TLOU ENERGY
ANNUAL REPORT 2017
CORPORATE DIRECTORY
ABN
79 136 739 967
Directors
Martin McIver
Anthony Gilby
Gabaake Gabaake
Colm Cloonan
Hugh Swire
Linah Mohohlo
Company Secretary
Solomon Rowland
Administration & Registered Office
210 Alice Street
Brisbane QLD 4000
Telephone: +61 7 3012 9793
Email: info@tlouenergy.com
Solicitors
Delphi Partners
Level 23
307 Queen Street
Brisbane QLD 4000
Auditors
BDO Audit Pty Ltd
Level 10
12 Creek Street
Brisbane QLD 4000
Tlou Energy Limited – Annual Report 2017
CONTENTS
Chairman’s Letter
Managing Director’s report
Directors’ report
Review of Results and Operations
Auditor’s Independence Declaration
Annual Financial Report
Corporate Governance Statement
Additional Information
2
4
8
8
28
29
63
75
1 Tlou Energy Limited – Annual Report 2017
CHAIRMAN’S
LETTER
Dear Shareholders,
Over the past year we have made excellent progress towards
establishing ourselves as a key power player in Botswana,
culminating in being awarded our Mining Licence in August 2017.
This was a key target as we work towards our goal of reducing the
regional power deficit in Southern Africa through the development
of our gas to power project via Coal Bed Methane ('CBM').
We are privileged to have the support of the forward-thinking Government of Botswana, which announced last year that CBM,
a relatively clean source of energy and more competitively priced than solar and diesel, is to be included as part of the
country's forward plan to combat power deficiency. Early in 2017, with our Environmental Impact Statement for upstream
development already approved, we were delighted to receive a Request for Proposal ('RFP') from the Ministry of Mineral
Resources, Green Technology and Energy Security to provide up to 100MW of CBM power from Lesedi. A detailed response
to this RFP will be submitted in Q3 2017 which will incorporate a phased approach, firstly delivering up to 10MW, before
expanding further. This phased development plan would allow power to get to the grid sooner, thereby generating revenue for
the Company and would require less capital expenditure upfront.
As 100% owners of the most advanced CBM project in Botswana we believe we are in an excellent position to deliver the
project outlined in our response to the RFP. In addition, we have collaborated with a leading power plant developer, London
based Independent Power Corporation PLC ('IPC') to jointly develop our CBM power project with Tlou taking responsibility for
the gas field development and IPC leading the power generation aspect of the project. IPC brings power generation experience
and funding partners to the project which significantly enhances its viability. Notably, IPC has since entered into a joint venture
partnership, “QG Power Africa”, with QG Africa Mezzanine LP, a US$250 million investment vehicle which is part of the
Quantum Global Group, and Tomé International Limited, a project management consulting firm, to jointly develop power assets
in sub-Saharan Africa.
2 Tlou Energy Limited – Annual Report 2017
Tlou's Lesedi project has Botswana's first independently-certified CBM reserves which were upgraded to 3.9 billion cubic feet
('BCF') 2P and 261 BCF 3P gas reserves. We believe there is significant further upside to these figures which will come to
fruition through further de-risking of both the Lesedi and Mamba project areas. With this in mind we have commissioned a 2D
seismic survey over areas considered to be highly prospective for the addition of gas reserves. As well as potentially
increasing the contingent resources and reserves the results of the survey will provide information which will enhance our
knowledge of the sub-surface structures and resources in advance of further core well drilling.
Tlou has been producing gas from its operations in Botswana for over a year and in June 2017 generated its first power from
CBM, a significant milestone for the Company and in effect a proof of concept of 'first gas monetisation'. This landmark
achievement followed the installation of a gas generator at the Selemo project area which is now running on gas being
produced by our own wells. Power required to run pumps and metering at the Selemo wells was previously supplied solely by
diesel generators.
During the year, we were delighted to complete a share purchase plan and placings to raise A$9.7 million which was well
supported by new investors and existing shareholders. This cash has enabled us to undertake additional field appraisal and to
finalise licencing requirements. Additionally, on a corporate level we have made two valuable additions to the Tlou Board as
Non-Executive Directors. We welcome Mr. Hugh Swire who brings expert knowledge and direct investment experience in the
low carbon, water, energy and technology sectors having completed and exited investments into several leading companies in
the low carbon sector; and Ms. Linah Mohohlo, who as well as being the former Governor of the Bank of Botswana, has
significant experience in the mining industry in Botswana.
This has been a highly active year for Tlou. With the Lesedi Mining Licence now in hand which is an important prerequisite to
developing the first commercial gas-to-power project in the Botswana, we have a range of milestones ahead that are set to be
pivotal in shaping our future and we believe we are very well placed to achieve our objectives. I would like to take this
opportunity to thank the Tlou Board, Management Team, Advisers and most importantly our shareholders for their continued
support during this exciting time for Tlou.
Yours faithfully,
Martin McIver
Chairman
3 MANAGING DIRECTOR’S
REPORT
Dear Shareholders,
The Lesedi CBM project has been further
de-risked during the year after achieving
some major milestones as we aim to
deliver power to Botswana and the
Southern African region.
Tlou Energy Limited – Annual Report 2017
In September 2016, we were granted approval of our
Environmental Impact Statement ('EIS') by Botswana's
Department of Environmental Affairs ('DEA'). This process
took over two years to be completed including preparation of
all regulatory documentation, followed by a review and final
approval by the Government. An approved EIS is essential
prior to the application for a Mining Licence in Botswana. A
Mining Licence is required prior to the commencement of full
field development. With our EIS in place, post-year end we
submitted our Mining Licence application to Botswana's
Department of Mines in the Ministry of Mineral Resources,
Green Technology and Energy Security. We received
notification in August 2017 that the application had been
successful and the Mining Licence was granted. This was the
first CBM mining licence granted in Botswana, with the Mining
Licence covering a large area of approximately 900km .
2
4 Tlou Energy Limited – Annual Report 2017
In October 2016, we were delighted to receive an initial
independent reserve certification from SRK Consulting
(Australasia) Pty Ltd ('SRK'), marking Botswana's first
independently certified CBM natural gas reserves. In
early 2017, we were able to reinforce the
commerciality of the project with a significant upgrade
to these reserves with an increase in 2P (Proved and
Probable) gas reserves to 3.9 billion cubic feet ('BCF')
and 3P (Proved, Probable and Possible) gas reserves
to 261 BCF. These increases comprised additional
certified reserves in the Lesedi Project area (PL 002)
based on a southern extension of the Selemo pilot
area; and initial certified reserves in the Mamba Project
area (PL's 238 and 240) based on a western extension
of the Selemo pilot area. Together, we believe that the
Lesedi and Mamba projects will continue to develop
into a valuable resource for our shareholders as we
work towards increasing the certified gas reserves in
both areas.
In January 2017, we received a detailed Request for
Proposal ('RFP') from the Government of Botswana to
develop up to 100MW of CBM power in Botswana.
This indicates the Government's commitment to
facilitate the development of a CBM industry in
Botswana. The proposed Government power purchase
agreement will assist in fast-tracking the development
of the gas industry in the country and creates a new
market for our gas. We made the decision to partner
with Independent Power Corporation PLC to jointly
develop our proposed (up to) 100 MW CBM to power
project. Together, we have finalised work on a detailed
proposal for the supply of CBM power in modular
stages, which forms a significant part of the planned
submission to the Government of Botswana in
response to the RFP.
In line with further de-risking our project ahead of development we
appointed Velseis Pty Ltd ('Velseis'), an experienced seismic
survey contractor, to undertake a fully funded seismic survey for
both the Lesedi and Mamba permits. The seismic survey will
assist in our plan to drill more wells, by providing us with enhanced
knowledge of sub-surface structures and resources in our project
areas. The seismic survey will expand our geological database
beyond the known gas reserve areas by providing data on potential
gas reservoir compartments that have been identified outside the
currently mapped gas reserve areas. Geological information over
these compartments is relatively sparse other than the existing
aeromagnetic data held by the Company, which was reprocessed
by our reserve certifiers during the year. New seismic information
is anticipated to potentially expand gas reserves and/or contingent
resources should it be demonstrated that continuity of gas-rich
coal exists. We look forward to reporting the results later this year.
Following the installation of a gas generator at the Selemo project
area during the year, we generated our first power from CBM at the
Lesedi project. Rather than flaring gas produced from the Selemo
pilot wells, it can now be redirected to a gas generator for use in
the field. Use of this indigenous gas provides a saving to the
Company due to the reduced diesel requirement, effectively 'first
gas monetisation'. We plan to replace another diesel generator in
the near term which would provide further savings on diesel costs.
We believe that Tlou is well positioned to succeed in the RFP
tender process and we look forward to providing further updates
over the coming months. This is an exciting time for Tlou and I
would like to thank our ground team for the consistent hard work in
moving this project forward.
Yours faithfully,
Anthony Gilby
Managing Director
5 DIRECTORS
Tlou Energy Limited – Annual Report 2017
Martin McIver
Non-Executive Chairman
Experience
Martin holds an MBA (International)
from the American Graduate School of
International Management, a Graduate
Diploma in Applied Finance and
Valuations (FINSIA/Kaplan) and a
Bachelor of Business (Marketing) from
the Queensland University of
Technology.
Martin has over 14 years experience as
General Manager for mining services
companies including bulk and
dangerous goods logistics, and drilling
services. Martin was the Executive
General Manager of the Mitchell Group,
a vertically integrated coal and coal
seam gas company with investments
and operations across Australia, Asia
and Africa. Prior to joining the Mitchell
Group, Martin was a Director in Mergers
and Acquisitions with
PricewaterhouseCoopers.
Martin was appointed Non-Executive
Director in September 2010 and is
currently the Chief Financial Officer of
the Workpac group.
Anthony Gilby
Managing Director
Experience
Tony was appointed Chief Executive
Officer and Managing Director in
March 2012 and has over 30 years
experience in the oil and gas industry.
He is a founding director of Tlou.
Tony was awarded a Bachelor of
Science (First Class Honours) degree
in Geology from the University of
Adelaide in 1984, and also won the
University Medal in Geology (Tate
Memorial Medal). Tony began his
career working as a well-site geologist
for Delhi Petroleum in the Cooper
Basin. He subsequently joined ESSO
Australia. His roles with ESSO included
exploration geology, geophysics,
petrophysics and a period of time
working in the Exxon Production
Research Centre in Houston studying
the seismic application of sequence
stratigraphy.
On his return to Australia, he continued
to work with ESSO in a New Ventures
capacity working on a variety of
projects prior to relocating to Brisbane
where he worked for MIM Petroleum
and the Louisiana Land and Exploration
Company (LL&E). In 1996, he left
LL&E to take on a consulting role as
well as the acquisition of prospective
Queensland acreage in a private
capacity. This work culminated with
the founding of Sunshine Gas Limited
where he remained Managing Director
until its sale in late 2008. He is a
former non-executive director of ASX
listed Comet Ridge Limited.
Gabaake Gabaake
Executive Director
Experience
Gabaake graduated with a Bachelor of
Science degree in Geology from the
University of Botswana in 1986
followed by a Masters degree in
groundwater hydrology from the
University College of London in 1989.
Gabaake is a Botswana citizen based
in Gaborone. He is a former Botswana
Government senior public servant who
headed the Ministry of Minerals,
Energy and Water Resources. Prior to
that, he served at the Ministry of Local
Government.
Gabaake has served on various private
company boards including De Beers
Group, Debswana Diamond Company
(Pty) Limited and Diamond Trading
Company Botswana. During the past
three years, Gabaake has not served
as a Director of any other ASX listed
companies.
6 Tlou Energy Limited – Annual Report 2017
Colm Cloonan
Finance Director
Experience
Colm is the Company’s Finance Director.
Colm is a Fellow of the Association of
Chartered Certified Accountants (FCCA)
with over 17 years’ experience in various
finance roles.
Colm joined Tlou in 2009 at the very
early stages of the company’s activities
and has been with the company through
all phases of its operations and
development to date. Colm has worked
in Europe and Australia in a range of
finance roles including audit and
business services, as well as providing
financial and management accounting
services to clients in various industries
including power generation in Australia.
Colm studied accountancy at the
Galway-Mayo Institute of Technology in
Ireland. During the past three years,
Colm has not served as a Director of any
other ASX listed companies.
Hugh Swire
Non-executive Director
Experience
Hugh started his career working with
Mahon China, an established
investment management and advisory
partnership based in Beijing. Active in
China since 1985, Mahon China have
over 3 decades of experience advising
foreign companies with investments
and corporate activities in China. Hugh
has remained a Partner of the firm and
now supports UK / EU companies
from London looking to expand and
find partners in China or increasingly
support Chinese companies looking to
make investments internationally.
After leaving Mahon China, Hugh spent
a decade working for Investment funds
and International banks in Hong Kong
and Tokyo where he worked for
Nomura as well as in London for J P
Morgan where he was Vice President.
Since 2010, Hugh has been focused
on supporting fast growing UK
companies in the low carbon and
technology sectors by investing growth
capital in Water Powered Technologies
Ltd. Hugh also helped found a leading
technology education company Black
Country Atelier Ltd, which provides
specialist training courses to students
globally in 3D printing (CAM) digital
electronics and CAD.
Hugh still travels to China regularly
after studying Chinese at Oxford
University graduating with a BA Hons.
Linah Mohohlo
Non-executive Director
Experience
Ms Linah Kelebogile Mohohlo, is the
former Governor of the Bank of
Botswana, a position she held from
1999 to 2016. Ms Mohohlo joined the
Bank of Botswana in 1976, where she
served in several capacities prior to
being appointed Governor, including
Board Secretary, Deputy Director of
Research, Director of the Financial
Market Department and Deputy
Governor.
Ms Mohohlo is a member of the
Commission for Africa, and the Africa
Progress Panel, a group of ten
distinguished individuals who advocate
at the highest levels for equitable and
sustainable development in Africa.
Along with her contacts and expertise
in the banking and finance sectors, Ms
Mohohlo also brings to Tlou significant
experience from the mining industry in
Botswana as a board member of both
Debswana Diamond Company (Pty)
Ltd and Diamond Trading Company
Botswana.
Ms Mohohlo holds a Bachelors Degree
in Economics from The George
Washington University, Washington
DC, a Masters Degree in Finance and
Investments from the University of
Exeter, UK and a Diploma in
Accounting and Business Studies from
the University of Botswana.
7 Tlou Energy Limited – Annual Report 2017
Directors' report
The Directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the
'consolidated entity') consisting of Tlou Energy Limited (referred to hereafter as the 'Company' or 'parent entity') and the entities it
controlled at 30 June 2017.
General Information
Directors
The following persons were directors of Tlou Energy Limited during the whole of the financial year and up to the date of this report,
unless otherwise stated:
Martin McIver
Anthony Gilby
Gabaake Gabaake
Colm Cloonan
Hugh Swire
Linah Mohohlo
Non-Executive Chairman
Managing Director & Chief Executive Officer
Executive Director
Finance Director
Non-Executive Director; appointed 22 June 2017
Non-Executive Director; appointed 12 July 2017
Dividends
There were no Dividends recommended or paid during the financial year.
Principal activities
The principal activity of the consolidated entity is the exploration and evaluation of assets in Botswana to identify and develop
Coalbed Methane (CBM) natural gas resources suitable for gas-to-power generation. No revenue from this activity has been earned
to date, as the consolidated entity is still in the exploration and evaluation stage.
Significant changes in the state of affairs
During the year ended 30 June 2017, there were no other significant changes to the state of affairs of the consolidated entity other
than those disclosed in the financial report and notes thereof.
Review and results of operations
The loss for the year after income tax amounted to $3,165,323 (30 June 2016: $3,065,583). The loss for the year is in line with the
loss for the previous year, however there are different expenses attributable to the loss in each year.
The 2017 figures include an expense for performance rights issued to key personnel during the reporting period, amounting to
$423,499. This is a non-cash item and represents the valuation of the performance rights issued. Further information on this
valuation is outlined in the notes to the financial statements.
Also included this year are share issue costs of $356,732, that relate to the capital raisings conducted by the Company during the
year. While the gross amount of capital raised in this reporting period (~$9.7m) was significantly higher than that of the prior year
(~$2.3m), the related costs incurred this year were lower. The prior year costs were high as this included the costs related to the
listing of the Company on the AIM Market in the UK.
Management continues to be extremely focused on reducing corporate, administrative, and operating costs wherever possible, as
long as this can be done without any adverse effect on performance. Significant corporate and administrative costs incurred during
the year include travel and accommodation, due to the location of the assets in Botswana and the Company being listed in both the
UK and Australia; stock market and advisory related costs, due to having corporate requirements both in the UK and Australia; and
also investor relations, which was a key focus during the reporting period, and remains so, in order to maximise market awareness of
the Company to increase shareholder value.
Net spend on exploration activities during the period amounted to approximately $1.8m. This is lower than the prior year as the
Company did not drill additional wells this financial year. Funds were primarily incurred on operations in the Selemo project area. The
increase in total liabilities compared to the end of the previous reporting period is primarily due to the additional amounts payable to
specialist consultants being used at year end in relation to the Company’s plan to submit a proposal to the Government of Botswana
8
Tlou Energy Limited – Annual Report 2017
for the development of a CBM gas-to-power project to produce up to 100MW of power. This isoutlined in more detail later in
this report.
N
AFRICA
Tlou Permits
LEGEND
Power Plant
Proposed Gas Plant
p
Pilot Pod
Tlou Base-Camp
Tlou Laydown Yard
Transmission Network
Existing
Proposed
400 kV
220 kV
132 kV
66 kV
33 kV
Mining Licence Area
Lesedi Project
Mamba Project
(
Border
Orapa
Letlhakane
90MW Orapa
Power Station
Mamba Project
Permits
Francistown
Mmashoro
Selebi-phihwe
Seruli
Morupule
Power
Station
Serowe
Selemo Pilot Pod
p
Proposed Power
Station Site
Mining Licence
Area
Palapye
Lekala
BOTSWANA
Mahalapye
Machaneng
D
D
SOUTH
AFRICA
50km
Lesedi Project Permits
Lephepe
Tlou field operations map
Reserves Certification
The Company is focused on delivering power in Botswana and Southern Africa through the development of its CBM assets.
Tlou's Lesedi CBM Project ('Lesedi') is believed to be the most advanced CBM project in Botswana. This was highlighted in
October 2016 when Tlou Energy became the first company in Botswana to achieve independently certified CBM gas reserves,
following certification from SRK Consulting (Australasia) Pty Ltd ('SRK') for the Lesedi CBM Project. Subsequently, these initial
reserves were upgraded in January 2017.
The three Selemo production wells, located at the Lesedi project, each consist of a vertical well and an intersecting horizontal
well. Sustained gas has been flowing at the Selemo pilot project for over 12 months with the data obtained from the production
testing program at Selemo used by SRK in the reserve certification process. Reserve certification is a major milestone and
demonstrates the commerciality of the Lesedi CBM Project. The Company aims to continue to upgrade these reserves as
further production data is collected.
