REG - Shuka Minerals PLC - Annual Results for the year ended 31 December 2023
27/06/2024 15:15
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RNS Number : 2083U Shuka Minerals PLC 27 June 2024
27 June 2024
Shuka Minerals Plc
("Shuka" or the "Company")
Annual Results for the year ended 31 December 2023
Shuka Minerals Plc (AIM: SKA), an African-focused mine operator and developer,
announces its audited results for the year ended 31 December 2023.
Enquiries:
Shuka Minerals Plc +44 (0) 7912 514 809
Noel Lyons - CEO
Strand Hanson Limited +44 (0) 20 7409 3494
Financial and Nominated Adviser
James Harris | Richard Johnson
Tavira Securities Limited +44 (0) 20 7100 5100
Joint Broker
Oliver Stansfield | Jonathan Evans
Peterhouse Capital Limited +44 (0)20 7469 0930
Joint Broker
Charles Goodfellow | Duncan Vasey
The 2023 Annual Report and Accounts is being posted to shareholders and will
shortly be available on the Company's website at:
https://www.shukaminerals.com/circularreports
(https://www.shukaminerals.com/circularreports)
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR") and is disclosed
in accordance with the Company's obligations under Article 17 of MAR.
CHAIRMAN'S REPORT
In the year ending 31 December 2023, the Company continued its transition in
terms of both operations and management, together with a refocus on future
strategy and direction and board changes. During this period of change I
assumed the role of Non-Executive Chairman. This ongoing refocus of the
Company has continued into the first half of 2024 with a further major
strategic financial commitment to the Company and material progress on a
potential acquisition.
On site in Tanzania, the changes in both 2022 and 2023 to operational
management have resulted in more efficient management of the Rukwa coal asset
where demand for output has remained encouraging although production and
output has continued to be a challenge as has been the case historically with
this coal asset. Without a meaningful amount of investment this is unlikely to
change. Production in 2023 amounted to 18,520 tonnes, achieving sales of
$194,346. A tight rein is kept on costs and we were pleased to have resolved
the legacy dispute with Upendo in early 2024.
The second half of 2023 was dominated by a capital raising, name change and
several significant changes to the Board and to the local management team in
Tanzania undertaken after consulting with key shareholders. These changes
included the appointments of Jason Brewer an experienced senior mining
executive, joining Noel Lyons and Paul Ryan, as Executive Director. In
addition, I joined the Board as non-executive Chairman, together with my
fellow non-executive colleagues Allen Zimbler and Marc Nally, during this
exciting time of transition for the Company. On 1 September 2023 the Company
renamed itself and rebranded as Shuka Mineral plc.
The capital raising comprised raising £1.468 million through direct
subscriptions, at 5.0 pence per share, with two strategic investors, Q Global
Commodities Group ("QGC") and Gathoni Muchai Investments Limited ("GMI"), both
of whom became major shareholders in the Company. QGC is one of South Africa's
leading independent commodity, logistics and investment funds and has a broad
global network in the mining finance sectors and the marketing and sales of
commodities. QGC has 12 thermal coal mines currently under management and is
actively expanding its metal mining interests throughout Southern and East
Africa through direct equity investments and partnership and co-development
agreements with a number of emerging mining and exploration companies. QGC is
led by myself, one of South Africa's leading mining entrepreneurs, with almost
20 years of mining experience, having developed over 47 projects to mining
stage, including two large-scale mining companies. QGC's invest was through
Dubai based AUO Commercial Brokerage LLC ("AUO"). AUO has a current interest
in 29.2% of the Company's issued shares. GMI is a Nairobi-based investment
firm focused on mining, property and retail sectors and headed up by Jason
Brewer and Ms Jackline Muchai. GMI have existing investments in four East
African countries, including Tanzania and are a major shareholder in battery
metals focused mining company Marula Mining plc and in Neo Energy Metals plc,
each London-listed.
Funds from the capital raising were used by the Company to fund its ongoing
working capital requirements and for due diligence costs associated with
ongoing review work of potential new and strategically complimentary projects
in Africa including, as announced post-period, on 18 March 2024, the detailed
legal and technical due diligence review of a major brownfield base metals
project located in East Africa.
On 24 May 2024 the Company announced that it had completed this work, and was
proposing to proceed with the acquisition. This work, which has included
independent technical and legal reports, has demonstrated a technically robust
and attractive acquisition opportunity of a brownfield mining operation which
has a long history of mining and processing operations of base and precious
metals (the "Project"). The Project's historical non-JORC compliant resources
have been independently verified by the Company's retained technical experts
and which have an in-situ value of approx. US$1.98 billion based on London
Metal Exchange prices in May 2024. Preliminary economic analyses of the
Project have estimated pre-tax cashflow of US$1.84 billion, NPV10 US$0.56
billion and an IRR of 112% based on the development of two of the five
existing non-JORC compliant historical resources.
On the same date the Company was pleased to announce that it had entered into
a £2 million unsecured convertible loan note agreement with AUO. The
proceeds, when drawn, will be applied towards the cash element of the
potential acquisition, should it proceed or other future acquisition
opportunities, and for general working capital purposes.
2023 was certainly a challenging period for the Company on the ground from an
operational perspective but outweighed by the strong steps taken to refocus
the Company for the future. We believe that the recent fundraise, together
with the investment strategy outlined above, will lead to a successful period
for the business in 2024 and beyond.
I would like to extend my gratitude to all our stakeholders and former board
directors, Nick von Schirnding, Andre Hope and Jason Brewer, who stepped
recently stepped down though of course remains as a consultant, for their
contributions to the Company.
Yours Sincerely,
Quinton Van Der Burgh
26 June 2024
CHIEF EXECUTIVE OFFICER'S REPORT
The past year, 2023, marked a period of significant refocus for our Company
and its future direction. As foreshadowed last year we see improving prospects
for the Company and a vision for further growth beyond coal, whilst maximising
the value of our coal asset. The Company has, in 2023 and 2024, announced two
fundraises and, in May 2024, completion of due diligence work on a potential
acquisition. This work, which has included independent technical and legal
reports, has demonstrated a technically robust and attractive acquisition
opportunity of a brownfield mining operation which has a long history of
mining and processing operations of base and precious metals (the "Potential
Acquisition"). The Company changed its name during the year to Shuka Minerals
PLC.
Funding
Following on from the equity placing that raised gross proceeds of £400,000
in December 2022, the Company raised a further £1,468,000 mid-year from two
substantial new investors who are working with the directors to review and
implement a long term vision for the future direction of the Company.
In May 2024 the Company entered into a £2 million convertible loan note
("Note") agreement with AUO, a wholly-owned subsidiary of QGC, one of South
Africa's leading independent commodity, mining, logistics and investment
funds, which is led by Quinton Van Den Burgh, the Company's Chairman. The
Notes, which are unsecured, have a 3 per cent annual coupon, are redeemable
in cash or Company shares, at the election of the Noteholder and have a final
redemption date of 31 March 2026. The Notes each have a conversion price of 15
pence per share, a substantial premium to the Company's then current share
price of 10p. The Notes are immediately available for subscription in a single
amount at AUO's election or, at the Company's election, in instalments which
instalments shall not be drawn down before August 2024 or such earlier date as
both parties agree provided that AUO must subscribe for the entire principal
amount of the Notes, being £2 million, by 31 March 2025. AUO has a current
interest in 29.2% of the Company's issued shares.
As of 31 May 2024, the Company had cash balances of approximately £100,000,
which together with funding available from the Notes is expected to be
sufficient for both general working capital purposes and the amount that would
be applied towards the cash element of the Potential Acquisition, should it
proceed or other future acquisition opportunities.
The Company has pursued the long outstanding debt owed by the Envirom Group
with debt collectors in Norway and now needs to evaluate whether there is a
possibility of collection of the debt following the conclusion of the debt
collection process.
Operational Review
The following statement is in relation to the Company's subsidiary Edenville
International (Tanzania) Limited ("EITL").
The Company, along with its local partners are continuing to evaluate the most
efficient strategy for the mine. Following a period of exceptionally heavy
rains, production is only now starting back up. Strategic partnerships are
being considered with large cement manufacturers who have expressed an
interest in buying all our coal output, up to 10,000 tonnes per month. This
deal can only be finalised when EITL shows its ability to produce a minimum
of 4,000 tonnes per month uninterrupted, a target that will require some
capital and equipment investment.
Corporate Social Responsibility
The Company remains committed to fulfilling its corporate and social
responsibilities. We recognise the importance of meeting social requirements
as an operator in Tanzania. The construction of the mining operation at Rukwa
has already led to improvements in local infrastructure, most notably the
construction and maintenance of a road from Kipandi to Mkomolo village and
beyond, benefiting farmers, the local population, and the mine itself. We have
also continued to prioritise the employment of local individuals from
surrounding villages, resulting in highly competent and skilled employees. The
positive social impact extends to the broader community, where enterprising
individuals are providing services such as food supply for workers. The
planning for a new school room is well underway in the local village which
EITL has committed to fund. The Board of EITL has been strengthened by the
addition of several local Directors.
