TIDMNCCL
RNS Number : 9822S
Ncondezi Energy Limited
29 June 2018
www.ncondezienergy.com
News Release
Audited Final Results for Year Ended 31 December 2017
29 June 2018: Ncondezi Energy Limited ("Ncondezi" or the
"Company") (AIM: NCCL) is pleased to announce its audited final
results for the year ended 31 December 2017.
Highlights
During the year
-- On 11 May 2017, the Company agreed an amendment to extend the
Shareholder Loan repayment date to 2 September 2017. The
Shareholder Loan included the original Shareholder Loan and Tranche
A provided by African Finance Corporation ("AFC").
-- On 26 May 2017, exclusive negotiations with Shanghai Electric
Power Co., Ltd ("SEP") were suspended ending the Joint Development
Agreement ("JDA") and the Company launched a new partner search
process.
-- On 26 May 2017, Christiaan Schutte resigned as Chief
Operating Officer but remained as a non-executive director.
-- On 23 June 2017, the Company obtained funding of an
additional US$350,000 under the amended Shareholder Loan ("New
Loan"). The New Loan provided the Company with sufficient funding
to progress the new partner search and cover working capital costs
until the beginning of September 2017. In addition, the senior
management team agreed to convert their deferred salaries of
US$232,000 into the existing Shareholder Loan ("Employee
Shareholder Loan").
-- On 2 September 2017, the Company agreed a further amendment
to extend the Shareholder Loan repayment date to 2 September 2018.
The Shareholder Loan includes the Shareholder Loan, Tranche A
provided by AFC the New Loan and Employee Shareholder Loan.
-- On 18 October 2017, the Company raised a total of GBP750,000
before expenses through an oversubscribed placing of 15,000,000
ordinary shares in the Company at a price of 5 pence per ordinary
share.
-- On 20 October 2017, the Company announced that it had agreed
in principle the terms of a Non-Binding Offer ("NBO") with China
Machinery Engineering Corporation ("CMEC") and General Electric
South Africa (PTY) Limited ("GE") (together the "Consortium") to
enter into exclusive negotiations to develop, construct and operate
the Power Project and Mine Project. The Company formally signed the
NBO on 9 November 2017 at a signing ceremony in Beijing.
-- On 27 December 2017, the Company announced that the JDA
conclusion date with CMEC and GE had been extended to 31 July
2018.
Post balance sheet events
-- In principle support received from Electricity de Mozambique
("EDM") and the Ministry of Mineral Resources and Energy ("MIREME")
for proposed strategic partners, CMEC and GE announced on 18 April
2018.
-- The Project integrated financial model ("FM") updated with
proposals for engineering, procurement, and construction ("EPC")
and operations and maintenance ("O&M") contracts, and approved
by CMEC and GE for submission to MIREME and EDM in June 2018.
-- Raised a total of GBP950,000 before expenses through a
placing of 15,200,000 ordinary shares in the Company at a price of
6.25 pence per ordinary share on 4 May 2018.
-- On 25 May 2018, as part of the Company's management incentive
scheme, the Company granted share options in respect of 22,897,522
shares in the Company to its directors, executive senior management
team and contracted personnel representing 8.2 per cent of the
issued share capital of the Company.
-- On 11 June 2018, the Company announced that the FM and
updated tariff proposal had been accepted by its potential partners
for submission to EDM and MIREME.
The Company will post its Annual Report and Accounts for the
year ended 31 December 2017 ("2017 Annual Report and Accounts") to
shareholders on 29 June 2018. A copy of the 2017 Annual Report and
Accounts will be available on the Company's website
www.ncondezienergy.com.
Enquiries
For further information please visit www.ncondezienergy.com or
contact:
Ncondezi Energy: Hanno Pengilly +27 71 362 3566
Liberum Capital Limited: +44 (0) 20 3100
NOMAD & Broker Neil Elliot / Richard Crawley 2000
Note:
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulation ("MAR"). Upon the publication of this
announcement via Regulatory Information Service ("RIS"), this
inside information is now considered to be in the public domain. If
you have any queries on this, then please contact Hanno Pengilly,
Chief Development Officer of the Company (responsible for arranging
release of this announcement) on +27 (0) 71 362 3566.
Ncondezi Energy owns 100% of the Ncondezi Project which is
strategically located in the power generating hub of the country,
the Tete Province in northern Mozambique. The Company is developing
an integrated thermal coal mine and power plant in phases of 300MW
up to 1,800MW. The first 300MW phase is targeting domestic
consumption in Mozambique using reinforced existing transmission
capacity to meet current demand.
Chairman's Statement
Dear Shareholder,
The 2017 financial year has seen the identification of new
potential strategic partners in CMEC and GE, who are global leaders
in the power sector with specific expertise operating in
Mozambique. Successful capital raisings in October 2017 and May
2018 through the placing of new shares raised GBP1.7 million before
expenses, putting the Company in a position of financial strength
to finalise the JDA process with its potential partners.
Operations
The Project remains one of the most advanced development coal
power projects in the region and, with the recently updated and
approved Financial Model (FM), is well positioned to re-start
tariff negotiations in Mozambique with a more attractive tariff
proposal for the Government.
Currently only 25% of Mozambicans have access to electricity and
the Government wants to improve access to 58% by 2023 and 100% by
2030. To achieve this will require significant expansion in
generation capacity, of which coal is expected to play a
significant role with 1,250 MW planned from coal fired projects.
Coal is seen as a key factor in reducing the country's dependence
on hydroelectric power (particularly in the north), where current
generation is vulnerable to the extreme weather effects of climate
change.
In May 2017, following over three years of negotiations and
ongoing delays in SEP providing funding for the Power Project, the
board of Directors (the "Board") suspended exclusive discussions
with SEP and engaged with alternative potential partners which had
expressed an interest in developing the Power Project.
In October 2017, in principle terms were agreed between CMEC, GE
and Ncondezi. The proposed terms represent a material opportunity
to de-risk the delivery of the Integrated Project. From a technical
perspective the terms propose that the Power Project and Mine
Project be treated as an integrated project, and that the Power
Project return to Circulating Fluidized-Bed ("CFB") boiler
technology from Pulverized Coal ("PC"), where technical work is
more advanced. From a commercial perspective, CMEC and GE are
looking to acquire a minimum 60% equity stake in the Integrated
Project, be responsible for the EPC and O&M for the Integrated
Project on a build own operate basis and lead project debt
financing in conjunction with Ncondezi for the Integrated Project
at Financial Close ("FC").
The terms are to be finalised in a binding JDA which is subject
to CMEC and GE successfully completing their due diligence and
agreeing the terms of the JDA. As part of this process, the Company
has submitted to CMEC and GE a draft JDA and updated the FM based
on new EPC and O&M proposals received from its potential
partners in April 2018.
The updated FM has generated positive results indicating Project
economics can be maintained with a more than 10% reduction in the
previously agreed tariff envelope. This lower tariff proposal
strengthens the commercial negotiating position of the Project in
Mozambique.
In early June 2018, the results of the FM were accepted by CMEC
and GE, and the Company has subsequently prepared an updated tariff
proposal to be submitted to MIREME and EDM in early July to seek in
principle support to initiate negotiations for a new power tariff
envelope. This represents a key milestone in confirming the Project
economics, re-starting tariff negotiations and completing the JDA
process.
Receipt of this support is being treated as a main priority and
is a key factor in finalising the JDA process which is currently
targeted for end of July 2018.
All development work streams for the Ncondezi Project, including
FC, are expected to remain on hold until the JDA is concluded, and
are expected to take at least 12 to 18 months to complete once
initiated.
Financing
In June 2017, the Company announced an additional US$0.35
million had been secured through existing Shareholder Loan holders
to fund the Company until the beginning of September 2017 in order
to progress with the new partner search process. In addition,
senior management deferred salaries totalling US$0.23m were
satisfied through issuance of an additional loan of the same value.
Further details of the terms of the loans are set out in the
Operations Review and in note 11 of the financial statements.
In October 2017, The Company raised GBP750,000 before expenses
through an oversubscribed placing of 15,000,000 ordinary shares in
the Company at a price of 5 pence per ordinary share. This was the
first time the Company had looked to the equity markets for capital
since January 2015, and was a good indicator of growing interest in
the Company by new investors as it delivers on its milestones
towards the JDA and FC. This was followed up by a second placing in
May 2018, where the Company raised GBP950,000 before expenses
through placing of 15,200,000 ordinary shares in the Company at a
price of 6.25 pence per ordinary share. This second placing
represented a 25% premium over the previous placing and further
demonstrated the growing support from new investors for the
Company.
On 25 May 2018, the Company granted share options in respect of
22,897,522 shares in the Company to its directors, executive senior
management team and contracted personnel. Of the options granted,
61% are performance related and linked to delivery of specific
milestones, 17% are in lieu of director remuneration and the
balance of 22% is in lieu of deferred payments to senior
management, ex-employees and consultants remuneration.