Request for Proposal for CBM Power Project
The Company received a detailed Request for Proposal ('RFP') from the Ministry of Mineral Resources, Green Technology and
Energy Security ('the Ministry') in Botswana for the development of up to 100MW of CBM fuelled pilot power plants ('IPP
Project'). Tlou was selected to bid for the development as an independent power producer. Tlou plans to submit its proposal
on or before the closing date of 20 September 2017. The RFP requires details of the proposed field development, the
installation of power generation facilities and supply of power into the grid in Botswana. The planned submission outlines a
scalable CBM gas-to-power project. A scalable approach, with power connected to the grid in phases would allow power to
get to the grid sooner, thereby generating revenue for the Company and would require less capital expenditure upfront.
The Ministry will assess the proposal and advise the Company if the application has been successful or not. An exact timeline
of when this decision will be made has not yet been indicated. In the event that the proposal is accepted, the Company will
then enter into further discussions with the relevant authorities in Botswana to determine the full specifics of the development
including signing a power purchase agreement. In the event that the proposal is unsuccessful, the Company will further
discussions with other parties who have expressed interest in using Tlou's gas.
9 Tlou Energy Limited – Annual Report 2017
Environmental approval
In 2014, the Company commenced work on its application for an Environmental Impact Statement ('EIS'). This addresses the
social and environmental context of the area surrounding the planned wellfield development project at Lesedi and CBM
exploration activities in Tlou's Mamba and Lesedi areas. The Department of Environmental Affairs in Botswana confirmed
during the year that the EIS has been approved and adequately identified and assessed anticipated impacts associated with the
proposed activity. This is another significant development highlighting Tlou's status as the most advanced CBM project in the
country. Any new entrants to the market would be expected to acquire an approved EIS prior to commencing field exploration,
let alone development.
The approved EIS allows further exploration operations to be conducted on Tlou's remaining prospecting licences and
commencement of field development work on the Lesedi project area.
Project Partner
In February 2017, Tlou signed a Heads of Agreement ('Agreement') with Independent Power Corporation PLC ('IPC') to jointly
develop Tlou's proposed IPP Project.
IPC develops and operates power plants for governments, large corporations and independent power producers. IPC has two
decades of experience in the development, operation and ownership of power plants in Southern Africa, South America, the
Middle East, Europe and Central Asia with roughly 4,000 MW operated, developed or owned. IPC's experience includes thermal
and hydropower generation. IPC's head office is located in London, UK.
IPC has also introduced funding partners who have provided letters of interest for in-principle funding support for the
downstream infrastructure requirements of the IPP Project. The agreement with IPC is potentially a major step forward in
commercialising Tlou Energy's gas resources with highly experienced power developers, funding groups and equipment
suppliers.
Post the announcement of IPC as project partner, IPC themselves announced that it has entered into a joint venture
partnership, QG Power Africa, with QG Africa Mezzanine LP, a USD250 million investment vehicle which is part of the Quantum
Global Group, and Tomé International Limited, project management consulting firm, to jointly develop power assets in sub-
Saharan Africa. This has potential positive implications for the future funding of the IPP Project. QG Power Africa plan to
develop power assets across sub-Saharan Africa with Botswana outlined as part of the first phase of development and
investment, where Tlou's project would be a potential investment opportunity for QG Power Africa.
Mining Licence
The Company was granted a mining licence in August 2017. The Mining Licence for the Lesedi CBM project is the first CBM
mining licence granted in Botswana.
Holders of Prospecting Licences ('PL') are issued Mining Licences once exploration on a relevant PL has been concluded and
the holder of the PL is ready to commence commercial production. Mining Licences are assessed in accordance with the
prescribed statutory requirements of the Botswana Mines and Minerals Act. Two major components of a Mining Licence
application are an approved EIS, granted for the Lesedi Project as outlined in this report, and a feasibility study for the relevant
project. The Mining Licence covers approximately 900Km2, which is the area previously designated as prospecting licence
PL002/2004. With a term of 25 years the Mining Licence gives security of tenure over the project area and shows Tlou's
progression from CBM exploration and appraisal to development.
The award of a Mining Licence is another milestone for the Company which further enhances its first mover advantage to
develop a gas-to-power project in the region. A CBM mining licence can pioneer the development of a new and exciting CBM
natural gas industry in Botswana, an industry that could lead to a new indigenous source of energy and employment for the
country and the region. Over time, it will potentially allow new manufacturing industries to develop using CBM gas and facilitate
the creation of a new renewable energy industry. Gas is a much cleaner alternative fuel source compared to coal and diesel so
is a relatively clean and cost-effective way to provide peaking power. CBM development can enhance the viability of solar
power projects and can be ideal for use with renewable energy which can often be intermittent in nature.
Conversion of field generation from diesel to gas
The Company generated its first power from CBM at its field in Botswana following the installation of a gas generator at the
Selemo project area, highlighting CBM as a real and viable source of power in the region. A Cummins 8.3L natural gas-
powered generator was installed and commissioned on the Selemo S1P site to replace the existing diesel-powered unit.
10 Tlou Energy Limited – Annual Report 2017
The gas generator is currently supplying power to operate the down hole pumps and surface infrastructure on Selemo wells 1P,
2P & 4P with the capacity to provide additional power if required. The previous diesel generator now serves as a backup power
supply to provide power during routine servicing of the new Cummins unit. The Cummins gas power unit was selected based
on its suitability to the project and was set up to meet the operating requirements on site, where high ambient temperatures
and sandy conditions are present. The proven reliability of the Cummins engine was also a significant factor along with
availability of a local support network. The unit has been in operation for 1500 hrs of continuous running without any issue. A
second unit has been secured for installation at a later date.
Selemo pilot wells
Ongoing gas flow testing of the Selemo wells has shown consistent production of gas, which has been encouraging and in-line
with expectations. Selemo 4P continues flaring with a steady and consistent rate of gas production, while gas from 1P has
been switched from flaring to supplying gas for the gas generator installed during the year.
A workover program was completed on the Selemo S1P vertical well and the adjoining Selemo S1AR lateral well. The
objectives of the workover were to flush any coal fines (minor coal particles) from the wells that may have accumulated near
the intersecting point of the lateral and vertical well; and for the scheduled monitoring of wear on downhole equipment. The
wear on the guide bushings on S1AR was found to be very minimal and the same configuration was re run with no
replacement of the down hole equipment required. The down hole pressure gauge was changed out as part of the workover.
The workover on S1P (vertical well) resulted in the down hole progressive cavity pump being changed out due to some noted
wear on the rotor of the existing unit. This was performed as a precautionary measure to ensure the life of the pump. The down
hole pressure gauge was also changed out as done on S1AR.
Planned Seismic Survey
The Company entered into a contract for a 250 km 2D seismic program with Velseis Pty Ltd, an Australian seismic acquisition
and processing company providing a fully integrated range of seismic technologies. Velseis has built a reputation as a leading
Australian contractor in this field, with over 25 years of experience throughout the Asia-Pacific Region. The seismic program is
scheduled to commence in Q3, 2017. It is envisaged this survey will give the Company the opportunity to expand its gas
reserves and contingent resources as it progresses towards developing the first CBM gas to power project in Botswana.
The seismic survey will assist in the next step of Tlou's plan to drill more wells by providing the Company with enhanced
knowledge of the sub-surface structures and resources within the Lesedi and Mamba project areas. The seismic information
along with the data from a subsequent core well program may also lead to further gas reserves and contingent resources
being certified.
Works to prepare for the seismic program are complete including clearing of tracks within the Lesedi and Mamba areas to
allow the seismic team to conduct seismic testing along the defined tracks. This work was carried out within the guidelines of
the Company's EIS with a focus on minimising the impact to vegetation and ground disturbance.
Capital Raised
The Company successfully raised capital through a share purchase plan and placements during the year. These funds are
being, or already have been, applied by Tlou towards various costs including:
! production testing at Selemo;
! achieving initial and expanded independent reserves certification;
! installation of a gas engine to run equipment on existing wells;
! completing environmental and mining licence application and approvals;
! acquisition and interpretation of new 2D seismic data in areas considered to be highly prospective for additional reserves
by the Company's reserve certifiers;
! drilling vertical (cored) wells along the new seismic lines (with geophysical logging and coal core gas sampling) to a depth
of approximately 500 metres;
! completing various studies (upstream and downstream) required for the submission of the mining licence application and
IPP Project submission; and
! capital raising expenses, corporate costs and working capital.
Matters subsequent to the end of the financial year
There has not been any matter or circumstance, other than that referred to in this report and disclosed in the financial
statements or notes thereto, that has arisen since the end of the period, that has significantly affected, or may significantly
affect, the operations of the consolidated entity, the results of these operations, or the state of affairs of the consolidated entity
in future financial years.
11 Tlou Energy Limited – Annual Report 2017
Likely developments and expected results of operations
Production testing is continuing in the Lesedi CBM project. Continued gas production will provide further assurance to
independent reserves certifiers regarding the commerciality of the gas flow rates, the ability of the wells to flow for a significant
length of time and ultimately an estimate of the amount of gas that could be attained from the gas field. The continued
performance of the gas wells is a key focus for the Company.
Additionally, a successful outcome from the RFP submission to the Ministry of Mineral Resources, Green Technology and
Energy Security in Botswana, is extremely important as it is an ideal pathway towards a power purchase agreement and, once
initial development is completed, the IPP Project will connect Tlou Energy's gas field to the regional grid, thereby opening up
the possibility for the Company to provide power across the Southern African region, through the Southern African Power Pool.
In the event that the Company does not receive approval, this may delay access to the grid and consequently development of
Tlou's gas assets. No guarantee can be given in relation to the expected results for the Consolidated Group, including whether
the gas production will continue in a positive manner or that the RFP submission to Government will be successful. However,
the electricity market in Southern Africa continues to suffer from chronic shortage of supply, so development of gas and gas
fired power in the region remains a very attractive commercial option.
Environmental regulation
The Directors are satisfied that adequate systems are in place for the management of its environmental responsibilities and
compliance with its various licence requirements and regulations. The Directors are not aware of any breaches of these
requirements and to the best of their knowledge, all activities have been undertaken in compliance with environmental
regulations.
12 Tlou Energy Limited – Annual Report 2017
Information on Directors
Martin McIver MBA
Special Responsibilities
Interest in Shares and options
Non-executive Chairman
Member of the Audit Committee
Member of the Risk Committee
Chairman of the Nomination & Remuneration Committee
446,088 Ordinary Shares
500,000 Performance Rights
Experience
Martin holds an MBA (International) from the American Graduate School of International Management, a Graduate Diploma in
Applied Finance and Valuations (FINSIA/Kaplan) and a Bachelor of Business (Marketing) from the Queensland University of
Technology.
Martin has over 14 years’ experience as General Manager for mining services companies including bulk and dangerous goods
logistics, and drilling services. Martin was the Executive General Manager of the Mitchell Group, a vertically integrated coal and coal
seam gas company with investments and operations across Australia, Asia and Africa. Prior to joining the Mitchell Group, Martin was
a Director in Mergers and Acquisitions with PricewaterhouseCoopers.
Martin was appointed Non-Executive Director in September 2010 and is currently the Chief Financial Officer of the Workpac group.
Anthony Gilby B.Sc. (First Class Honours)
Special Responsibilities
Interest in Shares and options
Managing Director and Chief Executive Officer
Member of the Audit Committee
Member of the Nomination & Remuneration Committee
17,946,487 Ordinary Shares
500,000 Performance Rights
Experience
Tony was appointed Managing Director and Chief Executive Officer in March 2012 and has over 30 years’ experience in the oil and
gas industry. He is a founding director of Tlou Energy Limited.
Tony was awarded a Bachelor of Science (First Class Honours) degree in Geology from the University of Adelaide in 1984, and also
won the University Medal in Geology (Tate Memorial Medal). Tony began his career working as a well-site geologist for Delhi
Petroleum in the Cooper Basin. He subsequently joined ESSO Australia. His roles with ESSO included exploration geology,
geophysics, petrophysics and a period of time working in the Exxon Production Research Centre in Houston studying the seismic
application of sequence stratigraphy.
On his return to Australia, he continued to work with ESSO in a New Ventures capacity working on a variety of projects prior to
relocating to Brisbane where he worked for MIM Petroleum and the Louisiana Land and Exploration Company (LL&E). In 1996, he
left LL&E to take on a consulting role as well as the acquisition of prospective Queensland acreage in a private capacity. This work
culminated with the founding of Sunshine Gas Limited where he remained Managing Director until its sale in late 2008. He is a
former non-executive director of ASX listed Comet Ridge Limited.
13
Tlou Energy Limited – Annual Report 2017
Gabaake Gabaake
Special Responsibilities
M.Sc.
Interest in Shares and options
Executive Director
Member of the Risk Committee
Member of the Nomination & Remuneration Committee
80,857 Ordinary Shares
500,000 Performance Rights
Experience
Gabaake graduated with a Bachelor of Science degree in Geology from the University of Botswana in 1986 followed by a Masters
degree in groundwater hydrology from the University College of London in 1989.
Gabaake is a Botswana citizen based in Gaborone. He is a former Botswana Government senior public servant having worked as
Permanent Secretary at the Ministry of Minerals, Energy and Water Resources. Prior to that, he served at the Ministry of Local
Government.
Gabaake has served on various private company boards including De Beers Group, Debswana Diamond Company (Pty) Limited and
Diamond Trading Company Botswana. During the past three years, Gabaake has not served as a Director of any other ASX listed
companies.
Colm Cloonan FCCA
Special Responsibilities
Interest in Shares and options
Finance Director
Member of the Audit Committee
Member of the Nomination & Remuneration Committee
419,525 Ordinary Shares
500,000 Performance Rights
Experience
Colm Cloonan is the Company’s Finance Director. Colm is a Fellow of the Association of Chartered Certified Accountants (FCCA)
with over 18 years’ experience in various finance roles.
Colm joined Tlou in 2009 at the very early stages of the company’s activities and has been with the company through all phases of
its operations and development to date. Colm has worked in Europe and Australia in a range of finance roles including audit and
business services, as well as providing financial and management accounting services to clients in various industries including
power generation in Australia.
Colm studied accountancy at the Galway-Mayo Institute of Technology in Ireland. During the past three years, Colm has not served
as a Director of any other ASX listed companies.
14
Tlou Energy Limited – Annual Report 2017
Hugh Swire
Special Responsibilities
BA (Hons)
Interest in Shares and options
Non-executive Director; appointed 22 June 2017
Chair of the Risk Committee
Member of the Nomination & Remuneration Committee
3,064,366 Ordinary Shares
Experience
Hugh started his career working with Mahon China, an established investment management and advisory partnership based in
Beijing. Active in China since 1985, Mahon China have over 3 decades of experience advising foreign companies with investments
and corporate activities in China. Hugh has remained a Partner of the firm and now supports UK / EU companies from London
looking to expand and find partners in China or increasingly support Chinese companies looking to make investments internationally.
After leaving Mahon China, Hugh spent a decade working for Investment funds and International banks in Hong Kong and Tokyo
where he worked for Nomura as well as in London for J P Morgan where he was Vice President.
Since 2010, Hugh has been focused on supporting fast growing UK companies in the low carbon and technology sectors by
investing growth capital in Water Powered Technologies Ltd, a leading innovator in zero energy water management systems as well
as MWF Ltd, one of the largest suppliers of renewable heat in the UK, which has since been sold to Aggregated Micro Power
Holdings plc. Hugh also helped found a leading technology education company Black Country Atelier Ltd, which provides specialist
training courses to students globally in 3D printing (CAM) digital electronics and CAD.
Hugh still travels to China regularly after studying Chinese at Oxford University graduating with a BA Hons
Linah Mohohlo
Special Responsibilities
MA Finance & Investments, BA Economics
Non-executive Director; appointed 12 July 2017
Chair of the Audit Committee
Member of the Nomination & Remuneration Committee
Nil
Interest in Shares and options
Experience
Ms Linah Kelebogile Mohohlo, is the former Governor of the Bank of Botswana, a position she held from 1999 to 2016. Ms Mohohlo
joined the Bank of Botswana in 1976, where she served in several capacities prior to being appointed Governor, including Board
Secretary, Deputy Director of Research, Director of the Financial Market Department and Deputy Governor.
Ms Mohohlo is a member of the Commission for Africa, and the Africa Progress Panel, a group of ten distinguished individuals who
advocate at the highest levels for equitable and sustainable development in Africa. Along with her contacts and expertise in the
banking and finance sectors, Ms Mohohlo also brings to Tlou significant experience from the mining industry in Botswana as a board
member of both Debswana Diamond Company (Pty) Ltd and Diamond Trading Company Botswana.
Ms Mohohlo holds a Bachelors Degree in Economics from The George Washington University, Washington DC, a Masters Degree in
Finance and Investments from the University of Exeter, UK and a Diploma in Accounting and Business Studies from the University of
Botswana.
15
Tlou Energy Limited – Annual Report 2017
Remuneration Report - audited
This report outlines the remuneration arrangements in place for the key management personnel of the Group.
Remuneration policy
Ensuring that the level of Director and Executive remuneration is sufficient and reasonable is dealt with by the full Board. The
Remuneration Policy of Tlou Energy Limited has been designed to align the objectives of key management personnel with
shareholder and business objectives. The Board of Tlou Energy Limited believes the remuneration policy to be appropriate and
effective in its ability to attract and retain the best key management personnel to run and manage the Group, as well as create
shared goals between key management personnel and shareholders.
The Board's policy for determining the nature and amount of remuneration for the executive Directors and senior executives of the
Group is as follows:
The remuneration policy is developed by the Board after seeking, if appropriate, professional advice from independent
external consultants.
Executives employed by the Group receive a base salary (which is based on factors such as length of service and
experience), inclusive of superannuation, fringe benefits, options and performance incentives where appropriate.
Performance incentives are generally only paid once predetermined key performance indicators have been met.
Executives engaged through professional service entities are paid fees based on an agreed market based hourly rate for
the services provided and may also be entitled to options and performance based incentives. Performance incentives are
generally only paid once predetermined key performance indicators have been met.
Incentives paid in the form of options or performance rights are intended to align the interests of management, the
Directors and Company with those of the shareholders. In this regard, executives are prohibited from limiting risk attached
to those instruments by use of derivatives or other means.
The Board reviews executive remuneration arrangements annually by reference to the Group’s performance, executive performance
and comparable information from industry sectors.
Key management personnel including Non-executive Directors and employed executives receive the superannuation guarantee
contribution required by the Commonwealth Government, which is currently 9.5% and do not receive any other retirement benefits.
Individuals, however, can chose to sacrifice part of their salary to increase payments towards superannuation.
Non-executive Director Remuneration
The Board's policy is to remunerate Non-executive Directors for time, commitment and responsibilities. The Board determines
payments to the Non- executive Directors and reviews their remuneration annually, based on market practice, duties and
accountability. Independent external advice is sought when required.
The maximum aggregate amount of fees that can be paid to Non-executive Directors is $500,000 per year. This was approved by
shareholders at a general meeting held on 10 July 2012.
Fees for Non-executive Directors are not linked to the performance of the Group, however, to align Directors interests with
shareholder interests, where possible the Directors are encouraged to hold shares in the Company. There is no minimum holding
prescribed in the Constitution.
