ENERGY FOR PAKISTAN Annual Report 2013 Contents Chairman’s Statement Chief Executive’s Report Group Strategic Report Report of the Directors Report of the Independent Auditors Consolidated Statement of Profit or Loss Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Company Statement of Financial Position Consolidated Statement of Changes in Equity Company Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Notice of Annual General Meeting Notes Company Information PAGE 01 02 03 07 13 15 16 17 18 19 20 21 22 25 41 43 44 01 Oracle Coalfields PLC Annual Report 2013 Chairman’s Statement For the year ended 31 December 2013 I am pleased to present Oracle Coalfields’ (or the “Company”) results for the period ending 31 December 2013, which was a year of much activity for your company. It began with a fully proved up and commercially viable coal resource; on that basis the key objective for the Board and management was to find partners and investors with whom we could take the project forward. There was considerable interest in China and since September, we have crystallised arrangements, firstly with the Chinese stated-owned company, China CAMC Engineering Co. Ltd. (CAMCE), for the mine and subsequently with another state-owned company, SEPCO Electric Power Construction Corporation (SEPCO), for the power plant. We now aim to complete Engineering, Procurement and Construction Contract (EPC) contracts with these companies for the mine and for the power plant respectively. CAMCE and SEPCO have introduced us to Sinosure, the state-owned China Export & Credit Insurance Corporation, which is expected to underwrite the capital expenditure of most of the power plant and part of the mine. Detailed discussions are to be held with Sinosure, and we also anticipate negotiations on the electricity tariff and coal price with the authorities in Pakistan. Reflecting the position of the Company as a mining company, now moving towards financial close, the consolidated financial results for the year to 31 December 2013 show an operational loss after taxation for Oracle and its subsidiaries (“Group”) of £1,038,342 (2012: £741,799). The basic loss per share was 0.37p (2012: loss 0.35p). The underlying operational costs for the year remain comparable to 2012 but in preparation for the move towards final investment decision, during the year the Board undertook a detailed review of the recoverability of all expenditure capitalised as exploration costs by the Company. As a result of the review an impairment provision of £217,519 has been made against costs capitalised in previous years, plus costs of £92,261 incurred during 2013 which had been charged directly to the statement of profit or loss instead of being capitalised. At the end 2013 the Group had cash and cash equivalents of £538,789 (2012: £99,592) and total assets less current liabilities of £4.19 million (2012: £3.52 million). During 2013, we raised further capital in two tranches including contributions from shareholders and management, in January of £934,000 and in October of £876,884. During the second quarter of 2014, the Company will approach the market to raise the funds needed to cover expenditure to reach final investment decision, anticipated by year-end. Towards the end of the year, and contingent on reaching final investment decision, the Company will make a further approach to the market for the funds needed to develop the project. The Group is considering various options to raise the necessary equity and debt, and has started discussions with potential strategic investors and technical partners. The new government in Pakistan, elected in May, has shown its determination to develop the economy by developing export capability and encouraging new opportunities for foreign investment. Its support for the development of indigenous coal resource is strong, energy being recognised as fundamental to the economic development of the country. The Board extends its thanks to the Thar Coal Energy Board, the Energy Department, the Sindh Coal Authority, and the Government of Sindh for their continued assistance. The Board continues to be very grateful for the patience and support of our shareholders. Adrian Loader Chairman 15 April 2014 02 Chief Executive’s Report For the year ended 31 December 2013 Pakistan continues to be affected by electricity shortages which are reducing the potential for economic growth. The new government elected in May 2013 has a commitment to resolve the energy shortfall and have reaffirmed support for the development of indigenous energy and power projects and in particular support for the development of coal and energy in the Thar coalfield. Following the completion of the Environmental and Social Impact Assessment (ESIA) by Hagler Bailly of Pakistan and Wardell Armstrong International the report was submitted to the Sindh Environmental Protection Agency, Government of Sindh (SEPA) in April 2013. A public hearing held on the site in June 2013 which was attended by the local people along with government representatives, SEPA, various non-governmental organisations (NGOs) and our consultants as part of the public consultation process. Early in July 2013 SEPA held a Technical Committee Hearing in Karachi to examine the technical aspects of the ESIA and to take on board concerns raised at the public hearing which was attended by the Company and its consultants. Following these meetings SEPA has issued the No Objections Certificate giving formal approval for the ESIA in January 2014 which is another significant step towards mine development. During 2013 the Company has been actively seeking strategic partners to work with to facilitate the development of an integrated mine and power plant on the site and in September 2013 entered into a Joint Development Agreement (JDA) with CAMCE, a division of Sinomach for the development of the mine. In November 2013, the Company entered into a Memorandum of Understanding (MOU) with SEPCO, a subsidiary of Power Construction Corporation of China (PowerChina) for the construction of initially a 600MW mine mouth power plant. An EPC is being developed and we are working towards entering a JDA with SEPCO which will involve investment by SEPCO in both the mine and power plant. As reported last year the Company entered a JDA with the Karachi Electric Supply Company, now renamed K-Electric (KE), to develop initially a 300MW power plant with the potential to increase this to 1100MW over time. Additionally KE have proposed entering into a Power Purchase Agreement (PPA) with the Company to purchase the entire output from the power plant for a period of 30 years and the Company is working with KE to draw up the PPA agreement which will be presented to the National Electric Power Regulatory Authority (NEPRA) for approval later in 2014. In view of the developments with SEPCO to develop initially a 600MW mine-mouth power plant and discussions with KE in Karachi, the strategy is to now develop a 600MW mine-mouth power plant at Block VI, Thar together with the PPA agreement. These are all exciting steps in the development of an integrated coal and power development within the Block VI coal property in Thar and the work in 2014 will concentrate on formalising agreements and contracts to bring the project into full implementation. Work is continuing on site in the pre-development stage to implement a Corporate Social Responsibility Programme (CSR) to provide early benefits to the local community in terms of water, basic healthcare and veterinary support. Land survey work is being undertaken to develop a Resettlement Action Plan (RAP) in accordance with the Resettlement policy framework recently published in draft by the Sindh Government and that will conform to international best practice. Oracle continues to look to find other coal mining and energy projects. Shahrukh Khan Chief Executive Officer 15 April 2014 Oracle Coalfields PLCAnnual Report 2013 03 Group Strategic Report For the year ended 31 December 2013 The Directors present their strategic report of the Company and the Group for the year ended 31 December 2013. PRINCIPAL ACTIVITY The principal activity of the Group in the year under review was that of an energy project, based on the exploration for and development of coal, and building a mine-mouth power station in Pakistan. The exploration and development is primarily carried out in Pakistan, but the Group is controlled, financed and administered within the United Kingdom which remains the principal place of business. REVIEW OF THE BUSINESS During the year the Group continued to utilise its funds to develop its Pakistan Thar mine project. The expenditures are either capitalised in accordance with IFRS, or expensed. The capitalised expenditures are shown as intangible fixed assets in the Statement of Financial Position and the expensed expenditures are shown as administrative expenses in the Statement of Profit or Loss and hence determine the loss for Oracle Coalfields PLC Group of Companies after taxation of £1,038,342 (2012: £741,799). The Chairman, in his statement, and the Chief Executive in his report, have fully described the activities of the Company during the financial year and the further steps now required to take the Company through to final investment decision. PRINCIPAL RISKS AND UNCERTAINTIES The Group is principally engaged in the development of lignite coal resources in Block VI in the Thar desert in the Sindh province in Pakistan through commercial open cast mine supplying projected mine-mouth power stations. The principal strategic and operational risks and uncertainties facing the Group are described below, together with the steps taken for their mitigation. Information on financial risk management is set out in the Financial Instruments section in this report. Environmental and social risk Impact The Thar coal mine project is subject to environmental regulations both in Pakistan and through international standards and conventions. Non-compliance could significantly impact the development of the mine and raising of debt financing. The development of the Block VI mine could negatively impact communities near its operation due to resettlements, population inflow and necessary infrastructure. Mitigation The completion of the ESIA in 2013 by Wardell Armstrong International and Hagler Bailly of Pakistan and its subsequent approval in January 2014 by the Sindh Environmental Protection Agency is another significant step towards project implementation. Oracle is developing a resettlement framework and action plan conducted in accordance with national and international standards in consultation with the affected communities. Since 2012 Oracle has employed a Community Liaison Officer (CLO) to ensure the local community can be fully engaged in the process and this is ongoing. Technical risk Impact Co-completion risk exists where the success of one project depends on the completion of another. Both the mine and any associated power station cannot operate without the other. If the power station does not complete on time then the mine cannot start deliveries, and vice versa. There is a similar co-dependency in the operational phase. The mine must be de-watered prior to mine construction and during production. The water will be used for the mine and the power plant as well as being available for the local community. Surplus water produced must be disposed of safely. Mitigation During 2013 the Company has been actively seeking strategic partners to work with to facilitate the development of an integrated mine and power plant on the site and in September 2013 entered into a Joint Development Agreement (JDA) with CAMCE of China a division of Sinomach for the development of the mine. In November 2013 the Company entered into a Memorandum of Understanding (MOU) with SEPCO the Shandong Electric Power Company, a subsidiary company of PowerChina, for the construction of initially a 600MW mine mouth power plant. An Engineering, Procurement and Construction Contract is being developed and we are working towards entering a Joint Development Agreement with SEPCO which will involve investment by SEPCO in both the mine and power plant. As reported last year the Company entered a JDA with the Karachi Electric Supply Company (KESC) now renamed K-Electric (KE) to develop initially a 300MW power plant with the potential to increase this to 1100MW over time. Additionally KE have proposed entering into a Power Purchase Agreement (PPA) with the Company to purchase the entire output from the power plant for a period of 30 years and the Company is working with KE to draw up the PPA agreement which will be presented to the National Electric Power Regulatory Authority (NEPRA) for