Post Period Events
As noted above the Company announced a further fundraising post year end. The
Company has also advanced the Potential Acquisition over the past several
months, undertaking a detailed legal and technical due diligence review of a
major brownfield base metals project located in East Africa. The Project's
historical non-JORC compliant resources have been independently verified by
the Company's retained technical experts and which have an in-situ value of
approx. US$1.98 billion based on London Metal Exchange prices as at May 2024,
and where preliminary economic analyses have estimated pre-tax cashflow of
US$1.84 billion, NPV10 US$0.56 billion and an IRR of 112% based on the
development of two of the five existing non-JORC compliant historical
resources.
If the Company proceeds with the Potential Acquisition, the Company expects to
propose completing a 3-phase exploration and development program, as part of
its plans to re-commence both open-pit and underground mining and associated
processing operations. Negotiations are at an advanced stage with the
shareholders of the locally incorporated company, with key commercial and
legal terms agreed for the Company to proceed with its planned acquisition of
a 100% interest in the locally incorporated company which holds the Project.
US$150,000 has already been paid by the Company to the counterparty, which is
non-refundable, and if the Potential Acquisition is completed, further
consideration of US$5.85m would be payable through a combination of cash and
equity in the Company, with the majority expected to be in equity. The
transaction remains subject certain regulatory approvals and customary closing
conditions. While the Board remains excited by the Potential Acquisition there
can be no certainty that the requisite regulatory approvals and customary
closing conditions will be satisfied (or waived) and that definitive
documentation will be concluded, or as to the eventual detailed terms or
timing of the transaction.
In February 2024, the Company signed a definitive settlement agreement with
Upendo Group who hold a historic residual 10% interest in the Rukwa coal
mining licence. The settlement involves the immediate payment to Upendo Group
of $110,000, the immediate settlement of all proceedings and a waiver of all
or any related claims by all parties howsoever arising. The Company has used
the funds already lodged in Court to meet the majority of the settlement
costs. In addition, under the settlement agreement, Upendo has the right to
nominate a director to be appointed to the local Rukwa operating subsidiary
(which currently has 5 directors nominated by the Company), and Upendo will
earn a royalty of $1.95 per tonne of coal from Rukwa sold and paid for by the
customers of the Company from the date of the settlement.
In May 2024, the Company also extended the exercise period for a total of
15,846,691 warrants, originally issued in May 2021 and August 2023, which have
an exercise price of 25 pence each, (the "Extended Warrants"), that would
otherwise have expired on 25 May 2024, for a period of 12 months, until 25 May
2025. All other terms of the Extended Warrants remain unchanged. Should these
warrants be exercised in full, the Company would receive gross proceeds of
£3.9m.
The Company has also recently announced that Mr Jason Brewer has stepped down
from the Board of Directors to avoid any potential conflicts of interest with
his current or possible future business roles, however as the Company values
Mr Brewer's experience and expertise it is therefore pleased to have entered
into a consultancy contract (the "Consultancy Agreement") GMI, which is headed
up by Mr Brewer, for the provision of his services as a strategic adviser to
the Company on an ongoing basis.
Summary and Outlook
We believe we are now stronger with our new refocused vision, a strong
executive management team and valuable new investors who bring extensive
experience, finance, and expertise in the mining business on the African
continent. Should the Potential Acquisition proceed in the second half of 2024
we expect significant positive changes going forward. Furthermore, with an
improved cash and funding position, we will continue to target additional
asset acquisitions, leveraging the natural resources and capital markets
expertise of the Board and significant shareholders.
I look forward to the future of Shuka, both for the remainder of 2024 and
beyond, with confidence in its potential to generate shareholder value.
Noel Lyons
Chief Executive Officer
26 June 2024
REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF SHUKA MINERALS PLC
Opinion
We have audited the financial statements of Shuka Minerals Plc (the 'parent
company') and its subsidiaries (the 'group') for the year ended 31 December
2023 which comprise the Group Statement of Comprehensive Income, the Group and
Parent Company Statement of Financial Position, the Group and Parent Company
Statement of Changes in Equity, the Group and Parent Company Cash Flows
Statements and notes to the financial statements, including significant
accounting policies. The financial reporting framework that has been applied
in their preparation is applicable law and UK-adopted international accounting
standards and as regards the parent company financial statements, as applied
in accordance with the provisions of the Companies Act 2006.
In our opinion:
· the financial statements give a true and fair view of the state of
the group's and of the parent company's affairs as at 31 December 2023 and of
the group's loss for the year then ended;
· the group financial statements have been properly prepared in
accordance with UK-adopted international accounting standards;
· the parent company financial statements have been properly prepared
in accordance with UK-adopted international accounting standards and as
applied in accordance with the provisions of the Companies Act 2006; and
· the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor's responsibilities for the
audit of the financial statements section of our report. We are independent of
the group and parent company in accordance with the ethical requirements that
are relevant to our audit of the financial statements in the UK, including the
FRC's Ethical Standard as applied to listed entities, and we have fulfilled
our other ethical responsibilities in accordance with these requirements. We
believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors'
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate. Our evaluation of the directors'
assessment of the Group's and parent company's ability to continue to adopt
the going concern basis of accounting included
· Obtaining and evaluating management's going concern assessment,
including their assumptions, key risks and uncertainties, and any available
supporting documentation.
· Assessing the historical forecasting accuracy and consistency of
the going concern assessment with information obtained from other areas of the
audit, such as our audit procedures on management's impairment assessments.
· Testing the clerical accuracy of the assessment.
· Evaluating whether the assumptions made by management are
reasonable and appropriately conservative, considering the Group's relevant
principal risks and uncertainties. We challenged the assumptions and estimates
made by management where necessary.
· Evaluating the adequacy of working capital, including assessing the
reasonableness of assumptions used in the cash flow forecasts and budgets and
any plans to address potential shortfalls.
· Performing sensitivity analysis on management's assumptions,
including applying incremental adverse cash flow sensitivities to assess the
potential impact of severe but plausible scenarios such as significant
movement in commodity prices or demand for coal, and any other risks specific
to the mining industry.
Based on the work we have performed, we have not identified any material
uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the Group's or parent company's
ability to continue as a going concern for a period of at least twelve months
from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to
going concern are described in the relevant sections of this report.
Emphasis of matter
Operationalisation of the 16% Government of Tanzania non-dilutable free
carried share interest.
We draw attention to note 28 of the financial statements, which highlights
that the Group has not completed the operationalisation of the issuance of the
16% non-dilutable free carried interest shares in its subsidiary, Edenville
International (Tanzania) Limited, as required by the Tanzania State
Participation Mining legislation.
Our opinion is not modified in this respect.
Recoverability of Value Added Tax
We draw attention to Note 4 of the financial statements, which describes the
group's assessment over the Value Added Tax (VAT) receivable balance of
£261,340 in its subsidiary, Edenville International (Tanzania) Limited. The
Group has assessed and concluded within its critical accounting estimates that
the VAT is recoverable. The financial statements do not include the
adjustments that would result if the group was unable to fully recover this.
Our opinion is not modified in this respect.
Our application of materiality
The quantitative and qualitative thresholds for materiality determine the
scope of our audit and the nature, timing, and extent of our audit procedures.
The materiality for the financial statements as a whole applied to the group
financial statements was £88,000 (2022: £74,000) based on 1.5% of gross
assets. We chose gross assets as the basis for materiality because in a mining
company, the primary focus of users is the efficient utilisation and
exploitation of mining assets to generate production, making it a key
performance indicator for stakeholders. The performance materiality for the
group was set at £57,200 (2022: £44,400) representing 65% (2022: 60%) of the
overall materiality. The materiality for the financial statements as a whole
applied to the parent company financial statements was £22,000 (2022:
£11,400) based on 2% of the expenses. We chose expenses as the basis for
materiality for the parent company financial statements because it aligns with
the key cost components associated with its administrative and management
functions, considering the parent company primarily serves as a holding entity
for the subsidiary. The performance materiality for the parent company was
£14,300 (2022: £6,840) representing 65% (2022: 60%) of the overall
materiality. Performance materiality is based at a medium to high risk level
of 65% considering the inherent risks in the mining industry and the specific
risks identified and disclosed in the key audit matters. We use performance
materiality to reduce to an appropriately low level the probability that the
aggregate of uncorrected and undetected misstatements exceeds overall
materiality. Specifically, we use performance materiality in determining the
scope of our audit and the nature and extent of our testing of account
balances, classes of transactions and disclosures, for example in determining
sample sizes.
For the component in the scope of our group audit, we allocated a materiality
that was less than our overall group materiality. This component
materiality, determined to be £79,200 (2022: £65,800), aligns with the same
benchmarks used for the group.
We agreed with those charged with governance that we would report all
differences identified during the course of our audit in excess of £4,400
(2022: £3,700) for the group and £1,100 (2022: £570) for the parent
company.
Our approach to the audit
In designing our audit approach, we determined materiality and assessed the
risks of material misstatement in the financial statements. In particular, we
assessed the areas involving significant accounting estimates and judgements
by the directors in respect of the carrying value of the mining assets and
carrying values of the parent company's investments in, and loans to,
subsidiaries and considered future events that are inherently uncertain. We
also addressed the risk of management override of internal controls, including
evaluation of whether there was evidence of bias by the directors that
represented a risk of material misstatement due to fraud.