Cost saving initiatives and strict budget control allowed the
Company to reduce administrative expenses, from US$2.4million in
2016 to US$1.1 million in 2017, despite additional unbudgeted third
party consultancy work being carried out to search for new
strategic partner.
With the new JDA process underway and the focus on cost control
during this time, the Company regretfully announced that Mr
Christiaan Schutte had resigned as Chief Operating Officer with
effect from 26 May 2017 but remains on the board as a Non-Executive
Director. The finance function, financial advisor and Mozambican
operations report directly to and are actively managed by the
Board.
A total of US$2.8 million has been drawn down under the
Shareholder Loan and the repayment amount is now US$5.1 million on
2 September 2018 including principal and return. The Directors are
exploring a number of refinancing and extension solutions for the
Shareholder Loan ahead of the 2 September 2018 maturity date. The
financial statements have been prepared in anticipation of a
positive outcome but it is important to highlight that the new
partner negotiations are in their early stages and that there are
no binding agreements in place with no certainty that the
Shareholder Loan will be restructured and that additional funding
will be raised.
Michael Haworth
Non-Executive Chairman
28 June 2018
Operations Review
Ncondezi is focused on the phased development of an integrated
coal fired power plant and mine, commencing with 300MW first phase.
The project is located near Tete in northern Mozambique.
Non-Binding Offer
On 20 October 2017, the Company announced that it had agreed in
principle terms of a NBO with CMEC and GE. On 9 November 2017, the
Company announced that the NBO had been signed. The NBO was part of
a new partner process which was launched in May 2017.
The NBO sets out the terms, work program and timetable by which
the parties will work together to execute a legally binding JDA by
31 July 2018 or such later date agreed between the parties.
The key terms of the NBO include:
-- CMEC and GE to acquire a minimum 60% stake in both the Power
Project and Mine Project holding companies which currently hold
100% of each project respectively.
-- JDA will set out the commercial terms on which the parties
will complete the acquisition and jointly develop and fund the
Integrated Project up to and including FC.
-- The Power Project and the Mine Project will be developed as
an integrated project, with CMEC and GE taking full responsibility
for EPC and O&M contracting.
-- CMEC and GE will take full responsibility for managing the
EPC process for the Transmission Line, which will be constructed on
a Build Transfer model, subject to EDM approval.
-- CMEC and GE to lead project debt financing in conjunction
with Ncondezi for both the Power Project and Mine Project at
FC.
-- Funding ratios to be adjusted should CMEC and GE take an equity stake larger than 60%.
-- The power plant generation technology will return to CFB
boiler technology from PC boiler technology. This provides a number
of advantages to the project including the technical feasibility
work being more advanced on a CFB solution, reduced time required
to reach FC and lower coal costs as CFB fuel requirements are more
suitable for Mozambican coal qualities.
Conditions
The terms of the NBO were subject to a number of conditions
including:
-- CMEC and GE completing satisfactory due diligence on the
project including development status, permits, project economics
and security package.
-- CMEC and GE completing satisfactory audit of the historic development costs.
-- CMEC and GE having exclusivity on the EPC and O&M for the
Integrated Project, and submitting binding offers that support the
agreed tariff envelope.
-- Confirmation of the process to award the Power Concession
Agreement and Power Purchase Agreement from Mozambican Government
and EDM respectively.
-- Execution of a binding JDA.
-- Compliance with relevant CMEC and GE compliance rules and guidelines.
-- Compliance with Mozambique and relevant governmental regulations and approvals.
JDA process update
As part of the JDA process, the following milestones have been
achieved:
-- Submission by Ncondezi of the draft JDA for review by CMEC and GE.
-- Site visit by CMEC and GE to inspect the Ncondezi Project's proposed development sites.
-- In principle support received from EDM and MIREME for proposed strategic partners.
-- Updated EPC and O&M proposals received and reviewed for the Integrated Project
-- FM updated and accepted for submission to MIREME and EDM by CMEC, GE and the Company.
Results of Integrated Financial Model
At the end of April 2018, the Company received updated and
completed EPC and O&M proposals and began a process to review
and update the FM. The Company completed its review of the FM on 3
May 2018 and submitted it to its potential partners for review and
acceptance. The Company's potential partners have now completed
their review of the FM and approved its submission to EDM and
MIREME.
The updated FM has been completed targeting a revised tariff
that the Company and its potential partners believe will be
attractive to EDM. Meetings with EDM in January 2018 indicated that
the historical tariff agreed was no longer competitive given
downward pressure in regional tariff rates and would need to be
revised down. Based on benchmarking of new and competing projects
in Mozambique and the southern African region, the Company and its
potential partners targeted a new tariff lower than the previously
agreed tariff envelope with EDM.
The specific tariff rate and target returns in the updated FM
are commercially sensitive and still to be negotiated with EDM. The
FM is based on the Project generating a gross 300MW at a target
tariff rate in excess of 10% lower than the tariff envelope
previously agreed with EDM, paid on an annual basis for 25
years.
With the lower tariff target, it was essential that improvements
were identified to protect the Project equity IRR agreed in the
previous tariff envelope. This was achieved primarily through the
choice of technology (moving from Pulverized Coal to Circulating
Fluidized-Bed boiler technology), integration of the power and mine
projects and optimisation of common infrastructure capex. Of key
importance was the ability to link boiler design to the most cost
effective coal product produced from the mine. This allows the
Project to minimise coal costs to the power plant which is achieved
through integration of a dedicated coal supply. Ncondezi is the
only power project in Mozambique with a dedicated coal fuel source
for in country power generation.
In addition to the lower proposed tariff envelope, the Project
is also expected to significantly benefit Mozambique through tax
receipts and royalties over the life of the Project which are
estimated to be between US$1.1 to 1.4 billion. This is in addition
to local skills development and thousands of jobs during
construction and hundreds of jobs during operation, as well as the
economic multiplier effect of providing stable cost effective power
to the north of Mozambique.
The FM results are not final and subject to change based on a
number of factors including the finalisation of tariff negotiations
with EDM, debt terms with commercial banks, technical and operating
assumptions and EPC and O&M contracts.
Next steps
The Company prepared an updated tariff proposal for submission
to EDM and MIREME in early July 2018 and will be seeking in
principle support to start negotiations on a new power tariff
envelope for the Power Project. Receipt of this support is being
treated as a main priority and is a key factor in finalising the
JDA process which is currently targeted to be completed by the end
of July 2018.
Background to Non-Binding Offer
The NBO was signed as part of a new partner search launched in
June 2017, which focused on identifying a partner capable of
providing a leadership role in the financing, construction and
operation of the Power Project, with a credible track record in
both the global and African power sectors.
CMEC is a large Chinese integrated company with international
reach and engineering contracting as its core business. CMEC's
project experience, technical ability, and financing capacity, has
allowed it to undertake projects in more than 150 countries in the
fields of international contracting and general international
trade. CMEC's contracting business involves a broad range of areas
such as electric power & energy, transportation, electronic
communication, water supply & treatment, housing &
architecture, manufacturing and processing plant, environmental
protection, mining and resource prospecting. As a world-renowned
engineering contractor, CMEC has been ranked among China's top 10
contractors by business turnover from overseas contracted projects
by the Chinese Ministry of Commerce for many consecutive years.
GE is a world energy leader that provides technology, solutions
and services across the entire energy value chain from the point of
generation to consumption. GE's Power business is transforming the
electricity industry by uniting all the resources and scale of the
world's first Digital Industrial Company. GE's customers operate in
more than 150 countries, and together power more than a third of
the world to illuminate cities, build economies and connect the
world.
CMEC and GE have jointly worked on numerous projects across the
world and successfully completed a number of power projects in the
sub Saharan African region. Most relevant to Ncondezi, the two
parties are currently working together on the Thar Block II Power
Plant project in Pakistan, which is a 660MW integrated coal fired
power plant and mine which utilises two 330MW CFB boilers and due
to be commissioned in 2019.
Experience in Mozambique
Both CMEC and GE have successful track records operating in
Mozambique.
CMEC has been involved in supplying and installing transmission
infrastructure to EDM, improving access to electricity for
Mozambicans and new industry development. In 2015, CMEC completed a
110kV transmission line project in Nacala City in northern
Mozambique, and in 2017, CMEC signed an EPC contract for a 400kV
transmission line project in the same location. CMEC is also an EPC
contractor for the Moatize to Macuse railway and port project
designed to provide a new coal transport corridor from the Tete
region.
GE has been present in Mozambique for over four years with
offices in Maputo and over 44 employees. GE is active in multiple
sectors including the transport, health care, oil and gas and
energy sectors. To date, GE has supplied over 120 locomotives,
installed 10 4.4MW power units for the Kuvaninga gas IPP project
and is to provide technology solutions and services to ENI's US$7
billion Coral South LNG project in the Rovuma Basin. In addition,
GE is working on initiatives to improve access and quality of basic
and diagnostic services of rural healthcare and reduce infant
mortality rates. This work is run in parallel to GE's local skills
development programs which include scholarships, funding of
educational facilities and the provision of local courses.