approval later in 2014. It is to be noted that following the MOU with SEPCO, KE have agreed to collaborate with Oracle and SEPCO to develop SEPCO’s 600 MW power plant. Oracle Coalfields PLCAnnual Report 2013 04 Group Strategic Report continued Economic risk Impact There are inherent uncertainties in estimation of the capital and operating costs to reach first production, and the fiscal regime applicable to the project, which will only be resolved when the project contracts are negotiated and the fiscal regime legally confirmed. Similarly the fiscal incentives for the construction and operation of the power plant will need to be confirmed prior to contract finalisation. Offtake agreements need to be reached at sustainable commercial rates the mine-mouth power station to justify the project investment, with sufficient creditworthiness to meet lenders’ risk criteria. Mitigation Following the signing of the JDA with CAMCE for the development of the mine the capital and operating costs for the mine are in preparation. These will allow for the fiscal incentives announced for Thar coal and power developments in the Special Economic Zone to be included and factored into the coal price for supply to the power plant. The power plant will be developed by SEPCO and EPC negotiations are well advanced. Again the fiscal incentives for Thar will need to be factored in to the final price. Last year the Company entered a JDA with the Karachi Electric Supply Company (KESC) now renamed K-Electric (KE) to develop initially a 300MW power plant with the potential to increase this to 1100MW over time. KE is now collaborating with Oracle and SEPCO on SEPCO’s 600 MW power plant. Additionally KE have proposed entering into a Power Purchase Agreement (PPA) with the Company to purchase the entire output from the power plant for a period of 30 years and the Company is working with KE to draw up the PPA agreement which will be presented to the National Electric Power Regulatory Authority (NEPRA) for approval later in 2014. Financing risk Impact Delivery of the Group’s strategy will require significant financing to fund the cash required for development of its Thar project. Delays in reaching a final investment decision (“FID”), or failure to obtain the necessary funding to reach an FID for the construction phase, and on terms which are acceptable, could mean the Group is not able to fulfil its strategy or remain as a going concern. Mitigation During the second quarter of 2014, the Company will approach the market to raise the funds needed to cover expenditure to reach FID, anticipated by year-end. Towards the end of the year, and contingent on reaching FID, the Company will make a further approach to the market for the funds needed to develop the project. The Group is considering various options to raise the necessary equity and debt for the project, and has started discussions with potential strategic investors and technical partners. Political, legal and regulatory risk Impact Although the Federal and Sindh Government have demonstrated strong support for the integrated Thar coal mining and power plant development, there is potential for the Group’s operations and financial results to be affected by instability and changes to the legal, regulatory or fiscal frameworks in Pakistan. This includes political unrest, variation to the lease terms, and changes to the royalty and tax rates. The relevant federal and Sindh authorities need to fund and complete local infrastructure, including the power transmission line from the power station(s). The risk of terrorist attack on the Company and its staff in Pakistan, or on suppliers and customers, remains very real and could restrict the Company’s ability to manage at the site and the Karachi office. Mitigation The Group works closely with the Thar Coal Energy Board, Government of Sindh, and maintains excellent relations with the Sindh Government. The Thar Coalfield area has been declared a Special Economic Zone and the Sindh Government has already built roads and a rescue centre, started construction of an airport capable of taking B737 and C130 transport aircraft, and plans more road and transmission line upgrades. Company staff are instructed to take a range of security precautions and generally keep a low profile in the country. As the profile of the project builds, the Company will implement further appropriate protections for its staff. Generally the Sindh Province has a low incidence of such attacks. Oracle Coalfields PLCAnnual Report 2013 05 CORPORATE SOCIAL RESPONSIBILITY Objective: Oracle Coalfields PLC is a responsible corporate entity, and is continuing to apply international best practice to the Thar project. We are aware of the key role we have to play in developing this pioneering project, in minimising the impact our operations can have on the natural and social environment and in creating opportunities for the local community. Environmental and Social Impact Assessment (“ESIA”) Oracle Coalfields Plc commissioned Wardell Armstrong International Ltd. (WAI) to produce an Environmental and Social Impact Assessment (ESIA) for the Block VI project. WAI is working with Hagler Bailly Pakistan, a local group of environmental consultants, based in Islamabad, to complete the ESIA to meet both national and international standards. The ESIA was completed in April 2013 and was submitted to the Sindh Environmental Protection Agency, Government of Sindh (SEPA) in April 2013. A public hearing held on the site in June 2013 which was attended by the local people along with government representatives, SEPA, various non-governmental organisations (NGOs) and our consultants as part of the public consultation process. The project along with its impacts and mitigation plans were presented to the public and all were given the opportunity to comment on the proposals and question the Company and the government on all aspects of the proposed development. There was overall support for the project and the Company will continue its consultation with the local people as the project moves into the implementation phase. Early in July 2013 SEPA held a Technical Committee Hearing in Karachi to examine the technical aspects of the ESIA and to take on board concerns raised at the public hearing which was attended by the Company and its consultants along with government representatives. All the technical queries raised by the panel were addressed satisfactorily and the Company outlined how the Environmental Management Plan would be implemented and monitored through the life of the project. Following these meetings SEPA has issued the No Objections Certificate giving formal approval for the ESIA in January 2014 which is another significant step towards mine development. Community and consultation In addition to the environmental characterisation of the site and its environs, a comprehensive social data gathering campaign is underway. Background information on local demography, village structure, local culture, resources and socioeconomics is being collected. In addition, an ongoing public consultation is underway, to gather the views and opinions of local stakeholders (both at a local and national level), and to disseminate information about the project. Resettlement Community response has generally been positive, with an interest in the project, and the associated community benefits that it will deliver. Due to the location of the lignite seams, and the requirement for associated infrastructure, some relocation of local communities currently residing within the Block, will be required. The Government of Sindh Thar Coal and Energy Board published a draft Resettlement Policy Framework in September 2013 which sets out the formal mechanism for resettlement in Thar and is generally in line with international performance standards. A Resettlement Framework and Resettlement Action Plan is being developed in line with the draft Resettlement Policy framework, to ensure that the process is managed in line with best practice standards, and a full program of consultation, specifically dealing with this issue is being instigated. Communities will be resettled locally (i.e. within the Block area). As part of the resettlement process, which will occur in full consultation with the affected communities and Project Affected Peoples (“PAPs”), resettled communities will be given equivalent, alternative lands for their villages. Oracle intends to construct replacement villages, with full electricity, sanitation, and potable water supply, and culturally appropriate places of worship, with opportunities for a local market area. The exact design of resettlement villages will be decided in consultation with the affected communities. Oracle social development initiatives Oracle Coalfields PLC has appointed a Community Liaison Officer (“CLO”) in 2012 to act as the local point of contact for stakeholders, and to receive information from, and disseminate information to local community members. The CLO will also act as an intermediary, to represent the interests of the local communities to Oracle. As part of Oracle’s Corporate Social Responsibility (“CSR”) initiatives, a strategy is being developed, to identify, and support community development projects. This is an ongoing process and will continue as the project moves into implementation. Oracle Coalfields PLCAnnual Report 2013 06 Group Strategic Report continued Benefits and opportunities Oracle is working with local groups to ensure that the Block VI project delivers sustainable benefits to the communities, and an overall improvement in local living conditions, whilst also positively responding to the energy crisis in Pakistan. This project will result in direct and indirect benefits to the local communities. Direct benefits will include employment at the mine and power plant, whilst indirect benefits may include revenues generated by local supply of goods and services to the operations. Benefits and opportunities include: – Improvements and extension of the existing government primary schools in Block VI, including; – Training of literate male and female community members for teaching – Extension of the building to support more students – Supply of stationery and other provisions – Bi-annual hygiene and healthcare awareness campaign in all Communities – Setting up water filter systems in all Communities – Awareness campaign on methods to improve livestock health and productivity in all Communities – Develop a compact link road to connect local villages and communities to the mine site access road proposed under project On behalf of the Board: Mr W A Loader Director 15 April 2014 Oracle Coalfields PLCAnnual Report 2013 07 Report of the Directors For the year ended 31 December 2013 The Directors present their report with the financial statements of the Company and the Group for the year ended 31 December 2013. DIVIDENDS No dividends will be distributed for the year ended 31 December 2013. EVENTS SINCE THE END OF THE YEAR Information relating to events since the end of the year is given in the notes to the financial statements. DIRECTORS The Directors during the year under review were: Mr W A Loader Mr S Khan Mr A C R Scutt Mr M R Stead Chairman Chief Executive Senior Independent Non-Executive Director Non-Executive Director The beneficial interests of the Directors holding office on 31 December 2013 in the issued share capital of the Company were as follows: Ordinary 0.1p shares Mr S Khan Mr W A Loader Mr A C R Scutt Mr M R Stead 31 December 2013 1 January 2013 32,395,967 29,530,791 100,000 113,000 20,000 2,967,460 858,865 765,865 In addition to the above, in his capacity as a joint honorary trustee, Mr A C R Scutt also holds 225,000 shares for The Acumen Brigade Investment Club and 165,000 shares for The Ridgeway Investors Group. Mr A C R Scutt is not a beneficial member of these investment clubs and has no beneficial interest in the shareholdings. Ordinary 0.1p shares under option Mr S Khan Mr A C R Scutt Mr W A Loader Mr M R Stead Mr M R Stead Number 6,000,000 2,000,000 1,000,000 200,000 250,000 Exercise price 5p 5p 10p 5p 10p Expiry date 31.03.2017 31.03.2017 01.08.2016 31.03.2017 31.03.2017 Oracle Coalfields PLCAnnual Report 2013 08 Report of the Directors continued INFORMATION ON DIRECTORS AND SENIOR MANAGEMENT Adrian Loader Chairman Mr Loader has extensive international experience with Royal Dutch Shell in strategy, business development, energy projects and new markets. He held regional responsibility for Shell Pakistan and, as President of Shell Canada, was responsible for Shell’s oil sands open pit mining operations. He previously served on the boards of Shell Canada, Alliance-Boots and Candax Energy and Compton Petroleum, the