 £ 106,509 - 2018 £ 727,746 - 2019 £ 606,900 1,095,945 2018 £ 414,289 711,967 7,158,687 7,727,655 106,509 727,746 1,702,845 1,126,256 £ 7,067,652 91,035 £ 7,568,618 159,037 £ 106.509 - £ 727,746 - £ 606,900 1,095,945 £ 414,289 711,967 7,158,687 7,727,655 106,509 727,746 1,702,845 1,126,256 48 EDENVILLE ENERGY PLC NOTES TO THE GROUP FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 5. Segmental information (continued) Information about major customers Included in revenues arising from the sale of coal are revenues which arose from sales to the Group’s largest customers based in Tanzania. No other customers contributed 10% or more to the Group’s revenue in either 2019 or 2018. Customer 1 Customer 2 Customer 3 6. Expenses by nature Staff costs Audit fees Office and other administrative services AIM related costs including investor relations Professional, legal and consultancy fees Travel, entertaining and subsistence Exchange gain Depreciation Amortisation Provisions and expected credit losses Other costs 7. Auditors’ remuneration Fees payable to the Company’s auditor for the audit of the parent company and consolidated accounts 2019 £ 149,236 39,399 25,014 2018 £ - - 220,600 213,649 220,600 2019 £ 198,793 34,850 60,445 37,097 418,681 16,456 (13,584) 61,217 16,856 45,332 28,267 2018 £ 232,858 30,000 46,741 36,721 384,668 29,681 5,129 4,595 - 26,680 42,442 904,410 839,515 2019 £ 2018 £ 34,850 30,000 49 EDENVILLE ENERGY PLC NOTES TO THE GROUP FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 8. Employees Wages and salaries Social security costs Pensions 2019 £ 194,488 3,356 741 198,585 2018 £ 212,873 18,825 1,160 232,858 Included within Development expenditure/Exploration and evaluation assets (note 16) are capitalised wages and salary costs of £233,397 (2018: £241,458). The average number of employees and directors during the year was as follows: Administration and security Mining and security 9. Directors’ remuneration Emoluments Pensions The highest paid director received remuneration of £ 71,375 (2018: £130,702). Directors’ interest in outstanding share options per director is disclosed in the directors’ report. Remuneration of key management personnel The remuneration of the directors and other key management personnel is set out below: Emoluments Pensions 2019 12 35 47 2019 £ 128,220 741 2018 7 31 38 2018 £ 211,000 1,160 128,943 212,160 2019 £ 190,871 741 2018 £ 255,935 1,160 191,612 257,095 50 EDENVILLE ENERGY PLC NOTES TO THE GROUP FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 10. Finance income Interest income on short-term bank deposits 11. Finance Costs Interest on convertible loan notes Convertible loan finance costs Hire purchase interest Lease liability interest 12. Income tax Current tax: Current tax on loss for the year Total current tax Deferred tax On write off/impairment on intangible assets Tax charge for the year 2019 £ 113 113 2019 £ 160,379 7,446 2,712 7,306 177,843 2018 £ 529 529 2018 £ 11,496 4,716 - - 16,212 2019 £ 2018 £ - - - - - - - - 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 £7,034,804 (2018: £6,256,070). A deferred tax asset of £1,336,275 (2018: £1,063,129) calculated at 19% (2018: 17%) 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. 51 EDENVILLE ENERGY PLC NOTES TO THE GROUP FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 12. Income tax (continued) 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 (1,847,064) (1,785,704) 2019 £ 2018 £ Expected tax credit at standard rate of UK Corporation Tax 19% (2017: 19%) Disallowable expenditure Capital allowances in excess of depreciation Movement in deferred tax not recognised Tax charge for the year 13. Earnings per share (350,942) 31,147 (326,253) 646,048 (339,284) 24,372 - 314,912 - - 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 2019 £ (1,847,064) 2018 £ (1,785,704) Weighted average number of shares in issue 3,554,665,440 1,476,497,888 Basic and diluted loss per share (0.05p) (0.12p) 52 EDENVILLE ENERGY PLC NOTES TO THE GROUP FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 14. Property, plant and equipment Coal Production assets As restated £ Fixtures, fittings and equipment Plant and machinery Motor vehicles £ £ £ Cost As at 1 January 2018 Transfer from intangible asses Additions Foreign exchange adjustment - 5,225,232 276,059 1,111,852 - 259,601 64,088 As at 31 December 2018 5,501,291 1,435,541 Depreciation As at 1 January 2018 Depletion/Charge for the year Foreign exchange adjustment - 57,928 - 64,873 226,551 14,986 As at 31 December 2018 57,928 306,410 7,184 - - 176 7,360 6,719 115 176 7,010 89,709 - - 4,237 93,946 77,570 3,066 3,760 84,396 Total £ 1,208,745 5,225,232 259,601 344,560 7,038,138 149,162 287,660 18,922 455,744 Net book value As at 31 December 2018 5,443,363 1,129,131 350 9,550 6,582,394 53 EDENVILLE ENERGY PLC NOTES TO THE GROUP FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 14. Property, plant and equipment (continued) Cost As at 1 January 2019 Additions Disposal Foreign exchange adjustment Coal Production assets £ 5,501,291 (183,654) Plant and machinery £ 1,435,541 680 (168,189) (42,060) Fixtures, fittings and equipment £ 7,360 - - (107) Motor vehicles £ 93,946 105,829 - (2,579) Total £ 7,038,138 106,509 (168,189) (228,400) As at 31 December 2019 5,317,637 1,225,972 7,253 197,196 6,748,058 Depreciation As at 1 January 2019 Depletion/ Charge for the year Disposal Foreign exchange adjustment 57,928 27,348 - (1,934) 306,410 226,110 (33,638) (16,481) As at 31 December 2019 83,342 482,401 7,010 87 - (107) 6,990 84,396 8,093 - (2,557) 455,744 261,638 (33,638) (21,089) 89,925 662,655 Net book value As at 31 December 2019 5,234,295 743,571 263 107,271 6,085,403 Plant and machinery depreciation amounting to £173,073 (2018I £226,343) is included within cost of sales as it relates to mining equipment. 54 EDENVILLE ENERGY PLC NOTES TO THE GROUP FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 15. Right of use assets Cost As at 1 January 2019 Recognised on adoption of IFRS 16 Foreign exchange adjustment As at 31 December 2019 Amortisation As at 1 January 2019 Charge for the year Foreign exchange adjustment As at 31 December 2019 Net book value As at 31 December 2019 16. Intangible assets Cost or valuation As at 1 January 2018 Additions Transfer to property, plant and equipment Foreign exchange adjustment At 31 December 2018 Accumulated depletion, amortisation and impairment As at 1 January 2018 Amortisation Foreign exchange adjustment At 31 December 2018 Net book value As at 31 December 2018 Mining asset leases £ - 114,016 - 114,016 - 16,856 (567) 16,289 97,727 Total £ 6,243,052 468,145 (5,225,232) 86,232 Development and Production Expenditure As restated £ 4,757,087 468,145 (5,225,232) - Mining Licences £ 1,485,965 - - 86,232 - - - - - - 1,572,197 1,572,197 1,171,734 - 67,997 1,171,734 - 67,997 1,239,731 1,239,731 332,466 332,466 55 EDENVILLE ENERGY PLC NOTES TO THE GROUP FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 16. Intangible assets (continued) Cost or valuation As at 1 January 2019 Foreign exchange adjustment At 31 December 2019 Accumulated depletion, amortisation and impairment As at 1 January 2019 Depletion of development and production assets Foreign exchange adjustment At 31 December 2019 Net book value As at 31 December 2019 Mining Licences £ 1,572,197 (52,485) Total £ 1,572,197 (52,485) 1,519,712 1,519,712 1,239,731 - (41,387) 1,239,731 - (41,387) 1,198,344 1,198,344 321,368 321,368 Mining Licences Intangible assets arose as a result of the valuation placed on the original six Tanzanian licences acquired on the acquisition of Edenville (Tanzania) Limited. The allocation price was based on the price paid to acquire these the Group’s licences. These assets are reviewed for impairment annually alongside the coal production assets 17. Inventories ROM stockpiles Fines Washed coal 2019 £ 11,108 230,906 5,524 247,538 2018 £ 11,493 238,881 5,708 256,082 The cost of inventories recognised as an expense during the year in was £697,405 (2018: £853,388). Inventory of washed coal has been reduced by £nil (2018: ££8,492) as a result of write-downs to net realisable value. This write down is recognised as an expense during the year. 56 EDENVILLE ENERGY PLC NOTES TO THE GROUP FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 18. Trade and other receivables Trade Receivables Less: provision for impairment of trade receivables Trade receivables - net Other receivables VAT receivable Prepayments 2019 £ - - - 34,324 329,133 2,084 365,541 2018 £ 53,941 (27,900) 26,041 77 368,579 1,974 396,671 Included within VAT receivable is VAT owed to Edenville International (Tanzania) Limited which is only recoverable against future sales made by Edenville International (Tanzania) Limited. The Group expects to recover the above VAT from sales of commercial coal. 19. 