Performance conditions linked to remuneration
The Board provides advice on remuneration and incentive policies and practices and specific recommendations on remuneration
packages and other terms of employment for executive Directors, other senior executives and Non-executive Directors. The aim is to
ensure that reward for performance is competitive and appropriate for the results delivered.
Remuneration and the terms and conditions of employment for executive Directors and Company executives are reviewed annually
having regard to performance and relative comparative information and are approved by the Board following independent
professional advice, as required. In this respect, consideration is given to normal commercial rates of remuneration for similar levels
of responsibility.
16
Tlou Energy Limited – Annual Report 2017
Key management personnel during the financial year ended 30 June 2017
Directors
Martin McIver
Anthony Gilby
Gabaake Gabaake
Colm Cloonan
Hugh Swire
Non-executive Chairman
Managing Director and Chief Executive Officer
Executive Director
Finance Director; appointed 11 February 2016
Non-executive Director; appointed 22 June 2017
Executives
Solomon Rowland
There were no other key management personnel of the Group during the financial year ended 30 June 2017.
Company Secretary
Details of remuneration
Details of remuneration of each of the Directors and executives of the Group during the financial year are set out in the following
table:
Benefits and Payments for the year ended 30 June 2017
Short-term
benefits
Salary &
Fees
Cash
Bonus
Post
Employment
benefits
Superannuation
Long
term
benefits
Share
based
payments
Leave
Benefits
Total Cash
Remuneration
Performance
Rights
Total
Performance
Rights as a %
of Total
Remuneration
Directors
M McIver
A Gilby
G Gabaake
C Cloonan
H Swire*
L Mohohlo**
Total
Directors
Executives
S Rowland
Total
Executives
Total
$
33,000
139,418
136,269
200,326
-
-
509,013
144,662
144,662
653,675
* Appointed 22 June 2017
** Appointed 12 July 2017
$
$
-
-
-
-
-
-
-
-
-
-
3,135
6,499
12,388
19,031
-
-
$
-
5,016
11,356
3,846
-
-
$
36,135
150,933
160,013
223,203
-
-
$
68,475
68,475
68,475
68,475
-
-
65%
31%
30%
23%
$
104,610
219,408
228,488
291,678
-
-
41,053
20,218
570,284
273,900
844,184
13,743
13,743
3,512
3,512
161,917
161,917
68,475
68,475
30%
54,796
23,730
732,201
342,375
230,392
230,392
1,074,576
During the 2017 year, performance rights were issued to key management personnel as outlined in the table below. No key
management personnel received other performance related bonuses, cash bonuses, termination benefits or non-cash benefits
during the year.
17
Tlou Energy Limited – Annual Report 2017
Performance Rights issued during the year are linked to the share price performance of the Company, ensuring alignment with the
interests of the Company's shareholders. The Performance Rights issued to key management personnel have been split into two
equal Tranches of 250,000 shares in each tranche. For the Performance Rights to vest and, therefore, become exercisable by a
participant, certain performance conditions will be required to be met as set out below. On vesting, holders of Performance Rights
will be entitled to acquire Tlou Energy Limited ordinary shares at nil cost.
Granted
Value
Exercised
Lapsed
Balance at
Year End
Unvested
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
2,500,000
34,475
34,000
34,475
34,000
34,475
34,000
34,475
34,000
34,475
34,000
342,375
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
2,500,000
-
-
-
-
-
-
-
-
-
-
-
30 June 2017
M McIver
Issue
Date
31-Jan-17
31-Jan-17
Tranche 1
Tranche 2
A Gilby
Tranche 1
Tranche 2
31-Jan-17
31-Jan-17
G Gabaake
Tranche 1
Tranche 2
31-Jan-17
31-Jan-17
Tranche 1
Tranche 2
31-Jan-17
31-Jan-17
Tranche 1
Tranche 2
31-Jan-17
31-Jan-17
C Cloonan
S Rowland
Total
Tranche
Tranche 1
Tranche 2
Performance Condition
The closing price of Shares being 50% or more above the price at the date of shareholder
approval for a period of 10 consecutive trading days.
The closing price of Shares being 100% or more above the price at the date of
shareholder approval for a period of 10 consecutive trading days.
Notes:
The date of shareholder approval was 10 November 2016
The share price on 10 November 2016 was AUD $0.14
For Tranche 1 to vest the share price needs to be AUD $0.21 per share or greater for a period of 10 consecutive trading
days
For Tranche 2 to vest the share price needs to be AUD $0.28 or greater for a period of 10 consecutive trading days
1
18
Tlou Energy Limited – Annual Report 2017
Benefits and Payments for the Year Ended 30 June 2016
Short-term
benefits
Post
Employment
benefits
Long
term
benefits
Share
based
payments
Salary &
Fees
Cash
Bonus
Superannuation
Leave
Benefits
Total Cash
Remuneration
Options
Options as a
% of Total
Remuneration
Total
Directors
N Mitchell1
A Gilby
M McIver
G Gabaake
C Cloonan
Total
Directors
Executives
S Rowland2
S Rodgers3
G Smith4
Total
Executives
Total
$
15,591
227,584
22,500
113,117
183,605
562,397
115,500
6,000
201,668
323,168
885,565
$
$
-
-
-
-
-
-
-
-
-
-
-
1,481
12,933
2,137
10,046
17,442
44,039
$
-
5,844
-
9,426
7,717
22,987
10,973
5,076
-
-
-
-
10,973
5,076
$
17,072
246,361
24,637
132,589
208,764
629,423
131,549
6,000
201,668
339,217
55,012
28,063
968,640
0%
0%
0%
0%
0%
0%
0%
0%
$
-
-
-
-
-
-
-
-
-
-
-
$
17,072
246,361
24,637
132,589
208,764
629,423
131,549
6,000
201,668
339,217
968,640
1. Represents remuneration from 1 July 2015 to 11 February 2016
2. Represents remuneration from 19 August 2015 to 30 June 2016
3. Represents remuneration from 1 July 2015 to 19 August 2015
4. Represents remuneration from 1 July 2015 to 13 December 2015
During the 2016 year, no proportion of the remuneration of any key management personnel was performance based. No key
management personnel received cash bonuses, performance related bonuses, termination benefits or non-cash benefits during the
year.
19
Tlou Energy Limited – Annual Report 2017
Service agreements
The following outlines the remuneration and other terms of employment for the following personnel which are formalised in
employment contracts for services.
Anthony Gilby
Term of Agreement:
Termination Benefit:
Termination Notice:
Solomon Rowland
Term of Agreement:
Base Fee:
Termination Benefit:
Termination Notice:
Gabaake Gabaake
Term of Agreement:
Base Fee:
Termination Benefit:
Termination Notice:
Colm Cloonan
Term of Agreement:
Base Fee:
Termination Benefit:
Termination Notice:
Managing Director and Chief Executive Officer
Mr Gilby's services are provided in a personal capacity. The agreement has no fixed term.
Based on the agreed rate the estimated contracted annual cost to the Group is
approximately $582,000. Mr Gilby has agreed to waive 50% of his current contracted rate, so
the current estimated cost is approximately $291,000.
No termination benefit is payable if terminated for cause.
The Company may give Mr Gilby three months’ notice or pay 1.5 times base salary in lieu of
notice to terminate the Agreement.
Company Secretary
Mr Rowland’s services are provided in a personal capacity. The agreement has no fixed
term.
Based on the contracted rate the estimated annual cost to the Group is approximately
$200,000.
No termination benefit is payable if terminated for cause.
The Company may give the Company Secretary two months’ notice of its intention to
terminate the Agreement.
Executive Director
Mr Gabaake’s services are provided in a personal capacity. The agreement has no fixed
term.
Based on the contracted rate the estimated annual cost to the Group is approximately
$143,000.
No termination benefit is payable if terminated for cause.
The Company may give the Managing Director two months’ notice of its intention to
terminate the Agreement.
Finance Director
Mr Cloonan's services are provided in a personal capacity. The agreement has no fixed term.
Based on the contracted rate the estimated annual cost to the Group is approximately
$220,000.
No termination benefit is payable if terminated for cause.
The Company may give the Finance Director two months’ notice of its intention to terminate
the Agreement.
20
Tlou Energy Limited – Annual Report 2017
Key management personnel shareholdings
The number of ordinary shares in Tlou Energy Limited held by each key management person of the group during the financial year is
as follows:
30 June 2017
M McIver
A Gilby
G Gabaake
C Cloonan
H Swire
L Mohohlo
S Rowland
Balance at
beginning of
year
Granted as
remunerati
on during
the year
Additions
Disposals
Balance at date
of resignation /
appointment
Balance at end
of year
296,088
17,796,487
80,857
269,525
-
-
-
18,442,957
-
-
-
-
-
-
-
-
150,000
150,000
-
150,000
-
-
-
450,000
-
-
-
-
-
-
-
-
-
-
-
-
3,064,366
-
-
3,064,366
446,088
17,946,487
80,857
419,525
3,064,366
-
-
21,957,323
Performance rights
The number of performance rights held by each key management person of the group during the financial year is as follows:
30 June 2017
Vested
Unvested
Balance at
beginning of
year
Granted as
remuneration
Balance at
date of
resignation /
appointment
Expired
during the
year
Balance at end
of year
M McIver
A Gilby
G Gabaake
C Cloonan
H Swire
L Mohohlo
S Rowland
Total
-
-
-
-
-
-
-
-
500,000
500,000
500,000
500,000
-
-
500,000
2,500,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
500,000
500,000
500,000
500,000
-
-
500,000
2,500,000
-
-
-
-
-
-
-
-
500,000
500,000
500,000
500,000
-
-
500,000
2,500,000
Shares issued on exercise of performance rights
No shares were issued on exercise of performance rights up to the date of this report.
Relationship between remuneration and Company performance
The factors that are considered to affect shareholder return during the last five years is summarised below.
Share price at end of financial year ($)
Market capitalisation at end of financial year ($M)
Loss for the financial year ($)
Cash spend on exploration programs ($)
2017
0.11
33
(3,165,323)
(1,852,642)
2016
0.07
14
2015
0.13
24
2014
0.30
44
(3,065,583)
(5,783,800)
(2,730,900)
(4,529,184)
(2,289,366)
(8,670,411)
2013
0.25
26
(6,087,074)
(2,292,295)
Director and Key Management Personnel remuneration ($)
1,074,576
968,640
1,441,785
1,168,396
3,125,338
Given that the remuneration is commercially reasonable, the link between remuneration, Company performance and shareholder
wealth generation is tenuous, particularly in the exploration and development stage. Share prices are subject to market sentiment
towards the sector and increases or decreases may occur independently of executive performance or remuneration.
The Company may issue options or performance rights to provide an incentive for key management personnel which, it is believed,
is in line with industry standards and practice and is also believed to align the interests of key management personnel with those of
the Company’s shareholders.
No remuneration consultants were used in the 2017 financial year.
21
Tlou Energy Limited – Annual Report 2017
Other transactions with key management personnel
Payment for goods and services:
Office rent paid to The Gilby McKay Alice Street Partnership, a director-related entity of Anthony
Gilby.
Receivable from and payable to related parties
The following balances are outstanding at the reporting date in relation to transactions with related parties:
2017
$
2016
$
21,000
46,500
Current payables:
Trade payables to The Gilby McKay Alice Street Partnership, a director-related entity of Anthony
Gilby
1,925
1,925
Loans to/from related parties
There were no loans to or from related parties at the reporting date or during the year.
Terms and conditions
Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties
unless otherwise stated.
(End of Remuneration Report)
1
22
Tlou Energy Limited – Annual Report 2017
Company secretary
Mr Solomon Rowland was appointed Company Secretary on 19 August 2015 and continues in office at the date of this report. Mr
Rowland has been the Assistant Company Secretary and Legal Counsel since March 2013.
Mr Rowland is a commercial lawyer with over 17 years’ experience in various private, government and in-house legal roles.
Solomon holds a Juris Doctor from the University of Queensland.
Prior to joining Tlou Energy Limited as Legal Counsel in February 2013, Solomon worked for Crown Law representing various
Queensland government departments in a range of legal matters. During his time in government, Solomon was involved in advising
government departments on commercial, corporate governance and policy matters as well as representing the state in various
courts, tribunals and commissions of Inquiry. Solomon brings many years of experience in commercial, advocacy, administrative and
planning and environment law.
Meetings of directors
The number of meetings of the consolidated entity's Board of Directors and committees held during the year ended 30 June 2017,
and the number of meetings attended by each Director are listed below. The Nomination & Remuneration committee comprises the
full board.
M McIver
A Gilby
G Gabaake
C Cloonan
Board / Nomination &
Remuneration Committee
Attended
6
7
6
7
Held
7
7
7
7
Audit Committee
Risk Committee
Attended
2
2
-
2
Held
2
2
-
2
Attended
1
-
-
1
Held
1
-
-
1
Held: represents the number of meetings held during the time the director held office or was a member of the relevant committee.
Shares under option
Unissued ordinary shares of Tlou Energy Limited under option at the date of this report are as follows:
Grant date
Expiry date
Exercise price
30-Nov-15
14-Jan-16
29-Nov-17
14-Jan-18
$0.140
$0.140
Number under
option
1,500,000
500,000
No option holder has any right under the options to participate in any other share issue of the company or any other entity.
Issued performance rights at the date of this report are as follows:
Vesting Date
31 January 2017
31 January 2017
Exercise Price
$0.21
$0.28
01/07/2016
-
-
-
Issued
2,275,000
2,275,000
4,550,000
Exercised
-
-
-
Expired
-
-
-
30/06/2017
2,275,000
2,275,000
4,550,000
Shares issued on the exercise of options
There were no ordinary shares of Tlou Energy Limited issued during the year ended 30 June 2017 on the exercise of options granted
or up to the date of this report.
Indemnity and insurance of officers
The consolidated entity has indemnified the Directors and executives of the consolidated entity for costs incurred, in their capacity as
a director or executive, for which they may be held personally liable, except where there is a lack of good faith.
During the financial year, the consolidated entity paid a premium in respect of a contract to insure the Directors and executives of the
consolidated entity against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits
disclosure of the nature of liability and the amount of the premium.
23
Tlou Energy Limited – Annual Report 2017
Indemnity and insurance of auditor
The consolidated entity has not, during or since the financial year, indemnified or agreed to indemnify the auditor of the consolidated
entity or any related entity against a liability incurred by the auditor.
During the financial year, the consolidated entity has not paid a premium in respect of a contract to insure the auditor of the
consolidated entity or any related entity.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the
Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the
Company for all or part of those proceedings.
Currency and rounding
The financial report is presented in Australian dollars and amounts are rounded to the nearest dollar.
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is attached.
Auditor
BDO Audit Pty Ltd continues in office in accordance with section 327 of the Corporations Act 2001.
Non-audit services
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s
expertise and experience with the Company and/or the Group are important.
The Board of Directors has considered the position and, in accordance with advice received from the Audit Committee, is satisfied
that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001. The Directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not
compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:
all non-audit services have been reviewed to ensure they do not impact the impartiality and objectivity of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of
Ethics for Professional Accountants.
Details of the amounts paid or payable to the auditor for non-audit services provided during the year are set out below.
Non-audit services - BDO Australia
Tax consulting and compliance services
AIM listing
Total
2017
$
2016
$
10,172
-
10,172
16,132
36,983
53,115
This report is made in accordance with a resolution of Directors, pursuant to section 298(2)(a) of the Corporations Act 2001.
On behalf of the Directors
Anthony Gilby
Director
Brisbane, 11 September 2017
24
Tlou Energy Limited – Annual Report 2017
2017 Annual Reserves Statement
Tlou Energy Limited is pleased to present its Annual Reserves Statement for the period ending 30 June 2017. As detailed in the
Director’s Report the Company achieved independently certified CBM gas reserves, following certification from SRK Consulting
(Australasia) Pty Ltd (‘SRK’) for the Lesedi CBM project in October 2016. Subsequently, these initial reserves were upgraded in early
2017. There has been no adjustment to the net gas reserves and contingent resources of the Company since the upgraded reserves
were announced on 15 February 2017. Please refer to the ASX announcement on 15 February 2017 for full details of the Group’s
gas reserves and contingent resources.
Having conducted a review of its gas reserves and resources position during the reporting period and satisfying itself that there was
no new data that might increase the reserves or resources estimates reported during the reporting period, the Company hereby
presents the net gas reserves and contingent resources on a combined basis as well as for each of its individual tenements as at 30
June 2017:
Location
Project
Tlou
Interest
Gas Reserves (BCF)
30/06/2017 30/06/2016 30/06/2017 30/06/2016 30/06/2017 30/06/2016
1P*
1P
Karoo Basin
Botswana
Karoo Basin
Botswana
Karoo Basin
Botswana
Lesedi CBM
(all coal seams)
PL001/2004,
PL002/2004
Mamba CBM
(Lower Morupule
coal)
PL238/2014,
PL240/2014
PL003/2004,
PL035/2000,
PL037/2000
100%
0.15
100%
0.02
100%
-
Total
0.17
-
-
-
-
2P*
3.5
0.4
-
3.9
2P
-
-
-
-
3P
117
144
-
261
3P
-
-
-
-
Location
Project
Karoo Basin
Botswana
Karoo Basin
Botswana
Karoo Basin
Botswana
Lesedi CBM
(all coal seams)
PL001/2004,
PL002/2004
Mamba CBM
(Lower Morupule
coal)
PL238/2014,
PL240/2014
PL003/2004,
PL035/2000,
PL037/2000
Tlou
Interest
100%
100%
100%
Gas Contingent Resource (BCF)
30/06/2017 30/06/2016 30/06/2017 30/06/2016 30/06/2017 30/06/2016
1C
4.3
-
-
1C
4.9
-
-
2C**
2C**
3C
3C
235
239
3,183
3,295
-
-
-
-
-
-
-
-
Total
4.3
4.9
235
239
3183
3,295
25
Tlou Energy Limited – Annual Report 2017
ASX Listing Rules Annual Report Requirements
*Listing Rule 5.39.1:
All 1P and 2P petroleum reserves recorded in the table are undeveloped and are attributable to unconventional gas.
100% of all 1P and 2P petroleum reserves are located in the Karoo Basin in Botswana.
*Listing Rule 5.39.2:
All 1P and 2P petroleum reserves reported are based on unconventional petroleum resources.
Listing Rule 5.39.3:
The table shows the 2P and 3P petroleum reserves as at 30 June 2017. There were no petroleum reserves certified at 30 June
2016.
Governance Arrangements and Internal Controls Listing Rule 5.39.5:
Tlou Energy has obtained all its gas reserves and resources reported as at 30 June 2017 from external independent
consultants who are qualified petroleum reserves and resource evaluators as prescribed by the ASX Listing Rules.
Tlou Energy estimates and reports its petroleum reserves and resources in accordance with the definitions and guidelines of
the Petroleum Resources Management System 2007, published by the Society of Petroleum Engineers (SPE PRMS).
To ensure the integrity and reliability of data used in the reserves estimation process, the raw data is reviewed by senior
reservoir and geological staff and consultants at Tlou Energy before being provided to the independent reserve certifiers. Tlou
Energy has not and does not currently intend to conduct internal reviews of petroleum reserves preferring to appoint
independent external experts prior to reporting any updated estimates of reserves or resources so as to ensure an
independent and rigorous review of its data.
