GROUP AND COMPANY CASH FLOW STATEMENTS

Year ended 31 December 2020

 

		Group		Company
		Year ended 31 December 2021   £	Year ended 31 December              2020   £	Year ended 31 December 2021   £	Year ended 31 December 2020   £
Operating activities
Operating loss		(1,455,184)	(1,130,054)	(557,208)	(515,218)
Adjustments to reconcile profit before tax to net cash flows: Depreciation		264,677	277,921	334	445
Interest paid		-	(351)	-	100,090
Expected credit losses		-	-	-	-
Share based payments		-	50,398	-	50,398
Foreign exchange difference Working capital changes:    Decrease/(Increase) in inventories		2,687   17,799	(34,531)   (4,198)	-   -	(10,482)
Impairment of inventories		92,150	-	-	-
(Decrease)/increase in trade and other    receivables		(116,768)	54,984	(217,136)	39,912
Decrease in trade and other payables		(286,968)	(116,836)	(110,197)	(189,149)
Net cash outflow from operating activities		(1,481,607)	(902,657)	(884,207)	(524,004)
Cash flows from investing activities Capital introduced to subsidiaries		-	-	(636,035)	(400,904)
Purchase of property, plant and equipment		-	-	-	-
Finance income		701	112	2,167	112
Net cash used in/(from) investing activities		701	112	(633,868)	(400,792)
Cash flows from financing activities
Proceeds from borrowings		-	180,000	-	180,000
Repayment of borrowings		(120,000)	-	(120,0000	-
Repayment of convertible loan notes		(312,226)	(160,421)	(312,226)	(160,421)
Repayment of lease liabilities		(30,214)	(17,404)	-	-
Lease interest		(3,451)	(5,059)	-	-
Proceeds from issue of ordinary shares		3,375,000	950,000	3,375,000	950,000
Share issue costs		(224,092)	(60,000)	(224,092)	(60,000)
Net cash inflow from financing activities		2,685,017	887,116	2,718,682	909,579
Net decrease in cash and cash equivalents		1,204,111	(15,429)	1,200,607	(15,217)
Cash and cash equivalents at beginning of year		25,690	41,110	25,628	40,845
Effect of foreign exchange rate changes on cash and cash equivalents		-	9	-	-
Cash and cash equivalents at end of year	19	1,229,801	25,690	1,226,235	25,628

 

 

NOTES TO THE COMPANY'S FINANCIAL STATEMENTS

Year ended 31 December 2021

 

1.            General Information

 

Edenville Energy Plc is a public limited Company incorporated in England and Wales. The address of the registered office is Aston House, Cornwall Avenue, London, N3 1LF. The Company's shares are listed on AIM, a market operated by the London Stock Exchange.

 

The principal activity of the Group is the exploration, development and mining of energy commodities predominantly coal in Africa.

 

2.            Group Accounting Policies

 

Basis of preparation and statement of compliance

 

The Group's and Company's financial statements have been prepared in accordance with UK-adopted international accounting standards, and the parts of the Companies Act 2006 applicable to companies reporting under IFRS. The Group's financial statements have also been prepared under the historical cost convention, except for the measurement to fair value of assets and financial instruments as described in the accounting policies set out below.

 

The preparation of financial statements in conformity with UK-adopted international accounting standards requires the use of certain critical accounting estimates.  It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Group's financial statements are disclosed in Note 4..

 

The Company has elected to take the exemption under section 408 of the Companies Act 2006 from presenting the Parent Company Income Statement. The loss after tax for the Parent Company for the year was £555,041 (2020: £515,106)

 

Going concern

 

At 31 December 2021 the Group had cash balances totalling £1,229,801. 

Production through the later half of 2021 struggled to achieve target levels and as a result of this the company entered into a Coal Mining Agreement which failed to have impact on production rates despite the current high coal prices.  This agreement was terminated in May 2022.

 

The high coal prices have resulted in:

 

-	the export of coal from the traditional local coal suppliers in Tanzania, usually to India and
-	created major demand from East Africa who would normally source their coal from South Africa but now find pricing prohibitive.

 

As a result of this situation the company is receiving regular enquiries for coal supply from within Tanzania, East Africa and internationally, the company has therefore taken back control of the mining operations and is already investing to raise production levels to leverage off the current demand situation.   

 

Based on the current working capital forecast which includes previous placings, the Group has sufficient funds in order to allow it to continue in production and implement planned project development and any upgrades. However, if there are delays in procuring orders or if large export contracts are entered into then the Group may require additional funds within twelve months of the date of approval of these financial statements. The ability of the Group to raise additional funds is dependent upon investor appetite or the willingness of the banking sector to finance ongoing operations.

 

Expenditure on excavation is related to the level of orders and both head office costs and Tanzanian administration costs can be reduced if the additional funds cannot be raised and the Group therefore continues to adopt the going concern basis in preparing its consolidated financial statements.

 

Adoption of new and revised standards and changes in accounting policies

 

There were no new standards or interpretations impacting the Group that will be adopted in the annual financial statements for the year ended 31 December 2021, and which have given rise to changes in the Group's accounting policies.

 

Standards and interpretations in issue but not yet effective or not yet relevant

 

At the date of authorisation of these financial statements the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective:

 

 

Standard	Detail	Effective for annual periods commencing on or after
IFRS 1	Amendments resulting from Annual improvements to IFRS Standards 2018-2020 (subsidiary as a first time adopter)	1 January 2022
IFRS 3	Amendments updating a reference to the Conceptual Framework	1 January 2022
IFRS 9	Amendments resulting form Annual improvements to IFRS Standards 2018-2020 (fees in ' 10 per cent' test for de-recognition of financial liabilities)	1 January 2022
IFRS 17	Original issue	1 January 2023
IAS 1	Amendments regarding the classification of liabilities. Amendments regarding the disclosure of accounting policies	1 January 2023
IAS 8	Amendments regarding the definition of accounting estimates	1 January 2023
IAS 12	Amendments regarding deferred tax on leases and decommissioning obligations	1 January 2023
IAS 16	Amendments prohibiting a company from deducting from cost of property, plant and equipment amounts received from selling items produced while the company is preparing the asset for its intended use.	1 January 2022
IAS 37	Amendments regarding the cost to include when assessing whether a contract is onerous	1 January 2022

 

The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the Group's financial statements.

 

Share based payments (Share options and Warrants)

 

The Group operates a number of equity-settled, share-based compensation plans, under which the entity receives services from employees as consideration for equity instruments (share options) of the Group. The fair value of the employee services received in exchange for the grant of options is recognised as an expense.

The Group also , from time to time , issues warrants, primarily to advisors of the company in connection with placing of shares and/or other services. There fair value of these warrants is either recognised as an expense or as a share issue costs offset against share premium, depending on the nature of services.

The total amount to be expensed or offset against share premium in respect of share issue costs is determined by reference to the fair value of the options granted:

 

·	including any market performance conditions;
·	excluding the impact of any service and non-market performance vesting conditions (for example, profitability, sales growth targets and remaining an employee of the entity over a specified time period); and
·	excluding the impact of any non-vesting conditions (for example, the requirement of employees to save).

 

Assumptions about the number of options that are expected to vest include consideration of non-market vesting conditions. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each reporting period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity.

 

When the options are exercised, the Group issues new shares. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised.

 

Basis of consolidation

 

The Group's financial statements consolidate the financial statements of Edenville Energy Plc and all its subsidiary undertakings (Edenville International (Seychelles) Limited, Edenville International (Tanzania) Limited and Edenville Power (TZ) Limited) made up to 31 December 2021 (Note 11).  Profits and losses on intra-group transactions are eliminated on consolidation.

 

Subsidiaries are all entities over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases.

 

Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the statement of profit or loss and other comprehensive income from the date the Group gains control until the date the Group ceases to control the subsidiary. Where the Group's interest is less than 100 per cent, the interest attributable to outside shareholders is reflected in non-controlling interests (NCIs).

 

Business combinations

 

The Group adopts the acquisition method in accounting for the acquisition of subsidiaries.  On acquisition the cost is measured at the fair value of the assets given, plus equity instruments issued and liabilities incurred or assumed at the date of exchange.  The assets acquired and liabilities and contingent liabilities assumed in a business combination are measured at their fair value at the date of acquisition. Any excess of the fair value of the consideration over the fair value of the identifiable net assets acquired is recorded as goodwill.