Of the four components of the group, two components being the London parent
company and its Tanzanian subsidiary that owns the mining license were
identified as significant and material components. We performed a full scope
audit of the London parent company's complete financial information using a
team with specific experience of auditing mining entities and publicly listed
entities, and the Tanzanian subsidiary's audit was conducted by component
auditors from a PKF network firm. Analytical procedures were performed in
respect of the remaining components of the group because they were not
significant to the group.
The subsidiary located in Tanzania was audited by a component auditor
operating under our instructions as the group auditor. The Senior Statutory
Auditor interacted regularly with the component audit team during all stages
of the audit and was responsible for the scope and direction of the audit
process. This, in conjunction with additional procedures performed, gave us
appropriate evidence for our opinion on the group and parent company's
financial statements.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those
which had the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Key Audit Matter How our scope addressed this matter
Carrying value of mining assets (Note 15)
The entity has capitalised mining assets of £5,334,949 (£5,681,377: 2022). Our work in this area included:
As per IAS 36, management is required to assess the carrying value of these - Reviewing and challenging the management's impairment review
assets for impairment at each reporting date or when there is an indication of process, including consideration of the NPV calculations used, and reviewing
impairment. the assumptions included in the models and performing a sensitivity analysis
on the key assumptions. We challenged management's assumptions by testing
The impairment test involves estimation of the recoverable amount of the against third-party evidence and ensuring the model is robust to these
assets, which requires significant judgement and estimation uncertainty. changes.
Management's assessment of the carrying value of mining assets involves
significant estimation and judgement related to the assumptions and inputs - Examining the assumptions made in the impairment review and
used in the NPV valuation model. supporting calculations. We tested the reasonableness of the assumptions and
compared them to industry benchmarks and other sources of external
information.
The carrying value of mining assets is a key audit matter because of the high - Considering the Group's resources, coal processing capacity, and
level of estimation uncertainty and judgement involved in determining the sales margins in our assessment of the carrying value of mining assets. We
carrying value of these assets reliably and accurately, the requirements of evaluated the potential impact of changes in market conditions, such as
IAS 36 for the company to assess the carrying value of these assets for changes in commodity prices or demand, on the carrying value of mining assets.
impairment, and the significance of these assets on the group's statement of
financial position. - Performing a sensitivity analysis to assess the impact of changes in
key assumptions on the carrying value of mining assets. This helped us to
assess the potential range of outcomes and the degree of estimation
uncertainty associated with the carrying value of mining assets.
- Reviewing the terms and conditions of the mining license agreement
to determine the requirements for license renewal and assess whether Edenville
International Tanzania has complied with these requirements.
- Inquiring with the management regarding the steps taken to renew the
mining license and assess the probability of renewal based on their responses.
- Reviewing the correspondence and communication with relevant
authorities to assess if there are any indications of non-compliance or breach
of conditions that could affect the renewal of the mining license.
- Ensuring that all conditions related to mining license renewal and
extensions are complied with.
- Ensuring that all mining licences are active and in good standing.
- Assessing whether appropriate rehabilitation provisions have been
recognized in the financial statements, considering the expiry of the mining
license in 2026 and the potential costs associated with rehabilitation in the
event that the license is not renewed.
- Performing testing to ensure the existence and ownership of licenses
and consideration has been given to whether a decommissioning provision is
required. We evaluated the adequacy of the decommissioning provision, and
assessed whether the decommissioning liability is appropriately recognized in
the financial statements; and
- Considering whether the treatment of mining assets is in accordance
with IAS 16 and has been correctly classified. We evaluated the
appropriateness of accounting policies used for mining assets, including the
recognition and measurement of mineral reserves and mine development costs.
The future carrying value of the mining assets is dependent on the ability of
the subsidiary to fully realise the potential of the mine and increase the
mining activities and extraction to pre-pandemic levels.
Valuation of the parent company's investment in, and loans to, subsidiaries
(Note 14)
The parent Company owns a significant investment in Edenville International Our work in this area included:
(Tanzania) Limited of £18,643,969 (£18,173,697: 2022), which includes loans
to the subsidiary of £11,600,657 (£11,130,386: 2022). The carrying value of - Reviewing and challenging management's impairment review of
this investment is linked to the value of the underlying assets held in investments held, including consideration of the NPV calculations used. We
Edenville International (Tanzania) Limited. These assets are primarily mining reviewed the assumptions included in the models and performed a sensitivity
assets located in Tanzania, and their valuation is subject to significant analysis on the key assumptions. We challenged management's assumptions by
estimation uncertainty and judgement. Therefore, there is a risk that the testing against third-party evidence and ensuring the model is robust to these
value in use of these assets is below the carrying value of the investment, changes. We also considered the reasonableness of the discount rate applied in
which could result in material misstatement of the amounts reported. the NPV calculations.
- Reviewing component auditor responses in relation to the Tanzania
based subsidiary and ensuring that no impairment indicators exist. We
As per IAS 36 - Impairment of Assets, management is required to assess the evaluated the work of the component auditor and assessed the accuracy and
recoverable amount of the mining assets held by Edenville International completeness of their audit work. We also reviewed the documentation provided
(Tanzania) Limited at each reporting date, or when there is an indication of by the component auditor to assess the existence of any impairment indicators.
impairment. This involves estimating the future cash flows expected to be
generated from the mining assets and comparing this to the carrying value of - Ensuring that all conditions related to mining license renewal and
the investment in the subsidiary. The estimation of future cash flows is based extensions are complied with.
on assumptions made by management, including factors such as commodity prices,
production volumes, and operational costs. - Ensuring that mining licence with subsidiary are active and in good
standing.
- Reviewing the value of the net investment in subsidiaries against
The carrying value of the investment in Edenville International (Tanzania) the underlying assets and verifying and corroborating the judgements/estimates
Limited is a key audit matter due to the high level of judgement and used by management to assess the recoverability of investments and
estimation involved in determining the recoverable amount of the underlying intercompany receivables. We assessed the reliability of the underlying
mining assets. assumptions made by management regarding the expected future cash flows from
the mining assets held by the subsidiary. We also performed sensitivity
analysis on the key assumptions used in the valuation and challenge
management's estimates where necessary. Additionally, we corroborated the
supporting documentation provided by management, such as mineral resource
reports and feasibility studies, to assess the reasonableness of the
judgements made.
The future carrying value of the mining assets is dependent on the ability of
the subsidiary to fully realise the potential of the mine and increase the
mining activities and extraction to pre-pandemic levels.
Other information
The other information comprises the information included in the annual report,
other than the financial statements and our auditor's report thereon. The
directors are responsible for the other information contained within the
annual report. Our opinion on the group and parent company financial
statements does not cover the other information and, except to the extent
otherwise explicitly stated in our report, we do not express any form of
assurance conclusion thereon. Our responsibility is to read the other
information and, in doing so, consider whether the other information is
materially inconsistent with the financial statements or our knowledge
obtained in the course of the audit, or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether this gives rise to a
material misstatement in the financial statements themselves. 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.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
· the information given in the strategic report and the directors'
report for the financial year for which the financial statements are prepared
is consistent with the financial statements; and
· the strategic report and the directors' report have been prepared
in accordance with applicable legal requirements
.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent
company and their environment obtained in the course of the audit, we have not
identified material misstatements in the strategic report or the directors'
report.
We have nothing to report in respect of the following matters in relation to
which the Companies Act 2006 requires us to report to you if, in our opinion:
· adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received from
branches not visited by us; or
· the parent company financial statements are not in agreement with
the accounting records and returns; or
· certain disclosures of directors' remuneration specified by law are
not made; or
· we have not received all the information and explanations we
require for our audit.
Responsibilities of directors
As explained more fully in the directors' responsibilities statement, the
directors are responsible for the preparation of the group and parent company
financial statements and for being satisfied that they give a true and fair
view, and for such internal control as the directors determine is necessary to
enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the group and parent company financial statements, the directors
are responsible for assessing the group and the parent company's ability to
continue as a going concern, disclosing, as applicable, matters related to
going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or the parent company or to
cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below:
· We obtained an understanding of the group and parent company and
the sector in which they operate to identify laws and regulations that could
reasonably be expected to have a direct effect on the financial statements. We
obtained our understanding in this regard through discussions with management,
industry research, application of cumulative audit knowledge and experience of
the sector.
· We determined the principal laws and regulations relevant to the
group and parent company in this regard to be those arising from the Companies
Act 2006, AIM Rules for Companies and Mining Act (14/2010) and various
regulations made there under applicable to subsidiary in Tanzania.
· We designed our audit procedures to ensure the audit team
considered whether there were any indications of non-compliance by the group
and parent company with those laws and regulations. These procedures included,
but were not limited to enquiries of management, review of minutes and
Regulatory News Service (RNS) announcements, and review of legal and
regulatory correspondence.