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 20. Trade and other payables Trade and other payables Social security costs and other taxes Accruals and deferred income 2019 £ 2018 £ 41,110 160,042 2019 £ 476,876 9,713 410,535 897,124 2018 £ 366,175 6,980 182,908 556,063 57 EDENVILLE ENERGY PLC NOTES TO THE GROUP FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 21. Borrowings Convertible loan notes Repayable with 1 year Repayable within 2 to 5 years Other loans Repayable with 1 year Hire purchase finance Repayable with 1 year Repayable within 2 to 5 years Lease liability Repayable with 1 year Repayable within 2 to 5 years Total Repayable with 1 year Repayable within 2 to 5 years Lease liabilities At 1 January 2019 Interest expense Lease payments Foreign exchange movement 2019 £ 361,581 141,463 503,044 120,000 120,000 22,863 44,136 66,999 16,376 99,304 115,680 520,820 284,903 805,723 2018 £ 288,118 282,076 570,194 - - - - - - - - 288,118 282,076 570,194 Mining licence leases 2019 £ 135,584 (22,437) 7,306 (4,773) 66,917 58 EDENVILLE ENERGY PLC NOTES TO THE GROUP FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 21. Borrowings (continued) Convertible loan In November 2018 $750,000 conditionally convertible loan notes were issued: the face value of these convertible securities is $900,000. A commitment fee of £37,500, which has been offset against the proceeds of issue of the convertible loan notes, was payable by the Company as well as issuing share options over 99,568,966 ordinary shares exercisable for 4 years at a conversion price on 0.29p per share. The company is required to make repayments of $45,000 over 20 months commencing in February 2019. If repayments are made in cash, then an additional 3% is payable on the $45,000. The company may elect to make the repayment in its shares priced at 90% of the average five day Volume Weighted Average Price (VWAP) chosen by the investor both. issuance, during combination before days the 20 of or a The company has the option to buy back the entire outstanding face value at any time at a premium of 5%. If this right is exercised the investor has an option to convert 25% of the face value into shares at the lesser of the repayment price or 0.29p per share. The repayment price being 130% of the 10-day VWAP immediately prior to the company entering the Convertible Agreement. In addition to the above the investor was offered 36,000,000 collateral shares which were issued by the company on 20 February 2019. In April 2019, the company agreed a repayment holiday up to September 2019 in respect of the convertible loan notes. As a condition of granting the repayment holiday the outstanding balance at the time. $855,000, was increased by 15% to $983,250 Other loans This represents a loan of £100,000 with a fixed coupon interest rate of 20%. 22. Share capital No Ordinary shares of 0.02p each £ Ordinary shares of 0.02p each No Deferred shares of 0.001p each £ Total share capital £ Deferred shares of 0.001p each 1,336,317,797 211,428,572 267,265 42,286 241,248,512,346 - 2,412,485 - 2,679,750 42,286 Issued and fully paid At 1 January 2018 On 3 May 2018 Ordinary shares issued at 0.35p As at 31 December 2018 1,547,746,369 309,551 241,248,512,346 2,412,485 2,722,036 59 EDENVILLE ENERGY PLC NOTES TO THE GROUP FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 22. Share capital (continued) No Ordinary shares of 0.02p each £ Ordinary shares of 0.02p each No Deferred shares of 0.001p each £ Deferred shares of 0.001p each £ Total share capital 1,547,746,369 309,551 241,248,512,346 2,412,485 2,722,036 36,000,000 7,200 64,515,192 12,903 500,000,000 100,000 2,263,980,200 452,796 600,000,000 120,000 - - - - - - - - - - 7,200 12,903 100,00 452,796 120,000 Issued and fully paid At 1 January 2019 On 20 February 2019 Ordinary shares were issued at 0.02p On 20 February 2019 Ordinary shares were issued at 0.12p On 2 May 2019 500,000 Ordinary shares at 0.02p On 20 May 2019 2,263,980,200 Ordinary shares at 0.02p On 2019 September 600,000,000 Ordinary shares at 0.05p 11 As at 31 December 2019 5,012,241,761 1,002,450 241,248,512,346 2,412,485 3,414,935 The deferred shares have no voting rights, dividend rights or any rights of redemption. On return of assets on winding up the holders are entitled to repayment of amounts paid up after repayment to ordinary share holders 23. Capital and reserves attributable to shareholders Share capital Share premium Other reserves Retained deficit Total equity 2019 £ 3,414,935 18,811,157 979,597 (17,736,330) ________ 5,649,359 2018 £ 2,722,036 18,566,642 1,208,959 (15,884,876) ________ 6,612,761 There have been no significant changes to the Group’s capital management objectives or what is considered to be capital during the year. 60 EDENVILLE ENERGY PLC NOTES TO THE GROUP FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 24. Capital management policy The Group’s policy on capital management is to maintain a low level of gearing. The group funds its operation primarily 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:  To safeguard the group’s ability to continue as a going concern.  To provide adequate resources to fund its exploration, development and production 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 considered: the size and nature of the requirement.   preferred sources of finance.  market conditions.  opportunities to collaborate with third parties to reduce the cash requirement. 25. 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 Convertible loan notes Net 2019 £ 2018 £ 41,110 363,457 404,567 160,042 394,697 554,739 887,411 503,044 549,082 570,194 1,390,455 1,119,276 (985,888) (565,537) 61 EDENVILLE ENERGY PLC NOTES TO THE GROUP FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 25. 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 only interest-bearing asset is cash invested on a short-term basis which attracts interest at the bank’s variable interest rate. The Group is exposed to interest rate risk through its convertible loan notes, its only interest-bearing liabilities. The level of interest payable will vary depending on whether the repayments are made with shares or in cash. The effective interest rate based on repayments of $49,162 (2018:$45,000) per month is 20.78% (2018:17.93%). If repayments are made in cash then the monthly repayments increase by 3%. 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. VAT receivable is owed to Edenville International (Tanzania) Limited which is only recoverable against future sales made by Edenville International (Tanzania) Limited. The Group expects to recover the above VAT from sales of commercial coal. 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 2019 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. 62 EDENVILLE ENERGY PLC NOTES TO THE GROUP FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 25. Financial instruments (continued) 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 £753,111. 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. The tables below summarise the maturity profit of the combined Group’s non-derivative financial liabilities at each financial year end based on contractual undiscounted payments 2018 Convertible loan notes (current and non – current) Trade payables Other payables Accruals 2019 Trade payables Other payables Accruals Borrowings Less than 1 year 288,118 333,940 39,215 182,908 844,181 Less than 1 year 466,645 10,232 410,535 520,820 1,408,232 1- 2 years 2-5 years 282,076 - - - - 282,076 - - - 1- 2 years 2-5 years - - - 284,903 284,903 - - - - 63 EDENVILLE ENERGY PLC NOTES TO THE GROUP FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 26. Equity-settled share-based payments The following options over ordinary shares have been granted by the Company: Grant Date Exercise price 21 October 2013 28 March 2017 5 November 2018 26 April 2019 of Number outstanding December 2018 options 31 at 6,011,481 42,000,000 99,568,966 100,000,000 5.00p 1.08p 0.29p 0.26p 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. Of the 46,000,000 issued on 28 March 2017, 32,000,000 were issued to the Directors and a member of senior management and 8,000,000 to two engineers, 4,000,000 of which lapsed during the year. The 38,000,000 options issued to the Directors and a member of senior management will vest one third immediately, one third upon production of in excess of 5,000 tonnes of commercial coal per month over three consecutive months and one third upon completion of the Bankable Feasibility Study for the Rukwa Power Plant. 8,000,000 of the options of which 4,000,000 have lapsed during the year were granted to two engineers, will vest one half upon production of in excess of 5,000 tonnes of commercial coal per month over three consecutive months and one half upon production of in excess of 10,000 tonnes of commercial coal per month over three consecutive months. The options are exercisable for a 5-year period from 27 March 2017. During the year on the issue of convertible loan notes (see note 21), 99,568,966 options were issued to the investor. These options are exercisable over a 4-year period at an exercise price of 0.29p On 26 April 2019, 100,000,000 options were issued to an investor, on variation of an agreement. These options are exercisable over a 4- year period at an exercise price of 0.26p 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% - - 28 March 2017 131% 3 years 0.37% - - 5 November 2018 70% 4 years 0.96% - - 26 April 2019 101% 3.5 years 0.75% - - 0.09p 0.56p/0.42p/0.28p 0.08p 0.02 Volatility was determined by reference to the standard deviation of daily share prices for one year prior to the date of grant. The charge to the income statement for share-based payments for the year ended 31 December 2019 was £16,077 (2018: £76,319). 