Suspension of Exclusive Discussions with SEP
On 26 May 2017, the Company announced that it had suspended
exclusive discussions with SEP. Exclusivity arrangements with SEP
had lapsed and Ncondezi had engaged with additional strategic
partners which had expressed an unsolicited interest in developing
the project alongside Ncondezi. This process led to the signing of
a NBO with CMEC and GE in November 2017.
Shareholder Loan
On 11 May 2016, the Company announced that it had secured a
US$1.32 million loan facility ("Shareholder Loan") with certain of
Ncondezi's Directors, Management and long term shareholders
(together the "Lenders").
The Shareholder Loan was intended to provide the Company with
bridge funding for its corporate overheads while it completed the
SEP Investment Conditions to make the JDA effective.
On 31 August 2016, AFC agreed to accede to the existing
Shareholder Loan and its terms, advancing Ncondezi up to US$3.0
million, with an initial tranche of $1.0 million ("Tranche A") and
a further tranche of US$2.0 million ("Tranche B") with Tranche B
conditional amongst other things upon the fulfilment of certain
conditions precedent, the completion of the JDA and Ncondezi
providing an appropriate security package.
Tranche A was drawn down in accordance with the existing
Shareholder Loan terms (set out in the announcement dated 11 May
2016), some of which have been amended since year end as detailed
in note 11 to the financial statements. A catch up advance of
US$960,000 was paid to Ncondezi as an upfront payment on 2
September 2016, which was equivalent to AFC's pro rata payment
alongside the existing drawdown from Lenders.
Tranche A was utilised to fund project development costs in
accordance with an agreed budget.
Repayment of the Shareholder Loan (comprising the existing
Shareholder Loan and initial US$1.0 million Tranche A from AFC) was
initially payable by no later than 10 May 2017, however on 11 May
2017, the Company agreed an amendment to the repayment terms, with
repayment due on 2 September 2017. On 2 September 2017, the Company
entered into a formal agreement to extend the total Shareholder
Loan repayment date to 2 September 2018.
Under the terms of the Shareholder Loan the cost of the loan was
1.5x (comprising 1.0x principal and 0.5x return) if repayment was
made by 10 May 2017 and increased to 2.0x if repayment was post 10
May 2017. The cost of the Shareholder Loan is now 2.0x the drawn
down amount (comprising 1.0x principal and 1.0x return).
Tranche B has lapsed and is not available for drawn down as it
was subject to certain conditions precedent including the
finalisation of the JDA with SEP.
On 23 June 2017, the Company entered into an amendment ("New
Loan") to the original Shareholder Loan with an additional funding
of US$350,000. The financing has been committed by the Chairman
Michael Haworth (US$200,000) and other existing long term
shareholders (US$150,000). The New Loan will receive a 1.25x return
at its maturity on 2 September 2017.
As part of this same amendment the senior management team of the
Company have agreed to convert their deferred 50% salary between
November 2016 and January 2017, and a percentage of their salary
since February 2017 into the existing Shareholder Loan. The total
amount is US$232,000, but this sum will not attract any
interest.
At 5 July 2017, a total of US$2,774,545 had been drawn down
under the total Shareholder Loan, this total includes the
US$232,000 deferred salaries. The repayment amount will be
US$5,054,591 which is due on 2 September 2018.
Development Program to Financial Close
The Power Project and Mine Project are at an advanced level of
development and will be advanced once the JDA has been executed and
the Company focusses on achieving Financial Close. The Company
expects Financial Close to take between 12 and 18 months post JDA
execution.
Financial Review
Results from operations
The Group made a loss after tax for the year of US$1.7 million
compared to a loss of US$3.0 million for the previous financial
year. The basic loss per share for the year was 0.7 cents (2016:
1.2 cents).
Administrative expenses totalled US$1.1 million (2016: US$2.4
million). Administrative expenses refer principally to staff costs,
professional fees and travel costs and underlying administrative
expenses, which have reduced due to cost cutting measures.
The loss after tax includes a US$0.64 million (2016: US$0.65
million) finance cost associated with the amortisation of the
redemption premiums on the Shareholder Loan. This comprises US$2.7
million of finance costs arising from the original and revised
amortisation periods as the loans were rescheduled and gains on
rescheduling of US$2.1 million.
Financial Position
The Group's statement of financial position at 31 December 2017
and comparatives at 31 December 2016 are summarised below:
2017 2016
US$'000 US$'000
---------------------------------- --------- ---------
Non-current assets 18,313 8,995
Current assets 697 242
----------------------------------- --------- ---------
Non-current assets held for sale - 9,389
----------------------------------- --------- ---------
Total assets 19,010 18,626
----------------------------------- --------- ---------
Current liabilities 4,620 3,374
Total liabilities 4,620 3,374
----------------------------------- --------- ---------
Net assets 14,390 15,252
----------------------------------- --------- ---------
The movement in non-current assets of US$9.3 million was largely
due to reclassification of US$9.4 million power related assets from
non-current asset held for sale to Property, Plant and Equipment.
This reclassification arose as the transaction with SEP was
terminated in the year. Given the recently signed NBO with CMEC and
GE is still in early stages with significant conditions required to
be met for completion, the IFRS 5 criteria are not considered to be
met and hence the Power assets have been reclassified as PPE.
Capitalised additions totalled US$0.05 million (2016: US$0.2
million) principally in respect of the Power Project.
The increase in current liabilities principally relates to the
Shareholder Loan, together with accrued interest.
Cash Flows
The net cash outflow from operating activities for the year was
US$0.9 million (2016: US$1.9 million). The cash outflow principally
represented administrative costs for the year with limited working
capital movements.
Net cash from investing activities was US$0.08 million (2016:
US$(0.3) million), mainly related to disposal of plant and
equipment from Mozambican subsidiary and development activities
incurred on the Power Project.
Net cash from financing activities was US$1.3 million (2016:
US$1.9 million) mainly related to the short term loans described
above and share issues in 2017.
The resulting year end cash and cash equivalents held totalled
US$0.6 million (2016: US$0.2 million). As at 18 June 2018 the
Company held cash and cash equivalents totalling US$1.34
million.
Outlook
As at 18 June 2018 the Group had cash reserves of approximately
US$1.34 million. Based upon projections the current cash reserves
will cover non project corporate costs until the beginning of July
2019, subject to the Shareholder Loan being extended or
restructured. The Shareholder Loan matures on 2 September 2018, and
the Company is currently evaluating options to extend or
restructure the loan together with proposals received from a number
of parties for refinancing of the loans.
The Directors continue to explore options in respect of raising
further funds to continue with the power plant and mine development
programmes. At present there are no binding agreements in place and
there can be no certainty as to the Group's ability to raise
additional funding.
The Group will need to extend, refinance or settle the US$5.1
million Shareholder Loan (principal and redemption premium) in
equity by their maturity date, of which US$0.91 million of the
principal was lent by Directors. In addition, further funding will
be required by the end of June 2019 to meet operating cash flows
under current forecasts or in the event of accelerated project
advancement. The Directors are exploring a number of funding and
working capital solutions beyond the 2 September 2018 maturity of
the Shareholder Loan. The financial statements have been prepared
on a going concern basis in anticipation of a positive outcome but
it is important to highlight that there are no binding agreements
in place and there can be no certainty that the Shareholder Loan
will be restructured, settled in equity or refinanced and that
additional funding will be raised.
These factors indicate the existence of a material uncertainty
which may cast significant doubt about the Group's ability to
continue as a going concern. The financial statements do not
include the adjustments that would result if the Group was unable
to continue as a going concern. Such adjustments would principally
be the write down of the Group's non-current assets.
Environmental and Social Responsibility
Ncondezi Social Development Programme
Ncondezi's Social Development Programme has been put on hold
pending positive development being made on the JDA.
Achievements from previous years include:
-- The drilling of 14 boreholes in several villages within the Tete province.
-- Four students completed their Master's degree in Mining
Engineering at Coimbra University benefiting from a full bursary
from Ncondezi.
-- A 4x4 ambulance was purchased to assist villagers in more remote areas.
-- Ncondezi built a new primary school at Waenera village.
-- Upgrading of the Mameme clinic and the construction of a new maternity wing.
-- An Agricultural Project based on conservation farming. This
included the villages of Catabua and Canjedza as an initial model.
The objective being a platform to educate the local communities in
all aspects of crop husbandry using their own resources.
Director's Biographies
Michael Haworth / Non-Executive Chairman
Michael Haworth has over 20 years finance experience,
predominantly in emerging markets and natural resources. Mr Haworth
co-founded Greenstone Resources a private equity fund specialising
in the mining and metals sector in 2013 and is a Senior Partner of
Greenstone Capital LLP and a Director of Greenstone Management
Limited. In addition, Mr Haworth is a Non-Executive Director of
Zanaga Iron Ore Company Limited. Mr Haworth was previously a
Managing Director at J.P. Morgan and Head of Mining and Metals
Corporate Finance in London.