last two as Chairman. Mr Loader is currently a Director of Holcim and of Sherritt International, as well as being a member of the International Advisory Board of Garda World. Mr Loader is a Fellow of the Chartered Institute of Personnel and Development and holds a Masters degree in History from Cambridge University. Shahrukh Khan Chief Executive Officer Mr Khan was educated in the USA and UK. He was awarded a BA in Business administration and Economics at Richmond, the American International University in London. Mr Khan has project finance experience in the natural resource and infrastructure related sector, predominantly in the Middle East, South Asia and China. He has specialist expertise in large and complex projects, including project valuation and investment appraisal, feasibility studies and other project finance related services. Anthony Scutt Non-Executive Director Mr Scutt is a qualified Chartered Secretary and a Certified Internal Auditor with the US Institute of Internal Auditors. He has over 30 years of financial management experience with Shell International Petroleum and has worked in many parts of the world, including the Malagasy Republic, East and Central Africa, South Vietnam, Cambodia, the Philippines, Gabon and latterly as the Chief Internal Auditor of Shell UK. Mr Scutt then went on to become an investment analyst, writer and investor. Mr Scutt is a Non-Executive director of AIM-listed Starvest plc and Beowulf Mining plc. Roderick Stead Non-executive Director Mr Stead was awarded a BSc in Economics from the London School of Economics and is a qualified accountant, FCCA. He brings experience in a variety of management roles in the oil, gas, coal, mining and forestry industries in different environments. This includes Board experience in over 16 companies with particular expertise in corporate governance issues, strategic business analysis and the management of major joint venture relationships. Mr Stead has extensive experience in project finance negotiations with investment banks, multilateral agencies, export credit agencies, commercial banks, law firms and accountants. Simon Smith Finance Manager Mr Smith has background in finance from a twenty-five year career in Shell, in a variety of posts. He was Finance Director in Sierra Leone and in Egypt where he also deputised for the Chief Executive. He also worked in Shell’s M&A unit, particularly on the sale of Billiton, Shell’s Metals division, the sale of Shell’s agrochemical interests and Shell’s early expansion into eastern Europe. Latterly he headed up Group Finance HR. Mr Smith has an MA in Economics from the University of Cambridge and is a fellow of the Institute of Chartered Accountants in England and Wales. Brian Rostron Mining and Contracts manager Mr Rostron is a Mining Engineer with over 30 years’ international experience and an expert on coal. He is a Chartered Engineer who has been responsible for the operational management of various coal mining companies with overall responsibility for production, financial performance, acquisitions and restructuring. Mr Rostron has previously worked with Miller Argent South Wales Ltd, H.J. Banks Mining, Scottish Coal Company, Coal Contractors Ltd as well as the Confederation of UK Coal Producers and UK member of Eurocoal Executive Committee. Oracle Coalfields PLCAnnual Report 2013 09 FINANCIAL INSTRUMENTS The Group’s financial instruments comprise cash and cash equivalents, loan investments and financial assets and various items such as trade receivables, trade payables, accruals and prepayments that arise directly from its operations. The main purpose of these financial instruments is to finance the Group’s operations. The Board regularly reviews and agrees policies for managing the level of risk arising from the Group’s financial instruments which are summarised as follows: Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s policy throughout the year has been to ensure that it has adequate liquidity to meet its liabilities when due by careful management of its working capital. Credit risk The Group’s principal financial assets are the cash and cash equivalents and taxation receivable as recognised in the statement of financial position, and which represent the Group’s maximum exposure to credit risk in relation to financial assets. Capital management The Company’s capital consists wholly of ordinary shares. The Board’s policy is to preserve a strong capital base in order to maintain investor, creditor and market confidence and to safeguard the future development of the business, whilst balancing these objectives with the efficient use of capital. Market risk Market risk is the risk that changes in market prices, such as commodity prices, foreign exchange rates, interest rates and equity prices will affect the Group’s and Company’s income or value of its holdings in financial instruments. Commodity price risk The principal activity of the Group is the development of a coal mining property in Pakistan and the principal market risk facing the Group is an adverse movement in the commodity price of coal. GOING CONCERN The Directors have considered the cashflow requirements of the Group over the next 12 months. It will be necessary to raise additional funds to bring the project to final investment decision. The Directors expect to meet the funding requirements and therefore believe that the going concern basis is appropriate for the preparation of the financial statements. SUBSTANTIAL SHAREHOLDINGS The Directors are aware of the following who were interested, directly or indirectly, in 3% or more of the Group’s ordinary shares on 31 December 2013: Mr S Khan Mr A Neubauer Starvest plc Sunvest Corporation Limited Newbridge Silverware Ltd S Richards W H Ireland Danske Bank H Pratt Hargreaves Lansdown Mr R Rowan Shareholding % holding 32,395,967 22,668,663 21,867,333 20,000,000 13,650,795 12,833,333 12,522,226 12,222,222 10,500,000 10,298,873 10,000,000 9.91% 6.93% 6.69% 6.12% 4.17% 3.92% 3.83% 3.74% 3.21% 3.15% 3.06% AUTHORITY TO ISSUE SHARES Each year at the AGM the Directors seek authority to allot shares. The authority, when granted, lasts until the next AGM. At the last AGM held on 22nd May 2013, shareholders gave authority for the Directors to allot equity securities for cash up to an aggregate nominal value of £200,000. HEALTH AND SAFETY There were no reported personal injuries or fatalities among the Company’s staff or contractors during the year. SIGNIFICANT AGREEMENTS The Companies Act 2006 requires the Company to disclose any significant agreements which take effect, alter or terminate upon a change in control of the Company. The Company is not aware of, or party to, any such agreement. Oracle Coalfields PLCAnnual Report 2013 10 Report of the Directors continued REMUNERATION REPORT This report has been prepared in accordance with the requirements of Schedules 2 Part 1 to the Companies Act 2006 (the Schedule) and describes how the Board has applied the Principles of Good Governance relating to Directors’ Remuneration. In accordance with Section 439 of the Companies Act 2006 (the Act), a resolution to approve the report will be proposed at the Annual General Meeting of the Company at which the Financial Statements are to be approved. Remuneration policy Executive remuneration packages are designed to attract, motivate and retain Directors of the necessary calibre and to reward them for enhancing value to shareholders. The performance measurement of the Executive Director and key members of senior management and the determination of their annual remuneration package is undertaken by the Remuneration Committee. The remuneration of Non-executive Directors is determined by the Board within limits set in the Articles of Association. Executive Directors are entitled to accept appointments outside the Company providing the Board’s permission is sought. Non-executive Directors’ terms of engagement The Non-executive Directors have specific terms of engagement. Their remuneration is determined by the Board. In the event that a Non-executive undertakes additional assignments for the Company, the Non-executive’s fee will be agreed by the Company in respect of each assignment. Aggregate Directors’ remuneration The remuneration paid to the Directors, inclusive of Employer National Insurance contributions, in accordance with the service contracts, during the year ended 31 December 2013 was as follows: Salary & fees £ Bonuses £ Pensions £ Termination benefits £ Share based payments £ 2013 Total £ 2012 Total £ Executive Mr S Khan Mr G A Philip (resigned 10.1.13) 112,738 – 37,554 – Non-executive Mr M R Stead Mr A C R Scutt Mr W A Loader 27,388 27,388 61,528 – – – – – – – – – – – – – – – – – – 150,292 – 112,767 73,938 27,388 27,388 61,528 38,797 27,416 61,557 As part settlement of the above salaries, the directors received 2,812,064 new ordinary shares of 0.1p each in lieu of cash remuneration of £50,617. The settlement was on the same terms as a larger placement with the placing price of 1.8 pence per share. Directors’ service contracts The Directors have contracts with an indefinite term and a stated termination notice period. Executive Mr S Khan Non-executive Mr M R Stead Mr A C R Scutt Mr W A Loader Date of appointment Notice period 13.2.2007 1 month 1.11.2007 22.12.2006 1.8.2011 6 months 6 months 3 months Oracle Coalfields PLCAnnual Report 2013 11 CORPORATE GOVERNANCE REPORT Throughout 2013 the Board has continued to demonstrate its commitment to maintaining high standards of corporate governance. The Board supports the ideals of the UK Corporate Governance Code (the "Code”), issued by the Financial Services Authority in June 2010. This statement describes how the Company applies the principles of the Code and the Company’s compliance with the specific provisions of the Code. The principles set out in the Code cover four areas: the Board, Directors’ remuneration, accountability and audit, and relations with shareholders. With the exception of the Directors’ Remuneration (which is dealt with separately in the Remuneration Report) the following report sets out how the Board has applied such principles. Board and Board Committees The Board of Directors The Board of the Company is responsible for the Group’s system of corporate governance. At 31 December 2013 the Board consisted of four Directors being a Chief Executive Officer, Mr S Khan; and three Non-executive Directors including the Chairman, Mr W A Loader. The two other Non-executive Directors were Mr A C R Scutt, Senior Independent Director and Mr M R Stead. Details of Directors’ service contracts are given in the Remuneration Report. All Directors had access throughout the year to the advice and services of the Company Secretary, Mr T Everitt, who was responsible for ensuring that Board procedures and applicable regulations under the Company’s Articles of Association or otherwise were complied with. Each Director is entitled, if necessary, to seek independent professional advice at the Company’s expense. Board meetings The Board of Directors meets a minimum of every two months and has a defined schedule of matters reserved for its decision. The matters so reserved include responsibility for the overall Group strategy, approval of contracts, commitments to capital expenditure budgets over £10,000, appointment of directors and staff, approval of remuneration of directors on the recommendation of the Nomination Committee, issue of shares and warrants, appointment of a financial advisor, approval of announcements to the market, and a final investment decision to proceed with project implementation. The Board met 12 times during the year. Board Committees The Board Committees, which are comprised of Non-executive Directors (except for the Nomination Committee which is chaired by the Chief Executive, Mr S Khan), operate within defined terms of reference and report regularly to the Board. Audit Committee The Audit Committee is responsible for (a) reviewing a wide range of matters including half year and annual results before their submission to the Board, and for monitoring the controls that are in force to ensure the integrity of information reported to shareholders, and (b) advising the Board on the appointment of external auditors and on their remuneration for both audit and non-audit work, and discusses the nature, scope and results of the audit with the external auditors, and (c) reviewing the cost effectiveness and the independence and objectivity of the external auditors. The Audit Committee comprises Mr M R Stead (Chairman) and Mr A C R Scutt. During the year there were three fully attended meetings. Nomination Committee The Nomination Committee was established post the