64 EDENVILLE ENERGY PLC NOTES TO THE GROUP FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 26. Equity-settled share-based payments (continued) Movements in the number of options outstanding and their related weighted average exercise prices are as follows: 2019 2018 Number of options Weighted average exercise price per share pence Number of options Weighted average exercise price per share pence At 1 January Granted Exercised Cancelled 147,580,477 100,000,000 - (7,005,741) At 31 December 240,574,706 0.71 0.26 - 2.76 0.46 52,011,481 99,568,966 - (4,000,000) 147,580,447 1.53 0.29 - 1.08 0.71 Exercisable year end at 215,241,373 118,247,114 The weighted average remaining contractual life of options as at 31 December 2019 was 2.78 years (2018: 3.73years). Warrants Movements in the number of warrants outstanding and their related weighted average exercise prices are as follows: 2019 Number of options Weighted average exercise price per share pence Number of options 2018 Weighted average exercise price per share pence At 1 January Granted Exercised Cancelled/expired - 127,500,000 - - At 31 December 127,500,000 - 0.02 - - 0.02 241,666,667 - - (241,666,667) 241,666,667 0.96 - - (0.96) 0.96 The weighted average remaining contractual life of warrants as at 31 December 2019 was 2.42 years (2018: Nil years). 127,500,000 warrants were issued to the company’s broker on at an exercise price of 0.02p. The warrants expire on 31 May 2022. 65 EDENVILLE ENERGY PLC NOTES TO THE GROUP FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 27. Contingent liabilities Edenville Internaitional (Tanzania) Limited has a dispute with a third party and arises from an Acquisition and Option Agreement signed in August 2010 (and its variation made in 2015) (“Agreement”). The third party is seeking financial compensation and other costs in addition to a dispute over certain mining licenses granted in the name of Edenville International (Tanzania) Limited. In the opinion of the directors and after taking appropriate legal advice, they have concluded that the case has no merit. 28. Reserves The following describes the nature and purpose of each reserve: Share Capital Share Premium Share Option Reserve Retained Earnings represents the nominal value of equity shares amount subscribed for share capital in excess of the nominal value fair value of the employee and key personnel equity settled share option scheme and broker warrants as accrued at the balance sheet date. cumulative net gains and losses less distributions made 29. Related Party Transactions Key management personnel are those persons having authority and responsibility for planning, directing and controlling activities of the Company, and are all directors of the Company. For details of their compensation please refer to the Remuneration report. During the year the Company paid £547,984 (2018: £1,435,463) 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 £9,117,401(2018: £8,565,706). This amount has been included within loans to subsidiaries. Also included in trade creditors is an amount of £3,584 (2018: £13,500) owed to Aaridhi Consultants in respect of Directors fees for Arun Srivastava. At the year end the Company was owed £3,712 (2018: £3,712) by its subsidiary Edenville International (Seychelles) Limited. At the year end the Company was owed £ (2018: £6,340) by its subsidiary Edenville Power Tz Limited. At the year end the Company was owed £6,340 (2018: £6,340) by its subsidiary Edenville Power Tz Limited. At the year end Edenville International (Tanzania) limited was owed $41,677 by Edenville Power Tz Limited and $9,517 was owed to JICL Consultants. 66 EDENVILLE ENERGY PLC NOTES TO THE GROUP FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 30. Events after the reporting date On 9 January 2020 the company issued 50,000,000 ordinary shares of 0.02p each at 0.05p, in settlement of invoices. On 21 January 2020 the company issued 1,750,000,000 ordinary shares of 0.02p each at 0.04p. On 8 June 2020 the company issued 1,250,000 ordinary shares of 0.02p for 0.04p raising gross proceeds of £500,000. In June 2020 the group’s subsidiary Edenville International (Tanzania) Limited (“EITL”) entered into a Coal Mining Agreement (the “Agreement”) with Infrastructure and Logistics Tanzania Limited (“ILTL”). Under the terms of the Agreement ILTL are expected to also become a customer of Edenville. It is envisaged under the Agreement that ILTL will enter into a long-term Coal Supply Agreement, which would see ILTL provide an anchor tenancy at the Company’s Rukwa coal project (“Rukwa” or the “Project’) by initially purchasing 3,000 tonnes of washed coal per month at standard market rates, before increasing this to 5,000 tonnes a month over a 12 month period. ILTL are also expected to use their logistics network and expertise with respect to existing and potential customers. In July 2020 EITL entered into a US$1 million Loan Agreement (the “Loan Agreement”) with ILTL. The loan shall attract interest at a rate of 9% per annum only on funds drawn. At present no amounts have been drawn. In August 2020 EITL entered into a Sales and Marketing Agreement with MarTek Global FZ-LLC (“MarTek”). MarTek is a Dubai-based sister company to Infrastructure and Logistics Tanzania Limited (“ILTL”), with both having the same principal shareholder. In August 2020, 83,333,333 warrants were exercised at a price of 0.06p per share EITL’s mining operations ceased during the COVID 19 lockdown in Tanzania, recommencing again on 3 August 2020. 31. Financial commitments The group has future aggregate minimum lease payments under non- cancellable operating leases of $Nil (2018: $43,472) and required expenditure of $Nil (2017: $Nil) in respect of its licences for the forthcoming year. 32. Ultimate Controlling Party The Group considers that there is no ultimate controlling party. 33. Prior year adjustment During April 2018 the groups mining activities moved into the production phase. At this stage costs of £5,225,232. Previously these costs continued to be classified within intangible assets to together with a fair value gain less depletion in the period. The 2018 figures have been restated to show the transfer of £5,225,232 to property, plant and equipment on completion of the development of the asset. The foreign exchange gain and depletion of the asset are now shownwith property , plant and equipment. This adjustment has no impact on Group Statement of Comprehensive Income or on the Group Statement of Changes in Equity. 67 EDENVILLE ENERGY PLC REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF EDENVILLE ENERGY PLC YEAR ENDED 31 DECEMBER 2019 Qualified Opinion We have audited the financial statements of Edenville Energy plc for the year ended 31 December 2019 which comprise the Statement of Financial Position, Statement of Changes in Equity, Statements of Cash Flows and the notes to the financial statements, including a summary of significant accounting policies. 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 regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006. In our opinion, except for the possible effects of the matters described in the basis of the qualified opinion section of our report, the financial statements:    the financial statements give a true and fair view of the state of the Company’s affairs as at 31 December 2019 and of their loss for the period then ended; the financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; and the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Basis for qualified opinion We were not appointed as auditors of the Company until after 31 December 2019 and thus did not observe the counting of physical inventories at the end of the year. We were unable to satisfy ourselves by alternative means concerning the inventory quantities held at 31 December 2019, which are included in the consolidated statement of financial position at £247,538, by using other audit procedures. Consequently, we were unable to obtain sufficient appropriate audit evidence regarding the existence and condition of the inventory reported in the consolidated statement of financial position or to determine whether any adjustment to the reported amount was necessary. We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion. Material uncertainty relating to going concern We draw attention to the disclosure made in Note 2 to the financial statements, under the heading “Going concern” concerning the ability of the Company and Group to continue as a going concern. The Company and Group’s forecasts and projections indicate that the Company and Group has sufficient cash reserves to operate within the level of its current facilities. However, if there are any material variances to the forecast which it is unable to manage with cashflow management to continue in operation, the Company and Group would be obliged to raise additional funds within twelve months of the date of the approval of these financial statements. The ability of the Company and Group to raise additional funds is dependent upon investor appetite. These conditions, along with the other matters explained in that note, indicate the existence of a material uncertainty which may cast significant doubt over the Company and Group’s ability to continue as a going concern. Our opinion is not modified in this matter. 