· We also identified the risks of material misstatement of the
financial statements due to fraud. We considered, in addition to the
non-rebuttable presumption of a risk of fraud arising from management override
of controls, that the potential for management bias was identified in relation
to the impairment assessment of mining assets and parent company's valuation
of investments in loans to subsidiaries. We addressed this by challenging the
assumptions and judgements made by management when evaluating any indicators
of impairment.
· As in all of our audits, we addressed the risk of fraud arising
from management override of controls by performing audit procedures which
included, but were not limited to: the testing of journals; reviewing
accounting estimates for evidence of bias; and evaluating the business
rationale of any significant transactions that are unusual or outside the
normal course of business.
· For the significant component within the group, the audit
procedures performed by the component auditors relating to non-compliance with
laws and regulations and the posting of journal entries was reviewed for
evidence of non-compliance or potential instances of fraud detected. As noted
in the Emphasis of matter section of our report, non-compliance with
requirement of the Government of Tanzania on operationalisation of the 16%
non-dilutable free carried interest shares was identified in the year.
Because of the inherent limitations of an audit, there is a risk that we will
not detect all irregularities, including those leading to a material
misstatement in the financial statements or non-compliance with regulation.
This risk increases the more that compliance with a law or regulation is
removed from the events and transactions reflected in the financial
statements, as we will be less likely to become aware of instances of
non-compliance. The risk is also greater regarding irregularities occurring
due to fraud rather than error, as fraud involves intentional concealment,
forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council's website at:
www.frc.org.uk/auditorsresponsibilities
(http://www.frc.org.uk/auditorsresponsibilities) . This description forms part
of our auditor's report.
Use of our report
This report is made solely to the company's members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the company's members those matters we
are required to state to them in an auditor's report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone, other than the company and the company's members as
a body, for our audit work, for this report, or for the opinions we have
formed.
Zahir Khaki (Senior Statutory Auditor)
15 Westferry Circus
For and on behalf of PKF Littlejohn
LLP
Canary Wharf
Statutory
Auditor
London E14 4HD
26 June 2024
GROUP STATEMENT OF COMPREHENSIVE INCOME
Note 2023 2022
£ £
Revenue 5 194,346 183,448
Cost of sales (438,877) (896,147)
(244,531)
Gross loss (712,699)
Administration expenses 6 (1,424,120) (1,038,384)
Group operating loss (1,668,651) (1,751,083)
Finance income 10 3,256 68
Finance costs 11 (16,133) (4,747)
Loss on operations before taxation (1,681,528) (1,755,762)
Income tax 12 (972) (917)
Loss for the year (1,682,500) (1,756,679)
Attributable to:
Equity holders of the Company (1,680,848) (1,754,011)
Non-controlling interest (1,652) (2,668)
Other comprehensive loss
Item that will or may be reclassified to the profit and loss:
Gain on translation of overseas subsidiary (349,479) 691,850
Total comprehensive loss for the year (2,031,979) (1,064,829)
Attributable to:
Equity holders of the Company (2,030,327) (1,062,161)
Non-controlling interest (1,652) (2,668)
Earnings per Share (pence)
Basic and diluted loss per share 13 (4.11p) (7.97p)
All operating income and operating gains and losses relate to continuing
activities.
No separate statement of comprehensive income is provided as all income and
expenditure is disclosed above.
GROUP AND COMPANY STATEMENT OF FINANCIAL POSITION
Company Registered Number 05292528 Note Group Company
31 December 31 December 31 December 31 December
2023 2022 2023 2022
£ £ £ £
Non-current assets
Investment in subsidiaries 14 - - 18,277,299 17,952,478
Property, plant and equipment 15 5,469,134 5,911,876 562 749
Intangible assets 16 333,041 352,627 - -
5,802,175 6,264,503 18,277,861 17,953,227
Current assets
Inventories 17 75,011 117,766 - -
Trade and other receivables 18 416,370 347,984 497,311 282,487
Cash and cash equivalents 19 633,093 237,300 499,661 159,558
1,124,478 703,050 996,972 442,045
Current liabilities
Trade and other payables 20 (515,376) (402,200) (150,538) (157,764)
Borrowings 21 (34,366) (29,376) - -
(549,742) (431,576) (150,538) (157,764)
Current assets less current liabilities 574,732 271,474 846,434 284,281
Total assets less current liabilities 6,376,907 6,535,977 19,124,295 18,237,508
Non-current liabilities
Borrowings 21 (32,131) (67,128) - -
Environmental rehabilitation liability 22 (32,086) (30,609) - -
6,312,690 6,438,240 19,124,295 18,237,508
Equity
Called-up share capital 23 4,562,344 4,233,744 4,562,344 4,233,744
Share premium account 23,995,626 22,569,976 23,995,626 22,569,976
Share option reserve 364,842 277,654 364,842 277,654
Foreign currency translation reserve 923,514 1,272,993 - -
Retained earnings (23,509,661) (21,896,430) (9,798,517) (8,843,866)
Attributable to the equity shareholders of the Company 6,336,665 6,457,937 18,237,508
19,124,295
Non- controlling interests (23,975) (19,697) - -
Total equity 6,312,690 6,438,240 19,124,295 18,237,508
The financial statements were approved by the board of directors and
authorised for issue on 26 June 2024 and signed on its behalf by:
Noel Lyons, Director
GROUP AND COMPANY STATEMENT OF CHANGES IN EQUITY
group
--------------------------------------------------Equity
Interests---------------------------------------
Share Capital Share Premium Retained Earnings Account Share Option Reserve Foreign Currency Total Non-controlling interest Total
Translation Reserve
£ £ £ £ £ £ £ £
At 1 January 2022 4,176,601 22,254,317 (20,325,577) 453,614 581,143 7,140,098 (17,328) 7,122,770
Other comprehensive loss for the year
Foreign currency translation - - - - 691,850 691,850 691,850
Loss for the year - - (1,754,011) - - (1,754,011) (2,668) (1,756,679)
Total comprehensive income for the year - - (1,754,011) - 691,850 (1,062,161) (2,668) (1,064,829)
Transactions with owners
Issue of share capital 57,143 342,857 - - - 400,000 - 400,000
Share issue costs - (20,000) - - - (20,000) - (20,000)
Share options/warrants charge -
- (7,198) - 7,198 - - -
Lapse of share options/warrants
- - 183,158 (183,158) - - - -
Total transactions with owners 57,143 315,659 183,158 (175,960) - 380,000 - 380,000
Non- controlling interest share of goodwill
- - - - - - 299 299
At 31 December 2022 4,233,744 22,569,976 (21,896,430) 277,654 1,272,993 6,457,937 (19,697) 6,438,240
--------------------------------------------------Equity
Interests---------------------------------------
Share Capital Share Premium Retained Earnings Account Share Option Reserve Foreign Currency Total Non-controlling interest Total
Translation Reserve
£ £ £ £ £ £ £ £
At 1 January 2023 4,233,744 22,569,976 (21,896,430) 277,654 1,272,993 6,457,937 (19,697) 6,438,240
Other comprehensive loss for the year
Foreign currency translation - - - - (349,479) (349,479) (2,464) (351,943)
Loss for the year - - (1,680,848) - - (1,680,848) (1,652) (1,682,500)
Total comprehensive income for the year - - (1,680,848) - (349,479) (2,030,327) (4,116) (2,034,443)
Transactions with owners
Issue of share capital 328,600 1,445,650 - - - 1,774,250 - 1,774,250
Share issue costs - (20,000) - - - (20,000) - (20,000)
Share options/warrants charge
- - 154,805 - 154,805 - 154,805
Lapse of share options/warrants
- - 67,617 (67,617) - - - -
Total transactions with owners 328,600 1,425,650 67,617 87,188 - 1,909,055 - 1,909,055
Non- controlling interest share of goodwill
- - - - - - (162) (162)
At 31 December 2023 4,562,344 23,995,626 (23,509,661) 364,842 923,514 6,336,665 (23,975) 6,312,690
COMPANY
Retained Earnings Account Share
Share Capital Share Premium Option Reserve
Total
£ £ £ £ £
At 1 January 2022 4,176,601 22,254,317 (8,337,372) 453,614 18,547,160
Other comprehensive loss for the year
Loss for the year - - (689,652) - (689,652)
Total comprehensive income for the year - - (689,652) - (689,652)
Transactions with owners
Issue of share capitals 57,143 342,857 - - 400,000
Share issue costs - (20,000) - - (20,000)
Share option/warrants charge - (7,198) - 7,198 -
Lapse of share options/warrants 183,158 (183,158)
Total transactions with owners 57,143 315,659 183,158 (175,960) 380,000
At 31 December 2022 4,233,744 22,569,976 (8,843,866) 277,654 18,237,508
Other comprehensive loss for the year
Loss for the year - - (1,022,268) - (1,022,268)
Total comprehensive income for the year - - (1,022,268) - (1,022,268)
Transactions with owners
Issue of share capital 328,600 1,445,650 - - 1,774,250
Share issue costs - (20,000) - - (20,000)
Share option/warrants charge - - 154,805 154,805
Lapse of share options/warrants 67,617 (67,617) -
Total transactions with owners 328,600 1,425,650 67,617 87,188 1,909,055
At 31 December 2023 4,562,344 23,995,626 (9,798,517) 364,842 19,124,295
Group Company
GROUP AND COMPANY CASH FLOW
STATEMENTS
Year ended Year ended Year ended Year ended 31 December
31 December 31 December 31 December 2023 2022
2023 2022
£ £
£ £
Operating activities
Operating loss (1,668,651) (1,751,083) (1,047,987) (699,273)
Adjustments to reconcile profit before tax to net cash flows:
Depreciation
114,422 324,790 187 251
Share based payments 154,805 - 154,805 -
Expected credit losses (4,387) 242,780 - 242,780
Impairment of inventories 45,925 - - -
Foreign exchange difference (2,135) (4,614) - -
Working capital changes:
Decrease/ in inventories (8,798) 40,903 - -
Increase in trade and other receivables (94,500) (92,615) (229,023) (250,227)
Increase/(decrease)/ in trade and other payables 104,216 (26,820) (7,226) 54,401
Net cash outflow from operating activities (1,359,103) (1,266,659) (1,129,244) (652,068)
Tax paid - (1,319) - -
Cash flows from investing activities
Capital introduced to subsidiaries - - (324,822) (754,827)
Purchase of property, plant and equipment - (41,236) -
Finance income 3,256 68 3,256 68
Net cash from/(used in) investing activities 3,256 (41,168) (321,566) (754,759)
Cash flows from financing activities
Repayment of lease liabilities (25,265) (22,138) - -
Interest payable (3,187) - (3,187)
Lease interest (9,687) (1,793) - -
Proceeds from issue of ordinary shares 1,814,100 360,150 1,814,100 360,150
Share issue costs (20,000) (20,000) (20,000) (20,000)
Net cash inflow from financing activities 1,755,961 316,219 1,790,913 340,150
Net increase/(decrease) in cash and cash equivalents 400,114 (992,927) 340,103 (1,066,677)
Cash and cash equivalents at beginning of year 237,300 1,229,801 159,558 1,226,235
Effect of foreign exchange rate changes on cash and cash equivalents
(4,321) 426 - -
Cash and cash equivalents at end of year 19 633,093 237,300 499,661 159,558
NOTES TO THE COMPANY'S FINANCIAL STATEMENTS
1. General Information
Shuka Minerals 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 ('UK adopted
IAS') and as applied in accordance with the provisions of the Companies Act
2006. The Group's financial statements have been prepared under the historical
cost convention.