Christiaan Schutte / Non-Executive Director (resigned as Chief
Operating Officer in May 2017)
Christiaan Schutte's career in the power sector spans over 20
years during which time he held a number of senior management
positions at Eskom, the South African electricity public utility
which is the largest producer of electricity in Africa.
Most recently he was Senior General Manager of the Group
Technology Division and responsible for all the engineering
functions at Eskom, including design accountability for new power
stations, transmission lines and distribution development. Prior to
this he was Senior General Manager of the Generation Division,
managing five power stations with over 18,000MW total installed
capacity, an operational budget of 3.8 billion Rand and a capital
budget just under 4 billion Rand. Operational experience was gained
at Majuba power station, which he also integrated into a single
cluster operation, and Kendal power station. He holds a degree in
mechanical engineering as well as an MBL from Unisa.
Estevão Pale / Non-Executive Director
Estevão Pale has more than 30 years' experience in the mining
industry. He is the Chief Executive Officer of Companhia
Moçambicana de Hidrocarbonetos S.A., a Mozambican natural gas
company. Between 1996 and 2005, Mr Pale was the National Director
of Mines in the Ministry of Mineral Resources and Energy, where he
was responsible for the supervision and control of mineral
activities in Mozambique and the formulation and implementation of
the mining and geological policy approved by the Government of
Mozambique.
Mr Pale has been a director of numerous companies in the mining
sector including Promaco SARL and the Mining Development Company,
as well as the General Director and Chief Executive of Minas Gerais
de Moçambique. Mr Pale has a postgraduate diploma in Mining
Engineering from the Camborne School of Mines in Cornwall and a
masters degree in Financial Economics from the University of London
(SOAS). He completed a course in Gas Business Management in Boston
at the Institute of Human Resources Development Corporation in
2006.
Jacek Glowacki / Non-Executive Director
Jacek Glowacki has over 30 years of international experience in
the power sector and is currently Chief Executive Officer and
Chairman of the Board of Polenergia Group, a Polish Independent
Power Producer and a subsidiary of Kulczyk Investments S.A. one of
Poland's largest private investment companies.
During his career, he has held senior executive positions at
Kulczyk Investments, AEI Corporation (USA), Trakya Elektrik
(Turkey) and Prisma Energy Europe. Mr Glowacki's operating
experience includes General Manager of Nowa Sarzyna, which was
owned by ENRON and Chief Production Engineer at Cracow Combined
Heat and Power Plant, owned by EDF. He holds a degree in
engineering from the University of Mining and Metallurgy in Cracow
and an MBA from the University of Chicago.
Aman Sachdeva / Non-Executive Director
Aman Sachdeva has more than 20 years experience in the
infrastructure industry, specializing in the energy sector; ranging
from project finance, management consulting, regulatory affairs,
mergers and acquisitions, power system planning, energy
conservation and marketing. Mr Sachdeva is currently the founder
and Chief Executive Officer of Synergy Consulting, an independent
consulting practice with a focus on project finance, which has to
date closed projects worth US$12 billion. Mr Sachdeva is also an
advisor to the World Bank, Energy Sector for Central Asia, South
Asia and Africa on a variety of projects.
Directors' Report
The Directors present their Annual Report and the audited group
financial statements headed by Ncondezi Energy Limited for the year
ended 31 December 2017.
Principal activities
The principal activity of the Group is the development of an
integrated 300MW power plant and mine to produce and supply
electricity to the Mozambican domestic market.
Business review and future developments
Details of the Group's business and expected future developments
are set out in the Chairman's Statement, the Operations Review and
in the Financial Review.
Principal risks and uncertainties
The Group operates in an uncertain environment that may result
in increased risk, cost pressures and schedule delays. The key risk
factors that face the Group and their mitigation are set out
below.
Additionally, the Group's multi-national operations expose it to
a variety of financial risks such as market risk, foreign currency
exchange rates and interest rates, liquidity risk, and credit risk.
These are considered further in notes 1 and 17.
Key performance indicators
The key performance indicators of the Group are as follows:
2017 2016 2015
------------------------------- ------- ------- -------
Mine exploration expenditure
(US$'000) 3 13 21
Power development expenditure
(US$'000) 48 249 939
Share price at 31 December
(pence) 3.63 5.3 3.6
Cash at bank at 31 December
(US$'000) 614 152 402
-------------------------------- ------- ------- -------
Results and dividends
The results of the Group for the year ended 31 December 2017 are
set out below.
The Directors do not recommend payment of a dividend for the
year (2016: nil). The loss will be transferred to reserves.
Events after the reporting date
See note 20 for further information.
Financial instruments
Details of the use of financial instruments by the Company, its
subsidiary undertakings and financial risk management are contained
in note 17 of the financial statements.
Going concern
As at 18 June 2018 the Group had cash reserves of approximately
US$1.34 million. The current cash reserves are sufficient to fund
ongoing costs until beginning of July 2019, subject to the
Shareholder Loan being extended or restructured. Details on going
concern are contained in note 1 of the financial statements.
Directors and Directors' interests
Ordinary Shares Ordinary Shares
Appointment held 31 December held 31 December
Director Note date 2017 2016
-------------------- ------------- ------------------- -------------------
Michael Haworth 1 01.06.12 16,468,087 16,438,296
Jacek Glowacki 2 28.10.13 - -
Estevão Pale 03.06.10 - -
Christiaan Schutte 04.02.13 - -
Aman Sachdeva 3 21.05.15 - -
-------------------- ------------- ------------------- -------------------
1. Includes shares held by a trust of which Michael Haworth is a potential beneficiary.
2. Jacek Glowacki is a director of Polenergia Group which holds
20,754,161 ordinary shares representing 7.82% of the issued
Ordinary Shares as at 31.12. 2017 and 7.36% as at 29.06.18.
3. Aman Sachdeva is AFC's nominated director. AFC holds
54,988,520 ordinary shares representing 20.73% of the issued
Ordinary Shares as at 31.12.17 and 19.51% as at 29.06.18.
Annual General Meeting
Resolutions will be proposed at the forthcoming Annual General
Meeting, as set out in the Formal Notice. In accordance with the
Company's Articles of Association one third of the Directors are
required to retire by rotation. Accordingly, Christiaan Schutte and
Estevão Pale will offer themselves for re-election at the
forthcoming Annual General Meeting of the Company.
Corporate Governance
The Company's compliance with the principles of corporate
governance is explained in the corporate governance statement set
out below.
Ordinary Share Capital
The Company's Ordinary Shares of no par value represent 100% of
its total share capital. At a meeting of the Company every member
present in person or by proxy shall have one vote for every
Ordinary Share of which he is the holder. Holders of Ordinary
Shares are entitled to receive dividends.
On a winding-up or other return of capital, holders are entitled
to share in any surplus assets pro rata to the amount paid up on
their Ordinary Shares. The shares are not redeemable at the option
of either the Company or the holder. There are no restrictions on
the transfer of shares.
Disclosure of information to auditors
So far as each Director at the date of approval of this report
is aware, there is no relevant audit information of which the
Company's auditors are unaware and each Director has taken all
steps that he ought to have taken to make himself aware of any
relevant audit information and to establish that the auditors are
aware of that information.
Auditors
BDO LLP have expressed their willingness to continue in office
as auditors, and a resolution to reappoint them will be proposed at
the Annual General Meeting.
By order of the Board
Elysium Fund Management Limited
Company Secretary
28 June 2018
Risk Factors
Risk(s) Potential Impact(s)
Mitigation Measure(s)
Financing The Group will need to The Project is at an advanced
risk restructure its existing level of development with
loans by 2 September 2018 the majority of technical
and secure investment from work completed and advanced
strategic investors and/or form PPA and PCA documents
investment from co-developers being agreed.
to provide sufficient working
capital for the next 12 Ncondezi has signed a NBO
months. Failure to do so with new potential strategic
may lead to the Group not partners and is negotiating
being a going concern (see a JDA which will provide
note 1). Additionally, financial support to the
project financing will project both at the developmental
be required to complete stages to Financial Close
the Project and failure as well as during construction.
to secure such financing It is important to highlight
would result in failure that there is no certainty
of the Power Project and/or that the JDA will occur
delay in its execution. or additional funding will
be raised.
To achieve Financial Close
of the Project, the Group The Company is in discussions
will also need to progress with the existing loan
conclude some of its on-going holders regarding restructuring
negotiations on key project of the loans, if necessary,
agreements, including the together with exploring
Power Concession Agreement funding solutions to refinance
("PCA") and the Power Purchase the loans.
Agreement ("PPA"). Failure
or delay in doing so may The Company intends to
lead to failure of the engage with a range of
Project and/or delay in potential financing partners
its execution. with the objective of securing
additional development
capital for the costs that
will not be covered by
a new partner, including
select corporate overheads.
Since October 2017, Ncondezi
has had a successful track
record in raising additional
capital with GBP1.7 million
before expenses raised
to cover development costs
during the year and since
year end.
The Directors' will monitor
the monthly cash burn rate
to ensure the Group operates
within its cash resources
for as long as possible.