 

Any deficiency of the fair value of the consideration below the fair value of identifiable net assets acquired is credited to the income statement in the period of the acquisition.

 

The results of subsidiary undertakings acquired or disposed of during the year are included in the group statement of comprehensive income statement from the effective date of acquisition or up to the effective date of disposal.

 

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the group. Inter-company transactions and balances between group companies are eliminated.

 

Revenue recognition

 

consideration received or receivable, and represent amounts receivable for goods supplied, stated net of discounts, returns and value added taxes. Under IFRS 15 there is a five-step approach to revenue recognition which is adopted across all revenue streams. The process is:

 

Step 1: Identify the contract(s) with a customer;

Step 2: Identify the performance obligations in the contract;

Step 3: Determine the transaction price;

Step 4: Allocate the transaction price to the performance obligations in the contract; and

Step 5: Recognise revenue as and when the entity satisfies the performance obligation.

 

The Group has one revenue stream being the sale of coal and other aggregate bi-products produced by the Group. Sales are predominantly made at the Group's premises as customers collect their quantities from the mine. Such revenue is recognised at the point of contact at a pre-agreed fixed price on a per tonnage basis. For deliveries made to customer premises, revenue is recognised at the point of which the products leave the Group's premises

 

Presentational and functional currency

 

This financial information is presented in pounds sterling, which is the Company's functional currency.

 

The functional currency of the Groups subsidiaries is US Dollars. The financial statements are presented in pounds sterling.

 

In preparing the financial statements of individual entities, transaction in currencies other than the entity's functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the balance sheet date.

 

For the purposes of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations (including comparatives) are expressed in pounds sterling using exchange rates prevailing at the balance sheet date. Income and expense items are translated at the average exchange rate for the period. Exchange differences arising, if any, are classified as equity and transferred to the Group's foreign currency translation reserve. Such translation differences are recognised in the income statement in the period in which the foreign operation is disposed.

 

Financial instruments

 

Financial assets

 

Financial assets comprise investments, cash and cash equivalents and receivables. Unless otherwise indicated, the carrying amounts of the Group's financial assets are a reasonable approximation of their fair values.

 

Classification and measurement

The Group classifies its financial assets into the following categories: those to be measured subsequently at fair value (either through other comprehensive income (FVOCI) or through the income statement (FVPL) and those to be held at amortised cost.

 

Classification depends on the business model for managing the financial assets and the contractual terms of the cash flows.

 

Management determines the classification of financial assets at initial recognition. The Group's policy with regard to financial risk management is set out in note 3. Generally, the group does not acquire financial assets for the purpose of selling in the short term. 

 

The group's business model is primarily that of "hold to collect" (where assets are held in order to collect contractual cash flows).   When the group enters into derivative contracts, these transactions are designed to reduce exposures relating to assets and liabilities, firm commitments or anticipated transactions.

 

Financial Assets

The Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss.

 

ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original EIR. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.

 

ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).

 

For trade receivables (not subject to provisional pricing) and other receivables due in less than 12 months, the Group applies the simplified approach in calculating ECLs, as permitted by IFRS 9. Therefore, the Group does not track changes in credit risk, but instead, recognises a loss allowance based on the financial asset's lifetime ECL at each reporting date.

 

The Group considers a financial asset in default when contractual payments are 90 days past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows and usually occurs when past due for more than one year and not subject to enforcement activity.

 

At each reporting date, the Group assesses whether financial assets carried at amortised cost are credit impaired. A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

 

Financial Assets held at fair value through other comprehensive income (FVOCI)

The classification applies to the following financial assets:

-	Debt instruments that are held under a business model where they are held for the collection of contractual cash flows and also for sale ("collect and sale") and which have cash flows that meet the SPPI criteria.  An example would be where trade receivable invoices for certain customers were factored from time to time.  All movements in the fair value of these financial assets are taken through comprehensive income, except for the recognition of impairment gains and losses, interest revenue (including transaction costs by applying the effective interest method), gains or losses arising on derecognition and foreign exchange gains and losses which are recognised in the income statement.  When the financial asset is derecognised, the cumulative fair value gain or loss previously recognised in other comprehensive income is reclassified to the income statement.
-	Equity investments where the group has irrevocably elected to present fair value gains and losses on revaluation of such equity investments, including any foreign exchange component, are recognised in other comprehensive income.
-	When equity investment is derecognised, there is no reclassification of fair value gains or losses previously recognised in other comprehensive income to the income statement.  Dividends are recognised in the income statement when the right to receive payment is established.

 

Financial Assets held at fair value through profit or loss (FVPL)

The classification applies to the following financial assets.  In all cases, transaction costs are immediately expensed to the income statement. 

 

-	Debt instruments that do not meet the criteria of amortised costs or fair value through other comprehensive income.
-	Equity investments which are held for trading or where the FVOCI election has not been applied.  All fair value gains or losses and related dividend income are recognised in the income statement.
-	Derivatives which are not designated as a hedging instrument.  All subsequent fair value gains or losses are recognised in the income statement.

Derecognition

 

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.

 

On derecognition of a financial asset measured at amortised cost, the difference between the asset's carrying amount and the sum of the consideration received and receivable is recognised in profit or loss.

 

Financial Liabilities

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial

 

Liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. The Group's financial liabilities include trade and other payables and loans.

 

Subsequent measurement

The measurement of financial liabilities depends on their classification, as described below:

 

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by IFRS 9. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognised in the statement of profit or loss and other comprehensive income.

 

Trade and other payables

 After initial recognition, trade and other payables are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in the statement of profit or loss and other comprehensive income when the liabilities are derecognised, as well as through the EIR amortisation process.

 

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss and other comprehensive income.

 

Derecognition

A financial liability is derecognised when the associated obligation is discharged or cancelled or expires.

 

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in profit or loss and other comprehensive income.

 

Liabilities within the scope of IFRS 9 are classified as financial liabilities at fair value through profit and loss or other liabilities, as appropriate.

 

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

 

Financial liabilities included in trade and other payables are recognised initially at fair value and subsequently at amortised cost.

 

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the average costing method. Components of inventories consist of coal, parts and supplies, net of allowance for obsolescence. Coal inventories represent coal contained in stockpiles, coal that has been mined and hauled to the wash plant (raw coal) for processing and coal that has been processed (crushed, washed and sized) and stockpiled for shipment to customers.

 

The cost of raw and prepared coal comprises extraction costs, direct labour, other direct costs and related production overheads (based on normal operating capacity). It excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

 

The Company performs inventory obsolescence at each reporting date. In determining whether inventories are obsolete, the Company assesses the age at which inventories held in the store in order to make an assessment of the inventory write down to net realisable value.

 

Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand, demand deposits and other short term highly liquid investments that are readily convertible to a known amount of cash and are subject to insignificant risk of changes in value.

 

Convertible loan notes

The convertible loan notes issued by the Company are classified separately as financial liabilities in accordance with the substance of contractual arrangements. The convertible loan note ("CLN") is a compound financial instrument that cannot be converted to share capital at the option of the holder. As the CLN, and the accrued interest, can only be repaid as a loan, it has been recognised within liabilities. Interest is accounted for on an accruals basis and charged to the Consolidated Income Statement and added to the carrying amount of the liability component of the CLN.

 

Property, plant and equipment

Property, plant and equipment are stated at cost on acquisition less accumulated depreciation and accumulated impairment losses.

 

Depreciation is provided on all property, plant and equipment categories at rates calculated to write off the cost, less estimated residual value on a reducing balance basis over their expected useful economic life. The depreciation rates are as follows:

	Basis of depreciation
Fixtures, fittings and equipment	25% reducing balance
Plant and machinery	5 years straight line or 25% reducing balance
Office equipment	25% reducing balance
Motor vehicles	25% reducing balance

 

Costs capitalised include the purchase price of an asset and any costs directly attributable to bringing it into working condition for its intended use.

 

Production assets

Coal land, mine development costs, which include directly attributable construction overheads, land and coal rights are recorded at cost.  Coal land and mine development are depleted and amortised, respectively, using the units of production method, based on estimated recoverable tonnage. The depletion of coal rights and depreciation of restoration costs are expensed by reference to the estimated amount of coal to be recovered over the expected life of the operation.