Tlou Energy reviews and updates its gas reserves and resources position on an annual basis to ensure that if there is any new
data that might affect the reserves or resources estimates of the Company steps can be taken to ensure that the estimates are
adjusted accordingly.
** Listing Rule 5.40.1:
All 2C contingent resources recorded in the table are undeveloped. 100% of the reported 2C contingent resource is
attributable to unconventional gas.
The geographical areas where the 2C contingent resources are located is the Karoo Basin in Botswana.
Listing Rule 5.40.2:
The table shows the 2C and 3C contingent resources as at 30 June 2017 as against the previous year. The net 2C and 3C
contingent resources did not increase from the 2016 year to the 2017 year.
2C and 3C contingent resources decreased during the period as a result of converting 2C and 3C contingent resources to
gas reserves. There were no other changes to the 2C and 3C contingent resources since the announcement on 15 February
2017.
Listing Rule 5.44:
The estimates of Reserves and Contingent Resources appearing in the 2017 Annual Reserves Statement for Tlou Energy
Limited and its subsidiaries are based on, and fairly represent, information and supporting documentation determined by the
various qualified petroleum reserves and resource evaluators listed below.
The gas reserves and resource estimates for the Lesedi CBM Project provided in this report were released to the Market
on 15 February 2017 (‘Announcement’). Tlou energy confirms that it is not aware of any new information or data that
materially affects the information included in the Announcement and that all of the material assumptions and technical
parameters underpinning the estimates in the Announcement continue to apply and have not materially changed. The gas
reserve and resource estimates are based on and fairly represents, information and supporting documentation and were
determined by Dr. Bruce Alan McConachie of SRK Consulting (Australasia) Pty Ltd, in accordance with Petroleum
Resource Management System guidelines. Dr. McConachie is considered to be a qualified person as defined under the
ASX Listing Rule 5.42 and has given his consent to the use of the resource figures in the form and context in which they
appear in this report.
2
26
Tlou Energy Limited – Annual Report 2017
Notes to Net Reserves and Resources Table:
1) Gas Reserve and Resource numbers have been rounded to the nearest whole number.
2) Gas Resource numbers have been rounded to the nearest tenth for amounts less than 100 BCF, otherwise to the nearest whole
number.
3) Tlou’s Gas Reserves have not been adjusted for fuel or shrinkage and have been calculated at the wellhead (which is the
reference point for the purposes of Listing Rule 5.26.5).
4) Contingent Gas Resources are (100%) Unrisked Gross and are derived from the SRK certification at 31 March 2015 for all coal
seams (as previously announced by Tlou on 9 April 2015) with adjustment for the gas volumes which have now been certified
by SRK in the Gas Reserves category.
5) ASX Listing Rule 5.28.2 Statement relating to Prospective Resources:
The estimated quantities of petroleum gas that may potentially be recovered by the application of a future development
project(s) relate to undiscovered accumulations. These estimates have both an associated risk of discovery and a risk of
development. Further exploration appraisal and evaluation is required to determine the existence of a significant quantity of
potentially moveable hydrocarbons.
6) Prospective Gas Resources are (100%) Unrisked Gross and are derived from a report to Tlou from Netherland, Sewell and
Associates Inc (NSAI) dated 16th February 2012 regarding certification for all coal seams located in the remaining prospecting
licences (as previously announced by Tlou in its prospectus dated 20 February 2013).
27
Auditor’s independence declaration
Tlou Energy Limited – Annual Report 2017
Tel: +61 7 3237 5999
Fax: +61 7 3221 9227
www.bdo.com.au
Level 10, 12 Creek St
Brisbane QLD 4000
GPO Box 457 Brisbane QLD 4001
Australia
DECLARATION OF INDEPENDENCE BY D P WRIGHT TO THE DIRECTORS OF TLOU ENERGY LIMITED
As lead auditor of Tlou Energy Limited for the year ended 30 June 2017, I declare that, to the best of
my knowledge and belief, there have been:
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
2. No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Tlou Energy Limited and the entities it controlled during the period.
D P Wright
Director
BDO Audit Pty Ltd
Brisbane, 11 September 2017
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050
110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited
by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional
Standards Legislation, other than for the acts or omissions of financial services licensees.
28
Tlou Energy Limited – Annual Report 2017
2017
CONTENTS
Statement of comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flows
Notes to the financial statements
Directors’ declaration
Independent auditor’s report to the
members of Tlou Energy Limited
30
31
32
33
34
58
59
29 Consolidated Statement of Comprehensive Income
for the year ended 30 June 2017
Interest income
Expenses
Employee benefits expense
Depreciation and amortisation expense
Foreign exchange loss
Share issue costs
Performance rights expense
Professional fees
Corporate expenses
Occupancy costs
Other expenses
LOSS BEFORE INCOME TAX
Income tax
LOSS FOR THE PERIOD
OTHER COMPREHENSIVE INCOME/(LOSS)
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations
Tax effect
TOTAL OTHER COMPREHENSIVE INCOME/(LOSS)
TOTAL COMPREHENSIVE INCOME/(LOSS)
Earnings per share
Basic loss per share
Diluted loss per share
Tlou Energy Limited – Annual Report 2017
Consolidated
Note
June 2017
$
June 2016
$
2,365
27,857
3
3
3
3
4
5
5
(617,581)
(240,961)
(37,181)
(356,732)
(423,499)
(177,121)
(48,437)
(47,817)
(1,218,359)
(3,165,323)
-
(3,165,323)
1,210,182
-
1,210,182
(1,955,141)
(613,809)
(260,564)
(247,007)
(779,310)
-
(185,566)
(57)
(64,601)
(942,526)
(3,065,583)
-
(3,065,583)
(2,395,125)
-
(2,395,125)
(5,460,708)
Cents
(1.3)
(1.3)
Cents
(1.5)
(1.5)
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
30
Consolidated Statement of Financial Position
as at 30 June 2017
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Other current assets
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Exploration and evaluation assets
Other non-current assets
Property, plant and equipment
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Provisions
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Deferred tax liabilities
Provisions
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Accumulated losses
TOTAL EQUITY
Tlou Energy Limited – Annual Report 2017
Consolidated
Note
June 2017
$
June 2016
$
6
8
9
7
10
11
4
11
12
6,727,424
100,674
8,650
6,836,748
49,328,038
694,402
320,739
50,343,179
57,179,927
431,032
166,193
597,225
369,353
94,000
463,353
1,060,578
1,224,404
290,431
43,969
1,558,804
46,183,722
946,675
444,358
47,574,755
49,133,559
306,956
160,874
467,830
369,353
94,000
463,353
931,183
56,119,349
48,202,376
83,380,184
(3,107,432)
(24,153,403)
56,119,349
73,931,569
(4,741,113)
(20,988,080)
48,202,376
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
31
Tlou Energy Limited – Annual Report 2017
Consolidated Statement of Changes in Equity
for the year ended 30 June 2017
Contributed
Equity
Share Based
Payments
Reserve
Foreign
Currency
Translation
Reserve
Accumulated
Losses
Total
Balance at 1 July 2015
Loss for the period
Other comprehensive income
Total comprehensive income
$
$
$
$
71,606,519
2,062,745
(2,442,989)
(19,985,242)
-
-
-
-
-
-
-
(2,395,125)
(3,065,583)
-
(2,395,125)
(3,065,583)
Transactions with owners in their capacity as owners
Share based payments
Transfers
Shares issued, net of costs
-
-
2,325,050
97,001
(2,062,745)
-
2,325,050
(1,965,744)
-
-
-
-
-
2,062,745
-
2,062,745
Balance at 30 June 2016
73,931,569
97,001
(4,838,114)
(20,988,080)
Balance at 1 July 2016
Loss for the period
Other comprehensive income
Total comprehensive income
73,931,569
97,001
(4,838,114)
(20,988,080)
-
-
-
-
-
-
-
1,210,182
1,210,182
(3,165,323)
-
(3,165,323)
$
51,241,033
(3,065,583)
(2,395,125)
(5,460,708)
97,001
-
2,325,050
2,422,051
48,202,376
48,202,376
(3,165,323)
1,210,182
(1,955,141)
Transactions with owners in their capacity as owners
Share based payments
Shares issued, net of costs
-
9,448,615
Balance at 30 June 2017
9,448,615
83,380,184
423,499
-
423,499
520,500
-
-
-
-
-
-
423,499
9,448,615
9,872,114
(3,627,932)
(24,153,403)
56,119,349
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
32
Consolidated Statement of Cash Flows
for the year ended 30 June 2017
CASH FLOWS FROM OPERATING ACTIVITIES
Payments to suppliers and employees (inclusive of GST)
Interest received
GST and VAT received
NET CASH USED IN OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for exploration and evaluation assets
Payment for property, plant and equipment
NET CASH USED IN INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares
Share issue costs
NET CASH PROVIDED BY FINANCING ACTIVITIES
Net increase/(decrease) in cash held
Cash at the beginning of the period
Effects of exchange rate changes on cash
Tlou Energy Limited – Annual Report 2017
Consolidated
June 2017
$
June 2016
$
(2,446,145)
2,365
98,911
(2,344,869)
(2,896,862)
27,857
565,759
(2,303,246)
22
(1,852,642)
(100,764)
(1,953,406)
(5,783,800)
(24,102)
(5,807,902)
9,938,787
(162,317)
9,776,470
5,478,195
1,224,404
24,825
2,292,540
(227,676)
2,064,864
(6,046,283)
7,197,813
72,875
CASH AT THE END OF THE PERIOD
6
6,727,424
1,224,404
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
33
Tlou Energy Limited – Annual Report 2017
Notes to the financial statements
Note 1. Significant accounting policies
Introduction
This financial report includes the consolidated financial statements of Tlou Energy Limited (the “Company”) and its controlled entities
(together referred to as the “consolidated entity” or the "group").
The separate financial statements of the parent entity, Tlou Energy Limited, have not been presented within this financial report as
permitted by the Corporations Act 2001. Supplementary information about the parent entity is disclosed in note 25.
Tlou Energy Limited is a public company, incorporated and domiciled in Australia. Its registered office and principal place of business
is 210 Alice St, Brisbane, QLD 4000, Australia.
The following is a summary of the material and principal accounting policies adopted by the consolidated entity in the preparation of
the financial report. The accounting policies have been consistently applied to all the years presented, unless otherwise stated.
Operations and principal activities
The principal activity of the consolidated entity is the exploration and evaluation of assets in Southern Africa to identify and develop
CBM resources. No revenue from this activity has been earned to date, as the consolidated entity is still in the exploration and
evaluation stage.
Currency
The financial report is presented in Australian dollars, rounded to the nearest dollar, which is the functional currency of the parent
entity.
Authorisation of financial report
The financial report was authorised for issue on 11 September 2017.
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001. Tlou Energy Limited is a for-
profit entity for the purposes of preparing the financial statements.
Compliance with IFRS
The consolidated financial statements of Tlou Energy Limited also comply with International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board (IASB).
Historical cost convention
The consolidated financial statements have been prepared on an accruals basis and are based on historical costs.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the consolidated entity's accounting policies. The areas involving a higher degree
of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in
note 2.
Foreign currency transactions
Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at
financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or
loss.
34
Notes to the financial statements (continued)
Note 1 Significant accounting policies (continued)
Tlou Energy Limited – Annual Report 2017
Going Concern
The consolidated financial statements have been prepared on a going concern basis which contemplates that the group will continue
to meet its commitments and can therefore continue normal business activities and the realisation of assets and settlement of
liabilities in the ordinary course of business.
Because of the nature of the operations, exploration companies, such as Tlou Energy Limited, find it necessary on a regular basis to
raise additional cash funds for future exploration activity and meet other necessary corporate expenditure. The company has recently
completed a capital raising which is expected to fund ongoing operations and working capital requirements for the next 12 months.
Subject to the results of these operations the group may need to raise additional capital to expand and develop the project further.
Accordingly, the group is in the process of investigating various options for the raising of additional funds which may include but is
not limited to an issue of shares or the sale of exploration assets where increased value has been created through previous
exploration activity.
At the date of this financial report, none of the above fund raising options have been concluded and no guarantee can be given that
a successful outcome will eventuate. The directors have concluded that as a result of the current circumstances there exists a
material uncertainty that may cast significant doubt regarding the group's and the company's ability to continue as a going concern
and therefore the group and company may be unable to realise their assets and discharge their liabilities in the normal course of
business. Nevertheless, after taking into account the current status of the various funding options currently being investigated and
making other enquiries regarding other sources of funding, the directors have a reasonable expectation that the group and the
company will have adequate resources to fund its future operational requirements and for these reasons they continue to adopt the
going concern basis in preparing the financial report.
The financial report does not include adjustments relating to the recoverability or classification of recorded assets amounts or to the
amounts or classification of liabilities that might be necessary should the group not be able to continue as a going concern.
Accounting Polices
Principles of consolidation
(a)
Subsidiaries are all entities (including structured entities) over which the Consolidated Entity has control. The Consolidated Entity
controls an entity when the Consolidated Entity is exposed to, or has rights to, variable returns from its involvement with the entity
and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated
from the date on which control is transferred to the Consolidated Entity. They are deconsolidated from the date that control ceases.
The acquisition method of accounting is used to account for business combinations by the Consolidated Entity.
Intercompany transactions, balances and unrealised gains on transactions between Consolidated Entity companies are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting
policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Consolidated
Entity.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of
comprehensive income, consolidated statement of changes in equity and consolidated statement of financial position respectively.
Revenue recognition
(b)
Revenue is recognised when it is probable that the economic benefit will flow to the consolidated entity and the revenue can be
reliably measured. Revenue is measured at the fair value of the consideration received or receivable.
Interest
Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised
cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate
that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the
financial asset.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
35
Notes to the financial statements (continued)
Note 1 Significant accounting policies (continued)
Tlou Energy Limited – Annual Report 2017
Investments and other financial assets
(c)
Investments and other financial assets are measured at either amortised cost or fair value depending on their classification.
Classification is determined based on the purpose of the acquisition and subsequent reclassification to other categories is restricted.
The fair values of quoted investments are based on current bid prices. For unlisted investments, the consolidated entity establishes
fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments
that are substantially the same, discounted cash flow analysis, and option pricing models.
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been
transferred and the consolidated entity has transferred substantially all the risks and rewards of ownership.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are either: (i) held for trading, where they are acquired for the purpose of selling in
the short- term with an intention of making a profit; or (ii) designated as such upon initial recognition, where they are managed on a
fair value basis or to eliminate or significantly reduce an accounting mismatch. Except for effective hedging instruments, derivatives
are also categorised as fair value through profit or loss. Fair value movements are recognised in profit or loss.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets, principally equity securities that are either designated as
available-for-sale or not classified as any other category. After initial recognition, fair value movements are recognised in the
available-for-sale reserve in equity. Cumulative gain or loss previously reported in the available-for-sale reserve is recognised in
profit or loss when the asset is derecognised or impaired.
Impairment of financial assets
The consolidated entity assesses at the end of each reporting period whether there is any objective evidence that a financial asset or
group of financial assets is impaired. Objective evidence includes significant financial difficulty of the issuer or obligor; a breach of
contract such as default or delinquency in payments; the lender granting to a borrower concessions due to economic or legal
reasons that the lender would not otherwise do; it becomes probable that the borrower will enter bankruptcy or other financial
reorganisation; the disappearance of an active market for the financial asset; or observable data indicating that there is a measurable
decrease in estimated future cash flows.
The amount of the impairment allowance for financial assets carried at cost is the difference between the asset’s carrying amount
and the present value of estimated future cash flows, discounted at the current market rate of return for similar financial assets.
Available-for-sale financial assets are considered impaired when there has been a significant or prolonged decline in value below
initial cost. Subsequent increments in value are recognised in the available-for-sale reserve.
Impairment of non-financial assets
(d)
Non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its
recoverable amount.
Recoverable amount is the higher of an asset’s fair value less costs to sell and value-in-use. The value-in-use is the present value of
the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to
which the asset belongs.
Assets that do not have independent cash flows are grouped together to form a cash-generating unit.
36
Notes to the financial statements (continued)
Note 1 Significant accounting policies (continued)
Tlou Energy Limited – Annual Report 2017
Goods and Services Tax ('GST') and other similar taxes
(e)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable
from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable
from, or payable to, the tax authority is included in other receivables or other payables in the consolidated statement of financial
position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which
are recoverable from, or payable to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority.
Comparative figures
(f)
When required by accounting standards comparative figures have been adjusted to conform to changes in presentation for the
current financial year.
New Accounting Standards and Interpretations
(g)
The Consolidated Entity has adopted all new and amended Australian Accounting Standards and AASB Interpretations as of 1 July
2016. The Consolidated Entity did not have to change its accounting policies or make retrospective adjustments as a result of
adopting these standards.
37
Notes to the financial statements (continued)
Note 1 Significant accounting policies (continued)
Tlou Energy Limited – Annual Report 2017
New Standards and Interpretations not yet adopted
(h)
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2017 reporting
periods. The Consolidated Entity has decided against early adoption of these standards. The Consolidated Entity's assessment of
the impact of these new standards and interpretations is set out below:
AASB 9 Financial Instruments
This standard and its consequential amendments are currently applicable to annual reporting periods beginning on or after 1 January
2018. This standard introduces new classification and measurement models for financial assets, using a single approach to
determine whether a financial asset is measured at amortised cost or fair value. To be classified and measured at amortised cost,
assets must satisfy the business model test for managing the financial assets and have certain contractual cash flow characteristics.
All other financial instrument assets are to be classified and measured at fair value. This standard allows an irrevocable election on
initial recognition to present gains and losses on equity instruments (that are not held-for-trading) in other comprehensive income,
with dividends as a return on these investments being recognised in profit or loss. In addition, those equity instruments measured at
fair value through other comprehensive income would no longer have to apply any impairment requirements nor would there be any
'recycling' of gains or losses through profit or loss on disposal. The accounting for financial liabilities continues to be classified and
measured in accordance with AASB 139, with one exception, being that the portion of a change of fair value relating to the entity's
own credit risk is to be presented in other comprehensive income unless it would create an accounting mismatch. The Group has not
yet made an assessment of the impact of this standard.
AASB 16: Leases
This standard is applicable to annual reporting periods beginning on or after 1 January 2019. When effective, this Standard will
replace the current accounting requirements applicable to leases in AASB 117: Leases and related Interpretations. AASB 16
introduces a single lessee accounting model that eliminates the requirement for leases to be classified as operating or finance
leases.
The main changes introduced by the new Standard include:
recognition of a right-to-use asset and liability for all leases (excluding short-term leases with less than 12 months of tenure
and leases relating to low-value assets);
depreciation of right-to-use assets in line with AASB 116: Property, Plant and Equipment in profit or loss and unwinding of
the liability in principal and interest components;
variable lease payments that depend on an index or a rate are included in the initial measurement of the lease liability
using the index or rate at the commencement date;
by applying a practical expedient, a lessee is permitted to elect not to separate non-lease components and instead account
for all components as a lease; and
additional disclosure requirements.