The preparation of financial statements in conformity with UK adopted IAS
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 £1,022,268 (2022:
£689,652)
Going concern
At 31 December 2023 the Group had cash balances totalling £633,094. The
Group also raised £2,000,000 in May 2024 by issuing convertible loan notes
(see note 31), which has not yet been drawn down.
Following the introduction of new management in August of 2022 production
improved slightly and in June of 2023 output was up on previous year. However
due to plant and equipment issues production has fallen back. It took longer
than expected to resolve these issues due to difficulties in the supply chain
in Tanxania and need for importation of parts. All is now resolved and with a
very heavy rainy season over the mine is ready to ramp up production.
The Company is now in significant discussions with its new target market, that
being the supply of coal and coal fines to cement factories in nearby
countries. While the location of the mine is a challenge for the market
outside Africa, it is strategically placed for neighbouring countries where
supply is limited and transport costly, therefore giving the company a
strategic and economic advantage. Oftakes are already in place for as much
production as Rukwa can manage and supply has already started to companies
such as Crimera and others. The company will focus on increasing production
and developing the partnership with these cement producing entities, who not
only seek our coal for its location but also for its chemical composition and
quality.
Based on the current working capital forecast , the Group has sufficient funds
for the next 12 months.
In May 2024 the Company entered into a £2 million unsecured convertible loan
note agreement with AUO Commercial Brokerage LLC, a wholly-owned subsidiary of
Q Global Commodities Group, which is led by Quinton Van Den Burgh, the
Company's Chairman. The £2 million is to be received by no later than 31
March 2025, although the company can receive the £2 million via a drawdown
process from August 2024 to March 2025. (see note 31), which has not yet been
drawn.
The Directors therefore consider that the Group has sufficient funds in place
to continue as a going concern for at least 12 months from the date of
approval of these financial statements.
Adoption of new and revised standards and changes in accounting policies
New standards, interpretations and amendments that are effective for the first
time for the financial year beginning 31 December 2023
IFRS 4 Amendments regarding the expiry date of the deferral approach
IFRS 17 Insurance contracts
IFRS 17 Amendments regarding comparative information for initial application of IFRS
17 and IFRS 9
IAS 1 Amendments regarding disclosure of accounting policies
IAS 8 Amendments regarding the definition of accounting estimates
IAS 12 Amendments resulting from deferred tax assets and liabilities arising from a
simple transaction
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:
Effect annual periods beginning before or after
IFRS 16 Amendments to clarify seller-lessee subsequently measured sale and leaseback 1(st) January 2024
transactions
IFRS S1 General Requirements for Disclosure of Sustainability-related Financial 1(st) January 2024
Information
IFRS S2 Climate-related Disclosures 1(st) January 2024
IFRS 7 Amendments regarding supplier finance arrangements 1(st) January 2024
IAS 1 Amendments regarding to the classification of liabilities with covenants as 1(st) January 2024
either current or non-current
IAS 7 Amendments regarding supplier finance arrangements 1(st) January 2024
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 Shuka
Minerals Plc and all its subsidiary undertakings (Edenville International
(Seychelles) Limited, Edenville International (Tanzania) Limited and Edenville
Power (TZ) Limited) made up to 31 December 2023 (Note 14). 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
Revenue comprises the fair value of the 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
The Group's consolidated financial statements are presented in pound sterling,
which is also the parent company's
functional currency.
For each entity, the Group determines the functional currency and items
included in the financial statements of each entity are measured using that
functional currency. The Group uses the direct method of consolidation and on
disposal of a foreign operation, the gain or loss that is reclassified to
profit or loss reflects the amount that arises from using this method.
The functional currency of the Group's subsidiaries is US Dollars.
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.
Impairment
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.
2. Group Accounting Policies (continued)
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 weighted 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 Group performs inventory obsolescence assessment 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.
Coal 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 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 the Coal Production Asset in the statement of financial position.
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.
Investments in subsidiaries
Investments in subsidiaries are measured at cost less accumulated impairment.
The Group considers long term loans to be cost of investment in subsidiary.
Leases
All leases are accounted for by recognising a right-of-use asset and a lease
liability except for:
• leases of low value assets; and
• leases with a duration of 12 months or less.
Lease liabilities are measured at the present value of the contractual
payments due to the lessor over the lease term, with the discount rate
determined by reference to the rate inherent in the lease unless (as is
typically the case) this is not readily determinable, in which case the
group's incremental borrowing rate on commencement of the lease is used.
Variable lease payments are only included in the measurement of the lease
liability if they depend on an index or rate. In such cases, the initial
measurement of the lease liability assumes the variable element will remain
unchanged throughout the lease term. Other variable lease payments are
expensed in the period to which they relate.
On initial recognition, the carrying value of the lease liability also
includes:
• amounts expected to be payable under any residual value guarantee;
• the exercise price of any purchase option granted in favour of the group
if it is reasonably certain to assess that option; and
• any penalties payable for terminating the lease, if the term of the lease
has been estimated on the basis of termination option
being exercised.
Right of use assets are initially measured at the amount of the lease
liability, reduced for any lease incentives received, and increased for:
• lease payments made at or before commencement of the lease;
• initial direct costs incurred; and
• the amount of any provision recognised where the group is contractually
required to dismantle, remove or restore the leased asset.
Subsequent to initial measurement lease liabilities increase as a result of
interest charged at a constant rate on the balance outstanding and are reduced
for lease payments made. Right-of-use assets are amortised on a straight-line
basis over the remaining term of the lease or over the remaining economic life
of the asset if, rarely, this is judged to be shorter than the lease term.
When the group revises its estimate of the term of any lease (because, for
example, it re-assesses the probability of a lessee extension or termination
option being exercised), it adjusts the carrying amount of the lease liability
to reflect the payments to make over the revised term, which are discounted at
the same discount rate that applied on lease commencement. The carrying value
of lease liabilities is similarly revised when the variable element of future
lease payments dependent on a rate or index is revised. In both cases an
equivalent adjustment is made to the carrying value of the right-of-use asset,
with the revised carrying amount being amortised over the remaining (revised)
lease term.
When the group renegotiates the contractual terms of a lease with the lessor,
the accounting depends on the nature of the modification:
• if the renegotiation results in one or more additional assets being
leased for an amount commensurate with the standalone price for the additional
rights-of-use obtained, the modification is accounted for as a separate lease
in accordance with the above policy;
• in all other cases where the renegotiated increases the scope of the lease
(whether that is an extension to the lease term, or one or more additional
assets being leased), the lease liability is remeasured using the discount
rate applicable on the modification date, with the right-of-use asset being
adjusted by the same amount; and
• if the renegotiation results in a decrease in the scope of the lease, both
the carrying amount of the lease liability and right-of-use asset are reduced
by the same proportion to reflect the partial of full termination of the lease
with any difference recognised in profit or loss. The lease liability is then
further adjusted to ensure its carrying amount reflects the amount of the
renegotiated payments over the renegotiated term, with the modified lease
payments discounted at the rate applicable on the modification date. The
right-of-use asset is adjusted by the same amount.