68 EDENVILLE ENERGY PLC REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF EDENVILLE ENERGY PLC YEAR ENDED 31 DECEMBER 2019 Our application of materiality Materiality The scope of our audit was influenced by our application of materiality. The quantitative and qualitative thresholds for materiality determine the scope of our audit and the nature, timing and extent of our audit procedures. The materiality applied to the financial statements as a whole was determined as follows: 2019 2018 Basis for materiality Company £47,500 £74,000 1% of gross assets In our professional judgement, we consider gross assets to be the principal benchmark relevant to members of the group in assessing financial position and performance. Our calculated materiality levels were discussed and agreed with the audit committee. We use a different level of materiality (‘performance materiality’) to determine the extent of our testing for the audit of the financial statements. Performance materiality is set based on the audit materiality as adjusted for the judgements made as to the entity risk and our evaluation of the specific risk of each audit area having regard to the internal control environment. Where considered appropriate performance materiality may be reduced to a lower level, such as, for related party transactions and directors’ remuneration. We agreed with the audit committee that we would report all individual audit differences identified during the course of our audit in excess of £2,375, in addition to other audit misstatements below that threshold that we believe warrant reporting on qualitative grounds. An overview of the scope of our audit In designing our audit, we assessed the risks of material misstatement in the group and parent company financial statements. In particular we considered areas involving significant accounting estimates and judgements by the directors and considered future events that are inherently uncertain. We also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the Basis for qualified opinion section, we have determined the matters described below to be the key audit matters to be communicated in our report. . 69 EDENVILLE ENERGY PLC REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF EDENVILLE ENERGY PLC YEAR ENDED 31 DECEMBER 2019 Key Audit Matter How the scope of our audit responded to the key audit matter Valuation of the parent company’s investments in, and loans to, subsidiaries As disclosed in 4, the parent company holds a significant investment in Edenville International (Tanzania) Limited of £16,160,713, which includes loans to the subsidiary of £8,569,417. The value of the investment is linked to the value of the assets held in Edenville International (Tanzania) limited. There is a risk that the value in use is below the carrying value of the investment and thus the amounts reported are materially misstated. Our work in this area included;  Reviewing the valuation methodology for the investment held and ensuring that the carrying values were supported by sufficient and appropriate audit evidence;  Ensuring that all asset types were categorised according to the financial reporting framework, including the associated disclosures;  Ensuring that the parent company has full title to the investments held;  Ensuring that appropriate disclosures surrounding the estimates, including a review of how these estimates were arrived at, are made in respect of any valuations are included in the financial statements; and . Our work indicated that the investments are fairly stated in the financial statements. Other information The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The Directors are responsible for the other information. Our opinion on the group and parent company financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. As described in the Basis for qualified opinion section of our report, we were unable to obtain sufficient appropriate audit evidence to support the carrying value of inventories. Information on cost of sales and inventories are included in the annual report and accordingly we are unable to confirm the accuracy of that disclosure for the same reason. Opinions on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit:   the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements. 70 EDENVILLE ENERGY PLC REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF EDENVILLE ENERGY PLC YEAR ENDED 31 DECEMBER 2019 Matters on which we are required to report by exception Except for the matter described in the Basis for qualified opinion section of our report, in the light of the knowledge and understanding of the group and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report. Arising solely from the limitation on the scope of our work relating to the carrying value of inventories referred to above:  we have not obtained all the information and explanations that we considered necessary for the purpose of our audit; and  we were unable to determine whether adequate accounting records have been kept by the group and parent company. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:    returns adequate for our audit have not been received from branches not visited by us; or the financial statements are not in agreement with the accounting records and returns; or certain disclosures of directors’ remuneration specified by law are not made Responsibilities of directors As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the group and parent company financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the group and parent company financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. 71 EDENVILLE ENERGY PLC REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF EDENVILLE ENERGY PLC YEAR ENDED 31 DECEMBER 2019 Use of our report 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 auditor’s 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. Zahir Khaki (Senior Statutory Auditor) For and on behalf of PKF Littlejohn LLP Statutory Auditor 15 Westferry Circus Canary Wharf London E14 4HD 29 September 2020 72 EDENVILLE ENERGY PLC COMPANY STATEMENT OF FINANCIAL POSITION YEA Non-current assets Investment in subsidiaries Property, plant & equipment Current assets Trade and other receivables Cash and cash equivalents Current liabilities Trade and other payables Borrowings Note 2019 £ 2018 £ 4 5 6 7 8 9 16,160,713 1,778 15,612,729 2,371 16,162,491 15,615,100 48,412 40,845 89,257 479,244 481,581 960,825 18,553 140,483 159,036 148,112 288,118 436,230 Current assets less current liabilities (871,569) (277,194) Total assets less current liabilities 15,290,923 15,337,906 Non-Current liabilities Borrowings Net Assets Equity Called-up share capital Share premium account Share option reserve Profit and loss account Total equity 9 141,463 282,076 15,149,460 15,055,830 10 3,414.935 18,811,157 281,502 (7,358,134) 2,722,036 18,566,642 275,463 (6,508,311) 15,149,460 15,055,830 The financial statements were approved by the board of directors and authorised for issue on 29 September 2020 and signed on its behalf by: Alistair Muir Director Company registration number: 05292528 73  ENDED 31 DECEMBER 2019 COMPANY STATEMENT OF CHANGES IN EQUITY YEAR ENDED 31 DECEMBER 2019 Share Capital £ Share Premium £ Retained Earnings Account £ Share Option Reserve £ Total £ At 1 January 2018 2,679,750 17,910,928 (5,823,387) 309,943 15,077,234 Issue of share capital Cost of issue Share option/warrants charge Cancellation of share options Total comprehensive loss for the year 42,286 - - - - 697,714 (42,000) - - - - - - 110,799 (795,723) - - 76,319 (110,799) - 740,000 (42,000) 76,319 - (795,723) At 31 December 2018 2,722,036 18,566,642 (6,508,311) 275,463 15,055,830 Issue of share capital Share option/warrants charge Cancellation of share options Total comprehensive loss for the year 692,899 244,515 - - - - - 10,038 (859,861) - 16,077 (10,038) - 937,414 16,077 - (859,861) At 31 December 2019 3,414,935 18,811,157 (7,358,134) 281,502 15,149,460 74 EDENVILLE ENERGY PLC COMPANY CASH FLOW STATEMENT YEAR ENDED 31 DECEMBER 2019 Cash flows from operating activities Operating loss Depreciation Share based payments Finance costs Foreign exchange losses (Increase)/decrease in trade and other receivables Increase in trade and other payables Net cash outflow from