The transitional provisions of AASB 16 allow a lessee to either retrospectively apply the Standard to comparatives in line with AASB
108 or recognise the cumulative effect of retrospective application as an adjustment to opening equity on the date of initial
application. The Group has not yet made an assessment of the impact of this standard.
38
Notes to the financial statements (continued)
Tlou Energy Limited – Annual Report 2017
Note 2.
Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the
reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets,
liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical
experience and on other various factors, including expectations of future events, management believes to be reasonable under the
circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements,
estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are discussed below.
Exploration & evaluation assets
The consolidated entity performs regular reviews on each area of interest to determine the appropriateness of continuing to carry
forward costs in relation to that area of interest. These reviews are based on detailed surveys and analysis of drilling results
performed to reporting date.
Deferred Tax assets
The group is subject to income taxes in Australia and jurisdictions where it has foreign operations. Significant judgement is required
in determining the worldwide provision for income taxes. There are certain transactions and calculations undertaken during the
ordinary course of business for which the ultimate tax determination is uncertain. The group estimates its tax liabilities based on the
group’s understanding of the tax law. Where the final tax outcome of these matters is different from the amounts that were initially
recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such
determination is made.
In addition, the group has recognised deferred tax assets relating to carried forward tax losses to the extent there are sufficient
taxable temporary differences (deferred tax liabilities) relating to the same taxation authority and the same subsidiary against which
the unused tax losses can be utilised. However, utilisation of the tax losses also depends on the ability of the entity, which is not part
of the tax consolidated group, to satisfy certain tests at the time the losses are recouped. Due to the parent entity acquiring the entity
that holds the losses it is expected that the entity will fail to satisfy the continuity of ownership test and therefore has to rely on the
same business test. As at 30 June 2017 the group has received advice that the losses are available, however should this change in
the future the group may be required to derecognise these losses.
39
Notes to the financial statements (continued)
Note 3.
Expenses
Loss before income tax includes the following specific expenses:
Employee benefits expense
●
●
● Other employee benefits expense
Defined contribution superannuation expense
Performance rights
Occupancy costs
●
Rental expense relating to operating leases ‐ minimum lease rentals
Other expenses include the following specific items:
●
●
●
●
Travel and accommodation costs
Consultants
Stock exchange, advisory, secretarial fees
Insurance
Note 4.
Income Tax
Tlou Energy Limited – Annual Report 2017
Consolidated
June 2017
$
June 2016
$
42,408
423,499
575,173
1,041,080
47,817
47,817
225,735
277,184
355,848
68,254
927,021
46,535
-
567,274
613,809
64,601
64,601
140,462
365,460
198,707
70,705
775,334
The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the applicable income
tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and
unused tax losses and under and over provision in prior periods, where applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are
recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for:
When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a
transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor
taxable profits; or
When the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint
ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in
the foreseeable future.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future
taxable amounts will be available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed each reporting date. Deferred tax assets
recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount
to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future
taxable profits available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current
tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entities which intend
to settle simultaneously.
40
Notes to the financial statements (continued)
Note 4
Income tax (continued)
Tlou Energy Limited – Annual Report 2017
Loss before income tax
Tax at the domestic tax rates applicable to profits in the country concerned
Tax effect of amounts which are not deductible/(taxable) in calculating taxable income:
Other non-deductible items
Difference in overseas tax rates
Previously unrecognised tax losses used to reduce deferred tax expense
Deferred tax asset not recognised
Income tax benefit
Recognised deferred tax assets
Unused tax losses
Recognised deferred tax liabilities
Assessable temporary differences
Consolidated
June 2017
$
June 2016
$
(3,165,323)
(3,065,583)
(949,597)
(919,675)
216,360
(218,335)
-
951,572
-
7,551,526
7,551,526
7,920,879
7,920,879
244,706
329,015
-
345,954
-
5,937,794
5,937,794
6,307,147
6,307,147
Net deferred tax liability recognised
369,353
369,353
Unrecognised temporary differences and tax losses
Unused tax losses and temporary differences for which no deferred tax asset has been recognised
29,026,473
25,426,397
The deductible temporary differences and tax losses do not expire under current tax legislation. Deferred tax assets have not been
recognised in respect of these items because it is not probable that future taxable profit will be available against which the group can
utilise these benefits.
Note 5.
Earnings per share
Basic and diluted earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Tlou Energy Limited, excluding any costs of
servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial
year.
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after
income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average
number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
Consolidated
June 2017
$
June 2016
$
Reconciliation of earnings used in calculating basic and diluted loss per share:
Loss for the year attributable to owners of Tlou Energy Limited
Loss used in the calculation of the basic and dilutive loss per share
(3,165,323)
(3,165,323)
(3,065,583)
(3,065,583)
Weighted average number of ordinary shares used as the denominator
Number used in calculating basic and diluted loss per share
Number
245,694,059
Number
197,910,139
Options and performance rights are considered to be "potential ordinary shares" but were anti-dilutive in nature and therefore the
diluted loss per share is the same as the basic loss per share.
41
Notes to the financial statements (continued)
Note 6.
Cash and Cash Equivalents
Tlou Energy Limited – Annual Report 2017
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid
investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value. For the consolidated statement of cash flows presentation purposes, cash and
cash equivalents also includes bank overdrafts, which are shown within borrowings in current liabilities on the consolidated
statement of financial position.
Cash at bank
Consolidated
June 2017
$
June 2016
$
6,727,424
6,727,424
1,224,404
1,224,404
Note 7.
Property, Plant and Equipment
Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes expenditure
that is directly attributable to the acquisition of the items.
Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and equipment (excluding
land) over their expected useful lives as follows:
Plant and equipment
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date.
An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the
consolidated entity. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss.
3-7 years
Plant and equipment at cost
Accumulated depreciation
Consolidated
June 2017
$
1,946,392
(1,625,653)
320,739
June 2016
$
1,782,697
(1,338,339)
444,358
Movements in Carrying Amounts
Movement in the carrying amount of plant and equipment between the beginning and the end of the current financial year:
Balance at the beginning of year
Additions
Disposals
Depreciation
Foreign exchange movements
Carrying amount at the end of year
444,358
100,664
(788)
(240,961)
17,466
320,739
724,334
24,140
(1,069)
(260,564)
(42,483)
444,358
42
Notes to the financial statements (continued)
Note 8.
Exploration and Evaluation Assets
Tlou Energy Limited – Annual Report 2017
Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest. Such expenditures
comprise net direct costs and an appropriate portion of related overhead expenditure but do not include overheads or administration
expenditure not having a specific nexus with a particular area of interest. These costs are only carried forward to the extent that they
are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a
stage which permits reasonable assessment of the existence of economically recoverable reserves and active or significant
operations in relation to the area are continuing.
Accumulated costs in relation to an area no longer considered viable are written off in full in the year the decision is made. Regular
reviews are undertaken on each area of interest to determine the appropriateness of continuing to carry forward costs in relation to
that area of interest.
Exploration and evaluation assets
Movements in exploration and evaluation assets
Balance at the beginning of period
Exploration and evaluation expenditure during the year
Foreign currency translation
Balance at the end of period
Consolidated
June 2017
$
49,328,038
49,328,038
June 2016
$
46,183,722
46,183,722
46,183,722
1,848,143
1,296,173
49,328,038
43,559,315
4,572,815
(1,948,408)
46,183,722
The recoupment of costs carried forward in relation to areas of interest in the exploration and evaluation phase is dependent on
successful development and commercial exploitation, or alternatively, sale of the respective areas of interest.
As at the date of this report, the current terms of the Mamba Prospecting Licences have expired. However, Tlou has applied to
extend the term of these Exploration Licences, and they continue in force until a determination is made regarding the application to
extend their terms. Accordingly, while Tlou has applied to renew the Mamba Prospecting Licences, there is no certainty that the
terms of the licences will be extended.
There is a risk that one of more of the exploration licences will not be extended, or that the terms of the extension are not favourable
to Tlou. This could have an adverse impact on the performance of Tlou. The Company is not aware of any reasons why the licences
will not be renewed.
Note 9.
Other non-current assets
Inventory and well consumables are valued at lower of cost or net realisable value. Inventory and well consumables are allocated to
exploration and evaluation expenditure when the assets are used in operations.
Inventory and well consumables
Consolidated
June 2017
$
June 2016
$
694,402
694,402
946,675
946,675
43
Notes to the financial statements (continued)
Note 10.
Trade and Other Payables
Tlou Energy Limited – Annual Report 2017
These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial year
and which are unpaid. Due to their short-term nature they are measured at amortised cost and not discounted. The amounts are
unsecured and are usually paid within 30 days of recognition.
Current
Trade payables
Accruals
Other payables
Consolidated
June 2017
$
June 2016
$
131,161
278,552
21,319
431,032
151,133
145,793
10,030
306,956
The carrying values of trade and other payables approximate fair values due to short-term nature of the amounts. These are non-
interest bearing.
Note 11.
Provisions
Provisions are recognised when the consolidated entity has a present (legal or constructive) obligation as a result of a past event, it
is probable the consolidated entity will be required to settle the obligation, and a reliable estimate can be made of the amount of the
obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at
the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value of money is material,
provisions are discounted using a current pre-tax rate specific to the liability. The increase in the provision resulting from the passage
of time is recognised as a finance cost.
Restoration
Both for close down and restoration and for environmental clean-up costs, a provision is made in the accounting period when the
related disturbance occurs, based on the net present value of estimated future costs. The amortisation or ‘unwinding’ of the discount
applied in establishing the net present value of provision is charged as a finance cost to the consolidated statement of
comprehensive income in each accounting period.
For close down and restoration costs, which include the dismantling and demolition of infrastructure, removal of residual materials
and remediation of disturbed areas, movements in provision other than the amortisation of the discount, such as those resulting from
changes in the cost estimates, lives of operations or discount rates, are capitalised into the carrying amount of development and
amortised against future production.
Rehabilitation
The provision represents the estimated costs to rehabilitate wells in licences held by the consolidated entity. This provision has been
calculated based on the number of wells which require rehabilitation and the expected costs to rehabilitate each well, taking into
consideration the type of well and its location.
Employee benefits
Wages and salaries and annual leave
Liabilities for wages and salaries, including non-monetary benefits, and annual leave expected to be settled within 12 months of the
reporting date are recognised in current liabilities in respect of employees' services up to the reporting date and are measured at the
amounts expected to be paid when the liabilities are settled.
44
Notes to the financial statements (continued)
Note 11 Provisions (continued)
Tlou Energy Limited – Annual Report 2017
Long service leave
The liability for long service leave is recognised in current and non-current liabilities, depending on the unconditional right to defer
settlement of the liability for at least 12 months after the reporting date. The liability is measured as the present value of expected
future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit
method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of
service. Expected future payments are discounted using market yields at the reporting date on national corporate bonds with terms
to maturity and currency that match, as closely as possible, the estimated future cash outflows.
Severance pay
As per the Botswana Labour a provision is calculated for each Botswana based employee of one day per month of service, which
can be paid out after 60 months or when employment ends. The benefit rises to two days per month after the first 60 months.
Current
Employee benefits
Employee benefits - Botswana severance
Non-current
Rehabilitation
Consolidated
June 2017
$
June 2016
$
42,322
123,871
166,193
94,000
94,000
49,136
111,738
160,874
94,000
94,000
Employee benefits – Botswana Severance
A provision has been recognised for employee benefits relating to severance pay payable in Botswana.
Note 12.
Contributed equity
Issued and paid up capital is recognised at the fair value of the consideration received by the consolidated entity. Incremental costs
directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
Opening balance
Issue of ordinary shares during the year*
Share issue costs
Ordinary shares ‐ fully paid
June 2017
Shares
June 2016
Shares
June 2017
$
June 2016
$
Consolidated
205,619,292
98,423,556
-
304,042,848
187,156,319
18,462,973
-
205,619,292
73,931,569
9,684,461
(235,846)
83,380,184
71,606,519
2,584,816
(259,766)
73,931,569
*Shares issued during the year and the issue price of each issue is as follows:
Issue Date
No. of Shares
Issue Price
AUD
07-Sep-16
07-Apr-17
27-Apr-17
02-May-17
31,578,947
51,788,334
8,276,275
6,780,000
$0.095
$0.10
$0.10
$0.10
45
Notes to the financial statements (continued)
Note 12 Contributed equity (continued)
Tlou Energy Limited – Annual Report 2017
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in proportion to the
number of, and amounts paid on, the shares held. The fully paid ordinary shares have no par value. On a show of hands every
member present at a meeting, in person or by proxy, shall have one vote and upon a poll, each share shall have one vote. The
company does not have authorised capital or par value in respect of its issued shares.
Options and performance rights
At 30 June 2017, the following options for ordinary shares in Tlou Energy Limited and performance rights were on issue:
Options
Number
2017
1,500,000
500,000
2,000,000
2016
1,500,000
500,000
2,000,000
Performance rights:
Vesting Date
31 January 2017
31 January 2017
Exercise
Price
$0.14
$0.14
Expiry
Date
29/11/2017
14/01/2018
Exercise Price
01/07/2016
Issued
Exercised
$0.21
$0.28
-
-
-
2,275,000
2,275,000
4,550,000
-
-
-
Expired
-
-
-
30/06/2017
2,275,000
2,275,000
4,550,000
Capital risk management
The capital structure of the consolidated entity consists of equity attributable to equity holders of the parent entity, comprising issued
capital and reserves as disclosed in the Consolidated Statement of Changes in Equity.
When managing capital, management’s objective is to ensure the parent entity continues as a going concern and to maintain a
structure that ensures the lowest cost of capital available and to ensure adequate capital is available for exploration and evaluation
of tenements. In order to maintain or adjust the capital structure, the group may seek to issue new shares. Consistent with other
exploration companies, the group and the parent entity monitor capital on the basis of forecast exploration and development
expenditure required to reach a stage which permits a reasonable assessment of the existence or otherwise of an economically
recoverable reserve.
There were no changes in the group's approach to capital management during the year.
The group is not subject to externally imposed capital requirements.
Note 13.
Reserves
Foreign Currency Translation Reserve
The foreign currency translation reserve records exchange differences arising on translation of foreign controlled entities.
The financial report is presented in Australian dollars rounded to the nearest dollar, which is Tlou Energy Limited's functional and
presentation currency.
Foreign operations
The assets and liabilities of foreign operations are translated into functional currency using the exchange rates at the reporting date.
The revenues and expenses of foreign operations are translated into functional currency using the average exchange rates, which
approximate the rate at the date of the transaction, for the period. All resulting foreign exchange differences are recognised in the
foreign currency translation reserve in equity. The foreign currency reserve is recognised in profit or loss when the foreign operation
or net investment is disposed of.
Share Based Payments Reserve
The share based payments reserve is used to record the share based payment associated with options granted to employees and
others under equity-settled share based payment arrangements.
46
Notes to the financial statements (continued)
Note 14.
Share-based payments
Tlou Energy Limited – Annual Report 2017
Equity-settled and cash-settled share-based compensation benefits are provided to employees.
Equity-settled transactions are awards of shares, or options over shares that are provided to employees in exchange for the
rendering of services. Cash-settled transactions are awards of cash for the exchange of services, where the amount of cash is
determined by reference to the share price.
The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using either
the Binomial or Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of
dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk
free interest rate for the term of the option, together with non-vesting conditions that do not determine whether the consolidated entity
receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions.
The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting period.
The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number
of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the period is
the cumulative amount calculated at each reporting date less amounts already recognised in previous periods.
Market conditions are taken into consideration in determining fair value. Therefore, any awards subject to market conditions are
considered to vest irrespective of whether or not that market condition has been met provided all other conditions are satisfied.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An
additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value of the
share-based compensation benefit as at the date of modification.
If the non-vesting condition is within the control of the consolidated entity or employee, the failure to satisfy the condition is treated as
a cancellation. If the condition is not within the control of the consolidated entity or employee and is not satisfied during the vesting
period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited.
If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is
recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is treated
as if they were a modification.
Employee Share Options and Performance Rights
Share Options and Performance Rights may be granted to certain personnel of the company on terms determined by the directors or
otherwise approved by the company at a general meeting.
The options are granted for no consideration. Options and entitlements to the options are vested on a time basis and/or on specific
performance based criteria such as share price increases or reserves certification. Options granted as described above carry no
dividend or voting rights. When exercisable, each option is convertible to one ordinary share.
Performance Rights issued during the year are linked to the share price performance of the Company, ensuring alignment with the
interests of the Company's shareholders. The Performance Rights have been split into two equal Tranches. For the Performance
Rights to vest and, therefore, become exercisable by a participant, certain performance conditions will be required to be met as set
out below. On vesting, holders of Performance Rights will be entitled to acquire Tlou Energy Limited ordinary shares at nil cost.
Tranche
Tranche 1
Tranche 2
Performance Condition
The closing price of Shares being 50% or more above the price at the date of shareholder
approval for a period of 10 consecutive trading days.
The closing price of Shares being 100% or more above the price at the date of
shareholder approval for a period of 10 consecutive trading days.
Notes:
The date of shareholder approval was 10 November 2016
The share price on 10 November 2016 was AUD $0.14
For Tranche 1 to vest the share price needs to be AUD $0.21 per share or greater for a period of 10 consecutive trading
days
For Tranche 2 to vest the share price needs to be AUD $0.28 or greater for a period of 10 consecutive trading days
47
Notes to the financial statements (continued)
Note 14 Share based payments (continued)
Tlou Energy Limited – Annual Report 2017
The expense recognised in the consolidated statement of comprehensive income in relation to share based payments amounts to
$423,499 (2016: $16,900). The amount assessed as fair value at the grant date is allocated equally over the period from grant date
to vesting date. The fair value at grant date is determined using generally accepted valuation techniques that take into account
exercise price, the term of the option or performance rights, the impact of dilution, the share price at grant date, the expected price
volatility of the underlying share, the expected dividend yield and the risk free rate for the term of the option/performance rights and
an appropriate probability weighting to factor the likelihood of the satisfaction of non-vesting conditions.
Inputs used to value the options on issue are as follows:
Grant date
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of options (years)
Weighted average share price ($)
Model used
14/01/16
-
68
1.94
2
$0.14
Black Scholes
30/11/15
-
68
1.94
2
$0.14
Black Scholes
Inputs used to value the performance rights on issue are as follows:
Grant date
Expected volatility (%)
Risk-free interest rate (%)
Expected life of (years)
Weighted average share price ($)
Model used
Tranche 1
10/11/16
100
2.20
7
$0.21
Trinomial
Tranche 2
10/11/16
100
2.20
7
$0.28
Trinomial
The following table shows the number, movements and weighted average exercise price of employee share options outstanding for
the 2017 year
Grant Date
Expiry date
Opening
Balance
July 2016
Exercised
During
the Year
Granted
During the
Year
Expired During
the year
Closing
Balance
June 2017
Vested &
Exercisable
Exercise
price
30/11/15
14/01/16
29/11/17
14/01/18
$0.14
$0.14
Total
1,500,000
500,000
2,000,000
-
-
-
-
-
-
-
-
-
1,500,000
1,500,000
500,000
500,000
2,000,000
2,000,000
Weighted average exercise price
$0.14
-
-
-
$0.14
$0.14
The weighted average remaining contractual life of share options outstanding at the end of the year was 0.4 years.