 

Coal Mine Reclamation Costs

Future cost requirements for land reclamation are estimated where surface operations have been conducted, based on the Group's interpretation of the technical standards of regulations enacted by the Government of Tanzania. These costs relate to reclaiming the pit and support acreage at surface mines and sealing portals at deep mines. Other costs include reclaiming refuse and slurry ponds as well as related termination/exit costs.

 

The Group records asset retirement obligations that result from the acquisition, construction or operation of long-lived assets at fair value when the liability is incurred. Upon the initial recognition of a liability, that cost is capitalised as part of the related long-lived asset and expensed over the useful life of the asset. The asset retirement costs are recorded in Land, Coal Rights and Restoration Costs.

 

The Group expenses reclamation costs prior to the mine closure. The establishment of the end of mine reclamation and closure liability is based upon permit requirements and requires significant estimates and assumptions, principally associated with regulatory requirements, costs and recoverable coal lands. Annually, the end of mine reclamation and closure liability is reviewed and necessary adjustments are made, including adjustments due to mine plan and permit changes and revisions of cost and production levels to optimize mining and reclamation efficiency. The amount of such adjustments is reflected in the year end reclamation provision calculation.

 

Stripping (waste removal) costs

 

As part of its mining operations, the Group incurs stripping (waste removal) costs both during the production phase of its operations. Stripping activities undertaken during the production phase of a surface mine (production stripping) are accounted for as set out below.

After the commencement of production, further development of the mine may require a phase of unusually high stripping that is similar in nature to development phase stripping. The cost of such stripping is accounted for in the same way as development stripping (as outlined above). Production stripping is generally considered to create two benefits, being either the production of inventory or improved access to the ore to be mined in the future. Where the benefits are realised in the form of inventory produced in the period, the production stripping costs are accounted for as part of the cost of producing those inventories.

Where the benefits are realised in the form of improved access to ore to be mined in the future, the costs are recognised as a non-current asset, referred to as a 'stripping activity asset', if the following criteria are met:

a) Future economic benefits (being improved access to the ore body) are probable;

b) The component of the ore body for which access will be improved can be accurately identified; and

c) The costs associated with the improved access can be reliably measured

If any of the criteria are not met, the production stripping costs are charged to profit or loss as operating costs as they are incurred.

In identifying components of the ore body, the Group works closely with the mining operations personnel for each mining operation to analyse each of the mine plans. Generally, a component will be a subset of the total ore body, and a mine may have several components. The mine plans, and therefore the identification of components, can vary between mines for a number of reasons. These include, but are not limited to: the type of commodity, the geological characteristics of the ore body, the geographical location, and/or financial considerations.

The stripping activity asset is initially measured at cost, which is the accumulation of costs directly incurred to perform the stripping activity that improves access to the identified component of ore, plus an allocation of directly attributable overhead costs. If incidental operations are occurring at the same time as the production stripping activity, but are not necessary for the production stripping activity to continue as planned, these costs are not included in the cost of the stripping activity asset.

If the costs of the inventory produced and the stripping activity asset are not separately identifiable, a relevant production measure is used to allocate the production stripping costs between the inventory produced and the stripping activity asset. This production measure is calculated for the identified component of the ore body and is used as a benchmark to identify the extent to which the additional activity of creating a future benefit has taken place. The Group uses the expected volume of waste extracted compared with the actual volume for a given volume of ore production of each component.

The stripping activity asset is accounted for as an addition to, or an enhancement of, an existing asset, being the mine asset, and is presented as part of 'Intangible assets' in the statement of financial position. This forms part of the total investment

 

Finance costs

 

Finance costs of debt, including premiums payable on settlement and direct issue costs are charged to the income statement on an accruals basis over the term of the instrument, using the effective interest method.

 

Income taxation

The taxation charge represents the sum of current tax and deferred tax.

The tax currently payable is based on the taxable profit for the period using the tax rates that have been enacted or substantially enacted by the balance sheet date. Taxable profit differs from the net profit as reported in the income statement

because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.

 

Deferred taxation

 

Deferred tax is recognised, using the liability method, in respect of temporary differences between the carrying amount of the Group's assets and liabilities and their tax base. Deferred tax liabilities are offset against deferred tax assets within the same taxable entity or qualifying local tax group. Any remaining deferred tax asset is recognised only when, on the basis of all available evidence, it can be regarded as probable that there will be suitable taxable profits, within the same jurisdiction, in the foreseeable future against which the deductible temporary difference can be utilised. Deferred tax is determined using tax rates that are expected to apply in the periods in which the asset is realised or liability settled, based on tax rates and laws that have been enacted or substantially enacted by the balance sheet date. Deferred tax is recognised in the income statement, except when the tax relates to items charged or credited directly in equity, in which case the tax is also recognised in equity.

 

Share capital

 

Ordinary shares are classified as equity.  Incremental costs directly attributable to the issue of new shares or options are shown in equity as deduction, net of tax, from the proceeds.

 

Intangible assets

 

Intangible assets arose as a result of the valuation placed on the original six Tanzanian licences acquired on the acquisition of Edenville (Tanzania) Limited. The allocation price was based on the price paid to acquire these the Group's licences. The licences are amortised over the life of the production asset using rates of depletion.

 

Operating segments

 

Operating segments are reported in a manner consistent with the internal reporting provided to the chief executive officer.

The Board considers that the Group's project activity constitutes one operating and reporting segment, as defined under IFRS 8.

The total profit measures are operating profit and profit for the year, both disclosed on the face of the combined income statement.

 

3.            Financial risk management

 

Fair value estimation

 

The carrying value less impairment provision of trade receivables and payables is assumed to approximate their fair values, due to their short-term nature.  The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the group for similar financial instruments.

 

4.            Critical accounting estimates and areas of judgement

 

The Group makes estimates and assumptions concerning the future, which by definition will seldom result in actual results that match the accounting estimate. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year are those in relation to:

 

·	the impairment of coal production assets and intangible assets;
·	share based payments
·	Valuation of provision for restoration costs
·	Recoverability of VAT balance
·	Recoverability of Inventory

 

Impairment - coal production assets and intangible assets (notes 15 and 16)

 

The Group is required to perform an impairment review, on coal production assets, for each CGU to which the asset relates. Impairment review is also required to be performed on other intangible assets when facts and circumstances suggest that the carrying amount of the asset may exceed its recoverable amount. The recoverable amount is based upon the Directors' judgements and are dependent upon the ability of the Company to obtain necessary financing to complete the development and future profitable production or proceeds from the disposal, at which point the value is estimated based upon the present value of the discounted future cash flows.

 

In assessing whether an impairment is required for the carrying value of an asset, its carrying value is compared with its recoverable amount. The recoverable amount is the higher of the asset's fair value less costs to sell and value in use. Given the nature of the Group's activities, information on the fair value of an asset is usually difficult to obtain unless negotiations with potential purchasers or similar transactions are taking place. Consequently, unless indicated otherwise, the recoverable amount used in assessing the impairment charges described below is value in use.

 

The calculation of value in use is most sensitive to the following assumptions:

 

·	Production volumes
·	Sales volumes
·	Discount rates
·	Coal prices
·	Operating overheads
·	Inventory

 

Estimated production volumes are based on the production capability of the plant and estimated customer demand.

 

 The Group generally estimates value in use using a discounted cash flow model. The future cash flows are adjusted for risks specific to the asset and discounted using a pre-tax discount rate of 10%.  The Directors believe this rate to be appropriate as this is in line with the borrowing rates the Group are expected to receive if they were to obtain significant long term finance based on discussions between the Directors and prospective parties. The Directors acknowledge that the Group does have small short term finance arrangements which attract a higher rate but have chosen not to use these rates as they would not be financing the production asset using short term borrowing facilities. These short term loans were needed mostly for working capital needs and most have been paid off in 2021. 

 

The directors have assessed the value of exploration and evaluation expenditure and development assets and intangible assets.  In their opinion there has been no impairment loss to these intangible assets in the period, other than the amounts charged to the income statement.

 

Share based payments (note 27)

 

The estimate of share based payments costs requires management to select an appropriate valuation model and make decisions about various inputs into the model including the volatility of its own share price, the probable life of the options, the vesting date of options where non-market performance conditions have been set and the risk free interest rate.