AIM Admission to review the structure, size and composition of the Board, including the skills, knowledge and experience required and to make recommendations to the Board with regard to any changes. The Nomination Committee comprises Mr S Khan (Chairman), Mr A C R Scutt and Mr M R Stead. No meetings were needed during the year as matters were covered by Board Meetings. Remuneration Committee The Remuneration Committee is responsible for reviewing the remuneration of Board members and senior executives of the Company. This responsibility will extend to the review of the remuneration of Board members and senior executives of the Pakistani subsidiary – at present the Directors of Sindh Carbon Energy Limited are unpaid. It is policy that no individual participates in discussions or decisions concerning his own remuneration. None of the Committee has any conflicts of interest arising from cross-directorships or day-to-day involvement in running the business. The Remuneration Committee is entirely non-executive Directors, being Mr A C R Scutt (Chairman) and Mr M R Stead. During the year there were two fully attended meetings. Re-election All Directors are submitted for re-election at regular intervals, subject to continued satisfactory performance. All Directors are subject to election by shareholders at the first annual general meeting after their appointment. Oracle Coalfields PLCAnnual Report 2013 12 Report of the Directors continued Accountability and audit Financial Reporting The Board is responsible for presenting a balanced and understandable assessment of the Company’s position and prospects, extending to interim financial reports and other announcements. All major announcements are approved by the Chairman, the Executive Directors and the NOMAD. Internal control The Directors have overall responsibility for ensuring that the Group maintains a system of internal control to provide them with reasonable assurance that the assets of the Group are safeguarded and that the shareholders’ investments are safeguarded. The system includes internal controls covering financial, operational and compliance areas, and risk management. There are limitations in any system of internal control, which can provide reasonable but not absolute assurance with respect to the preparation of financial information, the safeguarding of assets and the possibility of material misstatement or loss. At the time of the AIM listing, the Board reviewed the system of financial internal controls in place and adopted a series of accounting and control procedures. These were further strengthened later during 2013 with a series of changes being made particularly in respect of commitments, payments, cashflow forecasting and monthly financial reporting. The Board considers that an internal audit function would not be appropriate at this stage of the Group’s development but keeps the matter under review. Relations with shareholders The Directors place great importance on maintaining good communications with both institutional and private investors. The Group reports formally to shareholders twice a year and more regular communication is provided through Press Releases and through the website. The Chief Executive supported by the Group’s brokers, presented to shareholders regularly during the year. STATEMENT OF DIRECTORS’ RESPONSIBILITIES 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 elected to prepare the financial statements in accordance with International Financial Reporting Standards 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 Company and the Group and of the profit or loss of the Group for that period. In preparing these financial statements, the directors are required to: – select suitable accounting policies and then apply them consistently; – make judgements and accounting estimates that are reasonable and prudent; – state that the financial statements comply with IFRS; – prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s and the Group’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements comply with 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. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS So far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006) of which the Group’s auditors are unaware, and each director has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the Group’s auditors are aware of that information. AUDITORS The auditors, Price Bailey LLP, have expressed their willingness to continue in office and a resolution to re-appoint them will be proposed at the Group’s forthcoming Annual General Meeting. On behalf of the Board: Mr W A Loader Director 15 April 2014 Oracle Coalfields PLCAnnual Report 2013 13 Report of the Independent Auditors to the members of Oracle Coalfields PLC Group of Companies We have audited the financial statements of Oracle Coalfields plc Group of Companies for the year ended 31 December 2013 which comprise the Consolidated Statement of Profit or Loss, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Company Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Company Statement of Changes in Equity, the Consolidated Cash Flow Statement and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (“IFRSs”) as adopted by the European Union, and as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006. This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in a Report of the Auditors and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors As explained more fully in the Statement of Directors’ Responsibilities, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group’s and the parent company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Chairman’s Statement, the Chief Executive’s Report the Group Strategic Report and the Report of the Directors to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion on financial statements In our opinion: – the financial statements give a true and fair view of the state of the Group’s and the parent company’s affairs as at 31 December 2013 and of the Group’s loss for the year then ended; – the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; – the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and – the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Emphasis of matter – going concern and impairment of exploration costs In forming our opinion on the financial statements, which is not qualified, we have considered the adequacy of the disclosures made in note 1 to the financial statements concerning the Company and Group’s ability to continue as a going concern. The ability of the Company and Group to continue to trade is dependent on the Company being able to raise sufficient funds which will be dependent on market conditions at the time. As disclosed in note 9, without raising additional funds the Company and Group would be unable to progress the current development work to the next phase of implementation. This would have an impact on the carrying value of the intangible assets of £3,755,014 which may need to be impaired if they were unable to continue their work. These conditions indicate the existence of a material uncertainty which may cast doubt as to whether the Group and Company’s ability to continue as a going concern. The financial statements do not include the adjustments that would be necessary if the Group and Company was unable to continue as a going concern. Oracle Coalfields PLCAnnual Report 2013 14 Report of the Independent Auditors continued Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the Group Strategic Report and the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: – adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or – the parent company financial statements are not in agreement with the accounting records and returns; or – certain disclosures of directors’ remuneration specified by law are not made; or – we have not received all the information and explanations we require for our audit. Paul Cullen FCCA (Senior Statutory Auditor) for and on behalf of Price Bailey LLP Chartered Accountants & Statutory Auditors Richmond House Ely Cambridgeshire CB7 4AH 15 April 2014 Oracle Coalfields PLCAnnual Report 2013 15 Oracle Coalfields PLC Annual Report 2013 Consolidated Statement of Profit or Loss For the year ended 31 December 2013 CONTINUING OPERATIONS Revenue Other operating income Administrative expenses OPERATING LOSS Finance income LOSS BEFORE INCOME TAX Income tax LOSS FOR THE YEAR Loss attributable to: Owners of the parent Non-controlling interests Earnings per share expressed in pence per share: Basic Diluted The notes form part of these financial statements. Notes 2013 £ 2012 £ 2 4 5 6 8 – 82 (1,041,434) – – (743,663) (1,041,352) 3,010 (743,663) 1,864 (1,038,342) – (741,799) – (1,038,342) (741,799) (1,028,042) (10,300) (741,799) – (1,038,342) (741,799) -0.37 -0.35 -0.35 -0.33 16 Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended 31 December 2013 LOSS FOR THE YEAR OTHER COMPREHENSIVE INCOME Item that will not be reclassified to profit or loss: Exchange difference on consolidation Income tax relating to item of other comprehensive income 2013 £ 2012 £ (1,038,342) (741,799) (3,272) – (10,742) – OTHER COMPREHENSIVE INCOME FOR THE YEAR, NET OF INCOME TAX (3,272) (10,742) TOTAL COMPREHENSIVE INCOME FOR THE YEAR (1,041,614) (752,541) Total comprehensive income attributable to: Owners of the parent Non-controlling interests The notes form part of these financial statements. (1,031,314) (10,300) (752,541) – (1,041,614) (752,541) Oracle Coalfields PLCAnnual Report 2013 17 Consolidated Statement of Financial Position 31 December 2013 ASSETS NON-CURRENT ASSETS Intangible assets Property, plant and equipment Investments Loans and other financial assets CURRENT ASSETS Trade and other receivables Cash and cash equivalents TOTAL ASSETS EQUITY SHAREHOLDERS’ EQUITY Called up share capital Share premium Translation reserve Share scheme reserve Retained earnings Non-controlling interests TOTAL EQUITY LIABILITIES CURRENT LIABILITIES Trade and other payables TOTAL LIABILITIES TOTAL EQUITY AND LIABILITIES The notes form part of these financial statements. Notes 2013 £ 2012 £ 9 10 11 12 3,755,014 1,228 – – 3,672,424 1,816 – 60,149 3,756,242 3,734,389 13 14 40,952 538,789 52,016 99,592 579,741 151,608 4,335,983 3,885,997 16 17 17 17 17 15 327,009 7,672,130 (22,461) 63,070 (3,852,730) 216,011 6,070,418 (19,189) 63,070 (2,824,688) 4,187,018 5,729 3,505,622 16,029 4,192,747 3,521,651 18 143,236 364,346 143,236 364,346 4,335,983 3,885,997 The financial statements were approved and authorised for issue by the Board of Directors on 15 April 2014 and were signed on its behalf by: Mr S Khan Director Oracle Coalfields PLCAnnual Report 2013 18 Company Statement of Financial Position 31 December 2013 ASSETS NON-CURRENT ASSETS Intangible assets Property, plant and equipment Investments Loans and other financial assets CURRENT ASSETS Trade and other receivables Cash and cash equivalents TOTAL ASSETS EQUITY SHAREHOLDERS’ EQUITY Called up share capital Share premium Share scheme reserve Retained earnings TOTAL EQUITY LIABILITIES CURRENT LIABILITIES Trade and other payables TOTAL LIABILITIES TOTAL EQUITY AND LIABILITIES The notes form part of these financial statements. Notes 2013 £ 2012 £ 9 10 11 12 2,632,542 165 868,631 1,136,214 2,639,040 331 64,115 1,033,339 4,637,552 3,736,825 13 14 94,332 517,356 89,364 97,686 611,688 187,050 5,249,240 3,923,875 16 17 17 17 327,009 7,672,130 63,070 (3,757,636) 216,011 6,070,418 63,070 (2,786,785) 4,304,573 3,562,714 18 944,667 361,161 944,667 361,161 5,249,240 3,923,875 The financial statements were approved and authorised for issue by the Board of Directors on 15 April 2014 and were signed on its behalf by: Mr S Khan Director Oracle Coalfields PLCAnnual Report 2013 19 Oracle Coalfields PLC Annual Report 2013 Consolidated Statement of Changes in Equity For the year ended 31 December 2013 Balance at 1 January 2012 Changes in equity Issue of share capital Loss for the year Other comprehensive income Balance at 31 December 2012 Changes in equity Issue of share capital Loss for the year Other comprehensive income Balance at 31 December 2013 Balance at 1 January 2012 Changes in equity Issue of share capital Loss for the year Other comprehensive income Balance at 31 December 2012 Changes in equity Issue of share capital Loss for the year Other comprehensive income Balance at 31 December 2013 The notes form part of these financial statements. Called up share capital £ Retained earnings £ Share premium £ Translation reserve £ 214,211 (2,082,889) 6,029,702 (8,447) 1,800 – – – (741,799) – 40,716 – – – – (10,742) 216,011 (2,824,688) 6,070,418 (19,189) 110,998 – – – (1,028,042) – 1,601,712 – – – – (3,272) 327,009 (3,852,730) 7,672,130 (22,461) Share scheme reserve £ Total £ Non-controlling interests £ Total equity £ 63,070 4,215,647 16,029 4,231,676 – – – 42,516 (741,799) (10,742) – – – 42,516 (741,799) (10,742) 63,070 3,505,622 16,029 3,521,651 – – – 1,712,710 (1,028,042) (3,272) – (10,300) – 1,712,710 (1,038,342) (3,272) 63,070 4,187,018 5,729 4,192,747 20 Company Statement of Changes in Equity For the year ended 31 December 2013 Called up share capital £ Retained earnings £ Share premium £ Share scheme reserve £ Total equity £ Balance at 1 January 2012 214,211 (2,059,304) 6,029,702 63,070 4,247,679 Changes in equity Issue of share capital Loss for the year 1,800 – – (727,481) 40,716 – – – 42,516 (727,481) Balance at 31 December 2012 216,011 (2,786,785) 6,070,418 63,070 3,562,714 Changes in equity Issue of share capital Loss for the year 110,998 – – (970,851) 1,601,712 – – – 1,712,710 (970,851) Balance at 31 December 2013 327,009 (3,757,636) 7,672,130 63,070 4,304,573 The notes form part of these financial statements. Oracle Coalfields PLCAnnual Report 2013 21 Consolidated Statement of Cash Flows For the year ended 31 December 2013 Cash flows from operating activities Cash generated from operations Net cash from operating activities Cash flows from investing activities Purchase of intangible fixed assets Purchase of tangible fixed assets Cash acquired with subsidiary Interest received Net cash from investing activities Cash flows from financing activities Proceeds of share issue Cost of share issue Net cash from financing activities Increase/(decrease) in cash and cash equivalents Effect of the exchange rate changes on the balance of cash held in foreign currencies at the beginning of the financial year Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year The notes form part of these financial statements. Notes 2013 £ 2012 £ 1 (1,007,580) (446,246) (1,007,580) (446,246) (272,169) – 804,516 2,395 (1,100,872) (497) – 1,247 534,742 (1,100,122) 1,006,609 (94,393) 912,216 42,667 (151) 42,516 439,378 (1,503,852) (181) 99,592 (1,158) 1,604,602 538,789 99,592 2 2 Oracle Coalfields PLCAnnual Report 2013 22 Notes to the Consolidated Statement of Cash Flows For the year ended 31 December 2013 1. RECONCILIATION OF LOSS BEFORE INCOME TAX TO CASH GENERATED FROM OPERATIONS Loss before income tax Depreciation charges Impairment of exploration costs Impairment of loans Impairment of accrued interest receivable Finance income Decrease in trade and other receivables (Decrease)/increase in trade and other payables Cash generated from operations 2. CASH AND CASH EQUIVALENTS 2013 £ (1,038,342) 166 217,519 58,334 5,904 (3,010) (759,429) 5,722 (253,873) 2012 £ (741,799) 166 – – – (1,864) (743,497) 39,872 257,379 (1,007,580) (446,246) The amounts disclosed on the statement of cash flow in respect of cash and cash equivalents are in respect of these statement of financial position amounts: Year ended 31 December 2013 Cash and cash equivalents Year ended 31 December 2012 Cash and cash equivalents 3. ACQUISITION OF BUSINESS 31 December 2013 £ 538,789 31 December 2012 £ 1 January 2013 £ 99,592 1 January 2012 £ 99,592 1,604,602 During the year the Company acquired 100% of the share capital of Revive Finance Limited through a share exchange agreement with its existing shareholders. The notes form part of these financial statements. Oracle Coalfields PLCAnnual Report 2013 23 Notes to the Consolidated Financial Statements For the year ended 31 December 2013 1. ACCOUNTING POLICIES Reporting entity Oracle Coalfields PLC Group is a group domiciled in United Kingdom. The parent is a public limited company with the registered office at Richmond House, Broad Street, Ely, Cambridgeshire, CB7 4AH. The Group primarily is involved in the exploration for coal. Going concern The Directors have considered the cashflow requirements of the Group over the next 12 months. It will be necessary to raise additional funds to bring the project to final investment decision. The Directors expect to meet the funding requirements and therefore believe that the going concern basis is appropriate for the preparation of the financial statements. Compliance with accounting standards These financial statements have been prepared in accordance with International Financial Reporting Standards and IFRIC interpretations and with those parts of the Companies Act 2006 applicable to reporting groups under IFRS. The financial statements have been prepared under the historical cost convention. Significant accounting judgements, estimates and assumptions The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for revenues and expenses during the year and the amounts reported for assets and liabilities at the statement of financial position date. However, the nature of estimation means that the actual outcomes could differ from those estimates. The key sources of estimation uncertainty that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year are the measurement of any impairment on intangible assets and the estimation of share-based payment costs. The Group determines whether there is any impairment of intangible assets on an annual basis. The estimation of share- based payment costs requires the selection of an appropriate model, consideration as to the inputs necessary for the valuation model chosen and the estimation of the number of awards that will ultimately vest. Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. Business acquisitions have been accounted for in accordance with IFRS 3, ‘Business Combinations’. Fair values are attributed to the Group’s share of net assets. Where the cost of acquisition exceeds the fair values attributed to such assets, the difference is treated as purchased goodwill and is capitalised. In the case of subsequent acquisitions of minority interests, the difference between the consideration payable for the additional interest in the subsidiary and the minority interest’s share of the assets and liabilities reflected in the consolidated statement of financial position at the date of acquisition of the minority interest has been treated as goodwill. Intangible fixed assets – exploration costs Expenditure on the acquisition costs, exploration and evaluation of interests in licences, including related finance and administration costs, are capitalised. Such costs are carried forward in the statement of financial position under intangible assets and amortised over the minimum period of the expected commercial production of coal in respect of each area of interest where: a) such costs are expected to be recouped through successful development and exploration of the area of interest or alternatively by its sale; b) exploration activities have not yet reached a stage that permits a reasonable assessment of the existence or otherwise of economically recoverable reserves and active operations in relation to the areas are continuing. An annual impairment review is carried out by the Directors to consider whether any exploration or development costs have suffered impairment in value where a site has been abandoned or confirmed as no longer technically feasible. Accumulated costs in respect of areas of interest that have been abandoned are written off to the profit and loss account in the year in which the area is abandoned. Exploration costs are carried at cost less any provision for impairment. Oracle Coalfields PLCAnnual Report 2013 24 Notes to the Consolidated Financial Statements continued 1. ACCOUNTING POLICIES continued Property, plant and equipment Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life. – 20% on reducing balance Motor vehicles Computer equipment – 30% on reducing balance Investments Fixed asset investments are stated at cost. The investments are reviewed annually and any impairment is taken directly to the statement of profit or loss. Financial instruments Financial assets and liabilities are recognised on the statement of financial position when the Group becomes a party to the contractual provisions of the instrument. – Cash and cash equivalents comprise cash held at bank and short term deposits – Trade payables are not interest bearing and are stated at their nominal value – Equity instruments issued by the Company are recorded at the proceeds received except where those proceeds appear to be less than the fair value of the equity instruments issued, in which case the equity instruments are recorded at fair value. The difference between the proceeds received and the fair value is reflected in the share based payments reserve. – Derivative assets designated at fair value are loans made in Pakistan Rupees and their values are subject to foreign exchange fluctuations. Taxation Current taxes are based on the results shown in the financial statements and are calculated according to local tax rules, using tax rates enacted or substantially enacted by the statement of financial position date. Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the statement of financial position date. Foreign currencies Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the statement of financial position date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of transaction. Exchange differences are taken into account in arriving at the operating result. Profit and losses of overseas subsidiary undertakings are translated into sterling at average rates for the year. The statements of financial position of overseas subsidiary undertakings are translated at the rate ruling at the statement of financial position date. Differences arising from the translation of Group investments in overseas subsidiary undertakings are recognised as a separate component of equity. Net exchange differences classified as equity are separately tracked and the cumulative amount disclosed as a translation reserve. The principal place of business of the Group is the United Kingdom with sterling being the functional currency. Funds are advanced to Pakistan as required to finance the exploration costs which are payable in Rupees. Hire purchase and leasing commitments Rentals paid under operating leases are charged to the statement of profit or loss on a straight line basis over the period of the lease. Share-based payment transactions Where equity settled share options are awarded to employees, the fair value of the options at the date of grant is charged to the statement of profit or loss over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each statement of financial position date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of all options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition. Where terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the statement of profit or loss over the remaining vesting period. Where equity instruments are granted to persons other than employees, the statement of profit or loss is charged with the fair value of goods and services received. Cash and cash equivalents Cash and cash equivalents for the purpose of the cash flow statement comprise cash and bank balances. Oracle Coalfields PLCAnnual Report 2013 25 1. ACCOUNTING POLICIES continued New standards and interpretations applied In preparing these financial statements the Company has reviewed all new standards and interpretations, but there are no standards effective for the year commencing 1 January 2013 requiring new interpretations to be applied. New standards and interpretations adopted with no effect on the financial statements The following new and revised standards and interpretations have also been adopted in these financial statements. Their adoption has not had any significant impact on the amounts reported in these financial statements but may affect the accounting for future transactions or arrangements: – IAS 1 Presentation of Financial Statements (amended 2011 and 2012) – IAS 16 Property, Plant and Equipment (amended 2012) – IAS 19 Employee Benefits (amended 2011) – IAS 32 Financial Instruments (amended 2012) – IAS 34 Interim Financial Reporting (amended 2012) – IFRS 1 First-time adoption of International Financial Reporting Standards (amended 2012) – IFRS 7 Financial Instruments Disclosures (amended 2011) – IFRS 13 Fair Value Measurement (issued 2011) – IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine (issued 2011) New standards and interpretations not yet adopted A number of new standards, amendments to standards and interpretations are not yet effective for the year commencing 1 January 2013 and have not been applied in preparing these financial statements: – IAS 16 Property, Plant and Equipment (amended 2013) – IAS 19 Employee Benefits (amended 2013) – IAS 24 Related Party Disclosures (amended 2013) – IAS 27 Separate Financial Statements (revised 2011 and 2012) – IAS 28 Investments in Associates and Joint Ventures (re-issued 2011) – IAS 32 Financial Instruments (amended 2011) – IAS 36 Impairment of Assets (amended 2013) – IAS 38 Intangible Assets (amended 2013) – IAS 39 Financial Instruments: Recognition and Measurement (amended 2013) – IAS 40 Investment Property (amended 2013) – IFRS 2 Share-based Payment (amended 2013) – IFRS 3 Business Combinations (amended 2013) – IFRS 7 Financial Instruments Disclosures (amended 2011 and 2013) – IFRS 8 Operating Segments (amended 2013) – IFRS 9 Financial Instruments (issued 2009 and amended 2009, 2010 and 2013) – IFRS 10 Consolidated Financial Statements (issued 2011 and amended 2012) – IFRS 11 Joint Arrangements (issued 2011) – IFRS 12 Disclosure of Interests in Other Entities (issued 2011 and amended 2012) – IFRS 13 Fair Value Measurement (amended 2013) – IFRS 14 Regulatory Deferral Accounts (issued 2014) – IFRIC 21 Levies (issued 2013) The Directors do not consider that the implementation of any of these new standards will have a material impact upon reported income or reported net assets. 