operating activities Cash flows from investing activities Finance income Capital introduced to subsidiaries Note Year ended 31 December 2019 £ Year ended 31 December 2018 £ (859,974) 593 16,077 144,824 (13,331) (29,858) 351,132 (351,137) 113 (547,984) (796,250) 790 76,319 16,212 5,127 3,097 87,877 (606,828) 529 (1,438,977) Net cash outflow from investing activities (547,871) (1,438,448) Cash flows from financing activities New borrowings Proceeds from the issue of convertible loan notes Repayment of convertible loan notes Proceeds from issue of ordinary shares Share issue costs Net cash inflow from financing activities Net decrease in cash equivalents Cash and cash equivalents at beginning of year 100,000 - (198,643) 937,414 - 838,770 (99,638) 140,483 - 548,853 - 740,000 (42,000) 1,246,853 (798,423) 938,906 Cash and cash equivalents at end of year 7 40,845 140,483 75 EDENVILLE ENERGY PLC NOTES TO THE COMPANY’S FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 1. Accounting policies Basic of preparation and statement of compliance The Company financial statements are prepared under the historical cost convention, except for the measurement to fair value of assets and financial instruments, and 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 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 £859,861 (2018: £795,723). Going concern At 31 December the Company had cash balances of £40,845. Following the year end the company raised a further £500,000 before expenses by planning 1,250,000 ordinary share of 0.02p for 0.04p The Company meets its day to day working capital requirement from its own cash reserves and monies raised in follow on offerings. The Company’s forecast and projections indicate that the Company has sufficient cash reserves to operate within the level of its current facilities until such time as its subsidiary company is profitable from the sale of its coal resources thereby allowing it to fund the Company’s operations. The Company’s costs can be reduced if it is found that the subsidiary company’s levels of orders together with available cash resources are insufficient to meet its working capital needs. Whilst it is the Company’s intention to rely on it’s available cash reserves, and future income generated from its subsidiary, and if required a reduction in its cost base, a negative variance in the Company and the Groups forecasts and projections would make the Company’s ability to continue as a going concern dependent on an additional fund raise. If the Company’s and Group’s forecasts are not achieved, the Directors would seek to raise the additional funds through equity issues which would be dependent upon investor appetite. After making enquiries, the Directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. The company therefore continues to adopt the going concern basis in preparing its own financial statements. 76 EDENVILLE ENERGY PLC NOTES TO THE COMPANY’S FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 1. Accounting policies (continued) Adoption of new and revised standards and changes in accounting policies In the current year, the following new and revised standards and interpretations have been adopted by the Group. The adoption of these standards has had no impact on the current period. However they may have an effect in future periods. IFRS 9 IFRS 16 Prepayments features with negative compensation Leases 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 3 IFRS 3 IFRS 7,9, IAS 39 IFRS 7,9,16 IFRS 16 Amendment to provide lessees with an exemption from assessing Amendments to clarify the definition of a business Amendments updating a reference to The Conceptual Framework Amendments regarding pre-replacement issues in the context of IBOR reform Amendments regarding replacement issues in the context of the IBOR reform IFRS 17 IFRS 17 IAS 1 IAS 8 IAS 16 IAS 37 whether a COVID-1+ related rent concession is a lease modification Insurance Contracts – new standard Amendments to address the implantation challenges that were identified after IFRS 17 was published Amendments regarding the classification of liabilities Amendments regarding the definition of material Amendments prohibiting a company from deducting the cost of property, plant and equipment amounts received from selling items produced while the company is preparing the asset for its intended use. Amendments regarding the costs to include when assessing whether a contract is onerous Effective date for accounting period beginning on or after 1 January 2020 1 January 2022* 1 January 2020 1 January 2021* 1 June 2020* 1 January 2023* I January 2023* 1 January 2023* 1 January 2020 1 January 2022* 1 January 2022* 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:    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). 77 EDENVILLE ENERGY PLC NOTES TO THE COMPANY’S FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 1. Accounting policies (continued) 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. Segmental reporting The Company does not have separately identifiable business or geographical segments which are material to disclose. 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 Group’s financial assets are a reasonable approximation of their fair values. Classification and measurement The Group classifies its financial assets into the following categories: those to be measured subsequently at fair value (either through other comprehensive income (FVOCI) or through the income statement (FVPL) and those to be held at amortised cost. Classification depends on the business model for managing the financial assets and the contractual terms of the cash flows. Management determines the classification of financial assets at initial recognition. The Group’s policy with regard to financial risk management is set out in note 3. Generally, the group does not acquire financial assets for the purpose of selling in the short term. The group’s business model is primarily that of “hold to collect” (where assets are held in order to collect contractual cash flows). When the group enters into derivative contracts, these transactions are designed to reduce exposures relating to assets and liabilities, firm commitments or anticipated transactions. Financial Assets held at amortised cost The classification applies to debt instruments which are held under a hold to collect business model and which have cash flows that meet the “solely payments of principal and interest” (SPPI) criteria. At initial recognition, trade receivables that do not have a significant financing component, are recognised at their transaction price. Other financial assets are initially recognised at fair value plus related transaction costs, they are subsequently measured at amortised costs using the effective interest method. New impairment requirements use an ‘expected credit loss’ (‘ECL’) model to recognise an allowance. Impairment is measured using a 12- month ECL method unless the credit risk on a financial instrument has increased significantly since initial recognition in which case the lifetime ECL method is adopted. For receivables, a simplified approach to 78 EDENVILLE ENERGY PLC NOTES TO THE COMPANY’S FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 1. Accounting policies (continued) measuring expected credit losses using a lifetime expected loss allowance is available and has been adopted by the Group. During this process the probability of the non-payment of the trade receivables is assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for the trade receivables. For trade receivables, which are reported net, such provisions are recorded in a separate provision account with the loss being recognised within administrative expenses in the consolidated statement of comprehensive income. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision. Financial Assets held at fair value through other comprehensive income (FVOCI) The classification applies to the following financial assets: - Debt instruments that are held under a business model where they are held for the collection of contractual cash flows and also for sale (“collect and sale”) and which have cash flows that meet the SPPI criteria. An example would be where trade receivable invoices for certain customers were factored from time to time. All movements in the fair value of these financial assets are taken through comprehensive income , except for the recognition of impairment gains and losses, interest revenue (including transaction costs by applying the effective interest method), gains or losses arising on derecognition and foreign exchange gains and losses which are recognised in the income statement. When the financial asset is derecognised, the cumulative fair value gain or loss previously recognised in other comprehensive income is reclassified to the income statement. - Equity investments where the group has irrevocably elected to present fair value gains and losses on revaluation of such equity investments, including any foreign exchange component, are recognised in other comprehensive income. When equity investment is derecognised, there is no reclassification of fair value gains or losses previously recognised in other comprehensive income to the income statement. Dividends are recognised in the income statement when the right to receive payment is established. Financial Assets held at fair value through profit or loss (FVPL) The classification applies to the following financial assets. In all cases, transaction costs are immediately expensed to the income statement. - Debt instruments that do not meet the criteria of amortised costs or fair value through other comprehensive income. - Equity investments which are held for trading or where the FVOCI election has not been applied. All fair value gains or losses and related dividend income are recognised in the income statement. - Derivatives which are not designated as a hedging instrument. All subsequent fair value gains or losses are recognised in the income statement. Financial liabilities Borrowings and other financial liabilities (including trade payables but excluding derivative liabilities) are recognised initially at fair value, net of transaction costs incurred, and are subsequently measured at amortised costs. Impairment of financial assets A forward looking expected credit loss (ECL) review is required for: debt instruments measured at amortised costs are held at fair value through other comprehensive income: loan commitments and financial guarantees not measured at fair value through profit or loss; lease receivables and trade receivables that give rise to an unconditional right to consideration. 79 EDENVILLE ENERGY PLC NOTES TO THE COMPANY’S FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 1. Accounting policies (continued) As permitted by IFRS9, the group applies the “simplified approach” to trade receivable balances and the “general approach” to all other financial assets. The general approach incorporates a review for any significant increase in counter party credit risk since inception. The ECL reviews including assumptions about the risk of default and expected loss rates. For trade receivables, the assessment takes into account the use of credit enhancements, for example, letters of credit. Impairments for undrawn loan commitments are reflected as a provision Investment in subsidiaries Fixed asset investments in subsidiary undertakings held by the Company (see note 4) 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 the loan is either considered to be recoverable in the long term, as the company’s subsidiary Edenville International (Tanzania) Limited generates sufficient revenue from its coal assets in order to repay the loan, or it is expected to be capitalised. Investment in subsidiaries- 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. 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. Convertible loan notes The component parts of convertible loan notes issued by the Company are classified separately as financial liabilities and equity in accordance with the substance of contractual arrangements. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for a similar non-convertible instrument. This amount is recorded as a liability on an amortised cost basis using the effective interest method until extinguished upon conversion or at the instrument’s maturity date. The equity component is determined be deducting the amount of the liability component from the fair value of the convertible loan notes as a whole. This is recognised and included in equity, net of income tax effects, and is not subsequently remeasured. 80 EDENVILLE ENERGY PLC NOTES TO THE COMPANY’S FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 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. 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 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. 81 EDENVILLE ENERGY PLC NOTES TO THE COMPANY’S FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 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: Investments   Share based payments Investments The Company is required to perform an impairment review on its subsidiary undertakings as a group when facts and circumstances suggest that the carrying amount of the asset may exceed its recoverable amount. 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 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. At the reporting date, the carrying value of the company’s investments in, and loans to, its subsidiary undertakings amounted to £16,160,713 (2018: £15,612,729) 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, the vesting date of options where non-market performance conditions have been set and the risk free interest rate. Environmental rehabilitation liability The company makes full provision for the future cost of rehabilitating mine sites and related production facilities on a discounted basis at the time of developing the mines and installing and using those facilities. The rehabilitation provision represents the present value of rehabilitation costs relating to mine sites, which are expected to be incurred in the future, which is when the producing mine properties are expected to cease operations. These provisions have been created based on the company's internal estimates. Assumptions based on the current economic environment have been made, which management believes are a reasonable basis upon which to estimate the future liability. These estimates are reviewed regularly to take into account any material changes to the assumptions. However, actual rehabilitation costs will ultimately depend upon future market prices for the necessary rehabilitation works required that will reflect market conditions at the relevant time. Furthermore, the timing of rehabilitation is likely to depend on when the mines cease to produce at economically viable rates. This, in turn, will depend upon future coal prices, which are inherently uncertain. Management have reviewed the potential liability and have concluded that this is immaterial to include in the financial statements. 82 EDENVILLE ENERGY PLC NOTES TO THE COMPANY’S FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 3. Staff costs Wages and salaries Social security costs Pension costs The average number of employees and directors during the year was as follows: Administration Directors’ remuneration 2019 £ 128,202 5,912 741 2018 £ 212,873 18,825 1,160 134,855 232,858 2019 3 2018 3 The aggregate directors’ emoluments, including compensation for loss of office, in the year were: Emoluments Pension costs 128,202 741 211,000 1,160 128,943 212,160 The highest paid director received remuneration of £70,833 (2018: £130,702). Included in the above are accrued Director’s remuneration of £69,827 (2018: £58,085) Directors’ interest in outstanding share options per director is disclosed in the directors’ report. 83 EDENVILLE ENERGY PLC NOTES TO THE COMPANY’S FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 4. Investment in subsidiaries Company Cost At 1 January 2018 Additions Disposal At 31 December 2018 Accumulated impairment As at 1 January 2018 Impairment At 31 December 2018 Net Book Value As at 31 December 2018 Company Cost At 1 January 2019 Additions At 31 December 2019 Accumulated impairment As at 1 January 2019 Impairment At 31 December 2019 Net Book Value As at 31 December 2019 Shares in subsidiaries £ Loans to subsidiaries £ Total £ 7,043,312 - - _________ 7,043,312 7,130,440 1,438,977 - _________ 8,569,417 14,173,752 1,438,977 - _________ 15,612,729 - - _________ - - - _________ - - - _________ - 7,043,312 8,569,417 15,612,729 Shares in subsidiaries £ Loans to subsidiaries £ Total £ 7,043,312 - _________ 7,043,312 8,569,417 547,984 _________ 9,117,401 15,612,729 547,984 _________ 16,160,713 - - _________ - - - _________ - - - _________ - 7,043,312 9,117,401 16,160,713 The value of the company’s investment and any indications of impairment is based on the prospecting and mining licences held by its subsidiaries. The Tanzanian licences comprise a mining licence and various prospecting licences. The licences are, located in a region displaying viable prospects for 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. 