 

Valuation of provision for restoration costs (note 15)

 

The Company makes full provision for the future cost of rehabilitating mine sites and related production facilities on a discounted basis at the time of developing the mines and installing and using those facilities. The rehabilitation provision represents the present value of rehabilitation costs relating to mine sites, which are expected to be incurred in the future, which is when the producing mine properties are expected to cease operations. These provisions have been created based on the Company's internal estimates and a third party estimate from an independent consultant. Assumptions based on the current economic environment have been made, which management believes are a reasonable basis upon which to estimate the future liability. These estimates are reviewed regularly to take into account any material changes to the assumptions. However, actual rehabilitation costs will ultimately depend upon future market prices for the necessary rehabilitation works required that will reflect market conditions at the relevant time. Furthermore, the timing of rehabilitation is likely to depend on when the mines cease to produce at economically viable rates. This, in turn, will depend upon future coal prices, which are inherently uncertain.

 

Management increases reclamation costs estimates at an annual inflation rate to the anticipated future mine closure date.  This inflation rate is based on the historical rate for the industry for a comparable.

 

Recoverability of VAT receivable (note 18)

 

The group considers the recoverability of the VAT balance in Tanzania to be a key area of judgement, as the VAT can only be recovered by an offset against VAT payable on future sales.. The directors believe that the debtor is recoverable based on their knowledge of the market in Tanzania.

 

Recoverability of Inventory (Note 17)

 

The group considers the recoverability of the inventory to be a key area of judgement, and this is held at its realisable value. The directors believe the inventory to be in good condition and the main reason why the stock has remained high in the last two years is mainly because of the Covid-19 impact which necessitated the closure of the mine. The mine has now fully reopened in May 2021 and the directors are taking making concerted efforts to sell this excess stock. They have recently identified key customers and have sold 1,000 tonnes in June 2021 with an expected commitment to purchase at a rate of 1,200 tonnes per month thereafter. They are optimistic that the remainder of the stock will be sold over the next 1-3 years on the presumption that one of the key customers will sign a long term contract. As a result of this, they have concluded no impairment is required at this stage, based on the directors' judgement of the local market and estimates regarding the timeframe in which the goods can be sold. 

 

5.            Segmental information

 

The Board considers the business to have one reportable segment being Coal production assets.

 

Other represents unallocated expenses and assets held by the head office. Unallocated assets primarily consist of cash and cash equivalents.

 

			Coal Production Assets
2021			Coal	Other	Total
Consolidated Income Statement			£	£	£
Revenue - Tanzania			105,228	-	105,228
Cost of sales (excluding depreciation and amortisation)			(470,780)	-	(470,780)
Depreciation			(207,604)	-	(207,604)
Depletion of development assets			(6,464)	-	(6,464)
Gross profit			(579,620)	-	(579,620)
Administrative expenses			(183,321)	(646,874)	(830,195)
Depreciation			(45,035)	(334)	(45,369)
Group operating loss			(807,976)	(647,208)	(1,455,184)
Finance income				701	701
Finance cost			(5,842)		(5,842)
Loss on operations before taxation			(813,818)	(646,507)	(1,460,325)
Income tax			(526)	-	(526)
Loss for the year			(814,344)	(646,507)	(1,460,851)

 

 

 

			Coal Production Assets
2020			Coal	Other	Total
Consolidated Income Statement			£	£	£
Revenue - Tanzania			33,030	-	33,030
Revenue - other			822	-	822
Cost of sales (excluding depreciation and amortisation)			(349,121)	-	(349,121)
Depreciation			(209,208)	-	(209,208)
Depletion of development assets			(25,547)	-	(25,547)
Gross profit			(550,024)	-	(550,024)
Administrative expenses			(122,780)	(363,685)	(486,465)
Share based payment			-	(50,398)	(50,398)
Depreciation			(42,722)	(445)	(43,167)
Group operating loss			(715,526)	(414,528)	(1,130,054)
Finance income			-	112	112
Finance cost			(10,812)	(100,691)	(111,503)
Loss on operations before taxation			(726,338)	(515,107)	(1,241,445)
Income tax			-	-
Loss for the year			(726,338)	(515,107)	(1,241,445)

 

By Business Segment	Carrying value of segment assets		Additions to non-current assets and intangibles		Total liabilities
	2021	2020	2021	2020	2021	2020
	£	£	£	£	£	£
Coal	6,199,083	6,498,828		17,788	335,132	548,980
Other	1,361,402	35,458		-	97,022	639,445
	7,560,485	6,534,286	-	17,788	432,154	1,188,425
By Geographical Area
	£	£	£	£	£	£
Africa (Tanzania)	6,199,083	6,498,828	-	17,788	335,132	548,980
Europe	1,361,402	35,458	-	-	97,022	639,445
	7,560,485	6,534,286	-	17,788	432,154	1,188,425

 

 

Information about major customers

 

Included in revenues arising from the sale of coal are revenues which arose from sales to the Group's largest customers based in Tanzania. No other customers contributed 10% or more to the Group's revenue in either 2021 or 2020.

 

	2021	2020
	£	£
Customer 1	28,507	31,386
Customer 2	69,886	-
	98,393	31,386

 

6.            Expenses by nature

	2021	2020
	£	£
Staff costs	256,776	235,557
Audit fees	35,000	38,019
Office and other administrative services	109,840	70,257
AIM related costs including investor relations	77,405	3,220
Professional, legal and consultancy fees	317,131	113,110
Travel, entertaining and subsistence	10,534	7,906
Exchange gain	(1,358)	(10,482)
Depreciation	45,369	43,167
Provisions and expected credit losses	-	1,929
Other costs	24,867	26,949
	875,564	529,632

7.            Auditors' remuneration

 

	2021	2020
	£	£
Fees payable to the Company's auditor for the audit of the parent Company and consolidated accounts	47,000	40,000

 

8.            Employees

 

	Group 2021 £	2020 £	2021 £	Company 2020 £
Wages and salaries	405,452	325,009	174,000	179,250
Social security costs	40,484	20,781	13,807	-
Pensions	13,354	10,071	814	303
	459,290	355,861	188,621	179,553

 

The average number of employees and directors during the year was as follows:

 

	Group 2021	2020	2021	Company 2020
Administration	8	11	3	3
Mining , plant processing and security	13	29	-	-
	21	40	3	3

 

Remuneration of key management personnel

 

The remuneration of the directors and other key management personnel is set out below:

 

	2021	2020
	£	£
Emoluments	272,130	197,988
Compensation for loss of office	-	28,000
Pensions	814	303
	272,944	226,291

 

 

9.            Directors' remuneration

	Group 2021	2020	2021	Company 2020
	£	£	£	£
Emoluments	184,000	151,250	184,000	151,250
Compensation for loss of office	-	28,000	-	28,000
Pensions	814	303	814	303
	184,814	179,553	184,814	179,553

 

 

The highest paid director received remuneration of £97,500 (2020: £97,500).

 

Included in the above are accrued Director's remuneration of £17,750 (2020: £122,750)

 

Directors' interest in outstanding share options per director is disclosed in the directors' report in the Annual Report.

 

10.          Finance income

 

	2021	2020
	£	£
Interest income on short-term bank deposits	701	112
	701	112

 

11.          Finance Costs

 

 

	2021	2020
	£	£
Interest on convertible loan notes	-	87,977
Convertible loan finance costs	-	12,652
Bank interest	-	61
Hire purchase interest	3,450	6,423
Interest on rehabilitation provision	2,392	4,390
	5,842	111,503

 

 

 

12.          Income tax

 

	2021	2020
	£	£
Current tax:
Current tax on loss for the year	-	-
Foreign taxation	542
Total current tax	542	-
Deferred tax
On write off/impairment on intangible assets	-	-
Tax charge for the year	542	-

 

No corporation tax charge arises in respect of the year due to the trading losses incurred.  The Group has Corporation Tax losses available to be carried forward and used against trading profits arising in future periods of £7,840,335 (2020: £7,313,803).

 

A deferred tax asset of £1,959,833 (2020: £1,389,369) calculated at 25% (2020: 19%) has not been recognised in respect of the tax losses carried forward due to the uncertainty that profits will arise against which the losses can be offset.