The following table shows the number, movements and weighted average exercise price of employee share options outstanding for
the 2016 year:
Grant Date
Expiry date
Opening
Balance
July 2015
Exercised
During
the Year
Granted
During the
Year
Expired During
the year
Closing
Balance
June 2016
Vested &
Exercisable
Exercise
price
01/07/12
01/04/14
30/11/15
14/01/16
Total
30/04/16
30/04/16
29/11/17
14/01/18
$0.625
$0.625
$0.14
$0.14
10,175,000
400,000
-
-
10,575,000
-
-
-
-
-
-
-
(10,175,000)
(400,000)
-
-
-
-
1,500,000
500,000
-
-
1,500,000
1,500,000
500,000
500,000
2,000,000
(10,575,000)
2,000,000
2,000,000
Weighted average exercise price
$0.63
-
$0.14
$0.63
$0.14
$0.14
The weighted average remaining contractual life of share options outstanding at the end of the year was 1.4 years.
48
Notes to the financial statements (continued)
Note 14 Share based payments (continued)
Tlou Energy Limited – Annual Report 2017
The following table shows the number, movements and exercise price of performance rights for the 2017 year. There were no
performance rights in the prior year.
Vesting Date
31 January 2017
31 January 2017
Exercise Price
01/07/2016
Issued
Exercised
$0.21
$0.28
-
-
-
2,275,000
2,275,000
4,550,000
-
-
-
Expired
-
-
-
30/06/2017
2,275,000
2,275,000
4,550,000
Movements
Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transaction recognised during the year were as follows:
Performance rights
Options expensed
Options capitalised
Note 15.
Commitments
Consolidated
June 2017
$
June 2016
$
423,499
-
-
423,499
-
16,900
80,101
97,001
Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an
assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement
conveys a right to use the asset.
A distinction is made between finance leases, which effectively transfer from the lessor to the lessee substantially all the risks and
benefits incidental to ownership of leased assets, and operating leases, under which the lessor effectively retains substantially all
such risks and benefits.
Finance leases are capitalised. A lease asset and liability are established at the present value of minimum lease payments. Lease
payments are allocated between the principal component of the lease liability and the finance costs, so as to achieve a constant rate
of interest on the remaining balance of the liability.
Leased assets acquired under a finance lease are depreciated over the asset's useful life or over the shorter of the asset’s useful life
and the lease term if there is no reasonable certainty that the consolidated entity will obtain ownership at the end of the lease term.
Operating lease payments, net of any incentives received from the lessor, are charged to profit or loss on a straight-line basis over
the term of the lease.
Operating lease commitments
Commitments for minimum lease payments for non-cancellable operating leases for offices and equipment contracted for but not
recognised in the financial statements.
Payable - minimum lease payments
●
●
not later than 12 months
between 12 months and 5 years
Consolidated
June 2017
$
June 2016
$
5,250
-
5,250
5,250
-
5,250
49
Notes to the financial statements (continued)
Note 15 Commitments (continued)
Tlou Energy Limited – Annual Report 2017
Exploration expenditure:
In order to maintain an interest in the exploration tenements in which it is involved, the group is required to meet certain conditions
imposed by the various statutory authorities granting the exploration tenements or that are imposed by the joint venture agreements
entered into by the group. These conditions can include proposed expenditure commitments. The timing and amount of exploration
expenditure obligations of the group may vary significantly from the forecast based on the results of the work performed, which will
determine the prospectivity of the relevant area of interest. The group's proposed expenditure obligations, which are not provided for
in the financial statements are as follows:
Minimum expenditure requirements
●
●
not later than 12 months
between 12 months and 5 years
Consolidated
June 2017
$
1,637,420
2,637,363
4,274,783
June 2016
$
25,668,594
-
25,668,594
The minimum expenditure requirements at 30 June 2017 do not include commitment in relation to Prospecting licence PL002/2004.
In August 2017, post year end, this Prospecting Licence was converted to a mining licence with no minimum expenditure
requirement outlined in the mining licence, hence the reason for excluding the figure in the above amounts.
Five of the Group’s prospecting licences referred to as the Mamba permits expired at 30 June 2017. Renewal applications were
submitted in March 2017, however confirmation of whether renewal was successful or not has not been received at the date of this
report. The issuing authority have confirmed that they will extend the licences to 30 September 2017, by which time they expect to
have the renewal applications assessed. There was no additional commitment amount outlined in the extension document so the
above figures do not include any expenditure relating to the Mamba permits.
Note 16.
Financial instruments
Overview
The group's principal financial instruments comprise receivables, payables, cash and term deposits. The main risks arising from the
group's financial assets are interest rate risk, foreign currency risk, credit risk and liquidity risk.
This note presents information about the group's exposure to each of the above risks, its objectives, policies and processes for
measuring and managing risk. Other than as disclosed, there have been no significant changes since the previous financial year to
the exposure or management of these risks.
The group holds the following financial instruments:
Financial Assets
Cash and cash equivalents
Trade and other receivables
Financial Liabilities
Trade and other payables
Consolidated
June 2017
$
6,727,424
100,674
6,828,098
June 2016
$
1,224,404
290,431
1,514,835
431,032
431,032
306,956
306,956
Financial risk management objectives
The consolidated entity's activities expose it to a variety of financial risks: market risk (including foreign currency risk, price risk and
interest rate risk), credit risk and liquidity risk. The consolidated entity's overall risk management program focuses on the
unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the consolidated
entity. The consolidated entity uses different methods to measure different types of risk to which it is exposed. These methods
include sensitivity analysis in the case of interest rate, foreign exchange and other price risks and ageing analysis for credit risk.
50
Notes to the financial statements (continued)
Note 16 Financial instruments (continued)
Financial risk management objectives (continued)
Tlou Energy Limited – Annual Report 2017
Key risks are monitored and reviewed as circumstances change (e.g. acquisition of new entity or project) and policies are created or
revised as required. The overall objective of the group's financial risk management policy is to support the delivery of the group's
financial targets whilst protecting future financial security.
Given the nature and size of the business and uncertainty as to the timing and amount of cash inflows and outflows, the group does
not enter into derivative transactions to mitigate the financial risks. In addition, the group's policy is that no trading in financial
instruments shall be undertaken for the purpose of making speculative gains. As the group's operations change, the Directors will
review this policy periodically going forward.
The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. The Board
reviews and agrees policies for managing the group's financial risks as summarised below. These policies include identification and
analysis of the risk exposure of the consolidated entity and appropriate procedures, controls and risk limits.
Risk management is carried out by senior finance executives (finance) under policies approved by the Board of Directors. Finance
identifies, evaluates and hedges financial risks within the consolidated entity's operating units where appropriate.
(a) Interest rate risk
Exposure to interest rate risk arises on financial assets and financial liabilities recognised at reporting date whereby a future change
in interest rates will affect future cash flows or the fair value of fixed rate financial instruments. The group is also exposed to earnings
volatility on floating rate instruments.
A forward business cash requirement estimate is made, identifying cash requirements for the following period (generally up to one
year) and interest rate term deposit information is obtained from a variety of banks over a variety of periods (usually one month up to
six-month term deposits) accordingly. The funds to invest are then scheduled in an optimised fashion to maximise interest returns.
Interest rate sensitivity
A sensitivity of 1% interest rate has been selected as this is considered reasonable given the current market conditions. A 1%
movement in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown
below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.
Consolidated - 30 June 2017
Cash and cash equivalents
Consolidated - 30 June 2016
Cash and cash equivalents
Profit or loss
Equity
1% increase
$
1% decrease
$
1% increase
$
1% decrease
$
67,274
(67,274)
12,244
(12,244)
67,274
12,244
(67,274)
(12,244)
Interest rate risk on other financial instruments is immaterial.
51
Tlou Energy Limited – Annual Report 2017
Notes to the financial statements (continued)
Note 16 Financial instruments (continued)
(b) Liquidity risk
Liquidity risk is the risk that the group will not be able to meet its financial obligations as they fall due. The Board's approach to
managing liquidity is to ensure, as far as possible, that the group will always have sufficient liquidity to meet its obligations when due.
Ultimate responsibility for liquidity risk management rests with the Board of Directors. The group manages liquidity risk by
maintaining adequate reserves and by continuously monitoring forecast and actual cash flows and matching the maturity profiles of
financial assets and liabilities. This is based on the undiscounted cash flows of the financial liabilities based on the earliest date on
which they are required to be paid. At the end of the reporting period the group held cash of $6,727,424 (2016: $1,224,404).
The following table details the remaining contractual maturity for non-derivative financial liabilities.
Consolidated - 30 June 2017
Trade and other payables
Consolidated - 30 June 2016
Trade and other payables
(c) Foreign exchange risk
Within
Between
Total Contractual
Carrying
1 Year
$
431,032
306,956
1 & 2 years
$
Cash Flows
$
Amount
$
-
-
431,032
431,032
306,956
306,956
As a result of activities overseas, the group's consolidated statement of financial position can be affected by movements in exchange
rates. The group also has transactional currency exposures. Such exposures arise from transactions denominated in currencies
other than the functional currency of the relevant entity.
The group's exposure to foreign currency risk primarily arises from the group's operations overseas. Foreign exchange risk arises
from future commercial transactions and recognised financial assets and financial liabilities denominated in a currency that is not the
entity’s functional currency. The risk is measured using sensitivity analysis and cash flow forecasting.
The group currently does not engage in any hedging or derivative transactions to manage foreign currency risk. The group’s policy is
to generally convert its local currency to Pula, Rand or US dollars at the time of transaction. The group, has on rare occasions, taken
the opportunity to move Australian dollars into foreign currency (ahead of a planned requirement for those foreign funds) when
exchange rate movements have moved significantly in favour of the Australian dollar, and management considers that the currency
movement is extremely likely to move back in subsequent weeks or months. Therefore, the opportunity has been taken to lock in
currency at a favourable rate to the group. This practice is expected to be the exception, rather than the normal practice.
The group’s exposure to foreign currency risk at the reporting date, expressed in Australian dollars, was as follows:
Financial Assets
Cash and cash equivalents
Trade and other receivables
Financial Liabilities
Trade and other payables
Net Financial Instruments
2017
USD
$
2017
Pula
$
2017
SA Rand
$
2016
USD
$
2016
Pula
$
2016
SA Rand
$
20,603
-
105,567
78,337
36,377
-
21,279
-
100,871
28,313
-
20,603
(112,508)
71,396
-
-
(154,024)
36,377
21,279
(24,840)
8,976
-
-
8,976
52
Notes to the financial statements (continued)
Note 16 Financial instruments (continued)
Tlou Energy Limited – Annual Report 2017
Foreign currency rate sensitivity
Based on financial instruments held at 30 June 2017, had the Australian dollar strengthened/weakened by 10% the group’s profit or
loss and equity would be impacted as follows:
Profit or loss
Equity
10%
Increase
$
(2,060)
(7,140)
(3,638)
(2,182)
2,484
(898)
10%
Decrease
$
10%
Increase
$
10%
Decrease
$
2,060
7,140
3,638
2,182
(2,484)
898
(2,060)
(7,140)
(3,638)
(2,182)
2,484
(898)
2,060
7,140
3,638
2,182
(2,484)
898
2017
Dollar (US)
Pula (Botswana)
Rand (South Africa)
2016
Dollar (US)
Pula (Botswana)
Rand (South Africa)
(d) Credit risk
Credit risk is the risk of financial loss to the group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations. This arises principally from cash and cash equivalents and trade and other receivables. The group exposure and the
credit ratings of its counterparties are continuously monitored by the Board of Directors.
The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets as summarised in the table
above.
Credit Risk Exposures
Trade and other receivables
Trade and other receivables comprise primarily of VAT and GST refunds due. Where possible the group trades with recognised,
creditworthy third parties. The receivable balances are monitored on an ongoing basis. The group’s exposure to bad debts is not
significant. At 30 June 2017, none (2016: nil) of the group's receivables were past due.
Cash and cash equivalents
The group has a significant concentration of credit risk with respect to cash deposits with Westpac Banking Corporation, First
National Bank Botswana and First National Bank South Africa. However, significant cash deposits are invested across banks to
mitigate credit risk exposure to a particular bank. AAA rated banks are mostly used and non AAA banks are utilised where
commercially attractive returns are available.
53
Notes to the financial statements (continued)
Note 17.
Key Management Personnel
Tlou Energy Limited – Annual Report 2017
Key management personnel comprise directors and other persons having authority and responsibility for planning, directing and
controlling the activities of the Consolidated Entity.
Detailed remuneration disclosures are provided in the remuneration report on pages 13 to 19.
Key management personnel compensation
The aggregate compensation made to directors and other members of key management personnel of the consolidated entity is set
out below:
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Share based payments
Consolidated
June 2017
$
June 2016
$
653,675
54,796
23,730
732,201
342,375
1,074,576
885,565
55,012
28,063
968,640
-
968,640
Note 18.
Auditors' Remuneration
During the year the following fees were paid or payable for services provided by the auditor of the group:
Audit services
Auditing or reviewing the financial statements - BDO Australia
Auditing or reviewing the financial statements - BDO Botswana
Non-audit services - BDO Australia
Tax consulting and compliance services
AIM listing
Total
Note 19.
Contingent Liabilities
The Directors are not aware of any contingent liabilities (2016: nil).
Consolidated
June 2017
$
June 2016
$
55,000
25,214
80,214
10,172
-
10,172
90,386
48,500
25,088
73,588
16,132
36,983
53,115
126,703
54
Tlou Energy Limited – Annual Report 2017
Notes to the financial statements (continued)
Note 20.
Related Party Transactions
Parent entity
The legal parent entity is Tlou Energy Limited.
Subsidiaries
Interests in subsidiaries are set out in note 23.
Transactions with related parties
The following transactions occurred with related parties:
Payment for goods and services:
Office rent paid to The Gilby McKay Alice Street Partnership, a director-related entity of Anthony
Gilby.
Receivable from and payable to related parties
The following balances are outstanding at the reporting date in relation to transactions with related parties:
Consolidated
2017
$
2016
$
21,000
46,500
Current payables:
Trade payables to The Gilby McKay Alice Street Partnership, a director-related entity of Anthony
Gilby
1,925
1,925
Loans to/from related parties
There were no loans to or from related parties at the reporting date or during the year.
Terms and conditions
Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties
unless otherwise stated.
Note 21.
Segment Reporting
Reportable Segments
Operating segments are identified on the basis of internal reports that are regularly reviewed by the executive team in order to
allocate resources to the segment and assess its performance.
The Company currently operates in one segment, being the exploration, evaluation and development of Coalbed Methane resources
in Southern Africa.
Segment revenue
As at 30 June 2017 no revenue has been derived from its operations (2016: nil).
Segment assets
Segment non-current assets are allocated to countries based on where the assets are located as outlined below.
Botswana
Australia
June 2017
$
June 2016
$
50,341,366
1,813
50,343,179
47,574,122
633
47,574,755
55
Tlou Energy Limited – Annual Report 2017
Notes to the financial statements (continued)
Note 22.
Cash Flow Information
Reconciliation of cash flow from operations
Loss for the period
Depreciation
Share-based payments
Salaries and fees paid in equity
Loss on disposal
Net exchange differences
Changes in operating assets and liabilities, net of the effects of purchase and disposal of subsidiaries:
Decrease/(increase) in trade and other receivables
Decrease/(increase) in other assets
Increase/(decrease) in trade payables and accruals
Decrease/(increase) in employee benefits
Increase/(decrease) in provisions
Consolidated
June 2017
$
June 2016
$
(3,165,323)
240,961
423,499
-
788
37,181
189,757
-
(112,369)
35,318
5,319
(2,344,869)
(3,065,583)
260,564
97,001
(97,000)
-
247,007
(68,487)
431,342
(165,192)
170,322
(113,220)
(2,303,246)
Note 23.
Subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with
the accounting policy described in note 1.
Name of entity
Country of incorporation
Tlou Energy Botswana (Proprietary) Ltd
Technoleads International Inc
Tlou Energy Exploration (Proprietary) Limited
Sable Energy Holdings (Barbados) Inc
Tlou Energy Resources (Proprietary) Limited
Copia Resources Inc
Tlou Energy Corp Services Botswana
(Proprietary) Limited
Madra Holdings (Barbados) Inc
Tlou Energy Solutions (Proprietary) Limited
Aguia Energy Limitada
Mica Investments (Barbados) Inc
SK Holdings (Barbados) Inc
Tlou South Karoo (Proprietary) Limited
Apex Resources No. 2 Inc
Apex Resources Holdings No. 2 Corp
Tembo Holdings Inc
Botswana
Barbados
Botswana
Barbados
Botswana
Barbados
Botswana
Barbados
Botswana
Mozambique
Barbados
Barbados
Botswana
Barbados
British Virgin Islands
British Virgin Islands
Class of
shares
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Equity holding %
June 2017
100
June 2016
100
100
100
100
100
100
100
100
100
-
-
-
-
-
-
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
56
Notes to the financial statements (continued)
Note 24.
Subsequent Events
Tlou Energy Limited – Annual Report 2017
There has not been any matter or circumstance, other than that referred to in this report and disclosed in the financial statements or
notes thereto, that has arisen since the end of the period, that has significantly affected, or may significantly affect, the operations of
the consolidated entity, the results of these operations, or the state of affairs of the consolidated entity in future financial years.
Note 25.
Parent entity disclosures
Current assets
Non-current assets
Total assets
Current liabilities
Total liabilities
Net assets
Contributed equity
Share based payment
Accumulated losses
Total equity
Loss for the period
Total comprehensive income
Parent
June 2017
$
June 2016
$
6,640,713
30,215,563
36,856,276
330,900
330,900
36,525,376
83,380,184
520,499
(47,375,307)
36,525,376
1,411,310
30,214,384
31,625,694
173,688
173,688
31,452,006
73,931,569
2,159,745
(44,639,308)
31,452,006
2,735,999
2,735,999
2,598,498
2,598,498
Commitments, Contingencies and Guarantees of the Parent Entity
The Parent Entity has no commitments for the acquisition of property, plant and equipment, no contingent assets, contingent
liabilities or guarantees at balance date.
57
Tlou Energy Limited – Annual Report 2017
Directors' declaration
In the Directors' opinion:
the attached financial statements and notes thereto comply with the Corporations Act 2001, the Australian Accounting
Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements;
the attached financial statements and notes thereto comply with International Financial Reporting Standards as issued by
the International Accounting Standards Board as described in note 1 to the financial statements;
the attached financial statements and notes thereto give a true and fair view of the consolidated entity's financial position
as at 30 June 2017 and of its performance for the financial year ended on that date;
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and
payable;
the remuneration report as set out in the directors report for the year ended 30 June 2017 comply with section 300A of the
Corporations Act 2001; and
The directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A of
the Corporations Act 2001.
Signed in accordance with a resolution of Directors made pursuant to section 295(5) of the Corporations Act 2001.