84 EDENVILLE ENERGY PLC NOTES TO THE COMPANY’S FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 4. Investment in subsidiaries (continued) During 2018 the activities of the company’s subsidiary evolved from exploration and evaluation to development and as a result the exploration and evaluation assets held by the company’s subsidiary were transferred to development expenditure. The Directors carried out an impairment review on reclassification of exploration and evaluation assets to development assets, which covered the company’s investments in, and loans to, its subsidiaries. Following the impairment reviews the Directors did not consider the company’s investments to be impaired. In April 2019, the subsidiary moved into the production phase. The Directors have carried out an impairment review and consider the value in use to be greater than the book value in respect of The Company’s investment in its subsidiary company Edenville International (Tanzania) Limited. The Directors considered the recoverable amount by assessing the value in use by considering future cash flow projections of the revenue generated by its subsidiary through the sale of its coal resources. Cash flows were based on the revenue generated to date plus expected growth from current production levels to 10,000 tons per month in the short to medium term. In addition, the projections include future potential revenue generated from the Company’s plans relating to the Rukwa Coal to Power Project. It is expected that the Project will move ahead in parallel with the transmission development which is currently in the procurement stage and the Directors understand should be completed sometime in 2024. There is no guarantee that the company will be chosen as the successful party to develop the Power Project, and therefore there is no guarantee that revenue will be generated from this Project. Should this be the case then the Company would need to review its cash flow projections, and review the carrying value of its investment in Edenville International Tanzania Limited However, based upon current know resources the subsidiary has significant coal resources which based upon current projections prepared by the Directors would be sufficient to support the book value in the financial statements. The Directors are of the view that this amount is adequately supported by proposed returns generated by the Power Plant Project. The Directors have applied a 10% discount rate in their forecasts. Additional factors that may affect these projections include the following: – A 30% reduction in the margin per ton of coal would result in an impairment of the Edenville International (Tanzania) Limited investment by £736k An increase in the discount factor to 16% would result in an impairment of the Edenville International (Tanzania) Limited investment by £824k. A decrease of 50% of the EBITA would result in an impairment of the Edenville International (Tanzania) Limited investment by £5.7m. The mining licence is due to expire in 2026. Should the mining licence not be renewed this would result in an impairment of £7.037m. 85 EDENVILLE ENERGY PLC NOTES TO THE COMPANY’S FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 4. Investment in subsidiaries (continued) Holdings of more than 20%: The Company holds more than 20% of the share capital of the following companies: Subsidiary undertaking Edenville International (Seychelles) Limited Edenville International (Tanzania) Limited Edenville Power (Tz) Limited Edenville (South Africa) Limited Country of incorporation Seychelles Tanzania Tanzania England Class Ordinary Ordinary Ordinary Ordinary Shares held 100% 99.75%* 99.9% 100% * These shares are held by Edenville International (Seychelles) Limited. 5. Property, plant and equipment Cost As at 1 January 2018 and 31 December 2018 Depreciation As at 1 January 2018 Charge for the year As at 31 December 2018 Net book value As at 31 December 2018 Cost As at 1 January 2019 and 31 December 2019 Depreciation As at 1 January 2019 Charge for the year As at 31 December 2019 Net book value As at 31 December 2019 Plant and machinery £ Fixtures, fittings and equipment £ Motor Vehicles £ 7,471 4,153 16,691 6,639 208 6,847 3,692 115 3,807 14,823 467 15,290 Total £ 28,315 25,154 790 25,944 624 346 1,401 2,371 Plant and machinery £ Fixtures, fittings and equipment £ Motor Vehicles £ Total £ 7,471 4,153 16,691 28,315 6,847 156 7,003 3,807 87 3,894 15,290 350 15,640 25,944 593 26,537 468 259 1,051 1,778 86 EDENVILLE ENERGY PLC NOTES TO THE COMPANY’S FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 6. Trade and other receivables Current Other receivables Prepayments 7. Cash and cash equivalents 2019 £ 46,328 2,084 48,412 Cash and cash equivalents include the following for the purposes of the cash flow statement: Cash at bank and in hand 8. Trade and other payables Trade payables Amounts owed to subsidiary undertakings Social security costs and other taxes Accruals and deferred income 2019 £ 40,845 2019 £ 302,762 6,340 9,714 160,428 2018 £ 16,578 1,975 18,553 2018 £ 140,483 2018 £ 34,207 6,340 6,980 100,585 479,244 148,112 87 EDENVILLE ENERGY PLC NOTES TO THE COMPANY’S FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 9. Borrowings (continued) Convertible loan notes Repayable with 1 year Repayable within 2 to 5 years Other loans Repayable with 1 year Total Repayable with 1 year Repayable within 2 to 5 years 2019 £ 361,581 141,463 503,044 120,000 120,000 481,581 141,463 623,044 2018 £ 288,118 282,076 570,194 - - 288,118 282,076 570,194 In November 2018 $750,000 conditionally convertible loan notes were issued: the face value of these convertible securities is $900,000. A commitment fee of £37,500 which has been offset against the proceeds of issue of the convertible loan notes, was payable by the Company as well as issuing share options over 99,568,966 ordinary shares exercisable for 4 years at a conversion price on 0.29p per share. The company is required to make repayments of $45,000 over 20 months commencing in February 2019. If repayments are made in cash then an additional 3% is payable on the $45,000. The company may elect to make the repayment in its shares priced at 90% of the average five day Volume Weighted Average Price (VWAP) chosen by the investor during the 20 days before issuance, or a combination of both. The company has the option to buy back the entire outstanding face value at any time at a premium of 5%. If this right is exercised the investor has an option to convert 25% of the face value into shares at the lesser of the repayment price or 0.29p per share. The repayment price being 130% of the 10 day VWAP immediately prior to the company entering the Convertible Agreement. In addition to the above the investor was offered 36,000,000 collateral shares which were issued by the company on 20 February 2019. In April 2019, the company agreed a repayment holiday up to September 2019 in respect of the convertible loan notes. As a condition of granting the repayment holiday the outstanding balance at the time. $855,000, was increased by 15% to $983,250. Other loans This represents a loan of £100,000 with a fixed coupon interest rate of 20%. 88 EDENVILLE ENERGY PLC NOTES TO THE COMPANY’S FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 10. Share capital No Ordinary shares of 0.02p each £ Ordinary shares of 0.02p each No Deferred shares of 0.001p each £ Deferred shares of 0.001p each £ Total share capital 1,336,317,797 211,428,572 267,265 42,286 241,248,512,346 - 2,412,485 2,679,750 42,286 - Issued and fully paid At 1 January 2018 On 3 May 2018 Ordinary shares issued at 0.35p As at 31 December 2018 1,547,746,369 309,551 241,248,512,346 2,412,485 2,722,036 No Ordinary shares of 0.02p each £ Ordinary shares of 0.02p each No Deferred shares of 0.001p each £ Deferred shares of 0.001p each £ Total share capital 1,547,746,369 309,551 241,248,512,346 2,412,485 2,722,036 36,000,000 7,200 64,515,192 12,903 500,000,000 100,000 2,263,980,200 452,796 600,000,000 120,000 - - - - - - - - - - 7,200 12,903 100,00 452,796 120,000 Issued and fully paid At 1 January 2019 On 20 February 2019 Ordinary shares were issued at 0.02p On 20 February 2019 Ordinary shares were issued at 0.12p On 2 May 2019 500,000 Ordinary shares at 0.02p On 20 May 2019 2,263,980,200 Ordinary shares at 0.02p On 11 September 2019 600,000,000 Ordinary shares at 0.05p As at 31 December 2019 5,012,241,761 1,002,450 241,248,512,346 2,412,485 3,414,935 The deferred shares have no voting rights, dividend rights or any rights of redemption. On return of assets on winding up the holders are entitled to repayment of amounts paid up after repayment to ordinary share holders 11. Deferred Taxation A deferred tax asset of £1,336,275 (2018: £1,063,129) calculated at 19% (2018: 17%) 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. 89 EDENVILLE ENERGY PLC NOTES TO THE COMPANY’S FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 12. 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:  To safeguard the Company’s ability to continue as a going concern.  To provide adequate resources to fund its exploration, development and production 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  The size and nature of the requirement.  Preferred sources of finance.  Market conditions.  Opportunities to collaborate with third parties to reduce the cash requirement. 13. 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: Investments and loans to subsidiaries Cash and cash equivalents Other receivables Total 2019 £ 2018 £ 16,160,173 40,845 46,328 16,247,346 15,612,729 140,480 16,578 15,769,787 Financial liabilities Financial liabilities at amortised cost Trade and other payables Convertible loan notes Net 564,530 503,044 1,067,574 141,132 570,194 711,326 15,179,772 15,058,461 90 EDENVILLE ENERGY PLC NOTES TO THE COMPANY’S FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 13. 