 

The tax assessed for the year differs from the standard rate of corporation tax in the UK as follows:

 

	2021	2020
	£	£
Loss on ordinary activities before tax	(1,460,325)	(1,241,445)
Expected tax credit at standard rate of UK Corporation Tax
19% (2020: 19%) and 30% (2020:30%) In Tanzania	(377,043)	(235,875)
Disallowable expenditure	4,501	21,116
Depreciation in excess of capital allowances	79,367
Other adjustments	(106,947)
Capital allowances in excess of depreciation	-	(310,464)
Movement in deferred tax not recognised	400,648	525,223
Tax charge for the year	526	-

 

 

On 24 May 2021, the UK Government enacted that from 1 April 2023 the corporation tax rate would increase to 25% for companies with profits of over £250,000. A small profits rate will also be introduced for companies with profits of £50,000 or less so that they will continue to pay corporation tax at 19%. From this date companies with profits between £50,000 and £250,000 will pay tax at the main rate reduced by a marginal relief providing a gradual increase in the effective corporation tax rate.

 

 

13.          Earnings per share

 

The basic loss per share is calculated by dividing the loss attributable to equity shareholders by the weighted average number of shares in issue.   The loss attributable to equity shareholders and weighted average number of ordinary shares for the purposes of calculating diluted earnings per ordinary share are identical to those used for basic earnings per ordinary share. This is because the exercise of warrants would have the effect of reducing the loss per ordinary share and is therefore anti-dilutive.
	2021	2020
	£	£
Net loss for the year attributable to ordinary shareholders	(1,460,851)	(1,241,445)
Weighted average number of shares in issue	18,144,205	7,452,470
Basic and diluted loss per share	(8.04p)	(16.66p)

 

The earnings per share as at 31 December 2020 has been restated to reflect the consolidation of shares that took place in January 2021 (see note 23).

 

14.          Investment in subsidiaries

 

 

		Shares in	Loans to
		subsidiaries	subsidiaries	Total
Company		£	£	£
Cost
At 1 January 2020		7,043,312	9,117,401	16,160,713
Additions		-	400,904	400,904
Disposal
		_________	_________	_________
At 31 December 2020		7,043,312	9,518,305	16,561,617
Accumulated impairment
As at 1 January 2020		-	-	-
Impairment		-	-	-
		_________	_________	_________
At 31 December 2020		-	-	-
Net Book Value
As at 31 December 2020		7,043,312	9,518,305	16,561,617

 

		Shares in	Loans to
		subsidiaries	subsidiaries	Total
Company		£	£	£
Cost
At 1 January 2021		7,043,312	9,518,305	16,561,617
Additions		-	636,035	636,035
		_________	_________	_________
At 31 December 2021		7,043,312	10,154,340	17,197,652
Accumulated impairment
As at 1 January 2021		-	-	-
Impairment		-	-	-
		_________	_________	_________
At 31 December 2021		-	-	-
Net Book Value
As at 31 December 2021		7,043,312	10,154,340	17,197,652

 

The value of the Company's investment and any indications of impairment is based on the prospecting and mining licences held by its subsidiaries.

 

The Tanzanian licences comprise a mining licence and various prospecting licences. The licences are, located in a region displaying viable prospects for coal and occur in a country where the government's policy for development of the mineral sector aims at attracting and enabling the private sector to take the lead in exploration mining, development, mineral beneficiation and marketing.

 

During 2018 the activities of the Company's subsidiary evolved from exploration and evaluation to development and as a result the exploration and evaluation assets held by the Company's subsidiary were transferred to development expenditure.  The Directors carried out an impairment review on reclassification of exploration and evaluation assets to development assets, which covered the Company's investments in, and loans to, its subsidiaries.  Following the impairment reviews the Directors did not consider the Company's investments to be impaired.

 

In April 2019, the subsidiary moved into the production phase.

 

The Directors have carried out an impairment review and consider the value in use to be greater than the book value in respect of The Company's investment in its subsidiary Company Edenville International (Tanzania) Limited.

 

The Directors considered the recoverable amount by assessing the value in use by considering future cash flow projections of the revenue generated by its subsidiary through the sale of its coal resources.

 

Cash flows were based on the revenue generated to date plus expected growth from current production levels to 10,000 tons per month in the short to medium term.

 

In addition, the projections include future potential revenue generated from the Company's plans relating to the Rukwa Coal to Power Project. It is expected that the Project will move ahead in parallel with the transmission development which is currently in the procurement stage and the Directors understand should be completed sometime in 2024.  There is no guarantee that the Company will be chosen as the successful party to develop the Power Project, and therefore there is no guarantee that revenue will be generated from this Project. Should this be the case then the Company would need to review its cash flow projections, and review the carrying value of its investment in Edenville International Tanzania Limited 

 

However, based upon current know resources the subsidiary has significant coal resources which based upon current projections prepared by the Directors would be sufficient to support the book value in the financial statements. The Directors are of the view that this amount is adequately supported by proposed returns generated by the Power Plant Project. The Directors have applied a 10% discount rate in their forecasts. Additional factors that may affect these projections include the following: -

 

A 16% reduction in the margin per ton of coal would result in an impairment of the Edenville International (Tanzania) Limited investment by £187k.

 

An increase in the discount factor to 11.1% would result in an impairment of the Edenville International (Tanzania) Limited investment by £125k.

 

A decrease of 16% of the EBITA would result in an impairment of the Edenville International (Tanzania) Limited investment by £187k.

 

The mining licence is due to expire in 2026. Should the mining licence not be renewed this would result in an impairment of £14.1m.

 

Holdings of more than 20%:

 

The Company holds more than 20% of the share capital of the following companies:

 

Subsidiary undertaking	Country of incorporation	Class	Shares held
Edenville International (Seychelles) Limited	Seychelles	Ordinary	100%
Edenville International (Tanzania) Limited	Tanzania	Ordinary	99.75%*
Edenville Power (Tz) Limited	Tanzania	Ordinary	99.9%
Edenville (South Africa) Limited	England	Ordinary	100%
* These shares are held by Edenville International (Seychelles) Limited.

 

 

15.          Property, plant and equipment

 

	Group   Coal  Production assets	Plant and machinery	Fixtures, fittings and equipment	Motor vehicles	Total
	£	£	£	£	£
Cost
As at 1 January 2020	5,317,637	1,225,972	7,253	197,196	6,748,058
Additions	17,788	-	-	-	17,788
Foreign exchange adjustment	(171,033)	(39,191)	(100)	(5,806)	(216,130)
As at 31 December 2020	5,164,392	1,186,781	7,153	191,390	6,549,716
Depreciation
As at 1 January 2020	83,342	482,401	6,990	89,925	662,658
Depletion/Charge for the year	25,547	224,719	65	27,590	277,921
Foreign exchange adjustment	(2,674)	(28,648)	(97)	(4,021)	(35,440)
As at 31 December 2020	106,215	678,472	6,958	113,494	905,139
Net book value
As at 31 December 2020	5,058,177	508,309	195	77,896	5,644,577

 

 

 

	Coal Production assets	Plant and machinery	Fixtures, fittings and equipment	Motor vehicles	Total
	£	£	£	£	£
Cost
As at 1 January 2021	5,164,392	1,186,781	7,153	191,390	6,549,716
Foreign exchange adjustment	65,902	15,050	38	2,230	83,220
As at 31 December 2021	5,230,294	1,201,831	7,191	193,620	6,632,936
Depreciation
As at 1 January 2021	106,215	678,472	6,958	113,494	905,139
Depletion/ Charge for the year	6,464	238,444	49	19,720	264,677
Foreign exchange adjustment	1,347	8,568	38	1,246	11,199
As at 31 December 2021	114,026	925,484	7,045	134,460	1,181,015
Net book value
As at 31 December 2021	5,116,268	276,347	146	59,160	5,451,921

 

Plant and machinery depreciation amounting to £207,604 (2020: £209,208) is included within cost of sales as it relates to mining equipment.

 

 

 

Company

 

	Plant and machinery	Fixtures, fittings and equipment	Motor Vehicles	Total
	£	£	£	£
Cost
As at 1 January 2020 and 31 December 2020	7,471	4,153	16,691	28,315
Depreciation
As at 1 January 2020	7,003	3,894	15,640	26,537
Charge for the year	117	64	263	444
As at 31 December 2020	7,120	3,958	15,903	26,981
Net book value
As at 31 December 2020	351	195	788	1,334

 

 

	Plant and machinery	Fixtures, fittings and equipment	Motor Vehicles	Total
	£	£	£	£
Cost
As at 1 January 2021 and 31 December 2021	7,471	4,153	16,691	28,315
Depreciation
As at 1 January 2021	7,120	3,958	15,903	26,981
Charge for the year	88	49	197	334
As at 31 December 2021	7,208	4,007	16,100	27,315
Net book value
As at 31 December 2021	263	146	591	1,000

 

16.          Intangible assets

 

Group
		Mining Licences
		£
Cost or valuation
As at 1 January 2020		1,519,712
Foreign exchange adjustment		(48,879)
At 31 December 2020		1,470,833
Accumulated depletion, amortisation and impairment
As at 1 January 2020		1,198,344
Amortisation
Foreign exchange adjustment		(38,543)
At 31 December 2020		1,159,801
Net book value
As at 31 December 2020		311,032

Mining Licences

Intangible assets arose as a result of the valuation placed on the original six Tanzanian licences acquired on the acquisition of Edenville (Tanzania) Limited. The allocation price was based on the price paid to acquire these the Group's licences.