For contracts that both convey a right to the group to use an identified asset
and require services to be provided to the group by the lessor, the group has
elected to account for the entire contract as a lease, i.e. it does allocate
any amount of the contractual payments to, and account separately for, any
services provided by the supplier as part of the contract
Leased Assets
Assets obtained under hire purchase contract and finance leases are
capitalised as tangible fixed assets. Assets acquired by finance lease are
depreciated over the shorter of the lease term and their useful lives. Assets
acquired by hire purchase are depreciated over their useful lives. Finance
leases are those where substantially all of the benefits and risks of
ownership are assumed by the Group. Obligations under such agreements are
included in creditors net of the finance charge allocated to future periods.
The finance element of the rental payment is charged to the statement of
comprehensive income so as to produce a constant periodic rate of charge on
the net obligation outstanding in each period.
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
Production volumes are based on management's most reasonable possible estimate
of mine reaching its potential and achieving the run of mine production
capacity of 75,000 tonnes per year. The total mining quantities are on the
assumption that there are resources which is supported by the JORC report
carried out in 2017 indicating that the mine has 7 million tonnes of coal.
· Sales volumes
Sales volumes are based on the assumption that all of the coal produced will
be sold. There is no year on year growth rate assumed till 2028.
· Terminal growth rates
There is terminal growth rate applied in calculation of value in use is 5%
which is based on the assumption that mining licenses will be renewed and
extended.
· Discount rates
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.
· Selling prices
Coal selling prices are based on the most recent realisable value available
based on signed contracts with customers.
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.
Current dramatic increases in Global coal prices have had a major impact on
the demand situation in country and the east African region overall, with one
of the major producers turning their focus to export. As a result of this the
company has received regular coal sales enquiries and is focused on finding
new markets for its product and gearing up production. It has already
commenced the sale of fines and has regular enquiries about the purchase of
its washed coal.
Following the introduction of new management in August of 2022 production
improved slightly and in June of 2023 output was up on previous year. The
company has recently signed a contract to provide up to 5,000 per month of
washed coal to a Rwanda client. This opens up the opportunities for export to
neighbouring countries who suit the location of the mine at Rukwa.
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
2023 Coal Other Total
Consolidated Income Statement £ £ £
Revenue - Tanzania 194,346 - 194,346
Cost of sales (excluding depreciation and amortisation) (369,182) - (369,182)
Depreciation (38,824) - (38,824)
Depletion of development assets (30,871) - (30,871)
Gross loss (244,531) - (244,531)
Administrative expenses (211,592) (1,012,994) (1,224,586)
Depreciation (44,542) (187) (44,729)
Share based payments - (154,805) (154,805)
Group operating loss (500,665) (1,167,986) (1,668,651)
Finance income - 3,256 3,256
Finance cost (12,946) (3,187) (16,133)
Loss on operations before taxation (513,611) (1,167,917) (1,681,528)
Income tax (972) - (972)
Loss for the year (514,583) (1,167,917) (1,682,500)
Coal Production Assets
2022 Coal Other Total
Consolidated Income Statement £ £ £
Revenue - Tanzania 183,448 - 183,448
Cost of sales (excluding depreciation and amortisation)
(609,883) - (609,883)
Depreciation (240,262) - (240,262)
Depletion of development assets (46,002) - (46,002)
Gross profit (712,699) - (712,699)
Administrative expenses (180,837) (819,022) (999,859)
Depreciation (38,274) (251) (38,525)
Group operating loss (931,810) (819,273) (1,751,083)
Finance income
Finance cost - 68 68
(4,747) ________ (4,747)
Loss on operations before taxation (936,557) (819,205) (1,755,762)
Income tax (917) - (917)
Loss for the year (937,474) (819,205) (1,756,679)
By Business Segment Carrying value of segment assets Additions to non-current assets and intangibles Total liabilities
2023 2022 2023 2022 2023 2022
£ £ £ £ £ £
Coal 6,295,784 6,745,980 - 141,141 469,761 377,889
Other 630,865 221,575 - - 144,198 151,424
6,926,649 6,967,555 - 141,141 613,959 529,313
By Geographical Area
£ £ £ £ £ £
Africa (Tanzania) 6,295,784 6,745,980 - 141,141 469,761 377,889
Europe 630,865 221,575 - - 144,198 151,424
6,926,649 6,967,555 - 141,141 613,959 529,313
5. Segmental information (continued)
Information about major customers
Included in revenues arising from the sale of coal are revenues which arose
from sales to the Group's largest customers based in Tanzania except for
Customer 2 which was based in Rwanda. No other customers contributed 10% or
more to the Group's revenue in either 2023 or 2022. This information is not
available for 2022.
2023 2022
£ £
Customer 1 78,503 97,040
Customer 2 81,570 -
Customer 3 - 56,929
Customer 4 20,005 -
180,078 153,969
6. Expenses by nature
2023 2022
£ £
Staff costs 653,592 277,251
Share based payments 154,805 -
Audit fees 72,810 55,089
Office and other administrative services 46,530 88,261
AIM related costs including investor relations 28,417 30,000
Professional, legal and consultancy fees 385,737 220,202
Travel, entertaining and subsistence 18,674 45,995
Exchange gain (506) (1,277)
Depreciation 44,729 38,525
Provisions and expected credit losses (4,387) 267,081
Other costs 23,719 17,257
1,424,120 1,038,384
7. Auditors' remuneration
2023 2022
£ £
Fees payable to the Company's auditor for the audit of the parent Company and
consolidated accounts
50,000 47,000
8. Employees
Group
2023 2022
£
Wages and salaries 745,435 367,766
Social security costs 13,892 30,750
Benefits in kind 5,094 -
Pensions - 12,516
Share based payments 154,805 -
Other costs 723 -
919,949 411,032
The average number of employees and directors during the year was as follows:
Group
2023 2022
Administration 5 9
Mining , plant processing and security 18 14
23 23
Remuneration of key management personnel
The remuneration of the directors and other key management personnel is set
out below:
2023 2022
£ £
Emoluments 648,000 270,267
Pensions - 607
Benefits in kind 4,869 -
Share based payments 154,805
807,674 270,874
9. Directors' remuneration
2023
2022
£ £
Emoluments 648,000 246,000
Pensions - 608
Benefits in kind 4,869 -
Share based payment 154,805 -
807,674 246,608
The highest paid director received remuneration of £300,496 (2022: £74,250).
Included in the above are accrued Director's remuneration of £50,750 (2022:
£Nil)
Directors' interest in outstanding share options per director is disclosed in
the directors' report.
10. Finance income
2023 2022
£ £
Interest income on short-term bank deposits 3,256 68
3,256 68
11. Finance Costs
2023 2022
£ £
Hire purchase interest 9,687 1,793
Interest on rehabilitation provision 3,259 2,954
Other interest payable 3,187 -
16,133 4,747
12. Income tax
2023 2022
£ £
Current tax:
Current tax on loss for the year
Foreign taxation 972 917
Total current tax 972 917
Deferred tax
On write off/impairment on intangible assets - -
Tax charge for the year 972 917
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
£9,149,345 (2022: £8,324,834).
A deferred tax asset of £2,287,195 (2022 £2,081,021) calculated at 25%
(2022: 25%) 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:
2023 2022
£ £
Loss on ordinary activities before tax (1,681,529) (1,755,762)
Expected tax credit at standard rate of UK Corporation Tax
25.52% (2022: 19%) and 30% (2022:30%) In Tanzania (459,682) (450,409)
Disallowable expenditure 120,380 59,444
Depreciation in excess of capital allowances 87,464
Other adjustments 872 (18,025)
Capital allowances in excess of depreciation - (1,684,421)
Losses carried forward 251,938 2,092,494
Movement in deferred tax not recognised -
Tax charge for the year 972 917
On 1 April 2023 the corporation tax rate increased to 25% for companies with
profits of over £250,000. A small profits rate was introduced for companies
with profits of £50,000 or less so that they will continue to pay corporation
tax at 19%. 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. The group considers the amendments issued
by IAS 12 from the accounting requirements for deferred taxes are not
material. International Tax Reform-Pillar Two Model Rules - Amendments to IAS
12 had no impact on the Group's consolidated financial statements as the Group
is not in scope of the Pillar Two model rules as its revenue is less that EUR
750 million/year.
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.