On behalf of the Directors
Anthony Gilby
Director
Brisbane
11 September 2017
58
INDEPENDENT AUDITOR'S REPORT
To the members of Tlou Energy Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Tlou Energy Limited (the Company) and its subsidiaries (the
Group), which comprises the consolidated statement of financial position as at 30 June 2017, the
consolidated statement of comprehensive income, the consolidated statement of changes in equity and
the consolidated statement of cash flows for the year then ended, and notes to the financial report,
including a summary of significant accounting policies and the directors’ declaration.
In our opinion the accompanying financial report of the Group, is in accordance with the Corporations
Act 2001, including:
(i)
Giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its
financial performance for the year ended on that date; and
(ii)
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the Corporations
Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s
APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance
with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of the Company, would be in the same terms if given to the directors as at the
time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Material uncertainty related to going concern
We draw attention to Note 1 in the financial report which describes the events and/or conditions which
give rise to the existence of a material uncertainty that may cast significant doubt about the group’s
ability to continue as a going concern and therefore the group may be unable to realise its assets and
discharge its liabilities in the normal course of business. Our opinion is not modified in respect of this
matter.
59
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current period. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters. In addition to the matter described in the Material Uncertainty
Related to Going Concern section, we have determined the matters described below to be the key
audit matters to be communicated in our report.
Carrying value of exploration and evaluation assets
Key audit matter
How the matter was addressed in our audit
The group carries significant exploration and
Our procedures included, but were not limited to,
evaluation assets of $49,328,038 as at 30 June 2017 as
assessing and evaluating management's assessment of
disclosed in note 8 to the financial statements.
whether any impairment indicators in accordance
The carrying value of exploration and evaluation assets
represents a significant asset of the company and
assessing whether facts or circumstances exist to
with AASB 6 Exploration for and Evaluation of Mineral
Resources have been identified across the Group’s
exploration projects, the indicators being:
suggest that impairment indicators were present, and
•
Expiring, or imminently expiring, rights to
if present, whether the carrying amount of this asset
tenure
may exceed its recoverable amount was considered key
to the audit.
This assessment involves significant judgement applied
by management.
We considered it necessary to assess whether facts and
circumstances existed to suggest that impairment
indicators were present, and if present, whether the
carrying amount of these assets may exceed its
recoverable amount.
•
A lack of budgeted or planned exploration
and evaluation spend on the areas of interest
•
Discontinuation of, or a plan to discontinue,
exploration activities in the areas of interest
•
Sufficient data exists to suggest carrying
value of exploration and evaluation assets is
unlikely be recovered in full through
successful development or sale.
We verified current tenement licences to determine
that the group has the rights to tenure and maintains
the tenements in good standing. We obtained the
expenditure budget for the 2018 year and assessed
that there is reasonable forecasted expenditure to
confirm continued exploration spend into the projects
indicating that Management are committed to the
projects. We also reviewed ASX announcements and
Board meeting minutes for the year and subsequent
to year end for exploration activity to identify any
indicators of impairment.
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050
110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited
by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional
Standards Legislation, other than for the acts or omissions of financial services licensees.
60
Other information
The directors are responsible for the other information. The other information comprises the
information in the Group’s annual report for the year ended 30 June 2017, but does not include the
financial report and the auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf
This description forms part of our auditor’s report.
61
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 16 to 22 of the directors’ report for the
year ended 30 June 2017.
In our opinion, the Remuneration Report of Tlou Energy Limited, for the year ended 30 June 2017,
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with
Australian Auditing Standards.
BDO Audit Pty Ltd
D P Wright
Director
Brisbane, 11 September 2017
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050
110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited
by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional
Standards Legislation, other than for the acts or omissions of financial services licensees.
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Tlou Energy Limited – Annual Report 2017
Corporate Governance Statement
The Directors (the “Board”) of Tlou Energy Limited (“Tlou Energy” or “the Company”) are committed to the implementation of the
highest standards of corporate governance. In determining what these standards should be, the Board references guidance and
supports, where appropriate, the Corporate Governance Principles and Recommendations with 2014 amendments (3nd Edition) (“3rd
Edition Recommendations or ASX Recommendations”) established by the ASX Corporate Governance Council (the “Council”).
This statement outlines the key aspects of Tlou Energy’s governance framework and practices. The charters, policies and
procedures are reviewed regularly and updated to comply with the law and best practice. This statement contains specific
information and discloses the extent to which the Company intends to or is able to follow the 3rd Edition Recommendations. The
charters and policies of the Company can be viewed on Tlou Energy’s website at www.tlouenergy.com (“website”)
The Council’s recommendations are not prescriptive and, if certain recommendations are not appropriate for the Company given its
circumstances, it may elect not to adopt that particular practice in limited circumstances. The Company believes that during the
reporting period ending 30 June 2017 its practices are largely consistent with those of the 3rd Edition Recommendations and where
they do not follow a recommendation this statement identifies those that have not been followed and details reasons for non-
adherence. Even where there is a deviation from the recommendations the Company continues to review and update its policies and
practices in order that it keeps abreast of the growth of the Company, the broadening of its activities, current legislation and good
practice.
This Corporate Governance statement reports on the main practices of Tlou Energy and is current as at the 11th of September 2017
and has been approved by the Board of Directors.
Role of the Board
The Board is responsible for ensuring that the Company is managed effectively. Given the size of the Company and the Board, the
Board undertakes an active role in the management of the Company.
The Board's role and the Company’s Corporate Governance practices are continually being reviewed and updated to reflect the
Company’s circumstances and growth. An example of this has been the appointment, since the end of the reporting period of two
independent non-executive directors. The Board has adopted a Charter which sets out the responsibilities of the Board and its
structure and governance as well as the matters expressly reserved to the Board and those delegated to management. A copy of the
Charter is available on the Company’s website.
The Board is responsible for determining the strategic direction and objectives of the Company and overseeing management’s
achievements against these.
(ASX Recommendation 1.1)
5
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Tlou Energy Limited – Annual Report 2017
The Board of Directors
The Board is currently comprised of six (6) Directors. Details of the Directors who held office during the year under review and those
that have been appointed subsequent are namely:
Name of Director
Martin McIver
Anthony Gilby
Gabaake Gabaake
Colm Cloonan
Hugh Swire
Linah Mohohlo
Board Membership
Non-executive Chairman
Managing Director
Executive Director
Finance Director
Non-executive Director
Non-executive Director
Date of Appointment/Resignation
16 September 2010
23 April 2009
11 March 2015
11 February 2016
22 June 2017
12 July 2017
The skills, experience and expertise relevant to the position of each Director are set out in the Directors’ Report of this Annual
Report. Prior to the appointment of a person, or putting forward to shareholders a candidate for election, as a director, the Company
undertakes checks which it believes are appropriate to verify a director’s character, experience, educations, criminal record and
bankruptcy history. The Company will ensure that all material information in its possession relevant to a shareholders decision to
elect or re-elect a director is provided to shareholder in the Company’s Notice of Annual General Meeting.
(ASX Recommendation 1.2)
Each executive director and senior executive of Tlou Energy has an agreement in writing with the Company which sets out the key
terms and conditions of their appointment including their duties, rights and responsibilities. There are no formal agreements with the
non-executive directors other than their Deeds of Access and Indemnity. Given the size and operations of the Company at this stage
and the experience and skills that the non-executive directors possess the Board does not believe that there would be any benefit to
the Company in doing so.
(ASX Recommendation 1.3)
Company Secretary
The Company Secretary is directly accountable to the Board through the Chairman who the Company Secretary has a direct line of
reporting to. The Company Secretary is responsible for advising the Chairman and the Board to manage the day to day governance
framework of the Company. The responsibilities of the Company Secretary are contained in the Board Charter a copy of which is
available on the Company’s website.
(ASX Recommendation 1.4)
Diversity Policy
The Company is committed to creating a fair and inclusive work environment that embraces diversity and recognises its contribution
to the Company’s commercial success. As the Company has a relatively small staff at present the Board does not believe that any
benefit would be obtained setting measurable objectives for achieving gender diversity and has not done so. Neither is the Company
a ‘relevant employer’ under the Workplace Gender Equality Act.
A copy of the Company’s Diversity Policy can be found on the Company’s website.
(ASX Recommendation 1.5)
Improvement in Board processes and effectiveness is a continuing objective and the purpose of the annual Board evaluation is to
identify ways to improve performance. The Board has appointed the Chairman as the person responsible for conducting an annual
review of the Board’s performance.
This process will involve the Chairman circulating to members of the Board a detailed questionnaire on performance indicators and
collating the data from the same before discussing with each member of the Board and reviewing performance indicators such as
time engaged on Company business, so as to assess the effectiveness of processes structure and contributions made by individual
directors.
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Tlou Energy Limited – Annual Report 2017
The Managing Director assesses, annually or as necessary, the performance of all key executives. Both qualitative and quantitative
measures will be used consistent with performance targets set annually by the Managing Director in consultation with those
executives. The Managing Director reports to the Nomination & Remuneration Committee on their performance and the Nomination
& Remuneration Committee will then consider any changes to remuneration and the establishment of new performance targets.
During the reporting period, a review of the Boards performance was carried out by the Chairman.
(ASX Recommendation 1.6)
The Board will assess annually or as necessary the performance of the Managing Director benchmarking his performance against
the role description in the employment contract and general industry standards expected of a Managing Director carrying on that
role. The Board regularly evaluates management’s performance against various criteria and requires senior executives to address
the Board on execution of strategy and associated issues. The Chief Executive Officer reviews the performance of the senior
executives annually. Theses evaluations take into account matters such as the achieving of the Company’s objectives and reaching
of performance criteria.
An executive management review has been carried out for the current reporting period.
(ASX Recommendation 1.7)
Structure of Board to Add Value
The Board comprises three non-executive Directors, including the Chairman, and three executive Directors including Managing
Director. The names of the Directors of the Company in office at the date of this report or through the year under review and their
qualifications are set out in the section of the Annual Report headed “Directors’ Report”.
The composition and size of the Board is determined so as to provide the Company with a broad base of industry, business,
technical, administrative, financial and corporate skills and experience considered necessary to achieve the strategic objectives of
the Company taking into consideration the size of the Company and the nature of its current operations. During the current reporting
period, the make-up of the Board has been bolstered by the appointment of two independent non-executive Directors
The Board considers that, fundamentally, the independence of Directors is based on their capacity to put the best interests of the
Company and its shareholders ahead of all other interests, so that Directors are capable of exercising objective independent
judgment.
When evaluating candidates, the Board has regard to the potential for conflicts of interest, whether actual or perceived, and the
extent or materiality of these in the ongoing assessment of director independence. In this regard the Board has regard to the
definition of "independence" in the 3rd Edition Recommendations. The Board is of the view that the existence of one or more of the
relationships in the definition will necessarily result in the relevant Director not being classified as independent, particularly given the
criteria outlined above, and that the Company will seek to implement additional safeguards to ensure independence. An overall
review of these considerations is conducted by the Board to determine whether individual Directors are independent.
Additional policies and practices, such as Directors not being present during discussions or decision making on matters in which they
have or could be seen to potentially have a material conflict of interest, as well as Directors being excluded from taking part in the
appointment of third party service providers where the Director has an interest, provide further separation and safeguards to
independence. The Board has adopted materiality thresholds in relation to independence, which are contained in the Board Charter
and summarised below.
ASX Recommendation 2.4 requires a majority of the Board to be independent Directors. In addition, ASX Recommendation 2.5
requires the Chairman of the Company to be independent. The Council defines ‘independence’ as being a non-executive director
who is not a member of management and who is free from any business or other relationship that could materially interfere with or
could reasonably be perceived to materially interfere with the independent exercise of their judgment. Based on this definition the
current Directors, excluding Martin McIver could not be considered independent by virtue of them being either executives, substantial
shareholders of the Company or Directors or Officers of Companies that are substantial shareholders of the Company.
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Tlou Energy Limited – Annual Report 2017
The Chairman (Martin McIver) if applying the independence criteria in the Principles is considered to be independent.
Martin McIver has been previously treated not as an independent Director as formally he was employed by a Company that was a
substantial shareholder and which was a related party of the former Chairman. Mr McIver left the employ of that entity in January
2013 a period of more than three years. Given that effluxion of time, having regard to the materiality of the role and the fact that Mr
McIver meets all of the other criteria to establish independence, the Board has (in the absence of Mr McIver) determined that Mr
McIver is independent.
Hugh Swire and Linah Mohohlo, both of whom are non-executive directors are considered to be independent as they fall within the
Council’s definition of ‘independence’ as being a non-executive director who is not a member of management and who is free from
any business or other relationship that could materially interfere with or could reasonably be perceived to materially interfere with the
independent exercise of their judgment.
Notwithstanding that these 3rd Edition Recommendations in respect to the composition of the Board are not strictly followed (majority
of the Board to be independent) the Company believes that some significant progress to achieving this objective has been made this
year and given its history and the formation of the Board reflects certain founding members, it is not practical at this stage to have a
majority of independent Directors. Therefore, the Board takes the view that the interests of the Shareholders are best served with the
Board's present composition and has resolved that the situation will continue to be monitored as the operations of the Company
evolve and appoint appropriately qualified independent Directors as the opportunities and necessity arise.
(ASX Recommendation 2.3)
The Board has established a Nomination & Remuneration Committee which regularly reviews Board membership. This includes
considering what other skills that might be necessary for the Company to reach its strategic objectives. Due to the size of the
Company the composition of the Committee does not comply with the ASX Recommendation 2.1. However, it is intended that now
that the Board has acquired two more independent non-executive directors before the Committee meets again its membership will
be reviewed and updated by the Board. A copy of the Nomination & Remuneration Committee Charter is located on the website.
The Committee’s members, the number of times that they have met throughout the reporting period and the member’s attendance at
those meetings is recorded in the section of the 2017 Annual Report headed “Directors Report”.
(ASX Recommendation 2.1)
If a Board vacancy becomes available it will be the responsibility of the Nomination & Remuneration Committee to identify the skills,
experience and diversity that will best complement the Board and will then embark on a process to identify a candidate who can best
meet those criteria. A skills matrix has been developed and adopted by the Board to help assess the relevant criteria of candidates.
The Directors believe the skill base of the current Directors is appropriate for the Company given its size and stage of development.
(ASX Recommendation 2.2)
Given the size of the Company there is no formal induction process for new Directors nor does it have a formal professional
development program for existing Directors. The Board does not consider that a formal induction program is necessary given the
current size and scope of the Company’s operations.
Rather any new Director will be provided with a personalised induction which will be dependent upon the skills and experience that
any new Director might possess. Any new Director induction will include comprehensive meetings with senior management and the
provision of relevant materials such as all the Company’s policies and procedures as well as instruction in relation to these.
All Directors are expected to maintain the skills required to effectively discharge their obligations and are encouraged to undertake
continuing professional education such as industry seminars and approved education courses.
(ASX Recommendation 2.6)
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Tlou Energy Limited – Annual Report 2017
Board Charter
The Board operates in accordance with the broad principles set out in its Charter which is regularly reviewed and updated by the
Board. It has also adopted a written Code of Conduct which establishes guidelines for its conduct. The purpose of the Code is to
ensure that Directors and Executives act honestly, responsibly, legally and ethically and in the best interests of the Company.
Conflicts of Interest
In accordance with the Corporations Act 2001 and the Company’s Constitution, Directors must keep the Board advised on an
ongoing basis, of any interest that may lead to a conflict with the interests of the Company. Where the Board believes that there is a
significant or material conflict, the Director concerned shall be excluded from all discussions and access to Board papers and the
like, and shall not be present at any Directors meeting during the consideration or vote on such a matter.
Independence of Professional Advice
The Board has determined that individual Directors have the right to seek independent professional advice in connection with any of
their duties and obligations as Directors of the Company. Before a Director may obtain that advice at the Company’s expense, the
Director must obtain the approval of the Chairman who will not unreasonably withhold that consent. If appropriate any advice
received will be made available to the full Board. No member of the Board availed of this entitlement during the year under review.
Committees
Audit Committee, Risk Committee and Nomination & Remuneration Committee
The Board delegates specific responsibilities to various Board Sub-Committees. The Board has established the following standing
committees:
An Audit Committee, which is responsible for overseeing the external and internal auditing functions of the Company’s
activities;
A Risk Committee, which comprises representatives of the Board and staff to advise and assist the Board in assessing risk
factors associated with the operation of the Company; and
A Nomination & Remuneration Committee, which is responsible for making recommendations to the Board on recruitment
and remuneration packages for executives.
The Board has again this year delegated the specific responsibility of overseeing the Company’s audit obligations to an Audit
Committee. The Audit Committee is currently made up of the following members:
Linah Mohohlo – Chair
Martin McIver – Committee Member
Colm Cloonan – Committee Member
Anthony Gilby – Committee Member
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Tlou Energy Limited – Annual Report 2017
Act Ethically and Responsibly
The Company in recognition of the importance of ethical and responsible decision making has adopted a Corporate Code of Conduct
which sets out ethical standards and a Code of Conduct to which all Directors, and Senior Executives will adhere whilst conducting
their duties.
(ASX Recommendation 3.1)
The Code of Conduct for Director and Senior Executives forms part of this Corporate Code of Conduct. It provides as follows:
All Directors and Senior Executives will:
1. Actively promote the highest standards of ethics and integrity in carrying out their duties for the Company;
2. Disclose any actual or perceived conflicts of interest of a direct or indirect nature of which they become aware and which
they believe could compromise in any way the reputation or performance of the Company;
3. Respect confidentiality of all information of a confidential nature which is acquired in the course of the Company’s business
and not disclose or make improper use of such confidential information to any person unless specific authorisation is given
for disclosure or disclosure is legally mandated;
4. Deal with the Company’s suppliers, contractors, competitors and each other with the highest level of honesty, fairness and
integrity and to observe the rule and spirit of the legal and regulatory environment in which the Company operates;
5. Report any breach of this code of conduct or other inappropriate or unethical conduct to the appropriate authority within the
Group; and
6. This Code of Conduct is in addition to the Code of Conduct for all employees which has been adopted by the Board of the
Company.
The Company is committed to increasing shareholder value and aims to ensure its shareholders are fully informed as to the true
financial position and performance of the Group through timely and accurate disclosure of information and risk management
practices and exemplary compliance with the continuous disclosure regime. A copy of the Code of Conduct is available at the
Company’s website.
(ASX Recommendation 3.1)
The Company has adopted in compliance of ASX Listing Rule 12.12 a Policy for Trading in Company Securities which is binding on
all Directors, senior management, officers, employees and consultants of the Company. The purpose of this policy is to provide a brief
summary of the law on insider trading and other relevant laws, set out the restrictions on dealing in the Company’s securities by people
who work for or are associated with the Company and assist in maintaining market confidence in the integrity of dealings in Tlou Energy
securities. The Policy is posted on the Company’s website to ensure that there is public confidence and understanding of the
Company’s policies governing trading by “potential insiders”.
All persons covered by the Policy may not deal in the securities in the Company without first seeking and obtaining a written
acknowledgement from the Chairman (or in his absence the Company Secretary) or the Company Secretary (or in his absence the
Managing Director) prior to any trade, at which time they must confirm that they are not in possession of any unpublished price-
sensitive information. The Company Secretary maintains a register of notifications and acknowledgements given in relation to trading
in the Company’s securities. The policy was reviewed during the year to ensure that it aligns with the requirements of the ASX Listing
Rules.