 

These assets are reviewed for impairment annually alongside the coal production assets.(see note 4 for Critical accounting estimates and judgements).

 

17.          Inventories

 

	Group
	2021	2020
	£	£
ROM stockpiles	453	10,752
Fines	134,756	223,480
Washed coal	7,512	17,504
	142,721	251,736

 

The cost of inventories recognised as an expense during the year in was £158,296 (2020: £78,448 restated).

 

18.          Trade and other receivables

 

	Group		Company
	2021 £	2020 £	2021 £	2020 £
Other receivables	128,281	-	126,127	-
Amounts due from related parties	-		91,467
VAT receivable	287,198	301,251	8,041	8,499
Prepayments	-	-	-	-
	415,479	301,251	225,635	8,499

 

Included within VAT receivable is VAT owed to Edenville International (Tanzania) Limited which is only recoverable against future sales made by Edenville International (Tanzania) Limited. The Group expects to recover the above VAT from sales of commercial coal. 

 

 

19.          Cash and cash equivalents

 

Cash and cash equivalents include the following for the purposes of the cash flow statement:

 

 

	Group		Company
	2021	2020	2021	2020
	£	£	£	£
Cash at bank and in hand	1,229,801	25,690	1,226,235	25,628

 

20.          Trade and other payables

 

 

	Group		Company
	2021	2020	2021	2020
	£	£	£	£
Trade and other payables	308,043	227,288	15,801	41,505
Amounts owed to subsidiary undertakings	-		6,340	6,340
Social security costs and other taxes	-	10,279	-	10,279
Other creditors	-	-	-	33,437
Accruals and deferred income	81,221	448,242	81,221	121,998
	389,264	685,809	103,362	213,559

 

21.          Borrowings

 

	Group		Company
	2021	2020	2021	2020
	£	£	£	£
		(restated)
Convertible loan notes
Repayable within 1 year	-	416,142	-	416,142
Repayable within 2 to 5 years	-	16,084	-	16,084
	-	432,226	-	432,226
Hire purchase finance
Repayable within 1 year	18,258	24,689	-	-
Repayable within 2 to 5 years	-	23,789	-	-
	18,258	48,478	-	-
Total
Repayable within 1 year	18,258	440,831	-	416,142
Repayable within 2 to 5 years	-	39,873	-	16,084
	18,258	480,704	-	432,226

 

Convertible loan

 

In November 2018 $750,000 conditionally convertible loan notes were issued: the face value of these convertible securities is $900,000. A commitment fee of £37,500, which has been offset against the proceeds of issue of the convertible loan notes, was payable by the Company as well as issuing share options over 99,568,966 ordinary shares exercisable for 4 years at a conversion price on 0.29p per share. The Company is required to make repayments of $45,000 over 20 months commencing in February 2019.  If repayments are made in cash, then an additional 3% is payable on the $45,000. The Company may elect to make the repayment in its shares priced at 90% of the average five day Volume Weighted Average Price (VWAP) chosen by the investor during the 20 days before issuance, or a combination of both.

The Company has the option to buy back the entire outstanding face value at any time at a premium of 5%. If this right is exercised the investor has an option to convert 25% of the face value into shares at the lesser of the repayment price or 0.29p per share. The repayment price being 130% of the 10-day VWAP immediately prior to the Company entering the Convertible Agreement.

 

In addition to the above the investor was offered 36,000,000 collateral shares which were issued by the Company on 20 February 2019.

 

In April 2019, the Company agreed a repayment holiday up to September 2019 in respect of the convertible loan notes. As a condition of granting the repayment holiday the outstanding balance at the time. $855,000, was increased by 15% to $983,250

 

On 15 January 2021 the Company also agreed repayment terms with Lind Partners LLC whereby it agreed to repay 20% of the outstanding debt by 31 January 2021 with the balance to be paid in monthly instalments from the end of April 2021. Lind Partners LLC also agreed that no further interest is to be charged on the outstanding balance.

 

As announced on 22 June 2021, following two fund raises in January and May 2021, Edenville was able to pay off all outstanding obligations to Lind.

 

 

22.          Environmental rehabilitation liability

 

Group
	2021	2020
	£	£
At 1 January 2020	21,912	-
Additions	-	17,784
Interest	2,392	4,389
Foreign exchange movement	318	(261)
	24,623	21,912

 

 

The group makes full provision for the future cost of rehabilitating mine sites and related production facilities on a discounted basis at the time of developing the mines and installing and using those facilities. The rehabilitation provision represents the present value of rehabilitation costs relating to mine sites which are expected to be incurred in the future, which is when the producing mine properties are expected to cease operations. Those provisions have been created based on the Company's internal estimates. Assumptions based on the current economic environment have been made, which management believes are a reasonable basis upon which to estimate the future liability. These estimates are reviewed regularly to take into account any material changes to the assumptions. However actual rehabilitation costs will ultimately depend upon future market prices for the necessary rehabilitation costs will ultimately depend upon future market prices for the necessary rehabilitation works required that will reflect market conditions at the relevant time. Furthermore, the timing of rehabilitation is likely to depend on when the mines cease to produce at economically viable rates. This, in turn will depend upon future coal prices, which inherently uncertain.

 

 

23.          Share capital

 

Group and Company

	No	£	No	£	£
	Ordinary shares of 0.02p each	Ordinary shares of 0.02p each	Deferred shares of 0.001p each	Deferred shares of 0.001p each	Total share capital
Issued and fully paid
At 1 January 2020	5,012,241,761	1,002,450	241,248,512,346	2,412,485	3,414,935
On 9 January 2020 Ordinary shares were issued at 0.05p	50,000,000	10,000	-	-	10,000
On 21 January 2020 Ordinary shares were issue at 0.04p	1,750,000,000	350,000	-	-	350,000
On 8 June 2020 Ordinary shares were issued at 0.04p	1,250,000,000	250,000	-	-	250,000
On 14 August 2020 Ordinary shares were issued at 0.06p	83,333,333	16,666	-	-	16,666
As at 31 December 2020	8,145,575,094	1,629,116	241,248,512,346	2,412,485	4,041,601

 

 

	No	No	£	No	£	£
	Ordinary shares of 1p each	Ordinary shares of 0.02p each	Ordinary shares of 0.02p/1p each	Deferred shares of 0.001p each	Deferred shares of 0.001p each	Total share capital
Issued and fully paid
At 1 January 2021	-	8,145,575,094	1,629,116	241,248,512,346	2,412,485	4,041,601
On 5 January the company consolidated  and then subdivided the brought forward shares*	8,145,575	(8,145,575,094)	(1,547,659)	154,765,925,000	1,547,659	-
On 21 January the company issued 3,600,000 1p shares at 0.25p	3,600,000	-	36,000	-	-	36,000
On 26 May the company issued 9,900,000 1p shares at 0.25p	9,900,000	-	99,000	-	-	99,000
As at 31 December 2021	21,645,575	-	216,457	396,014,437,346	3,960,144	4,176,601

 

 

*On 5 January 2021 the Company reduced the number of issued ordinary shares of £0.0002 each in the Company by a multiple of 1,000 (the "Consolidation"), Following the Consolidation the Company sub-divided each consolidated ordinary share of £0.20 each in the capital of the Company, into 1 ordinary share of £0.01 each in the capital of the Company and 19,000 new deferred shares of £0.00001 each in the capital of the Company.

 

The deferred shares have no voting rights, dividend rights or any rights of redemption. On return of assets on winding up the holders are entitled to repayment of amounts paid up after repayment to ordinary share holders.