----------------------------------- ------------------------------------------------------------
Off-taker In the event that the Group The Company has substantially
risk is unable to renew the advanced the PPA and PCA
commercial deal with EDM through previous negotiations
or finalise the PPA on with EDM and Ministry of
acceptable terms, the Group Mineral Resources and Energy.
will need to secure an EDM has indicated its willingness
alternative credible power to continue negotiations
off-taker(s) to raise finance once the Company introduces
for the project. There an acceptable strategic
is no guarantee that, in partner and a new tariff
such circumstances, the proposal. Subsequent to
Group will be able to secure signing the NBO, the Company
a credit worthy off-taker received in principle support
for the full output with for its new partners and
the plant operating at is planning to submit an
load factors in excess updated tariff proposal
of 80 per cent. in early July 2018 which
is more attractive that
the previously agreed tariff
envelope.
There is a shortage of
power in the region, with
Mozambique currently exporting
power to South Africa,
Zimbabwe, Zambia, Botswana
and Namibia. Each of these
countries could provide
a potential credible power
off-taker for the Power
Project either as a substitute
or as additional power
off-taker for an expanded
power plant. The Company
monitors this potential
closely and has responded
to a Request for Information
('RFI') from the South
African government regarding
potential cross border
power supply.
----------------------------------- ------------------------------------------------------------
Competition Other power stations are The Project is one of
from other being developed in the the most advanced projects
power stations Tete region and are competing in the region, making competition
in Mozambique for offtake to EDM as well from nearby projects more
as resources such as water difficult due to the time
and transmission line servitudes. they require to catch up.
Competing gas projects
are mainly located in the
southern part of Mozambique
and are not able to supply
the portion of the Mozambican
power grid that the Power
Project is to connect to
in the north of the country.
Additionally, being a thermal
coal power station project,
the Group can implement
commissioning of the power
plant faster than competing
hydroelectric projects
which typically take 2-3
years longer to commission.
----------------------------------- ------------------------------------------------------------
Estimating The estimation of mineral Resources
mineral reserve reserves and mineral resources * Sign-off of resources by registered Competent Person
and resource is a subjective process ("CP").
and the accuracy of reserve
and resource estimates
is a function of the quantity * Reporting resources in accordance with the JORC code
and quality of available
data and the assumptions
used and judgements made * Classification of resources into a high level of
in interpreting engineering confidence category
and geological information.
There is significant uncertainty * Conduct detailed geological modelling
in any reserve or resource
estimate and the actual
deposits encountered and * The utilisation of accredited laboratories for the
the economic viability analyses of coal samples
of mining a deposit may
differ materially from
the Group's estimates. * QA/QC procedures according to best practices
The exploration of mineral
rights is speculative in Reserves
nature and is frequently * Sign-off of reserves by registered CP
unsuccessful. The Group
may therefore be unable
to successfully discover * Classification of reserves into proven or probable
and/or exploit reserves. reserves
Detailed mine design and
scheduling.
----------------------------------- ------------------------------------------------------------
Coal risk Coal specification developed Further coal quality analysis
at the pre-feasibility will be conducted and supplied
study and verified during to the boiler supplier
the feasibility stage may for finalisation of boiler
not be representative of design.
coal to be used in the
plant.
Not properly characterised
coal resources may lead
to incorrect boiler design
and plant underperformance.
----------------------------------- ------------------------------------------------------------
Transmission Available transmission A Transmission Agreement
grid constraints capacity is allocated to Heads of Terms has been
other power generators. signed with EDM and the
Mozambican Government to
ensure that available transmission
infrastructure allocation
is secured early and that
proper evacuation infrastructure
and capacities are available
to the Project in line
with the Group's strategy.
The Group will explore
and develop all potential
future transmission options
including new transmission
capacity in Mozambique
as well as other countries
including Malawi and Zambia.
----------------------------------- ------------------------------------------------------------
Environmental Existing and possible future The Group adopts standards
and other environmental legislation, of international best practice
regulatory regulations and actions in environmental management
requirements could cause additional and community engagement
expense, capital expenditures, in addition to focussing
restrictions and delays on satisfying Mozambican
in the activities of the environmental regulations
Group, the extent of which and requirements in all
cannot be predicted. Before stages of development.
production can commence
on any properties, the Environmental Management
Group must obtain regulatory and Social Development
approval and there is no Plans have been advanced
assurance that such approvals and are being implemented
will be obtained. No assurance to satisfy national and
can be given that new rules international best practice.
and regulations will not
be enacted or existing The Mine and Power Plant
rules and regulations will Environmental Social Impact
not be applied in a manner Assessment (ESIA) have
which could limit or curtail been conducted by independent,
the Group's operations. internationally recognised
consultants, and have approved
by the Mozambican Government.
----------------------------------- ------------------------------------------------------------
Foreign Country The Group's exploration The Mozambican Government
risk licences and project are has been stable for many
in Mozambique. The Group years and fosters a beneficial
faces political risk whereby climate towards companies
changes in government policy exploring for resources.
or a change of governing
political party could place The Mozambican Government
its is working with donors
exploration licences and and the IMF to restore
project in jeopardy. aid to the country, and
an audit report into the
Mozambique has recently defaulting loans has been
defaulted on commercial commissioned as a first
loans resulting in donors step to reaching a resolution.
and the International Monetary All parties have committed
Fund (IMF) freezing aid to resolving the issue
to Mozambique, which may in a reasonable and transparent
affect financing of the manner to restore confidence
Project at Financial Close. in the country.
----------------------------------- ------------------------------------------------------------
Corporate Governance Statement
The Company's shares are admitted to trading on AIM and so it is
not required to comply with the UK Corporate Governance Code, which
applies to companies which are officially listed and admitted to
trading on the Main Market of the London Stock Exchange with a
Premium Listing. Although the Company does not comply with the UK
Corporate Governance Code, the Board has given consideration to the
provisions. The Directors support the objectives of this code and
intend to comply with those aspects which they consider relevant to
the Group's size and circumstances.
A statement of the Directors' responsibilities in respect of the
financial statements is set out on Statement of the Directors'
Responsibilities. Below is a brief description of the role of the
Board and its committees, including a statement regarding the
Group's system of internal financial control.
The workings of the Board and its committees
The Board of Directors
At 31 December 2017, the Board comprised a Non-Executive
Chairman, (Michael Haworth), and four further Non-Executive
Directors (Aman Sachdeva, Christiaan Schutte, Estevão Pale, and
Jacek Glowacki).
An agreed procedure exists for Directors in the furtherance of
their duties to take independent professional advice. With the
prior approval of the Chairman, all Directors have the right to
seek independent legal and other professional advice at the
Company's expense concerning any aspect of the Company's operations
or undertakings in order to fulfil their duties and
responsibilities as Directors. If the Chairman is unable or
unwilling to give approval, Board approval will be sufficient.
Newly appointed Directors are made aware of their responsibilities
through the Company Secretary. The Company does not make any
provision for formal training of new Directors.
The Company has established audit and remuneration committees of
the Board with formally delegated duties and responsibilities. In
2017 Estevão Pale was appointed as second member of the
remuneration committee together with Michael Haworth.
Conflicts of interest
The Board confirms that it has instituted a process for
reporting and managing any conflicts of interest held by Directors.
Under the Company's Articles of Association, the Board has the
authority to authorise, to the fullest extent permitted by law:
(a) any matter which would otherwise result in a Director
infringing his duty to avoid a situation in which he has, or can
have, a direct or indirect interest that conflicts, or possibly may
conflict, with the interests of the Company and which may
reasonably be regarded as likely to give rise to a conflict of
interest (including a conflict of interest and duty or conflict of
duties);
(b) a Director to accept or continue in any office, employment
or position in addition to his office as a Director of the Company
and may authorise the manner in which a conflict of interest
arising out of such office, employment or position may be dealt
with, either before or at the time that such a conflict of interest
arises provided that for this purpose the Director in question and
any other interested Director are not counted in the quorum at any
board meeting at which such matter, or such office, employment or
position, is approved and it is agreed to without their voting or
would have been agreed to if their votes had not been counted.
Company materiality threshold
The Board acknowledges that assessment on materiality and
subsequent appropriate thresholds are subjective and open to
change. As well as the applicable laws and recommendations, the
Board has considered quantitative, qualitative and cumulative
factors when determining the materiality of a specific relationship
of Directors.
Bribery Act
It is our policy to conduct all of our business in an honest and
ethical manner. We take a zero-tolerance approach to bribery and
corruption and are committed to acting professionally, fairly and
with integrity in all our business dealings and relationships
wherever we operate, implementing and enforcing effective systems
to counter bribery.
We will uphold all laws relevant to countering bribery and
corruption in all the jurisdictions in which we operate and remain
bound by the laws of the UK, including the Bribery Act 2010, in
respect of our conduct both at home and abroad.
Board meetings
Board meetings are held on average every quarter. Decisions
concerning the direction and control of the business are made by
the Board.