2. SEGMENTAL REPORTING The principal activity of the Group is the exploration for and development of coal in Pakistan. All expenses are in respect of this one activity and there are no business segments requiring separate disclosure. Oracle Coalfields PLCAnnual Report 2013 26 Notes to the Consolidated Financial Statements continued 3. EMPLOYEES AND DIRECTORS Wages and salaries Social security costs 2013 £ 2012 £ 352,380 41,835 410,354 50,280 394,215 460,634 The above costs for 2012 include salaries of £101,400 and social security costs of £14,780 which were capitalised within intangible assets exploration costs on the basis that they were incurred solely in respect of the development of the exploration project. An impairment provision has been made against these costs during 2013 to charge them against administration costs. The average monthly number of employees during the year was as follows: Directors Administration and production Directors’ remuneration Information regarding the highest paid director is as follows: Emoluments etc 4. NET FINANCE INCOME Finance income: Deposit account interest Other loan interest 5. LOSS BEFORE INCOME TAX The loss before income tax is stated after charging/(crediting): Other operating leases Depreciation – owned assets Auditors’ remuneration Foreign exchange differences Impairment of exploration costs Impairment of loans Impairment of accrued interest receivable 2013 2012 4 3 7 5 2 7 2013 £ 2012 £ 238,000 280,880 2013 £ 2012 £ 133,000 100,000 2013 £ 2,395 615 3,010 2013 £ 35,078 446 10,750 (82) 217,519 58,334 5,904 2012 £ 1,247 617 1,864 2012 £ 41,369 559 14,850 341 – – – The depreciation charges shown above include £280 (2012: £393) which have been capitalised as exploration costs by the subsidiary company in accordance with the accounting policy. Included within the impairment of exploration costs are salaries of £101,400 and social security costs of £14,780 which were previously capitalised, but are no longer considered to be recoverable. During 2013 there are corresponding salaries of £82,000 and social security costs of £10,261 which have been charged directly to administration costs in the statement of profit or loss. Oracle Coalfields PLCAnnual Report 2013 27 6. INCOME TAX Analysis of tax expense No liability to UK corporation tax arose on ordinary activities for the year ended 31 December 2013 nor for the year ended 31 December 2012. Factors affecting the tax expense The tax assessed for the year is higher than the standard rate of corporation tax in the UK. The difference is explained below: Loss on ordinary activities before income tax Loss on ordinary activities multiplied by the standard rate of corporation tax in the UK of 23.250% (2012 – 24.500%) Effects of: Interest capitalised in subsidiary Potential deferred taxation on losses for year Foreign losses of subsidiary Tax expense Tax effects relating to effects of other comprehensive income Exchange difference on consolidation Exchange difference on consolidation 2013 £ 2012 £ (1,038,342) (741,799) (241,415) (181,741) 3,718 225,724 11,973 3,508 178,233 – – – Gross £ (3,272) (3,272) Gross £ (10,742) (10,742) 2013 Net £ (3,272) (3,272) 2012 Net £ (10,742) (10,742) Tax £ – – Tax £ – – The Group and Company has estimated UK excess management charges of £3,227,995 (2012: £2,257,310) to carry forward against future income. The overseas subsidiary generated losses of £51,498 (2012: nil) during the year which will be carried forward to offset future profits. There is no charge for foreign taxation for the year (2012: nil). 7. LOSS OF PARENT COMPANY As permitted by Section 408 of the Companies Act 2006, the statement of profit or loss of the parent company is not presented as part of these financial statements. The parent company’s loss for the financial year was £970,851 (2012: £727,481). Oracle Coalfields PLCAnnual Report 2013 28 Notes to the Consolidated Financial Statements continued 8. EARNINGS PER SHARE Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share is calculated using the weighted average number of shares adjusted to assume the conversion of all dilutive potential ordinary shares. Reconciliations are set out below. Basic EPS Earnings attributable to ordinary shareholders Effect of dilutive securities Options granted Diluted EPS Adjusted earnings Basic EPS Earnings attributable to ordinary shareholders Effect of dilutive securities Options granted Diluted EPS Adjusted earnings Earnings £ Weighted average number of shares 2013 Per-share amount pence (1,038,342) 282,644,053 -0.37 – 10,796,666 – (1,038,342) 293,440,719 -0.35 Earnings £ Weighted average number of shares 2012 Per-share amount pence (741,799) 214,504,260 -0.35 – 13,531,184 – (741,799) 228,035,444 -0.33 Oracle Coalfields PLCAnnual Report 2013 29 9. INTANGIBLE ASSETS Group COST At 1 January 2013 Additions Impairments Exchange differences At 31 December 2013 NET BOOK VALUE At 31 December 2013 Group COST At 1 January 2012 Additions Exchange differences At 31 December 2012 NET BOOK VALUE At 31 December 2012 Exploration costs £ 3,672,424 402,089 (217,519) (101,980) 3,755,014 3,755,014 Exploration costs £ 3,204,424 581,838 (113,838) 3,672,424 3,672,424 Total Group exploration costs of £3,755,014 are currently carried at cost in the accounts. The Group will need to raise funds to progress its development activities to the next phase of implementation and therefore generate sufficient value to justify the carrying value of its intangible fixed assets. If insufficient funds are raised then some of the assets may require impairment. Company COST At 1 January 2013 Additions Impairments At 31 December 2013 NET BOOK VALUE At 31 December 2013 Company COST At 1 January 2012 Additions At 31 December 2012 NET BOOK VALUE At 31 December 2012 The impairment of exploration costs is charged to administration and included within the statement of profit or loss as an expense. Exploration costs £ 2,639,040 176,828 (183,326) 2,632,542 2,632,542 Exploration costs £ 2,258,391 380,649 2,639,040 2,639,040 Oracle Coalfields PLCAnnual Report 2013 30 Notes to the Consolidated Financial Statements continued 10. PROPERTY, PLANT AND EQUIPMENT Group COST At 1 January 2013 Exchange differences At 31 December 2013 DEPRECIATION At 1 January 2013 Charge for year Exchange differences At 31 December 2013 NET BOOK VALUE At 31 December 2013 Group COST At 1 January 2012 Additions Exchange differences At 31 December 2012 DEPRECIATION At 1 January 2012 Charge for year Exchange differences At 31 December 2012 NET BOOK VALUE At 31 December 2012 Company COST At 1 January 2013 and 31 December 2013 DEPRECIATION At 1 January 2013 Charge for year At 31 December 2013 NET BOOK VALUE At 31 December 2013 Company COST Additions At 31 December 2012 DEPRECIATION Charge for year At 31 December 2012 NET BOOK VALUE At 31 December 2012 Motor vehicles £ Computer equipment £ 5,177 (492) 4,685 3,819 246 (362) 3,703 867 (35) 832 409 200 (23) 586 Totals £ 6,044 (527) 5,517 4,228 446 (385) 4,289 982 246 1,228 Motor vehicles £ Computer equipment £ 5,868 – (691) 5,177 3,946 339 (466) 3,819 419 497 (49) 867 214 220 (25) 409 Totals £ 6,287 497 (740) 6,044 4,160 559 (491) 4,228 1,358 458 1,816 Computer equipment £ 497 166 166 332 165 Computer equipment £ 497 497 166 166 331 Oracle Coalfields PLCAnnual Report 2013 31 11. INVESTMENTS Company COST At 1 January 2013 Additions At 31 December 2013 NET BOOK VALUE At 31 December 2013 Company COST At 1 January 2012 and 31 December 2012 NET BOOK VALUE At 31 December 2012 Shares in Group undertakings £ 64,115 804,516 868,631 868,631 Shares in Group undertakings £ 64,115 64,115 The Group or the Company’s investments at the balance sheet date in the share capital of companies include the following: Subsidiaries Sindh Carbon Energy Limited Country of incorporation: Pakistan Nature of business: Coal exploration and mining Class of shares: Ordinary Aggregate capital and reserves Loss for the year % holding 80.00 2012 £ 80,144 – 2013 £ 28,646 (51,498) The subsidiary company was incorporated in Pakistan on 23 January 2007 for the exploration and future extraction of coal in Pakistan. Oracle Coalfields PLC agreed to acquire 80% of the ordinary share capital of the Company at par, fully paid by cash. The investment in share capital for the 80% holding amounted to £64,115. Company Revive Financial Limited Nature of business: Administration and financial support Class of shares: Ordinary Aggregate capital and reserves The Company was incorporated on 8 October 2013. % holding 100.00 2013 £ 804,516 The Company was acquired under the terms of a share exchange agreement whereby shares were allotted to the shareholders of Revive Financial Limited in exchange for their shareholdings in Revive Financial Limited. The Company became a subsidiary of Oracle upon the completion of the share exchange on 18 October 2013. The investment in share capital for the 100% holding amounted to £804,516. Oracle Coalfields PLCAnnual Report 2013 32 Notes to the Consolidated Financial Statements continued 12. LOANS AND OTHER FINANCIAL ASSETS Group At 1 January 2013 Impairment of loan Exchange movement At 31 December 2013 Group At 1 January 2012 Exchange movement At 31 December 2012 Other loans £ 60,149 (58,334) (1,815) – Other loans £ 62,705 (2,556) 60,149 Group Sindh Koela Limited holds 20% of the issued shares of Sindh Carbon Energy Limited and these shares are funded by a loan from Oracle Coalfields PLC. The loan accrues interest on a daily basis at a rate of 9 per cent per annum. The loan is unsecured and repayable from 50% of dividends due to Sindh Koela Limited from Sindh Carbon Energy Limited, when the project starts to generate revenues, or is repayable in full on any early transfer of shares by Sindh Koela Limited in Sindh Carbon Energy Limited. There is a loan of PKR 2,000,000, amounting to £16,029 (2012: £16,029) made by Oracle Coalfields PLC to Sindh Koela Limited, representing Sindh Koela Limited’s initial 20 per cent shareholding of 200,000 shares of PKR 10 per share. Further loans were made to Sindh Koela Limited to fund initial expenditure in Pakistan on behalf of the Group as follows: At the statement of financial position date there is a loan of £25,000 (2012: £25,000) from Oracle Coalfields PLC to Sindh Koela Limited. The loan is interest free, unsecured and is not due for repayment until the project starts to generate revenues. At the statement of financial position date there is a loan of PKR 3,000,000, amounting to £17,305 (2012: £19,120) from Sindh Carbon Energy Limited to Sindh Koela Limited. The loan is interest free, unsecured and is not due for repayment until the project starts to generate revenues. The directors consider the recovery of the above loans to be in doubt and during the year made a full impairment provision of £58,334 (2012: nil) against them. Company At 1 January 2013 New in year Impairment of loan At 31 December 2013 Company At 1 January 2012 New in year At 31 December 2012 Loans to Group undertakings £ 992,310 143,904 – Other loans £ Totals £ 41,029 – (41,029) 1,033,339 143,904 (41,029) 1,136,214 – 1,136,214 Loans to Group undertakings £ 860,144 132,166 Other loans £ Totals £ 41,029 – 901,173 132,166 992,310 41,029 1,033,339 Company In addition to items disclosed for the Group, Oracle Coalfields PLC made loans of £143,904 (2012: £132,166) during the period to its subsidiary company Sindh Carbon Energy Limited and the amount outstanding at the statement of financial position date was £1,136,214 (2012: £992,310). Interest accrues on a daily basis at a rate of 1% over the Bank of England base rate. The loan is unsecured and although it is repayable on demand, it is unlikely to be repaid until the project becomes successful and the subsidiary starts to generate revenue. Oracle Coalfields PLCAnnual Report 2013 33 13. TRADE AND OTHER RECEIVABLES Current: Other receivables VAT Prepayments and accrued income 14. CASH AND CASH EQUIVALENTS Cash in hand Bank deposit account Bank accounts 2013 £ 3,034 19,533 18,385 40,952 2013 £ – 507,356 31,433 Group 2012 £ 34,339 5,363 12,314 52,016 Group 2012 £ 25 87,661 11,906 2013 £ 56,795 19,533 18,004 94,332 2013 £ – 507,356 10,000 538,789 99,592 517,356 Company 2012 £ 72,108 5,363 11,893 89,364 Company 2012 £ 25 87,661 10,000 97,686 15. NON-CONTROLLING INTERESTS The non-controlling interest representing 20 per cent of the capital and reserves of the subsidiary Sindh Carbon Energy Limited is held by Sindh Koela Limited. There were no pre-acquisition reserves or goodwill. 