 

 

24.          Capital and reserves attributable to shareholders

 

	Group		Company
	2021	2020	2021	2020
	£	£	£	£
Share capital	4,176,601	4,041,601	4,176,601	4,041,601
Share premium	22,254,317	19,390,849	22,254,317	19,390,849
Other reserves	1,034,757	795,304	453,614	301,174
Retained deficit	(20,325,577)	(18,866,991)	(8,337,372)	(7,782,331)
Total equity	7,140,098	5,360,763	18,547,160	15,951,293

 

There have been no significant changes to the Group's capital management objectives or what is considered to be capital during the year.

 

25.          Capital management policy   

 

The Group's policy on capital management is to maintain a low level of gearing. The group funds its operation primarily through equity funding.

 

The Group defines the capital it manages as equity shareholders' funds less cash and cash equivalents.

 

The Group objectives when managing its capital are:

 

·	To safeguard the group's ability to continue as a going concern.
·	To provide adequate resources to fund its exploration, development and production activities with a view to providing returns to its investors.
·	To maintain sufficient financial resources to mitigate against risk and unforeseen events.

 

The group's cash reserves are reported to the board and closely monitored against the planned work program and annual budget. Where additional cash resources are required the following factors are considered:

 

·	the size and nature of the requirement.
·	preferred sources of finance.
·	market conditions.
·	opportunities to collaborate with third parties to reduce the cash requirement.

 

26.          Financial instruments

 

The Board of Directors determine, as required, the degree to which it is appropriate to use financial instruments to mitigate risk with the main risk affecting such instruments being foreign exchange risk, which is discussed below.

 

 

	Group		Company
Categories of financial instruments	2021	2020	2021	2020
	£	£	£	£
Receivables at amortised cost including cash and cash equivalents:
Investments and loans to subsidiaries	-	-	10,154,340	9,518,305
Cash and cash equivalents	1,229,801	25,690	1,226,235	25,628
Trade and other receivables	415,479	301,251	225,635	8,498
Total	1,645,280	326,941	11,606,210	9,552,431
Financial liabilities
Financial liabilities at amortised cost:
Trade and other payables	389,264	675,330	103,362	203,280
Convertible loan notes	-	432,226	-	432,226
	389,264	1,107,566	103,362	635,506
Net	1,256,016	(780,625)	18,546,160	15,960,237

 

 

Cash and cash equivalents

 

This comprises cash held by the Group and short-term deposits. The carrying amount of these assets approximates to their fair value.

General risk management principles

The Directors have an overall responsibility for the establishment of the Group's risk management framework. A formal risk assessment and management framework for assessing, monitoring and managing the strategic, operational and financial risks of the Group is in place to ensure appropriate risk management of its operations.

The following represent the key financial risks that the Group faces:

 

Interest rate risk

The Group only interest-bearing asset is cash invested on a short-term basis which attracts interest at the bank's variable interest rate.

In 2020, the Group was exposed to interest rate risk through its convertible loan notes, its only interest-bearing liabilities. The level of interest payable will vary depending on whether the repayments are made with shares or in cash. The effective interest rate per month is 20.78%. If repayments are made in cash then the monthly repayments increase by 3%. These convertible loan notes were repaid during the year.

Credit risk

Credit risk arises principally from the Group's trade receivables and investments in cash deposits. It is the risk that the counterparty fails to discharge its obligation in respect of the instrument.

 

VAT receivable is owed to Edenville International (Tanzania) Limited which is only recoverable against future sales made by Edenville International (Tanzania) Limited. The Group expects to recover the above VAT from sales of commercial coal. 

The Group holds its cash balances with reputable financial institutions with strong credit ratings. There were no amounts past due at the balance sheet date.

The maximum exposure to credit risk in respect of the above at 31 December 2020 is the carrying value of financial assets recorded in the financial statements.

 

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as and when they fall due.

Liquidity risk is managed through an assessment of short, medium and long-term cash flow forecasts to ensure the adequacy of working capital.

 

The Group's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. To achieve this aim, it seeks to maintain cash balances to meet expected requirements for a period of one year.

 

Currency Risk

 

The Group is exposed to currency risk as the assets (see note 5) of its subsidiaries are denominated in US Dollars. The Group's policy is, where possible, to allow group entities to settle liabilities denominated in their functional currency (primarily US Dollars) with cash. The Company transfers amounts in sterling or US dollars to its subsidiaries to fund its operations. Where this is not possible the parent Company settles the liability on behalf of its subsidiaries and will therefore be exposed to currency risk.

 

The Group has no formal policy is respect of foreign exchange risk; however, it reviews its currency exposure on a regular basis. Currency exposures relating to monetary assets held by foreign operations are included in the Group's income statement. The Group also manages its currency exposure by retaining the majority of its cash balances in sterling, being a relatively stable currency.

 

The effect of a 10% rise or fall in the US dollar/Sterling exchange rate would result in an increase or decrease in the net assets of the group of £650,958.

 

Fair value of financial assets and liabilities

 

Fair value is the amount at which a financial instrument could be exchanged in an arm's length transaction between informed and willing parties, other than a forced or liquidation sale and excludes accrued interest. Where available, market values have been used to determine fair values. Where market values are not available, fair values have been calculated by discounting expected cash flows at prevailing interest rates and by applying year end exchange rates.

 

The Directors consider that there is no significant difference between the book value and fair value of the Group's financial assets and liabilities.

 

The tables below summarise the maturity profit of the combined Group's non-derivative financial liabilities at each financial year end based on contractual undiscounted payments.

 

 

Group   2020
	Less than 1 year	1-    2 years	2-5 years
Trade payables	227,288	-	-
Other payables	10,279	-	-
Accruals	448,242	-	-
Borrowings	440,831	39,873	-
	1,126,640	39,873	-

 

 

2021
	Less than 1 year	1-    2 years	2-5 years
Trade payables	308,043	-	-
Accruals	81,221	-	-
Borrowings	18,258	-	-
	407,522	-	-

 

 

Company   2020
	Less than 1 year	1-2 years	2-5 years
Convertible loan notes (current and non - current)	416,142	16,084	-
Trade payables	41,505	-	-
Other payables	39,777	-	-
Accruals	121,998	-	-
	619,422	16,084	-

 

2021
	Less than 1 year	1-2 years	2-5 years
Convertible loan notes (current and non - current)	-	-	-
Trade payables	15,801	-	-
Other payables	6,340	-	-
Accruals	81,221	-	-
	103,362	-	-

 

27.          Equity-settled share-based payments

 

The following options over ordinary shares have been granted by the Company:

                               

			Number of options
Grant Date	Expiry date	Exercise price*	As at 1 January 2021	Granted	Lapsed	As at 31 December 2021
28 March 2017	27 March 2022**	£10.80	23,333	-	-	23,333
7 November 2018	6 November 2022	£2.90	99,569	-	-	99,569
9 May 2019	8 May 2023	£2.60	100,000	-	-	100,000
3 April 2020	2 April 2025	£3.00	270,000	-	-	270,000
			492,902	-	-	492,902

 

The following warrants over ordinary shares have been granted by the Company:

 

\* The brought forward outstanding share options have been divided a factor of 1,000 and the related exercise price has been multiplied by 1,000 to account for the share consolidation that took place on 5 January 2021 (see note 23)

 

** These options were not exercised and have expired post year end.

 

At the date of grant, the options were valued using the Black-Scholes option pricing model. The fair value per option granted and the assumptions used in the calculation were as follows:

 

28.          Equity-settled share-based payments (continued)

 

Date of grant		28 March 2017	5 November 2018	26 April 2019	17 April 2020
Expected volatility		131%	70%	101%	72%
Expected life		3 years	4 years	3.5 years	3 years
Risk-free interest rate		0.37%	0.96%	0.75%	0.11%
Expected dividend yield		-	-	-	-
Possibility of ceasing employment before vesting		-	-	-	-
Fair value per option		0.56p/0.42p/0.28p	0.08p	0.02p	0.02p

 

Volatility was determined by reference to the standard deviation of  daily share prices for one year prior to the date of grant.

 

The charge to the income statement for share-based payments for the year ended 31 December 2020 was £Nil (2020: £50,398).

 

On 6 June 2020 85,900,800 warrants were issued to settle liabilities of £51,540.