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 only interest-bearing asset is cash invested on a short-term basis which attracts interest at the bank’s variable interest rate. The Company is exposed to interest rate risk through its convertible loan notes, its only interest-bearing liabilities. The level of interest payable will vary depending on whether the repayments are made with shares or in cash. The effective interest rate based on repayments of $45,000 per month is 17.93%. If repayments are made in cash then the monthly repayments increase by 3% giving an effective interest rate of 20.95%, excluding transaction costs. 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 2019 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. 91 EDENVILLE ENERGY PLC NOTES TO THE COMPANY’S FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 13. Financial instruments (continued) 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. The tables below summarise the maturity profit of the combined Group’s non-derivative financial liabilities at each financial year end based on contractual undiscounted payments 2018 Convertible loan notes (current and non – current) Trade payables Other payables Accruals 2019 Convertible loan notes (current and non – current) Trade payables Other payables Accruals Less than 1 year 288,118 34,207 13,320 100,585 436,230 Less than 1 year 361,581 277,762 136,054 160,428 935,825 1-2 years 2-5 years 282,076 - - - - 282,076 - - - 1-2 years 2-5 years 141,463 - - - 141,463 - - - - - 14. Equity-settled share-based payments The following options over ordinary shares have been granted by the Company: Grant Date Exercise price 21 October 2013 28 March 2017 5 November 2018 26 April 2019 of Number outstanding December 2019 options 31 at 3,005,740 42,000,000 99,568,966 100,000,000 5.00p 1.08p 0.29p 0.26p 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. Of the 46,000,000 issued on 28 March 2017, 38,000 were issued to the Directors and a member of senior management and 8,000,000 to two engineers, 4,000,000 of which lapsed during the year. 92 EDENVILLE ENERGY PLC NOTES TO THE COMPANY’S FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 14. Equity-settled share-based payments (continued) The 38,000,000 options issued to the Directors and a member of senior management will vest one third immediately, one third upon production of in excess of 5,000 tonnes of commercial coal per month over three consecutive months and one third upon completion of the Bankable Feasibility Study for the Rukwa Power Plant. 8,000,000 of the options of which 4,000,000 lapsed during the year were granted to two engineers and will vest one half upon production of in excess of 5,000 tonnes of commercial coal per month over three consecutive months and one half upon production of in excess of 10,000 tonnes of commercial coal per month over three consecutive months. The options are exercisable for a 5-year period from 27 March 2017. During 2018, on the issue of contingently convertible loan notes (see note 14), 99,568,966 options were issued to the investor. These options are exercisable over a 4-year period at an exercise price of 0.29p. On 26 April 2019, 100,000,000 options were issued to an investor, on variation of an agreement. These options are exercisable over a 4- year period at an exercise price of 0.26p 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% - - 28 March 2017 131% 3 years 0.37% - - 5 November 2018 70% 4 years 0.96% - - 26 April 2019 101% 3.5 years 0.75% - - 0.09p 0.56p/0.42p/0.28p 0.08p 0.02 Volatility was determined by reference to the standard deviation of daily share prices for one year prior to the date of grant. The charge to the income statement for share-based payments for the year ended 31 December 2019 was £16,077 (2018: £76,319). 93 EDENVILLE ENERGY PLC NOTES TO THE COMPANY’S FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 14. Equity-settled share-based payments (continued) Movements in the number of options outstanding and their related weighted average exercise prices are as follows: 2019 2018 Number of options Weighted average exercise price per share pence Number of options Weighted average exercise price per share pence At 1 January Granted Exercised Cancelled 147,580,447 100,000,000 - (7,005,741) At 31 December 240,574,706 0.71 0.26 - 2.76 0.46 52,011,481 99,568,966 - (4,000,000) 147,580,447 1.53 0.29 - 1.08 0.71 Exercisable year end at 215,241,373 118,247,114 The weighted average remaining contractual life of options as at 31 December 2019 was years 2.78 (2018: 3.73 years). The weighted average remaining contractual life of exercisable options as at 31 December 2019 was years 2.84 (2018: 3.85 years). Warrants Movements in the number of warrants outstanding and their related weighted average exercise prices are as follows: 2019 Number of options Weighted average exercise price per share pence Number of options 2018 Weighted average exercise price per share pence At 1 January Granted Exercised Cancelled/expired - 127,500,000 - - At 31 December 127,500,000 - 0.02 - - 0.02 241,666,667 - - (241,666,667) - 0.96 - - (0.96) - The weighted average remaining contractual life of warrants as at 31 December 2019 was years 2.42 years (2018: Nil years). 127,500,000 warrants were issued to the company’s broker on at an exercise price of 0.02p. The warrants expire on 31 May 2022. 94 EDENVILLE ENERGY PLC NOTES TO THE COMPANY’S FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 15. Reserves The following describes the nature and purpose of each reserve: Share Capital Share Premium Share Option Reserve Retained Earnings represents the nominal value of equity shares amount subscribed for share capital in excess of the nominal value fair value of the employee and key personnel equity settled share option scheme and broker warrants as accrued at the balance sheet date. cumulative net gains and losses less distributions made 16. Related Party Transactions Key management personnel are those persons having authority and responsibility for planning, directing and controlling activities of the Company, and are all directors of the Company. For details of their compensation please refer to the Remuneration report. During the year the Company paid £547,984 (2018: £1,438,977) 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 £9,117,401 (2018: £8,565,706). This amount has been included within loans to subsidiaries. Also included in trade creditors is an amount of £3,584 (2018: £13,500) owed to Aaridhi Consultants in respect of Directors fees for Arun Srivastava. At the year end the Company was owed £3,712 (2018: £3,712) by its subsidiary Edenville International (Seychelles) Limited. At the year end the Company was owed £6,340 (2018: £6,340) by its subsidiary Edenville Power Tz Limited. At the year end Edenville International (Tanzania) limited was owed $41,677 by Edenville Power Tz Limited and $9,517 was owed to JICL Consultants. 17. Events after the reporting date On 9 January 2020 the company issued 50,000,000 ordinary shares of 0.02p each at 0.05p, in settlement of invoices. On 21 January 2020 the company issued 1,750,000,000 ordinary shares of 0.02p each at 0.04p. On 8 June 2020 the company issued 1,250,000 ordinary shares of 0.02p for 0.04p raising gross proceeds of £500,000. In June 2020 the company’s subsidiary Edenville International (Tanzania) Limited (“EITL”) entered into a Coal Mining Agreement (the “Agreement”) with Infrastructure and Logistics Tanzania Limited (“ILTL”). Under the terms of the Agreement ILTL are expected to also become a customer of Edenville. It is envisaged under the Agreement that ILTL will enter into a long-term Coal Supply Agreement, which would see ILTL provide an anchor tenancy at the Company’s Rukwa coal project (“Rukwa” or the “Project’) by initially purchasing 3,000 tonnes of washed coal per month at standard market rates, before increasing this to 5,000 tonnes a month over a 12 month period. ILTL are also expected to use their logistics network and expertise with respect to existing and potential customers. In July 2020 the company’s subsidiary EITL entered into a US$1 million Loan Agreement (the “Loan Agreement”) with ILTL. The loan shall attract interest at a rate of 9% per annum only on funds drawn. At present no amounts have been drawn. 95 EDENVILLE ENERGY PLC NOTES TO THE COMPANY’S FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2019 17. Events after the reporting date (continued) In August 2020 the company’s subsidiary EITL entered into a Sales and Marketing Agreement with MarTek Global FZ-LLC (“MarTek”). MarTek is a Dubai-based sister company to Infrastructure and Logistics Tanzania Limited (“ILTL”), with both having the same principal shareholder. In August 2020, 83,333,333 warrants were exercised at a price of 0.06p per share EITL’s mining operations ceased during the COVID 19 lockdown in Tanzania, recommencing again on 3 August 2020. 18. Ultimate controlling party The Company considers that there is no ultimate controlling party 96 

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