16. CALLED UP SHARE CAPITAL Allotted, issued and fully paid 327,009,493 (2012: 216,011,000) Ordinary shares of 0.1p each 2013 £ 2012 £ 327,009 216,011 62,282,707 Ordinary shares of 0.1p each were allotted as fully paid for cash at a premium of 1.4p per share during the year. 4,020,453 Ordinary shares of 0.1p each were allotted to directors and senior managers as fully paid in lieu of cash remuneration, at a premium of 1.7p per share during the year. 44,695,333 Ordinary shares of 0.1p each were allotted as fully paid under a share exchange agreement at a premium of 1.7p per share. Under the terms of the agreement, shares were allotted to the shareholders of Revive Financial Limited in exchange for their shareholdings in Revive Financial Limited, which then became a subsidiary of the Group. The number of shares in issue are as follows: At 1 January 2013 Issued during the year At 31 December 2013 2013 No. 2012 No. 216,011,000 214,211,000 1,800,000 110,998,493 327,009,493 216,011,000 Oracle Coalfields PLCAnnual Report 2013 34 Notes to the Consolidated Financial Statements continued 17. RESERVES Group At 1 January 2013 Deficit for the year Proceeds of share issue Cost of share issue Exchange translation difference At 31 December 2013 Group At 1 January 2012 Deficit for the year Proceeds of share issue Cost of share issue Exchange translation difference At 31 December 2012 Company At 1 January 2013 Deficit for the year Proceeds of share issue Cost of share issue At 31 December 2013 Company At 1 January 2012 Deficit for the year Proceeds of share issue Cost of share issue At 31 December 2012 18. TRADE AND OTHER PAYABLES Current: Trade payables Amounts owed to Group undertakings Social security and other taxes Other payables Accruals and deferred income Retained earnings £ Share premium £ (2,824,688) (1,028,042) – – – 6,070,418 – 1,700,128 (98,416) – Translation reserve £ (19,189) – – – (3,272) Share scheme reserve £ 63,070 – – – – Totals £ 3,289,611 (1,028,042) 1,700,128 (98,416) (3,272) (3,852,730) 7,672,130 (22,461) 63,070 3,860,009 Retained earnings £ Share premium £ (2,082,889) (741,799) – – – 6,029,702 – 40,867 (151) – Translation reserve £ (8,447) – – – (10,742) Share scheme reserve £ 63,070 – – – – Totals £ 4,001,436 (741,799) 40,867 (151) (10,742) (2,824,688) 6,070,418 (19,189) 63,070 3,289,611 Retained earnings £ Share premium £ (2,786,785) (970,851) – – 6,070,418 – 1,700,128 (98,416) Share scheme reserve £ 63,070 – – – Totals £ 3,346,703 (970,851) 1,700,128 (98,416) (3,757,636) 7,672,130 63,070 3,977,564 Retained earnings £ Share premium £ (2,059,304) (727,481) – – 6,029,702 – 40,867 (151) Share scheme reserve £ 63,070 – – – Totals £ 4,033,468 (727,481) 40,867 (151) (2,786,785) 6,070,418 63,070 3,346,703 2013 £ 60,392 – 16,800 50,252 15,792 Group 2012 £ 99,677 – 3,817 218,350 42,502 2013 £ 60,391 804,516 16,800 50,252 12,708 Company 2012 £ 99,677 – 3,817 218,350 39,317 143,236 364,346 944,667 361,161 Oracle Coalfields PLCAnnual Report 2013 35 19. LEASING AGREEMENTS Future minimum lease payments under non-cancellable operating leases fall due as follows: Group Within one year Between one and five years Company Within one year Between one and five years Non-cancellable operating leases 2012 £ 19,200 – 19,200 2012 £ 19,200 – 19,200 2013 £ 34,800 14,500 49,300 2013 £ 34,800 14,500 49,300 20. FINANCIAL RISK MANAGEMENT The Group’s financial instruments comprise cash and cash equivalents, loan investments and financial assets and various items such as trade receivables, trade payables, accruals and prepayments that arise directly from its operations as follows: At 31 December 2013 Financial assets Cash and cash equivalents Trade and other receivables Other financial assets Derivative financial assets Financial liabilities Trade and other payables At 31 December 2012 Financial assets Cash and cash equivalents Trade and other receivables Other financial assets Derivative financial assets Financial liabilities Trade and other payables Fair value through profit and loss £ Held at amortised cost £ Fair value through other comprehensive income £ – – – – – – – Fair value through profit and loss £ – – – 35,149 538,789 40,952 – – 579,741 143,236 143,236 Held at amortised cost £ 99,592 52,016 25,000 – 35,149 176,608 – – 364,346 364,346 – – – – – – – Fair value through other comprehensive income £ – – – – – – – Total £ 538,789 40,952 – – 479,741 143,236 143,236 Total £ 99,592 52,016 25,000 35,149 211,757 364,346 364,346 Oracle Coalfields PLCAnnual Report 2013 36 Notes to the Consolidated Financial Statements continued 20. FINANCIAL RISK MANAGEMENT continued The main purpose of these financial instruments is to finance the Group’s operations. The Board regularly reviews and agrees policies for managing the level of risk arising from the Group’s financial instruments as summarised below. a) Market risk Market risk is the risk that changes in market prices, such as commodity prices, foreign exchange rates, interest rates and equity prices will affect the Group’s income or value of its holdings in financial instruments. i) Foreign exchange risk The Group operates internationally and is exposed to foreign exchange risk arising from currency exposures with respect to the Pakistan Rupee. The Group is exposed to currency risk on cash and cash equivalents, loans, receivables and payables that are denominated in currencies other than sterling which is the functional currency of the Group. The Group’s exposure to foreign currency risk at the reporting date is as follows: Cash and cash equivalents Loans Receivables Payables 2013 PKR 2012 PKR 3,715,707 – 89,283 (534,633) 299,111 5,000,000 86,993 (499,706) 3,270,357 4,886,398 Sensitivity analysis A 10 percent strengthening of sterling against the Pakistan Rupee at 31 December 2013 would have increased/(decreased) equity and profit and loss by the amounts shown below: Pakistan Rupees 2013 £ Equity 2012 £ (1,887) (3,443) Profit and loss 2012 £ – 2013 £ – A 10 percent weakening of sterling against the Pakistan Rupee at 31 December 2013 would have an equal but opposite effect on the amounts shown above. ii) Commodity price risk The principal activity of the Group is the development of a coal mining property in Pakistan and the principal market risk facing the Group is an adverse movement in the commodity price of coal. iii) Interest rate risk The Group is exposed to interest rate risk on its interest bearing bank accounts and loans. Cash and cash equivalents Loans Weighted average interest rate % 0.70 1.50 Weighted average interest rate % 0.38 1.50 2013 £ 339,979 – 339,979 2012 £ 87,661 41,029 128,690 Sensitivity analysis A change of 100 basis points in interest rates at the reporting date would have increased/(decreased) equity and profit and loss by £5,816 (2012: £410). Oracle Coalfields PLCAnnual Report 2013 37 20. FINANCIAL RISK MANAGEMENT continued b) Credit risk The Group’s principal financial assets are the cash and cash equivalents and taxation receivable as recognised in the statement of financial position, and which represent the Group’s maximum exposure to credit risk in relation to financial assets. The Company has made an unsecured loan of £1,136,214 (2012: £992,310) to its subsidiary Sindh Carbon Energy Limited. Although it is repayable on demand, it is unlikely to be repaid until the project becomes successful and the subsidiary starts to generate revenue. c) Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s policy throughout the year has been to ensure that it has adequate liquidity to meet its liabilities when due by careful management of its working capital. The following tables illustrate the contractual maturity profiles of its financial liabilities, all of which are repayable within one year, as at 31 December: Trade payables Tax liabilities 2013 £ 2012 £ 126,436 16,800 360,529 3,817 143,236 364,346 d) Fair values of financial assets and liabilities The Group measures the fair value of its financial assets and liabilities in the statement of financial position in accordance with the fair value hierarchy. This hierarchy groups financial assets and liabilities into three levels based on the significance of inputs used in measuring the fair value of the financial assets and liabilities. The fair value hierarchy has the the following levels: Level 1: Level 2: Level 3: Quoted prices (unadjusted) in active markets for identical assets and liabilities; Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and Inputs for the asset or liability that are not based on observable market data (unobservable inputs). The fair value of derivative financial assets in 2012 amounted to £35,149 and was measured in line with level 2. There were no derivatives instruments requiring valuation for 2013. Capital management The Company’s capital consists wholly of ordinary shares. The Board’s policy is to preserve a strong capital base in order to maintain investor, creditor and market confidence and to safeguard the future development of the business, whilst balancing these objectives with the efficient use of capital. Oracle Coalfields PLCAnnual Report 2013 38 Notes to the Consolidated Financial Statements continued 21. RELATED PARTY DISCLOSURES During the year Oracle Coalfields PLC accrued interest of £15,992 (2012: £14,318) in respect of loans totalling £1,136,214 (2012: £992,310) made to Sindh Carbon Energy Limited. At the Statement of Financial Position date the total interest outstanding amounted to £53,895 (2012: £37,903). During the year Oracle Coalfields PLC accrued interest of £615 (2012: £617) in respect of loans totalling £41,029 (2012: £41,029) made to Sindh Koela Limited. At the Statement of Financial Position date the total interest outstanding amounted to £5,904 (2012: £5,289). Full provision has been made during the year for the outstanding loans and accrued interest as the directors consider there recovery to be in doubt. During the year Oracle Coalfields plc received a loan of £804,516 (2012: nil) from its subsidiary Revive Financial Limited. The loan is interest free and has no fixed terms for repayment. During the year the directors participated in a placing of new ordinary shares of 0.1 pence each at a placing price of 1.8 pence per share. Within this placement the directors received 555,556 shares for cash consideration of £10,000 and 2,812,064 shares in lieu of cash remuneration of £50,617. Key management personnel compensation The directors’ and key management personnel of the Group during the year were are follows: Mr S Khan (Chief Executive Officer) Mr A C R Scutt (Non-Executive Director) Mr M R Stead (Non-Executive Director) Mr W A Loader (Chairman) The aggregate compensation made to key management personnel of the Group is set out below: Short-term employee benefits Post-employment benefits Termination benefits Share-based benefits 2013 £ 266,596 – – – 2012 £ 314,475 – – – 266,596 314,475 Details of key management personnel compensation are disclosed in the Remuneration Report included in the Directors Report. Key management personnel equity holdings Details of key management personnel beneficial interests in the fully paid Ordinary shares of the Company and share options held are unchanged during the year and are disclosed in the Directors Report. 22. EVENTS AFTER THE REPORTING PERIOD Other than the above, there has not arisen in the interval between the year end and the date of this report any other item, transaction or event of a material nature, likely, in the opinion of the Directors of the Group to affect: i) The Group’s operations in future financial periods; or ii) The results of those operations in future periods; or iii) The Group’s state of affairs in future financial periods. Oracle Coalfields PLCAnnual Report 2013 39 Oracle Coalfields PLC Annual Report 2013 23. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS Group Loss for the financial year Proceeds of share issue Cost of share issue Exchange translation difference Net addition/(reduction) to shareholders’ funds Opening shareholders’ funds Closing shareholders’ funds Company Loss for the financial year Proceeds from issue of shares Cost of share issue Net addition/(reduction) to shareholders’ funds Opening shareholders’ funds Closing shareholders’ funds 2013 £ (1,028,042) 1,811,125 (98,415) (3,272) 2012 £ (741,799) 42,667 (151) (10,742) 681,396 3,505,622 (710,025) 4,215,647 4,187,018 3,505,622 2013 £ 2012 £ (970,851) 1,811,125 (98,415) (727,481) 42,667 (151) 741,859 3,562,714 (684,965) 4,247,679 4,304,573 3,562,714 40 Notes to the Consolidated Financial Statements continued 24. SHARE-BASED PAYMENT TRANSACTIONS The Company has a share option programme that entitles the holders to purchase shares in the Company with the options exercisable at the price determined at the date of granting the option. The terms and conditions of the grants are as follows; there are no vesting conditions to be met and all options are to be settled by the issue of shares: Grant date 13 February 2007 (expiry date extended on admission to AIM) 15 November 2007 (expiry date extended on admission to AIM) 14 April 2011 18 April 2011 1 August 2011 23 July 2012 The number and weighted average exercise prices of share options is as follows: Outstanding at 1 January Expired during the period Granted during period Outstanding at 31 December Number of instruments Contractual life of options 8,080,000 200,000 600,000 250,000 1,000,000 666,666 10 years 6 years 5 years 6 years 5 years 3 years Weighted average exercise price 2013 Number of options 2013 Weighted average exercise price 2012 Number of options 2012 5.73p – – 10,796,666 – – 5.60p 5.00p 4.80p 22,630,000 (12,500,000) 666,666 5.73p 10,796,666 5.73p 10,796,666 Exercisable at 31 December 5.73p 10,796,666 5.73p 10,796,666 No share options were exercised during the year (2012: nil). During the year no options expired unexercised (2012: 12,500,000 with a weighted average exercise price of 5p). The options outstanding at 31 December 2013 have an exercise price of 5.73p (2012: 5.73p), and a weighted average remaining contractual life of 2.79 years (2012: 3.70 years). The fair value of services received and commission payable in return for share options granted is based on the fair value of share options granted, measured using a binomial lattice model, with the following inputs: Fair value at grant date Share price Exercise price Expected volatility Option life Risk-free interest rate Services 23.07.12 2.75p 1p 4.8p 43% 3 years 3.75% Services 1.08.11 8.75p 1p 10p 56% 5 years 4% Services 18.04.11 14.11p 1p 5p 67% 5 years 4% Commission 14.04.11 Services 13.02.07 14.67p 1p 10p 67% 5 years 4% 0.0003p 1p 5p 20% 5 years 5% The expected volatility was determined by reviewing the actual volatility of the Company’s share price since its listing on AIM to the date of granting the option. In calculating the fair value, consideration was given to the market trends at the grant date of the option. There is no expense (2012: nil) for the year in respect of equity-settled share-based payment transactions. Oracle Coalfields PLCAnnual Report 2013 41 Notice of Annual General Meeting Notice is hereby given that the Annual General Meeting (Meeting) of Oracle Coalfields PLC (the Company) will be held at 23 Hanover Square, Mayfair, London, W1S 1JB on Wednesday 21 May 2014 at 2.30pm to transact the following business: As ordinary business To consider and if thought fit, to pass the following resolutions which will be proposed as ordinary resolutions: 1. To receive and adopt the Company’s audited report and accounts for the period from 1 January 2013 to 31 December 2013 and the directors’ and auditors’ reports thereon; 2. To re-elect Roderick Stead as a director of the Company; 3. To re-appoint Price Bailey LLP as auditors to hold office from the conclusion of the meeting to the conclusion of the next meeting at which the accounts are laid before the Company and authorise the directors to fix the auditors’ remuneration. As special business To consider and if thought fit, to pass the following resolutions, of which resolution 4 will be proposed as an ordinary resolution and resolution 5 will be proposed as a special resolution: 4. THAT, for the purposes of section 551 of the Companies Act 2006 (the Act) the directors of the Company be and are hereby generally and unconditionally authorised to exercise all powers of the Company to allot equity securities (within the meaning of section 560 of the Act) up to an aggregate nominal amount of £100,000 provided that this authority shall expire (unless previously renewed, varied or revoked by the Company in general meeting) at the conclusion of the next annual general meeting of the Company, save that the Company may before such expiry make an offer or agreement which would or might require relevant securities to be allotted after such expiry and the directors of the Company may allot relevant securities in pursuance of such an offer or agreement as if the authority conferred hereby had not expired. This authority is in substitution for any and all authorities previously conferred upon the directors for the purposes of section 551 of the Act, without prejudice to any allotments made pursuant to the terms of such authorities. 5. THAT, subject to the passing of resolution 4 above the directors of the Company be and are hereby empowered pursuant to section 570 of the Act to allot equity securities (within the meaning of section 560 of the Act) pursuant to the authority conferred by resolution 4 above as if section 561 of the Act did not apply to any such allotment provided that the power conferred by this resolution shall be limited to: 5.1. the allotment of equity securities for cash in connection with an issue or offer of equity securities (including, without limitation, under a rights issue, open offer or similar arrangement) to holders of equity securities in proportion (as nearly as may be practicable) to their respective holdings of equity securities subject only to such exclusions or other arrangements as the directors of the Company may consider necessary or expedient to deal with fractional entitlements or legal or practical problems under the laws of any territory, or the requirements of any regulatory body or stock exchange in any territory; and 5.2. the allotment (otherwise than pursuant to resolution 5.1) of equity securities for cash up to an aggregate nominal value of £100,000. The power conferred by this resolution 5 shall expire (unless previously renewed, revoked or varied by the Company in general meeting), at such time as the general authority conferred on the directors of the Company by resolution 4 above expires, except that the Company may at any time before such expiry make any offer or agreement which would or might require equity securities to be allotted after such expiry and the directors of the Company may allot equity securities in pursuance of such an offer or agreement as if the authority conferred hereby had not expired. By order of the Board Tony Everitt Company secretary Oracle Coalfields PLC Richmond House Broad Street Ely, Cambridgeshire CB7 4AH Oracle Coalfields PLCAnnual Report 2013 42 Notice of Annual General Meeting continued Appointment of proxies 1. Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, the Company specifies that only those members registered on the Company’s register of members at 2.30pm on Monday 19 May 2014 or, if this Annual General Meeting is adjourned, 48 hours (excluding bank holidays and weekends) prior to the time fixed for the adjourned meeting, shall be entitled to attend and vote at the Annual General Meeting. 2. As a member of the Company you are entitled to appoint a proxy to exercise all or any of your rights to attend, speak and vote at the Meeting and you should have received a proxy form with this notice of meeting. You can only appoint a proxy using the procedures set out in these notes and the notes to the proxy form. 3. A proxy does not need to be a member of the Company but must attend the Annual General Meeting to represent you. Details of how to appoint the Chairman of the Annual General Meeting or another person as your proxy using the proxy form are set out in the notes to the proxy form. If you wish your proxy to speak on your behalf at the Annual General Meeting you will need to appoint your own choice of proxy (not the Chairman) and give your instructions directly to them. 4. You may appoint more than one proxy provided each proxy is appointed to exercise rights attached to different shares. You may not appoint more than one proxy to exercise rights attached to any one share. To appoint more than one proxy, please contact the Company’s Registrars, Neville Registrars Limited, Neville House, 18 Laurel Lane, Halesowen, West Midlands B63 3DA to obtain another hard copy form. 5. A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or against the resolution. If no voting indication is given, your proxy will vote or abstain from voting at his or her discretion. Your proxy will vote (or abstain from voting) as he or she thinks fit in relation to any other matter which is put before the Annual General Meeting. 6. The notes to the proxy form explain how to direct your proxy how to vote on each resolution or withhold their vote. To appoint a proxy using the proxy form, the form must be completed and signed, sent or delivered to the Company’s Registrars, Neville Registrars Limited, Neville House, 18 Laurel Lane, Halesowen, West Midlands B63 3DA by no later than 2.30pm on Monday 19 May 2014. Completion and return of the form of proxy will not preclude a member from attending and voting in person at the Annual General Meeting. 7. In the case of a member which is a company, the proxy form must be executed under its common seal or signed on its behalf by an officer of the company or an attorney for the company. Any power of attorney or any other authority under which the proxy form is signed (or a duly certified copy of such power or authority) must be included with the proxy form. 8. In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment submitted by the most senior holder will be accepted. Seniority is determined by the order in which the names of the joint holders appear in the Company’s register of members in respect of the joint holding (the first-named being the most senior). 9. To change your proxy instructions simply submit a new proxy appointment using the methods set out above. Note that the cut-off time for receipt of proxy appointments (see above) also apply in relation to amended instructions; any amended proxy appointment received after the relevant cut-off time will be disregarded. Where you have appointed a proxy using the hard-copy proxy form and would like to change the instructions using another hard-copy proxy form, please contact the Company’s Registrars, Neville Registrars Limited, Neville House, 18 Laurel Lane, Halesowen, West Midlands B63 3DA. If you submit more than one valid proxy appointment, the appointment received last before the latest time for the receipt of proxies will take precedence. Oracle Coalfields PLCAnnual Report 2013 43 Notes Oracle Coalfields PLCAnnual Report 2013 44 Company Information For the year ended 31 December 2013 Oracle Coalfields PLC is registered as a public company under English Law. Its shares are listed on the AIM market of the London Stock Exchange. Oracle Coalfields PLC is incorporated and domiciled in England and its registered number is 05867160. DIRECTORS Mr S Khan Mr A C R Scutt Mr M R Stead Mr W A Loader SECRETARY Mr T Everitt LONDON OFFICE 23 Hanover Square Mayfair London W1S 1JP REGISTERED OFFICE Richmond House Broad Street Ely Cambridgeshire CB7 4AH AUDITORS Price Bailey LLP Chartered Accountants & Statutory Auditors Richmond House Ely Cambridgeshire CB7 4AH NOMAD Grant Thornton UK LLP 30 Finsbury Square London EC2P 2YU REGISTRAR Neville Registrars Limited Neville House 18 Laurel Lane, Halesowen West Midlands B63 3DA BROKERS Peterhouse Corporate Finance Limited 31 Lombard Street London EC3V 9BQ SOLICITORS Trowers & Hamlins LLP 3 Bunhill Row London EC1 8YZ Hafeez Pirzada Law Associates 7-A First Sunset Street DHA Phase ll Karachi Pakistan Haidermota & Co D-79 Block 5 K.D.A Scheme No.5 Clifton Karachi Pakistan BANKERS Royal Bank of Scotland plc 1st Floor, Conqueror House Vision Park Histon Cambridge CB24 9NL Oracle Coalfields PLCAnnual Report 2013 Design & Production www.carrkamasa.co.uk Oracle Coalfields PLC 23 Hanover Square Mayfair London W1S 1JB T: +44 (0)203 102 4807 F: +44 (0)203 102 4601 www.oraclecoalfields.com