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Tlou Energy Limited – Annual Report 2017
Safeguard Integrity in Financial Reporting
In accordance with ASX Recommendation 4.1 the Board has had established for all of the financial year under review an Audit
Committee with a Charter that sets out the roles, responsibilities, composition, structure and membership requirements.
The primary objective of the Committee is to assist the Board to discharge its responsibilities with regard to:
Monitoring the integrity of the financial statements of the Company, reviewing significant financial reporting judgements;
Reviewing the Company’s internal financial control system;
Monitoring and reviewing the effectiveness of the Company’s internal audit function (if any);
Monitoring and reviewing the external audit function including matters concerning appointment and remuneration,
independence and non-audit services; and
Performing such other functions as assigned by law, the Company’s constitution, or the Board.
Structure of the Audit Committee and Charter
ASX Recommendation 4.1 states that the audit committee should have at least 3 members consisting only of non-executive
directors, a majority of which should be independent with the Chair of the Committee being one of the independent directors who is
not the chair of the Company.
During the reporting period, the Committee appointed by the Board did not comply with this recommendation as it comprised only
one non-executive Director and two executive directors of which only one is considered independent in accordance with the
definition of independence prescribed by the ASX Corporate Governance Independence Criteria. Subsequent to the report period the
Company appointed an additional non-executive directors to the Committee, with that director assuming the role as chair of the
Committee.
Colm Cloonan and Anthony Gilby are the members of the Committee who is not currently a non-executive director. At the time of his
original appointment to the Committee Mr. Gilby was a non-executive director but has since been appointed the Managing Director.
The Chair of the Committee is Linah Mohohlo who is an independent non-executive director.
Martin McIver who is an independent non-executive director was previously the Chair of the Committee but also Chair of the Board
of Directors. He now sits on the Committee as a member only.
Each member of the Audit Committee has an appropriate knowledge of the Company’s affairs and has the financial and business
expertise to effectively discharge the duties of the Committee. The members of the Audit Committee by virtue of their professional
background experience and personal qualities are well qualified to carry out the functions of the Audit Committee.
The members of the Committee have direct access to any employee, the auditors and financial and legal advisers without
management present. The Committee meets as often as is required but no less than twice a year.
The Committee Chair shall report any significant issues arising from the Committee Meetings at the next meeting of the Board.
The Directors report contained in the Company’s annual report to shareholders is to contain a dedicated section that describes the
role of the Audit Committee and what action it has taken.
The role of the Audit Committee is to: -
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Tlou Energy Limited – Annual Report 2017
(a) monitor the integrity of the financial statements of the Company, by reviewing significant financial reporting
judgements;
(b) review the effectiveness of the Company’s internal financial control system and, unless expressly addressed
by a separate Risk Committee or by the Board itself, risk management systems;
(c) monitor and review the effectiveness of the Company’s internal audit function;
(d) monitor and review the external audit function including matters concerning appointment and remuneration,
independence and non-audit services;
(e) perform such other functions as assigned by law, the Company’s constitution, or the Board;
(f) approve the corporate governance section of the Company’s Annual Report relating to the Committee and its
responsibilities; and
(g) review compliance with legal and regulatory requirements.
The Audit Committee keeps minutes of its meetings and includes them for review at the following Board Meeting. The Audit
Committee members’ attendance at meetings as compared to total meetings held is set out in the Directors’ Report contained in the
Annual Report.
As a matter of practice the Chief Executive Officer and the Chief Financial Officer are required to make declarations in accordance
with section 295A of the Corporations Act that the Company’s financial reports present a true an fair view in all material respects of
the Company’s financial condition and operational results and are in accordance with relevant accounting standards, and to provide
assurance that the declaration is founded on a sound system of risk management and internal control, and that the system is
operating effectively in all material respects.
(ASX Recommendation 4.2)
The external auditors attend the committee meetings at least twice a year and on other occasions where circumstances warrant as
well as being available at the Company’s AGM to answer shareholders questions about the conduct of the audit and the preparation
and content of the audit report.
The Auditor’s lead engagement partner attended the Company’s 2016 Annual General Meeting. There were no questions from
shareholders about the conduct of the audit and the preparation and content of the auditor’s report for year ended 30 June 2016.
(ASX Recommendation 4.3)
Make Timely and Balanced Disclosure
The Company appreciates the considerable importance of communications with Shareholders and the market. The Company’s
communication strategy requires communication with shareholders and investors in an open regular and timely manner so that the
shareholders and investors have sufficient information to make informed investment decisions on the operations and results of the
Company.
The strategy provides for the use of systems that ensure regular and timely release of information about the Company to
shareholders.
Methods of communication currently employed include:
Shareholder Updates
Quarterly Reports
Half Yearly Reports
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Tlou Energy Limited – Annual Report 2017
Annual Reports; and
Face to face Shareholder presentations
Continuous Disclosure
The Company is a “disclosing entity” pursuant to section 111AR of the Corporations Act and, as such, complies with the continuous
disclosure requirements of Chapter 3 of the ASX Listing Rules and section 674 of the Corporations Act. Subject to the exceptions
contained in the ASX Listing Rules, the Company is required to disclose to ASX any information concerning the Company which is
not generally available and which a reasonable person would expect to have a material effect on the price or value of the Shares.
The Company has adopted an updated Continuous Disclosure Policy in compliance with ASX Recommendation 5.1 and ASX
Guidance Note 8: Continuous Disclosure. A copy of the policy can be found on the Company’s website.
Each employee and consultant engaged by the Company will be provided with a copy of the policy while impressing upon them
during their induction the importance of the same.
The Company Secretary has primary responsibility for discharging the Company's continuous disclosure obligations to the ASX. All
officers and employees must immediately notify the Company Secretary of any material information which may need to be disclosed
under Listing Rule 3.1-3.1B. Where uncertainty arises as to the meeting of continuous disclosure obligations, the Company
Secretary may seek external legal advice.
The Officers of the Company are committed to:
Encouraging prompt disclosure of any material information which may need to be disclosed under Listing Rule 3.1-3.1B;
and
Promoting an understanding of the importance of the continuous disclosure regime throughout the Company.
The Company uses its website www.tlouenergy.com as its primary communication tool for distribution of the annual report, market
announcements and media disclosures. External communication which may have a material effect on the price or value of the
Company’s securities will not be released unless it has been announced previously to the ASX. Effective participation by
Shareholders is encouraged at general meetings and procedures have been designed to facilitate this including online voting and the
ability of stakeholders to subscribe to receive copies of announcements and reports that are released by the Company.
(ASX Recommendation 5.1)
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Tlou Energy Limited – Annual Report 2017
Respect the Rights of Security Holders
The Company keeps shareholders and other interested parties informed of performance and major developments via
communications through its website. This includes details of the Governance framework adopted by the Company including copies
of the Corporate Governance Polices and Charters. The link to which is: http://tlouenergy.com/corporate-governance
(ASX Recommendation 6.1)
The Company has a Shareholder Communications and Engagement Policy that outlines the processes followed to ensure
communication with shareholders and the investment community is effective, consistent and adheres to the principles of continuous
disclosure. This is one of the policies available on the Governance page of the Company’s website.
(ASX Recommendation 6.2)
The policy regarding shareholder communication and engagement sets out the processes the Company has in place to facilitate and
encourage the participation of shareholders and other investors at meetings and to engage with management. These include
encouraging shareholders to attend the AGM and allowing them to vote on line if they are unable to attend the meeting.
(ASX Recommendation 6.3)
The Company considers that communicating with shareholders by electronic means is an efficient way to distribute information in a
timely and convenient manner. Therefore, its website contains a function to allow interested parties to subscribe to receive electronic
notification of public releases and other relevant material concerning the Company and its activities.
(ASX Recommendation 6.4)
Recognition and Management of Risk
The Board is responsible for the oversight of the Company’s risk management. The responsibility and control of risk management is
overseen by the Managing Director, with matters delegated to the appropriate level of management within the Company with the
Managing Director being responsible for assuring the systems are maintained and complied with.
The Company has established a Risk Committee that is focused on ensuring that the Company maintains an effective system of
internal control and risk management. The Committee’s structure, roles and responsibilities are detailed in the Risk Committee Charter.
Flowing from this, the Company has adopted a Risk Management Policy that governs the Company’s approach to managing financial
and non-financial risks.
The members of the Risk Committee are appointed by the Board, two of whom are to be Board Members. Company personnel are
required to attend Risk Committee meetings as and when requested.
Specific functions of the Risk Committee are to:
(a)
(b)
(c)
(d)
(e)
(f)
review and oversee the Company's risk profiles as developed and reported by management;
identify material business risks and monitor emerging risks and changes in the Company's risk profile;
monitor and review the risk management performance of the Company, including conducting specific investigations
where deemed necessary;
review any legal matters which could significantly impact the Company's risk management and internal control
systems, and any significant compliance and reporting issues, including any recent internal regulatory compliance
reviews and reports;
review the effectiveness of the compliance function at least annually, including the system for monitoring compliance
with laws and regulations and the results of management's investigations and follow-ups (including disciplinary action)
of any fraudulent acts or non-compliance;
be satisfied that all regulatory compliance matters have been considered in the preparation of the Company's official
documents;
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Tlou Energy Limited – Annual Report 2017
(g)
(h)
(i)
(j)
(k)
review the findings of any examinations by regulatory agencies and oversee all liaison activities with regulators;
review and discuss media releases, ASX announcements and any other information provided to analysts;
review corporate legal reports of evidence of a material violation of the Corporations Act, the ASX Listing Rules or
breaches of fiduciary duties;
review the Company's insurance strategy, including the coverage and limits of the insurance policies, in order to, if
thought fit, recommend to the Board for approval; and
promote an awareness of a risk based culture in the balance of pursuit of business objectives whilst managing risks.
(ASX Recommendation 7.1)
The Risk Committee meets whenever necessary but no less than three times a year and keeps minutes of its meetings which are
included for review at the following Board Meeting.
The Company has a qualified Compliance and Risk Manager who has been engaged to oversee the design and implementation of the
risk control programme. The Company’s Risk Management Policy requires the Board, being guided by the Risk Committee to at least
annually undertake a risk review to determine if the existing risk framework is satisfactory considering the material risks faced by the
Company.
The Board with the assistance of the Risk Committee has completed a review of the Company’s risk management framework during
the year under review and determined that the risk management framework that was in place was satisfactory for the present needs
of the Company.
(ASX Recommendation 7.2)
The Company does not have a formal internal audit function. However, it has adopted a number of internal controls such as
identifying key risks in a Risk Register and managing activities within a budget and operational plan. Management led by the Chief
Financial Officer periodically undertakes an internal review of financial systems and processes and where systems are considered to
require improvement these systems are developed. Delegations of Authority are reviewed annually by the Audit Committee.
The ongoing mitigation and management of financial and operational risks are standing agenda items of the Audit and Risk
Committees. The Chief Executive Officer and the Chair of the Audit Committee are responsible for reporting to the Board on a
regular basis in relation to whether the Company’s material business risks are being managed effectively by the existing
management and internal controls systems.
(ASX Recommendation 7.3)
The Company undertakes gas exploration activities and as such faces inherent risks to its business, including economic,
environmental and social sustainability risks which may materially impact the Company’s ability to create or preserve value for
shareholders over the short, medium or long term. The Board is regularly briefed by management as well as keeping itself abreast of
possible material exposure to risks that the Company may face.
Of core importance to the Company is safety, which it considers a priority not only in respect to its employees and contractors but
also to the community and environment in which it operates. The Company believes that if these matters are priorities then they will
act as drivers for value to shareholders. The Company has in place policies and procedures, including a risk management
framework, to help manage these risks.
(ASX Recommendation 7.4)
Remunerate Fairly and Responsibly
The Board has established a Nomination & Remuneration Committee. There is no separate Remuneration Committee.
Given the size of the Board, the Directors have previously determined that the non-executive Directors would execute the functions
of a Nomination & Remuneration Committee and have adopted a Nomination & Remuneration Charter. As a result of the recent
appointments to the Board the Company expects that the Nomination & Remuneration Committee will in the future be constituted by
a majority of independent non-executive directors.
73
Tlou Energy Limited – Annual Report 2017
The Board does not believe that any advantage would be achieved at this juncture taking into account the size of the Company and
the Board to have a separately constituted Remuneration Committee to carry out this function.
The non-executive members of the Board acting in their capacity as a Committee is tasked with ensuring that the Company has
remuneration policies and practices which enable it to attract and retain Directors and executives who will best contribute towards
achieving positive outcomes for Shareholders.
The Company complies with the guidelines for executive remuneration packages and non-executive Director remuneration as
recommended in the ASX Recommendations.
The ASX Listing Rules and the Constitution require that the maximum aggregate amount of remuneration to be allocated among the
non-executive Directors be approved by the shareholders in a general meeting. In proposing the maximum amount of consideration
by shareholders, and in determining the allocation, the Nomination & Remuneration Committee will take into account the time
demands made on Directors and such factors as fees paid to non-executive Directors in comparable Australian companies. A
meeting of shareholders held 10 July 2012 saw a resolution passed approving a pool of no more than $500,000 for this purpose.
The names of the members of the Nomination & Remuneration Committee and their attendances at the meetings of the Committee
are set out in the Directors Report which forms a part of the Company’s Annual Report. The remuneration paid to Directors and
senior executives is shown in the Remuneration Report contained in the Directors’ Report, which includes details on the Company’s
remuneration policies. There are no termination and retirement benefits for non-executive Directors other than statutory
superannuation entitlements.
(ASX Recommendation 8.1)
The Company’s policies and practices regarding the remuneration of non-executive Directors, executive Directors and senior
executives is set out in the Nomination & Remuneration Committee Charter and in the Remuneration Report contained in the 2017
Annual Report.
A copy of the Nomination & Remuneration Committee Charter is available on the Company’s website.
(ASX Recommendation 8.2)
The Company has an equity based remuneration scheme, although no shares have been issued through the same since the listing
of the Company. The Company’s Policy for Trading in the Company’s Securities does not specifically prohibit Directors entering into
transactions or arrangement s which would limit the economic risk of unvested entitlements.
However, all dealings in the Company’s Securities do need to be first approved by the Company. The Securities Trading Policy is
available on the Company’s website.
(ASX Recommendation 8.3)
74
Tlou Energy Limited – Annual Report 2017
Additional Information
1.
Shareholder Information
The shareholder information set out below was applicable as at 24 August 2017 and relates to shares held on the ASX. Depositary
Interests on London’s AIM market are included as one holder ‘Computershare Clearing Pty Ltd’.
2.
Ordinary Share Capital
304,042,848 fully paid ordinary shares.
3.
Number of Equity Holders
Ordinary Share Capital held by 462 individual shareholders.
4.
Voting Rights
In accordance with the Company's Constitution, for a show of hands, every shareholder present in person or by a proxy, attorney or
representative of a shareholder has one vote and for a poll, every shareholder present in person or by a proxy, attorney or
representative has in respect of fully paid shares, one vote for every share held. No class of option holder or performance rights
holder has a right to vote, however the shares issued upon exercise of options or performance rights will rank pari passu with the
then existing issued fully paid ordinary shares.
5.
Distribution of Shareholdings
Holdings
No. of
Holders
Units
1
1,001
5,001
10,001
50,001
100,001
-
-
-
-
-
-
1,000
5,000
10,000
50,000
100,000
maximum
12
34
47
146
59
164
462
2,436
125,485
368,947
4,006,586
4,539,491
294,999,903
304,042,848
6.
Substantial Shareholders
% of
Issued
Ordinary
Capital
2.6
7.4
10.2
31.6
12.8
35.5
100
The following information is extracted from the Company’s Register of Substantial Shareholders:
Investor Group - Anthony Gilby
Investor Group - Nathan Mitchell
Ordinary Fully
Paid Shares Held
17,946,487
16,680,814
% of
Issued
Ordinary
Capital
5.9
5.5
75
Tlou Energy Limited – Annual Report 2017
7.
The 20 Largest Holders of Ordinary Shares
Computershare Clearing Pty Ltd
Mitchell Group Holdings Pty Ltd
Gilby Super Pty Ltd
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
IK Botswana Investments Pty Ltd
Mr Christopher John Blamey & Mrs Anne Margaret Blamey
Gilby Resources Pty Ltd
Dynamic Supplies Investments Pty Ltd
Liath Pty Ltd
Mitchell Family Investments (Qld) Pty Ltd
BNP Paribas Nominees Pty Ltd
Heath Self Managed Superannuation Pty Ltd
Nathan Mitchell
Portland Australia Pty Ltd
Heath Self Managed S/F Pty Ltd
Rag Superannuation Pty Ltd
David Royds
Anthony Gilby
Total
Balance of register
Grand total
Ordinary
Fully Paid
Shares Held
141,374,193
11,136,364
10,854,240
10,513,416
8,163,614
8,033,310
7,115,000
4,994,401
4,775,105
4,674,809
3,300,000
2,913,650
2,850,909
2,513,875
2,500,000
2,000,000
1,986,125
1,897,042
1,750,476
1,695,330
235,041,859
69,000,989
304,042,848
% of
Issued
Ordinary
Capital
46.50
3.66
3.57
3.46
2.69
2.64
2.34
1.64
1.57
1.54
1.09
0.96
0.94
0.83
0.82
0.66
0.65
0.62
0.58
0.56
77.31
22.69
100.00
8.
Restricted Securities
There were no restricted securities issued during the reporting period and there are currently none on issue.
9.
Interests in Prospecting Licences (PL) and Mining Licence
As at the date of this Report, Tlou Energy Limited had an interest in the following licences:
PL
1/2004
3/2004
35/2000
37/2000
237/2014
238/2014
239/2014
240/2014
241/2014
Region
Lesedi Project (Botswana)
Lesedi Project (Botswana)
Lesedi Project (Botswana)
Lesedi Project (Botswana)
Mamba Project (Botswana)
Mamba Project (Botswana)
Mamba Project (Botswana)
Mamba Project (Botswana)
Mamba Project (Botswana)
interest % *
100%
100%
100%
100%
100%
100%
100%
100%
100%
Operator
Tlou Energy Botswana Pty Ltd
Tlou Energy Botswana Pty Ltd
Tlou Energy Botswana Pty Ltd
Tlou Energy Botswana Pty Ltd
Tlou Energy Botswana Pty Ltd
Tlou Energy Botswana Pty Ltd
Tlou Energy Botswana Pty Ltd
Tlou Energy Botswana Pty Ltd
Tlou Energy Botswana Pty Ltd
Mining Licence
Lesedi Project (Botswana)
100%
Tlou Energy Botswana Pty Ltd
* The interest shown in each of the licences represents the percentage that Tlou Energy Limited holds in the corporate holder of the
licence.
76
TLOU ENERGY
77 TLOU ENERGY
210 Alice Street
Brisbane QLD 4000
Australia
Phone:
Fax:
Email:
+61 7 3012 9793
+61 7 3003 0675
info@tlouenergy.com
www.tlouenergy.com