2023 2022
£ £
Net loss for the year attributable to ordinary shareholders (1,682,500) (1,756,679)
Weighted average number of shares in issue 40,922,217 22,036,964
Basic and diluted loss per share (4.11) (7.97)
14. Investment in subsidiaries
Shares in Loans to
subsidiaries subsidiaries Total
Company £ £ £
Cost
At 1 January 2022 7,043,312 10,154,340 17,197,652
Additions - 754,826 754,826
_________ _________ _________
At 31 December 2022 7,043,312 10,909,166 17,952,478
Accumulated impairment
As at 1 January 2022 - - -
Impairment - - -
_________ _________ _________
At 31 December 2022 - - -
Net Book Value
As at 31 December 2022 7,043,312 10,909,166 17,952,478
Shares in Loans to
subsidiaries subsidiaries Total
Company £ £ £
Cost
At 1 January 2023 7,043,312 10,909,166 17,952,478
Additions - 324,821 324,821
_________ _________ _________
At 31 December 2023 7,043,312 11,233,987 18,277,299
Accumulated impairment
As at 1 January 2023 - - -
Impairment
_________ _________ _________
At 31 December 2023 - - -
Net Book Value
As at 31 December 2023 7,043,312 11,233,987 18,277,299
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.
The JORC compliant resource statement completed in 2013 can be found in the
operations section of the Groups website: www.shukaminerals.com
(http://www.shukaminerals.com) .
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.
. The Group is continuing to sell its washed coal through export to
neighbouring countries for use by cement manufacturers. It is expected these
sales, subject to satisfactory continuous production, will increase going
forward.
The Company is now in significant discussions with its new target market, that
being the supply of coal and coal fines to cement factories in nearby
countries. While the location of the mine is a challenge for the market
outside Africa, it is strategically placed for neighbouring countries where
supply is limited and transport costly, therefore giving the company a
strategic and economic advantage. Oftakes are already in place for as much
production as Rukwa can manage and supply has already started to companies
such as Crimera and others. The company will focus on increasing production
and developing the partnership with these cement producing entities, who not
only seek our coal for its location but also for its chemical composition and
quality.
However, based upon estimated 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 supplying coal to nearby cement factories in neighbouring
countries. Production projections are based on ROM (Run of Mine) which is
higher than the actual production levels and the value in use is dependent on
the mine achieving ROM capacity. The Directors have applied a 10% discount
rate in their forecasts. Additional factors that may affect these projections
include the following: -
An increase in the discount factor to 14% would result in an impairment of the
Edenville International (Tanzania) Limited investment by £806k.
A decrease of 37% of the EBITA would result in an impairment of the Edenville
International (Tanzania) Limited investment by £206k.
A decrease of quantity by 12% would result in an impairment of the Edenville
International (Tanzania) Limited investment by £170k.
The mining license is due to expire in 2026. Should the mining license not be
renewed this would result in an impairment of £18.2m.
14. Investment in subsidiaries (continued)
Holdings of more than 20%:
The Company holds more than 20% of the share capital of the following
companies:
Subsidiary undertaking 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%
* These shares are held by Edenville International (Seychelles) Limited.
15. Property, plant and equipment
Coal Production assets Plant and machinery Fixtures, fittings and equipment Motor vehicles Total
£ £ £ £ £
Cost
As at 1 January 2022 5,230,294 1,201,831 7,191 193,620 6,632,936
Additions - - - 141,141 141,141
Adjustment - - - (27,414) (27,414)
Foreign exchange adjustment 142,660 21,133 788,881
624,725 363
As at 31 December 2022 5,855,019 1,344,491 7,554 328,480 7,535,544
Depreciation
As at 1 January 2022 114,026 925,484 7,045 134,460 1,181,015
Depletion/ Charge for the year 259,777 18,974 324,790
46,002 37
Adjustment - - - (27,414) (27,414)
Foreign exchange adjustment 116,659 14,641 145,277
13,614 363
As at 31 December 2022 173,642 1,301,920 7,445 140,661 1,623,668
Net book value
As at 31 December 2022 5,681,377 42,571 109 187,819 5,911,876
Coal Production assets Plant and machinery Fixtures, fittings and equipment Motor vehicles Total
£ £ £ £ £
Cost
As at 1 January 2023 5,855,019 1,344,491 7,554 328,480 7,535,544
Foreign exchange adjustment (74,262) (17,318) (416,979)
(325,211) (188)
As at 31 December 2023 5,529,808 1,270,229 7,366 311,162 7,118,565
Depreciation
As at 1 January 2023 173,642 1,301,920 7,445 140,661 1,623,668
Depletion/ Charge for the year 39,171 44,353 114,422
30,871 27
Foreign exchange adjustment (71,908) (6,910) (88,659)
(9,653) (188)
As at 31 December 2023 194,860 1,269,183 7,284 178,104 1,649,431
Net book value
As at 31 December 2023 5,334,948 1,046 82 133,058 5,469,134
Plant and machinery depreciation amounting to £49,489 (2022: £240,262) is
included within cost of sales as it relates to mining equipment.
In addition the groups obligations under finance leases (see note 21) are
secured by the assets purchased under hire purchase included in motor vehicles
are assets with a net book value of £124,785 (2022: £138,200).
15. Property, plant and equipment (continued)
Company
Fixtures, fittings and equipment
Plant and machinery Motor Vehicles
Total
£ £ £ £
Cost
As at 1 January 2022 and 31 December 2022 7,471 4,153 16,691 28,315
Depreciation
As at 1 January 2022 7,208 4,007 16,100 27,315
Charge for the year 66 37 148 251
As at 31 December 2022 7,274 4,044 16,248 27,566
Net book value
As at 31 December 2022 197 109 443 749
Fixtures, fittings and equipment
Plant and machinery Motor Vehicles
Total
£ £ £ £
Cost
As at 1 January 2023 and 31 December 2023 7,471 4,153 16,691 28,315
Depreciation
As at 1 January 2023 7,274 4,044 16,248 27,566
Charge for the year 49 27 111 187
As at 31 December 2023 7,323 4,071 16,359 27,753
Net book value
As at 31 December 2023 148 82 332 562
16. Intangible assets
Group
Mining Licences
£
Cost or valuation
As at 1 January 2022 1,489,604
Foreign exchange adjustment 177,926
At 31 December 2022 1,667,530
Accumulated depletion, amortisation and impairment
As at 1 January 2022 1,174,602
Amortisation
Foreign exchange adjustment 140,301
At 31 December 2022 1,314,903
Net book value
As at 31 December 2022 352,627
Group
Mining Licences
£
Cost or valuation
As at 1 January 2023 1,667,530
Foreign exchange adjustment (92,619)
At 31 December 2023 1,574,911
Accumulated depletion, amortisation and impairment
As at 1 January 2023 1,314,903
Amortisation
Foreign exchange adjustment (73,033)
At 31 December 2023 1,241,870
Net book value
As at 31 December 2023 333,041
16. Intangible assets (continued)
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
2023 2022
£ £
ROM stockpiles 30 498
Fines 162,033 158,106
Washed coal 2,542 6,594
Less; Impairment (89,594) (47,432)
75,011 117,766
The cost of inventories recognised as an expense during the year in was
£136,021 (2022: £363,877).
.
18. Trade and other receivables
Group Company
2023 2022 2023 2022
£ £ £ £
Trade receivables 93,657 84,441 - -
Less : Expected credit loss allowance (70,986) (79,692) - -
Net Trade receivables 22,671 4,749 - -
Other receivables 148,642 314,709 120,080 283,464
Less : Expected credit loss allowance (26,843) (271,202) - (242,780)
121,799 43,507 120,080 40,684
Amounts due from related parties - - 366,670 221,220
VAT receivable 271,900 298,798 10,561 19,653
Prepayments - 930 - 930
416,370 347,984 497,311 282,487
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
2023 2022 2023 2022
£ £ £ £
Cash at bank and in hand 633,093 237,300 499,661 159,558
20. Trade and other payables
Group Company
2023 2022 2023 2022
£ £ £ £
Trade payables 132,578 252,666 13,979 1,890
Amounts owed to subsidiary undertakings - - 6,340 6,340
Accruals and deferred income 138,064 149,534 130,219 149,534
Other payables 244,734 - - -
515,376 402,200 150,538 157,764
21. Borrowings
Group Company
2023 2022 2023 2022
£ £ £ £
Hire purchase finance
Repayable within 1 year 34,366 29,376 - -
Repayable within 2 to 5 years 32,131 67,128 - -
66,497 96,504 - -
22. Environmental rehabilitation liability
Group
2023 2022
£ £
At 1 January 30,609 24,632
Interest 3,260 2,954
Foreign exchange movement (1,783) 3,023
32,086 30,609
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 1p 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 2022 21,645,575 216,457 396,014,437,346 3,960,144 4,176,601
On 7 December 2022 the company issued 5,714,286 Ordinary 1p shares at 7p 5,714,286 57,143 - - 57,143
each
As at 31 December 2022 27,359,861 273,600 396,014,437,346 3,960,144 4,233,744
23. Share capital (continued)
Group and Company
No £ No £ £
Ordinary shares of 1p 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 2023 27,359,861 273,600 396,014,437,346 3,960,144 4,233,744
On 31 May 2023 11,500,000 Ordinary 1p shares were issue for 5p 11,500,000 115,000 - - 115,000
On 7 September 2023 17,860,000 Ordinary 1p shares were issued for 5p
17,860,000 178,600 - - 178,600
On 7 September 2023 3,500,000 Ordinary shares of 1p each were issued for 8.75p
3,500,000 35,000 - - 35,000
As at 31 December 2023 60,219,861 602,200 396,014,437,346 3,960,144 4,562,344
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 shareholders
24. Capital and reserves attributable to shareholders
Group Company
2023 2022 2023 2022
£ £ £ £
Share capital 4,562,344 4,233,744 4,562,344 4,233,744
Share premium 23,995,626 22,569,976 23,995,626 22,569,976
Other reserves 1,288,356 1,550,647 364,842 277,654
Retained deficit (23,509,661) (21,896,430) (9,798,517) (8,843,866)
Total equity 6,336,665 6,457,937 19,124,295 18,237,508
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 2023 2022 2023 2022
£ £ £ £
Receivables at amortised cost including cash and cash equivalents:
Investments and loans to subsidiaries - - 11,233,987 10,909,166
Cash and cash equivalents 633,093 237,300 499,661 159,558
Trade and other receivables 416,370 347,054 497,311 282,847
Total 1,049,463 584,354 12,230,959 11,351,571
Financial liabilities
Financial liabilities at amortised cost:
Trade and other payables 515,376 402,200 150,538 157,764
515,376 402,200 150,538 157,764
Net 534,087 182,154 12,080,421 11,93,807
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.