 

The following warrants over ordinary shares have been granted by the Company:

 

			Number of Warrants
Grant Date	Expiry date	Exercise price	As at 1 January 2021	Granted	Exercised	As at 31 December 2021
2 May 2019	31 May 2022**	20p*	127,500	-	-	127,500
23 January 2020	22  January 2022**	60p*	791,667	-	-	791,667
6 June 2020	5 June 2023	40p*	125,000	-	-	125,000
6 June 2020	5 June 2023	60p*	85,901	-	-	85,901
14 January 2021	13 January 2024	25p	-	180,000	-	180,000
26 May 2021	25 May 2024	25p	-	9,900,000	-	9,900,000
26 May 2021	25 May 2024	25p	-	495,000	-	495,000
26 May 2021	25 May 2024	35p	-	117,459	-	117,459
			1,130,068	10,692,459	-	11,822,526

 

\* The brought forward outstanding share options have been divided a factor of 1,000 and the related exercise price has been multiplied by 1,000 to account for the share consolidation that took place on 5 January 2021 (see note 23).

 

** These warrants were not exercised and have expired post year end.

 

At the date of grant, those warrants that came under the scope of IFRS 2 Share based payment were valued using the Black-Scholes option pricing model. The fair value per option granted and the assumptions used in the calculation were as follows:

 

 

28.          Equity-settled share-based payments (continued)

 

Date of grant	14 January 2021	26 May 2021
Expected volatility	81%	69%
Expected life	3 years	3 years
Risk-free interest rate	(0.06)%	0.14%
Expected dividend yield	-	-
Possibility of ceasing employment before vesting	-	-
Fair value per option	£0.2241p	£0.1571/£0.1892

Volatility was determined by reference to the standard deviation of  daily share prices for one year prior to the date of grant.

 

The charge to £152,440 was made against share premium in respect of share issue costs. (2020: £Nil).

 

Movements in the number of options outstanding and their related weighted average exercise prices are as follows:

 

	2021		2020
	Number of options	Weighted average exercise price per share pence	Number of options	Weighted average exercise price per share pence
At 1 January	492,901	327	240,574	46
Granted	-	-	270,000	30
Cancelled	-	-	(17,672)	1750
At 31 December	492,901	327	492,902	327
Exercisable at year end	482,235		482,235

 

The weighted average remaining contractual life of options as at 31 December 2021 was 2.15 years (2020: 3.15 years).

 

Warrants

 

Movements in the number of warrants outstanding and their related weighted average exercise prices are as follows:

	2021		2020
	Number of options	Weighted average exercise price per share pence	Number of options	Weighted average exercise price per share pence
At 1 January	1,130,067	53.27	127,500	20.00
Granted	10,692,459	25.11	1,085,900	60.00
Exercised	-	-	(83,333)	60.22
At 31 December	11,822,526	27.80	1,130,067	53.27

 

 

The 2020 outstanding warrants have been divided a factor of 1,000 and the related exercise price has been multiplied by 1,000 to account for the share consolidation that took place on 5 January 2021 (see note 23)

 

The weighted average remaining contractual life of warrants as at 31 December 2021 was 2.20 years (2020: 1.36 years).

 

28.          Contingent liabilities

 

Edenville International (Tanzania) Limited has a dispute with a third party and arises from an Acquisition and Option Agreement signed in August 2010 (and its variation made in 2015) ("Agreement"). The third party is seeking financial compensation and other costs in addition to a dispute over certain mining licenses granted in the name of Edenville International (Tanzania) Limited. Further to the Company announcements on 18 and 31 May 2022 that Upendo Group Ltd.'s current 10% economic interest in the joint venture, which holds the licences governing the Rukwa Project, had been transferred to a 10% direct holding on the principal production licence. The Company has sought legal advice and has been advised that the variation has been undertaken illegally and that the holding should be reversed by the Government, This reversal has been sought. The Company will provide a further update as appropriate.

 

 

29.          Reserves

 

The following describes the nature and purpose of each reserve:

 

Share Capital	represents the nominal value of equity shares
Share Premium	amount subscribed for share capital in excess of the nominal value
Share Option Reserve	fair value of the employee and key personnel equity settled share option scheme and broker warrants as accrued at the balance sheet date.
Retained Earnings	cumulative net gains and losses less distributions made

 

 

30.          Related Party Transactions

 

Key management personnel are those persons having authority and responsibility for planning, directing and controlling activities of the Company, and are all directors of the Company. For details of their compensation please refer to the Remuneration report.

 

During the year the Company paid £636,035 (2020: £400,904) to or on behalf of its wholly owned subsidiary, Edenville International (Tanzania) Limited. The amount due from Edenville International (Tanzania) Limited at year end was £10,154,340 (2020: £9,518,305). This amount has been included within loans to subsidiaries. The company also invoiced Edenville International (Tanzania) Limited £90,000 (2020: Nil) in respect of management fees. This remained outstanding at the year end.

 

At the year end the Company was owed £3,712 (2020: £3,712) by its subsidiary Edenville International (Seychelles) Limited.

 

At the year end the Company was owed £6,340 (2020: £6,340) by its subsidiary Edenville Power Tz Limited.

 

At the year end Edenville International (Tanzania) limited was owed $41,677 (2020: $41,677) by Edenville Power Tz Limited and $9,517 (2020: $9,517)  was owed to JICL Consultants.

 

31.          Events after the reporting date

 

Subsequent to the year end, the Directors confirmed their intention to convert the loan of £10,154,340 between the Company and its subsidiary into equity. This process will commence soon and it is anticipated that the conversion will be completed before 31 December 2022.

On 3 February 2022 we announced that the Company's subsidiary Edenville International (Tanzania) Limited had entered into a contract with Nextgen Coalmine Limited ("Nextgen") for the operation of the Company's Rukwa Coal Project.  This superseded the Coal Mining Agreement with Infrastructure and Logistics Tanzania Limited and the Sales and Marketing Agreement with MarTek Global FZ-LLC, announced on 8 June 2020 and 26 August 2020 respectively.  These agreements were terminated by Edenville due to lack of progress on implementation.

 

Subsequent to entering into the agreement with NextGen both the international and domestic coal price increased significantly. This coincided with heightened interest from potential customers to enter into offtake agreements for coal from Rukwa.  Additionally, the implementation of the coal mining agreement with Nextgen was, for various reasons, problematic, resulting in very poor production figures over the period from February to May 2022 and no material revenue for the Company.

 

The lack of progress by Nextgen culminated in the announcement on 31 May 2022 that the Company had reached an agreement with NextGen to terminate the contract.  Following the termination of the contract all mining equipment has been brought back into service by Edenville, whilst an additional pre-strip excavator has been added to the fleet. Up to three additional trucks have been sourced to rapidly scale production. Our initial goal is to satisfy existing demand from local customers of 1,500 tonnes of washed lump coal product and 500 tonnes of coal fines in the immediate future, targeting sales of 5,000 tonnes per month of washed coal late in Q3 2022, with coal fines sales also expected to continue and possibly expand. During the first half of 2022, 9,466 tonnes of ROM coal has been mined.

 

We believes there is sufficient demand based on the Company's order book and recent discussions with potential customers to sell any coal that is produced at Rukwa. The Company is also exploring the potential of exporting its coal for the first time, given margins would be expected to be even greater.

 

Much of 2021 and the first half of 2022 was spent pursuing reverse takeover and other opportunities to add assets to the Company. During this time the Company focused on reducing cash burn on its Tanzanian project whilst it has explored these potential new projects. One potential transaction progressed significantly, however was ultimately terminated by mutual consent. As part of the termination it was agreed that the transaction costs incurred by the Company would be re-imbursed in full by the potential take-over target.

 

Further to the Company announcements on 18 and 31 May 2022 that Upendo Group Ltd.'s current 10% economic interest in the joint venture, which holds the licences governing the Rukwa Project, had been transferred to a 10% direct holding on the principal production licence. The Company has sought legal advice and has been advised that the variation has been undertaken illegally and that the holding should be reversed by the Government, this reversal has been sought. The Company will provide a further update as appropriate.

 

32.          Commitments

 

License commitments

Edenville owns a coal mining exploration licences in Tanzania. These licences includes commitments to pay annual licence fees and minimum spend requirements.

 

As at 31 December 2021 these are as follows:

 

Group	2021 £	2020 £
Not later than one year	21,993	23,089
Later than one year and no later than five years	65,979	72,619
Total	87,972	95,708

 

 

33.          Ultimate Controlling Party

 

The Group considers that there is no ultimate controlling party.