Generally, the powers and obligations of the Board are governed
by the Company's Memorandum and Articles and the BVI Business
Companies Act 2004, as amended and the other laws of the
jurisdictions in which it operates. The Board is responsible, inter
alia, for setting and monitoring Group strategy, reviewing trading
performance, ensuring adequate funding, examining major acquisition
opportunities, formulating policy on key issues and reporting to
the shareholders.
The Audit Committee
During 2017, the Audit Committee members were Jacek Glowacki
(Committee Chairman) and Christiaan Schutte.
The Committee provides a forum for reporting by the Group's
external auditors. Meetings are held on average twice a year and
are also attended, by invitation, by the Non-Executive
Directors.
The Audit Committee is responsible for reviewing a wide range of
financial matters including the annual and half year results,
financial statements and accompanying reports before their
submission to the Board and monitoring the controls which ensure
the integrity of the financial information reported to the
shareholders.
The Remuneration Committee
The Remuneration Committee comprised Michael Haworth (Committee
Chairman) and Estevão Pale.
The Committee is responsible for making recommendations to the
Board, within agreed terms of reference, on the Company's framework
of executive remuneration and its cost. The Remuneration Committee
determines the contract terms, remuneration and other benefits for
the Executive Directors, including performance related bonus
schemes, compensation payments and option schemes. The Board itself
determines the remuneration of the Non-Executive Directors.
Internal financial control
The Board is responsible for establishing and maintaining the
Group's system of internal financial controls. Internal financial
control systems are designed to meet the particular needs of the
Group and the risk to which it is exposed, and by its very nature
can provide reasonable, but not absolute, assurance against
material misstatement or loss.
The Directors are conscious of the need to keep effective
internal financial control, particularly in view of the cash
resources of the Group. Due to the relatively small size of the
Group's operations, the Executive Director and senior management
are very closely involved in the day-to-day running of the business
and as such have less need for a detailed formal system of internal
financial control. The Directors have reviewed the effectiveness of
the procedures presently in place and consider that they are still
appropriate to the nature and scale of the operations of the
Group.
Continuous disclosure and shareholder communication
The Board is committed to the promotion of investor confidence
by ensuring that trading in the Company's securities takes place in
an efficient, competitive and informed market. The Company has
procedures in place to ensure that all price sensitive
information is identified, reviewed by management and disclosed to
the market through a Regulatory Information Service in a timely
manner.
All information disclosed through a Regulatory Information
Service is posted on the Company's website
http://www.ncondezienergy.com. Shareholders are forwarded documents
relating to each Annual General Meeting, being the Annual Report,
Notice of Meeting and Explanatory Memorandum and Proxy Form, and
are invited to attend these meetings.
Managing business risk
The Board constantly monitors the operational and financial
aspects of the Company's activities and is responsible for the
implementation and on-going review of business risks that could
affect the Company. Duties in relation to risk management that are
conducted by the Directors include but are not limited to:
-- Initiate action to prevent or reduce the adverse effects of risk;
-- Control further treatment of risks until the level of risk becomes acceptable;
-- Identify and record any problems relating to the management of risk;
-- Initiate, recommend or provide solutions through designated channels;
-- Verify the implementation of solutions;
-- Communicate and consult internally and externally as appropriate; and
-- Inform investors of material changes to the Company's risk profile.
Ongoing review of the overall risk management programme
(inclusive of the review of adequacy of treatment plans) is
conducted by external parties where appropriate. The Board ensures
that recommendations made by the external parties are investigated
and, where considered necessary, appropriate action is taken to
ensure that the Company has an appropriate internal control
environment in place to manage the key risks identified.
Remuneration Committee Report
At the year ended 31 December 2017, the Remuneration Committee
(the "Committee") comprised Michael Haworth and Estevão Pale.
Remuneration packages are determined with reference to market
remuneration levels, individual performance and the financial
position of the Company and the Group.
The Board determines the remuneration of Non-Executive Directors
within the limits set by the Company's Articles of Association. The
Non-Executive Directors have letters of engagement with the Company
and their appointments are terminable on one months' or three
months' written notice on either side.
Long Term Incentive Plan ("LTIP") and unapproved share option
scheme
The Company adopted an LTIP and unapproved share option scheme
which are administered by the Committee. These are discretionary
and the Committee will decide whether to make share awards under
the LTIP or unapproved share option scheme at any time. As at 31
December 2017 the following awards to Directors remained in
place:
Non-Executives Exercise
Date of grant Number granted price Expiry
-------------------- --------------- --------------- --------- --------------
10 years from
Estevão Pale 5 May 2015 75,000 17.25p vesting
10 years from
Christiaan Schutte 5 May 2015 75,000 17.25p vesting
Grant of Share Awards
During 2017 no share options were issued to the Company's
executive senior management and contracted personnel (2016:
nil).
Directors' Options
During 2017 no share options were issued to the Company's
Directors (2016: nil).
Directors' service agreements
None of the Directors have a service contract which is
terminable on greater than one year's notice.
Non-Executive Directors' fees
The Company has adopted a standard level of fees for
Non-Executive directors of GBP40,000 per annum, and GBP70,000 for
the Chairman. The current Chairman has waived all fees since his
original appointment. In addition, Jacek Glowacki and Aman Sachdeva
have waived their Directors fees since 1 April 2015 and Christiaan
Schutte and Estevao Pale since 1 April 2017. GBP66,000 of the
current year fees was converted into the existing Shareholder
loan.
Awards post year end
On 25 May 2018, as part of the Company's management incentive
scheme, the Company granted share options in respect of 22,897,522
shares in the Company to its directors, executive senior management
team and contracted personnel representing 8.2 per cent of the
issued share capital of the Company. Directors related share
options amounts to 8,987,542 of the total.
Directors' remuneration
The following table sets out an analysis of the pre-tax
remuneration for the year ended 31 December 2017 for individual
directors who held office in the Company during the period.
Share
Base based Total Total
Salary/fee Benefits payments 2017 2016
Director Note US$'000 US$'000 US$'000 US$'000 US$'000
----------------- ------ ------------ --------- ---------- ---------- ----------
Michael Haworth - - - - -
Christiaan
Schutte 60 - - 60 324
Estevão
Pale 12 - - 12 61
Jacek Glowacki - - - - -
Aman Sachdeva - - - - -
Total 72 - - 72 385
-------------------------- ------------ --------- ---------- ---------- ----------
GBP66,000 of the current year fees was converted into the
existing Shareholder loan.
On behalf of the Board
Jacek Glowacki
Non-Executive Director
28 June 2018
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Directors'
report and the financial statements for the Group. The Directors
have prepared the financial statements for each financial year
which present fairly the state of affairs of the Group and of the
profit or loss of the Group for that year.
The Directors have chosen to use the International Financial
Reporting Standards ("IFRS") as adopted by the European Union in
preparing the Group's financial statements.
The Directors are responsible for keeping proper accounting
records which disclose with reasonable
accuracy at any time the financial position of the Group, for
safeguarding the assets, for taking reasonable steps for the
prevention and detection of fraud and other irregularities and for
the preparation of financial statements.
International Accounting Standards require that financial
statements present fairly for each financial year the company's
financial position, financial performance and cash flows. This
requires the faithful
representation of the effects of transactions, other events and
conditions in accordance with the definitions and recognition
criteria for assets, liabilities, income and expenses set out in
the International Accounting Standards Board's 'Framework for the
preparation and presentation of financial statements'.
In virtually all circumstances a fair presentation will be
achieved by compliance with all applicable IFRS as adopted by the
European Union. The Directors are also required to prepare
financial statements in accordance with the rules of the London
Stock Exchange for companies trading securities on AIM.
A fair presentation also requires the Directors to:
-- consistently select and apply appropriate accounting policies;
-- present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
-- make judgements and accounting estimates that are reasonable and prudent;
-- provide additional disclosures when compliance with the
specific requirements in IFRS as adopted by the European Union is
insufficient to enable users to understand the impact of particular
transactions, other events and conditions on the entity's financial
position and financial performance;
-- state that the Group has complied with IFRS as adopted by the
European Union, subject to any material departures disclosed and
explained in the financial statements; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the company will
continue in business.
The Directors are responsible for ensuring the annual report and
the financial statements are made available on a website. In
addition to being mailed to shareholders, financial statements are
published on the company's website in accordance with legislation
in the United Kingdom governing the preparation and dissemination
of financial statements, which may vary from legislation in other
jurisdictions. The maintenance and integrity of the Company's
website is the responsibility of the Directors. The Directors'
responsibility also extends to the on-going integrity of the
financial statements contained therein.
Independent audit report to the members of Ncondezi Energy
Limited
Opinion
We have audited the financial statements of Ncondezi Energy
Limited (the 'parent company') and its subsidiaries (the 'group')
for the year ended 31 December 2017 which comprise the consolidated
statement of profit or loss, the consolidated statement of other
comprehensive income, the consolidated statement of financial
position, the consolidated statement of changes in equity, the
consolidated statement of cash flows and notes to the financial
statements, including a summary of significant accounting
policies.