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 as at 31 December 2023 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 in 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% strengthening of sterling against the US dollar
would result in an increase the net assets of the group of £582,602, whist
a 10% weaking would result in a fall in net assets of the group of £529,638.
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
2022
Less than 1 year 1- 2 years Total
Trade payables 252,666 - 252,666
Accruals 149,534 - 149,534
Borrowings 29,376 67,128 96,504
431,576 67,128 431,576
2023
Less than 1 year 1- 2 years Total
Trade payables 132,578 - 132,578
Accruals 138,064 - 138,064
Other payables 244,734 - 244,734
Borrowings 34,366 32,131 66,497
549,749 32,131 581,873
26. Financial instruments (continued)
Company
2022
Less than 1 year 1-2 years Total
Trade payables 1,890 - 1,890
Other payables 6,340 - 6,340
Accruals 149,534 - 149,534
157,764 - 157,764
2023
Less than 1 year 1-2 years Total
Trade payables 13,979 - 13,979
Other payables 6,340 - 6,340
Accruals 130,219 - 130,219
150,538 - 150,538
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 2023 Granted Lapsed As at 31 December 2023
9 May 2019 8 May 2023 £2.60 100,000 - (100,000) -
3 April 2020 2 April 2025 £3.00 270,000 - - 270,000
370,000 - (100,000) 270,000
The following warrants over ordinary shares have been granted by the Company:
At the date of grant, the options were valued using the Black-Scholes option
pricing model. The fair value per option granted and the assumptions used in
the calculation were as follows:
Date of grant 26 April 2019 17 April 2020
Expected volatility 101% 72%
Expected life 3.5 years 3 years
Risk-free interest rate 0.75% 0.11%
Expected dividend yield - -
Possibility of ceasing employment before vesting - -
Fair value per option 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 2023 was £Nil (2022: £Nil).
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 2023 Granted Exercised As at 31 December 2023
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
9 December 2022 8 December 2025 7p 285,714 - - 285,714
6 December 2022 5 December 2027 25p 333,334 - 333,334
3 August 2023 25 May 2024 25p 5,451,691 - 5,451,691
3 August 2023 02 August 2028 9.125p 3,600,000 - 3,600,000
11,189,074 9,385,025 (201,901) 20,363,198
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:
Date of grant 14 January 2021 26 May 9 December 2022 6 December 2022 3 August 2023
2021
Expected volatility 81% 69% 66% 60% 79%
Expected life 3 years 3 years 3 years 3 years 3 years
Risk-free interest rate (0.06)% 0.14% 3.33% 3.21% 4.78%
Expected dividend yield - - - - -
Fair value per option £0.2241p £0.1571/£0.1892 £0.03 £0.019 £0.058
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 £154,805 was made against share premium in respect of share
issue costs. (2022: £7,198).
Movements in the number of options outstanding and their related weighted
average exercise prices are as follows:
2023 2022
Number of options Weighted average exercise price per share Number of options Weighted average exercise price per share
pence pence
At 1 January 370,000 289 492,901 327
Granted - - - -
Lapsed (100,000) (122,901) 440
At 31 December 270,000 289 370,000 289
Exercisable at year end 270,000 370,000
The weighted average remaining contractual life of options as at 31 December
2023 was 1.26 years (2022: 1.74 years).
27. Equity-settled share-based payments (continued)
Warrants
Movements in the number of warrants outstanding and their related weighted
average exercise prices are as follows:
2023 2022
Number of options Weighted average exercise price per share Number of options Weighted average exercise price per share
pence pence
At 1 January 11,189,074 25.08 11,822,526 27.80
Granted 9,385,025 18.91 285,714 7.00
Lapsed (210,901) (48.15) (919,166) (54.45)
At 31 December 20,363,198 13.28 11,189,074 25.08
The weighted average remaining contractual life of warrants as at 31 December
2023 was 1.22 years (2022: 1.42 years).
28. Contingent liabilities
Edenville International (Tanzania) Limited had 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"). This dispute has been settled in
full.
As of the time of signing of these financial statements, the Group had not
finalised the operationalisation of the issuance of up to 16% non-dilutable
free carried interest shares to the Government of Tanzania as per the
requirements of the State Participation Government Notice No. 939 of 30
October 2020 which require the Government of Tanzania to acquire up to 16% of
the non dilutable free carried interest shares in the capital of a mining
company or any other person holding a mining license or special mining
license. This situation is being managed by our experienced local directors.
Following the Upendo Group settlement (note 31). The Upendo Group holds a
residual 10% interest in the Rukwa coal mining licence.
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 £324,821 (2022: £754,826) 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
£11,230,276 (2022: 10,905,454). This amount has been included within loans to
subsidiaries.
A further amount of £366, 670(2022: £221,220) is due from Edenville
International (Tanzania) Limited included in trade and other receivables in
respect of management fees and interest receivable.
The company also invoiced Edenville International (Tanzania) Limited £120,000
(2022: £120,000) and £25,650 (2022: £9,554) in respect of management fees
and interest respectively . This remained outstanding at the year end.
At the year end the Company was owed £3,712 (2022: £3,712) by its subsidiary
Edenville International (Seychelles) Limited.
At the year end the Company was owed £6,340 (2022: £6,340) by its subsidiary
Edenville Power Tz Limited.
At the year end Edenville International (Tanzania) limited was owed $41,677
(2022: $41,677) by Edenville Power Tz Limited.
31. Events after the reporting date
Upendo Group Settlement
As announced on 15 February 2024, the Company signed a definitive settlement
agreement with Upendo Group ("Upendo") who hold a residual 10% interest in the
Rukwa coal mining licence. The dispute with Upendo, regarding the
interpretation of the "residual" interest entitlements comprise, has been
dragging on for many years. Upendo had obtained a judgement for $110,000, with
interest and costs and $108,000 was previously lodged by the Company with the
Court in Tanzania.
The settlement involved the immediate payment to Upendo Group of $110,000, the
immediate settlement of all proceedings and a waiver of all or any related
claims by all parties howsoever arising. The Company has used the funds
already lodged in Court to meet the majority of the settlement costs. In
addition, Upendo has a right to nominate a director to be appointed to the
local Rukwa operating subsidiary which currently has 5 directors nominated by
the Company, and Upendo will earn a royalty of $1.95 per tonne of coal from
Rukwa sold and paid for by the customers of the Company from the date of the
settlement. The settlement agreement provides that the royalty described above
and the right to nominate a Board member to the local company are the only
rights attaching to the Upendo residual interest in the licence.
31. Events after the reporting date (continued)
Convertible loan note
In May 2024 the Company entered into a £2 million unsecured convertible loan
note agreement ("CLN") with AUO Commercial Brokerage LLC ("AUO"), a
wholly-owned subsidiary of Q Global Commodities Group ("QGC"), which is led
by Quinton Van Den Burgh, the Company's Chairman. AUO has a current interest
in 29.2% of the Company's issued shares.
The £2 million is to be received by no later than 31 March 2025, although the
company can receive the £2 million via a drawdown process from August 2024 to
March 2025.
The loan notes attract an interest of 3% per annum, and are convertible at 15p
per share at any time up to 31 March 2026.
Warrant Extension
The Company has extended the exercise period for a total of 15,846,691
warrants, originally issued in May 2021 and August 2023, which have an
exercise price of 25 pence each, that would otherwise have expired on 25 May
2024, for a period of 12 months, until 25 May 2025. All other terms of the
extended warrants remain unchanged.
GMI and AUO hold 2,186,136 and 3,265,555 of the extended warrants,
respectively.
32. Commitments
License commitments
Shuka 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 2023 these are as follows:
Group 2023 2022
£ £
Not later than one year 23,253 24,620
Later than one year and no later than five years 23,253 49,240
Total 46,506 73,860
33. Ultimate Controlling Party
The Group considers that there is no ultimate controlling party.
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