The financial reporting framework that has been applied in the
preparation of the financial statements is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by
the European Union.
In our opinion:
-- the financial statements present fairly, in all material
respects the state of the group's affairs and its financial
position as at 31 December 2017 and of its financial performance
and its cash flows for the year ended; and
-- have been prepared in accordance with IFRS as adopted by the European Union.
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
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.
Material uncertainty relating to going concern
We draw attention to Note 1 to the financial statements
concerning the group's ability to continue as a going concern which
states that the group will need to extend, refinance or settle
existing loans by their maturity date of 2 September 2018 and raise
further funds to enable the group to meet its liabilities as they
fall due for a period of at least 12 months form the date of
signing these financial statements.
The matters explained in note 1 indicate that a material
uncertainty exists that may cast significant doubt on the group's
ability to continue as a going concern. The financial statements do
not include the adjustments that would result if the group were
unable to continue as a going concern. Our opinion is not modified
in respect of this matter.
Given the conditions and uncertainties noted above we considered
going concern to be a Key Audit Matter.
We performed the following procedures in respect of this key
audit matter:
-- We obtained management's cash flow forecasts to 30 June 2019
and critically assessed the key assumptions. In doing so, we
compared the operating cash flows to historical operating
expenditure and reviewed the group's licences, board minutes and
market announcements for indications of additional cash
requirements.
-- We reviewed the terms of the existing loans and recalculated
the repayment on maturity on 2 September 2018.
-- We considered management's judgment that they had a
reasonable expectation of refinancing, extending or settling the
loans in equity and securing additional financing to meet working
capital requirements. In doing so, we made specific inquiries of
the Board, reviewed term sheets for prospective funding being
negotiated by the group and obtained written representations from
the Board.
-- Our assessment also included making enquiries of management
of the future financing plans and options and evaluating the
adequacy of the disclosure made in the financial statements in
respect of going concern to confirm that they are consistent with
the relevant accounting framework and set out the material risks
and uncertainties.
We found the key underlying assumptions in the forecasts to be
within an acceptable range and the disclosures in the financial
statements in respect of going concern to be appropriate.
Key audit matters
In addition to the matter described in the material uncertainty
related to going concern section, 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.
Matter identified How we addressed the matter
Carrying value of the group's mining and power assets and appropriateness
of disclosures of key judgments and estimates in the financial
statements
The group's mining and power We assessed the appropriateness
assets represent its most significant management's conclusion that
assets and total US$17 million the mining and power assets represented
as at 31 December 2017. The separate cash generating units,
mining assets are held at their notwithstanding the planned integrated
recoverable value of US$7.7 project development plan, against
million which is below cost the relevant accounting framework.
following previous impairment.
We obtained the power asset financial
The Board are required to assess models, prepared by an external
whether they consider there consultant, and confirmed that
are any indications that the the models demonstrated significant
group's mining and power assets headroom over the carrying value
may be of the power assets. In respect
impaired as at 31 December of key inputs we confirmed that
2017. the project costs were consistent
with updated quotes and supporting
Management performed impairment information, compared the discount
assessments for the mining rate to relevant third party
and power assets and concluded rates and performed sensitivity
that no impairment of the power analysis. We determined that
assets was required and that the project development is dependent
no further impairment or reversal on the electricity tariff which
of impairment on the mining remains subject to agreement
assets was required as detailed with the Government. Management
in note 2 and 6 which sets confirmed that the tariff rate
out the key judgments and estimates represented their best estimate
involved in the impairment of the rate required by the Government
assessment. based on verbal discussions they
had held and we obtained specific
The carrying value of mining written representation to that
and power assets represented effect. We reviewed market reports
a significant risk for our and internal correspondence to
audit given the significant confirm that they were consistent
judgements required in the with the tariff used in the model.
impairment assessment, together
with the appropriateness of
associated disclosures. We reviewed the agreements with
the project partners and obtained
supporting documents demonstrating
progress against the conditions
precedent and the continued feasibility
of the project at this time.
We obtained correspondence demonstrating
the review and approval of the
financial models and key assumptions
by the project partners.
In respect of the mining assets
we obtained the Life of Mine
Plan and obtained evidence supporting
key inputs such as confirming
the coal reserves to the Competent
Person's Report, agreeing the
coal price to the associated
coal costs in the power models
and confirming the costs to quotations.
We found the mine valuation to
be highly sensitive to changes
in discount rate and considered
whether the discount rate was
in an acceptable range given
the status of the project, risks
and uncertainties.
We reviewed the disclosures in
notes 2 and 6 against the requirements
of the relevant accounting framework
and considered whether they appropriately
reflected the key judgments and
estimates.
-------------------------------------------
Accounting for debt instruments
As detailed in notes 2 and We reviewed the loan agreements
11, the group holds a number and amendments to those agreements
of loan instruments which are to assess the key terms. We verified
repayable inclusive of redemption amounts drawn down to bank and
premiums and which were extended deferred salary/fee arrangements.
during the year.
We assessed the accounting treatment
Where an amendment to a loan adopted by management for the
agreement results in substantially loan modifications against the
different terms from the original relevant accounting requirements.
agreement, the loan is derecognised In doing so, we confirmed that
and new loan recognised initially the amendments represented a
at fair value resulting in significant modification of terms
gains or losses. under those standards. We recalculated
the gain on modification based
The accounting for the instruments on the terms of the agreements
is considered complex and required and determined whether the discount
management to apply judgement rate applied in the calculations
in the accounting treatment was in an acceptable range based
of gains arising on modification on the terms of the original
of the loans, together with loans and the group's financial
the determination of the effective position.
interest rate applied for the
amended loans in order to arrive We considered whether management's
at a fair value. recognition of the gain in the
income statement was appropriate,
as opposed to the gains being
considered in whole or in part
a capital contribution with loan
holders acting in their capacity
as shareholders. In determining
whether management's treatment
was appropriate we made inquiries
of management as to the discussions
at the time, reviewed the shareholding
levels of the loan holders and
considered relevant facts and
circumstances around the transactions,
including the group financial
position.
We reviewed the calculation of
the amortised cost of the loans
before and after modification
and assessed the appropriateness
of the effective interest rate
used.
We reviewed the disclosures in
notes 2 and 11 against the requirements
of the relevant accounting framework
and considered whether they appropriately
reflected the key judgments and
estimates.
-------------------------------------------
Our application of materiality
The materiality for the group financial statements as a whole
was set at US$0.28 million (2016: US$0.37 million). This was based
on 1.5% (2016: 2.0%) of total assets which we consider to be an
appropriate benchmark due to the focus of stakeholders being the
assets of the group.
Whilst materiality for the financial statements as a whole was
US$0.28 million (2016: US$0.37million), the significant components
of the group were audited to a lower materiality of US$0.1millon to
US$0.17million (2016: US$0.12 million to US$0.23million).
Performance materiality was set at US$0.20million (2016:
US$0.26million) which represents 70% of the above materiality
levels.
We agreed with the Audit Committee that we would report to them
all uncorrected audit differences in excess of US$6,000 (2016:
US$7,000), which was set at 2% of materiality, as well as
differences below that threshold that, in our view, warranted
reporting on qualitative grounds. We evaluated any uncorrected
misstatements against both quantitative measures of materiality
discussed above and in light of other relevant qualitative
considerations when forming our opinion.
We apply the concept of materiality both in planning and
performing our audit, and in evaluating the effect of
misstatements. We consider materiality to be the magnitude by which
misstatements, including omissions, could influence the economic
decisions of reasonable users that are taken on the basis of the
financial statements. Importantly, misstatements below these levels
will not necessarily be evaluated as immaterial as we also take
account of the nature of identified misstatements, and the
particular circumstances of their occurrence, when evaluating their
effect on the financial statements as a whole.
An overview of the scope of our audit
Our audit was scoped by obtaining an understanding of the group
and its environment, as well as assessing the risks of material
misstatement in the financial statements at group level.
In approaching the audit, we considered how the group is
organised and managed. We completed a full scope audit on the
group's financial information and the components we deemed
significant. The group comprises seven components of which we
identified two to be significant and performed a full scope audit
on these components. The non-significant components were subject to
analytical review procedures.
Other information
The directors are responsible for the other information. The
other information comprises the information included in the annual
report, other than the financial statements and our auditor's
report thereon. Our opinion on the financial statements does not
cover the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a
material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact. We
have nothing to report in this regard.
Responsibilities of directors
As explained more fully in the directors' responsibilities
statement set out on the Statement of Director's Responsibilities,
the directors are responsible for the preparation of the 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 financial statements, the directors are
responsible for assessing the group's and the parent company's
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the
group or the parent company or to cease operations, or have no
realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users
taken on the basis of these financial statements.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council's website at: www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor's report.
Use of our report
This report is made solely to the company's members, as a body,
in accordance with our engagement letter dated 1 June 2018. 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.
BDO LLP
Chartered Accountants
55 Baker Street
London
W1U 7EU
United Kingdom
28 June 2018
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
Consolidated statement of profit or loss
for the year ended 31 December 2017 2016
2017 Note
US$'000 US$'000
------------------------------------- ----- -------- --------
Other administrative expenses 3 (1,051) (2,356)
Total administrative expenses
and loss from operations (1,051) (2,356)
Finance expense 11 (644) (648)
------------------------------------- ----- -------- --------
Loss for the year before taxation (1,695) (3,004)
Taxation 4 - 58
------------------------------------- ----- -------- --------
Loss for the year attributable
to
equity holders of the parent
company (1,695) (2,946)
------------------------------------- ----- -------- --------
Loss per share expressed in
cents
Basic and diluted 5 (0.7) (1.2)
------------------------------------- ----- -------- --------
Consolidated statement of other comprehensive income
for the year ended 31 December 2017
2017 2016
US$'000 US$'000
------------------------------------- -------- --------
Loss after taxation (1,695) (2,946)
Other comprehensive income:
Exchange differences on translating
foreign operations* 6 (10)
--------------------------------------- -------- --------
Total comprehensive loss for
the year attributable to equity
holders of the parent company (1,689) (2,956)
--------------------------------------- -------- --------
*Items that may be reclassified to profit or loss subject to
certain future events.
Consolidated statement of financial position
as at 31 December 2017
Note 2017 2016
US$'000 US$'000
----------------------------------- ----- --------- ---------
Assets
Non-current assets
Property, plant and equipment 6 18,313 8,995
Total non-current assets 18,313 8,995
----------------------------------- ----- --------- ---------
Current assets
Inventory - 2
Trade and other receivables 8 83 88
Cash and cash equivalents 9 614 152
Total current assets 697 242
----------------------------------- ----- --------- ---------
Non-current assets held for
sale (diluted interest in
relation to SEP transaction) 6 - 9,389
----------------------------------- ----- --------- ---------
Total assets 19,010 18,626
----------------------------------- ----- --------- ---------
Liabilities
Current liabilities
Trade and other payables 10 1,018 1,205
Loans and borrowings 11 3,495 2,169
Derivative financial liability 17 107 -
----------------------------------- ----- --------- ---------
Total current liabilities 4,620 3,374
Total liabilities 4,620 3,374
----------------------------------- ----- --------- ---------
Capital and reserves attributable
to shareholders
Share capital 12 87,384 86,557
Foreign currency translation
reserve - (6)
Accumulated losses (72,994) (71,299)
----------------------------------- ----- --------- ---------
Total capital and reserves 14,390 15,252
----------------------------------- ----- --------- ---------
Total equity and liabilities 19,010 18,626
----------------------------------- ----- --------- ---------
The financial statements were approved and authorised for issue
by the Board of Directors on 28 June 2018 and were signed on its
behalf by:
Jacek Glowacki
Non-Executive Director
The notes to the consolidated financial statements form part of
these financial statements.
Consolidated statement of changes in equity
for the year ended at 31 December 2017
Foreign
Currency
Share Translation Accumulated
capital reserve Losses Total
US$'000 US$'000 US$'000 US$'000
------------------------------------- -------------- ----------------- ------------ -----------------
At 1 January 2017 86,557 (6) (71,299) 15,252
Loss for the year - (1,695) (1,695)
Other comprehensive loss for
the year - 6 - 6
-------------------------------------- -------------- ----------------- ------------ -----------------
Total comprehensive loss for
the year - 6 (1,695) (1,689)
Issue of shares 987 - - 987
Costs associated with issue
of shares (160) - - (160)
Equity settled share-based payments - - - -
------------------------------------- -------------- ----------------- ------------ -----------------
At 31 December 2017 87,384 - (72,994) 14,390
-------------------------------------- -------------- ----------------- ------------ -----------------
Foreign
Currency
Share Translation Accumulated
capital reserve Losses Total
US$'000 US$'000 US$'000 US$'000
------------------------------------- -------------- ------------------- ------------ -------------------
At 1 January 2016 86,557 4 (68,353) 18,208
Loss for the year - - (2,946) (2,946)
Other comprehensive income for
the year - (10) - (10)
-------------------------------------- -------------- ------------------- ------------ -------------------
Total comprehensive loss for
the year - (10) (2,946) (2,956)
Issue of shares - - - -
Costs associated with issue of - - - -
shares
Equity settled share-based payments - - - -
------------------------------------- -------------- ------------------- ------------ -------------------
At 31 December 2016 86,557 (6) (71,299) 15,252
-------------------------------------- -------------- ------------------- ------------ -------------------
The notes to the consolidated financial statements form part of
these financial statements.
Consolidated statement of cash flows
for the year ended at 31 December 2017
2017 2016
US$'000 US$'000
----------------------------------------- -------- --------
Cash flow from operating activities
Loss before taxation (1,695) (3,004)
Adjustments for:
Finance expense 644 648
Unrealised foreign exchange movements 3 (34)
(Gain)/loss on disposal of property
plant and equipment (89) 1
Deferred payroll costs capitalised
to Shareholder Loan 132 231
Depreciation and amortisation 78 126
Net cash flow from operating activities
before changes in working capital (927) (2,032)
Decrease in inventory 2 6
Increase in payables 13 16
Decrease in receivables 5 16
------------------------------------------- -------- --------
Net cash flow from operating activities
before tax (907) (1,994)
------------------------------------------- -------- --------
Income taxes refunded - 58
------------------------------------------- -------- --------
Net cash flow from operating activities
after tax (907) (1,936)
------------------------------------------- -------- --------
Investing activities
Sales of property plant and equipment 133 -
Power development costs capitalised (48) (249)
Mine development costs capitalised (3) (13)
Net cash flow from investing activities 82 (262)
------------------------------------------- -------- --------
Financing activities
Issue of ordinary shares 987 -
Cost of share issue (50) -
Bank charges - (13)
Short term loan 350 1,961
Net cash flow from financing activities 1,287 1,948
------------------------------------------- -------- --------
Net increase/(decrease) in cash and
cash equivalents in the year 462 (250)
------------------------------------------- -------- --------
Cash and cash equivalents at the
beginning of the year 152 402
------------------------------------------- -------- --------
Cash and cash equivalents at the
end of the year 614 152
------------------------------------------- -------- --------
The notes to the consolidated financial statements form part of
these financial statements.
Notes to the consolidated financial statements
1. Principal accounting policies.
General
The Company is a limited liability company incorporated on 30
March 2006 in the British Virgin Islands. The address of its
registered office is Ground Floor, Coastal Building, Wickham's Cay
II, PO Box 2136, Road Town, Carrot Bay, VG1130 Tortola, British
Virgin Islands.
Going concern
The Directors have reviewed future cash forecasts for a period
of at least the next 12 months. As at 18 June 2018 the Group had
cash reserves of approximately US$1.34 million. Based upon
projections the current cash reserves will cover non project
corporate costs until the beginning of July 2019, subject to the
Shareholder Loan being extended or restructured. The Shareholder
Loan matures on 2 September 2018, and the Company is currently
evaluating options to extend or restructure the loan together with
proposals with a number of parties for refinancing of the
loans.
The Directors continue to explore options in respect of raising
further funds to continue with the power plant and mine development
programmes. At present there are no binding agreements in place and
there can be no certainty as to the Group's ability to raise
additional funding.
The Group will need to extend, refinance or settle the US$5.1
million Shareholder Loan (principal and redemption premium) in
equity by their maturity date, of which US$0.91 million of the
principal was lent by Directors. In addition, further funding will
be required by the end of June 2019 to meet operating cash flows
under current forecasts or in the event of accelerated project
advancement. The Directors are exploring a number of funding and
working capital solutions beyond the 2 September 2018 maturity of
the Shareholder Loan. The financial statements have been prepared
on a going concern basis in anticipation of a positive outcome but
it is important to highlight that there are no binding agreements
in place and there can be no certainty that the Shareholder Loan
will be restructured, settled in equity or refinanced and that
additional funding will be raised.
These factors indicate the existence of a material uncertainty
which may cast significant doubt about the Group's ability to
continue as a going concern. The financial statements do not
include the adjustments that would result if the Group was unable
to continue as a going concern. Such adjustments would principally
be the write down of the Group's non-current assets.
Basis of preparation
The principal accounting policies adopted in the preparation of
these consolidated financial statements are set out below. The
policies have been consistently applied to all the years presented,
unless otherwise stated.
These financial statements have been prepared in accordance with
International Financial Reporting Standards, International
Accounting Standards and Interpretations (collectively "IFRS")
issued by the International Accounting Standards Board ("IASB") as
adopted by the European Union ("adopted IFRS").
The preparation of financial statements in conformity with IFRS
requires management to make judgments, estimates and assumptions
that affect the application of policies and reported amounts of
assets and liabilities, income and expenses. The estimates and
associated assumptions are based on historical experience and
factors that are believed to be reasonable under the circumstances,
the results of which form the basis of making judgments about
carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these
estimates. The areas involving a higher degree of judgment or
complexity, or where assumptions and estimates are significant to
the consolidated financial statements, are disclosed in note 2.
The Group financial information is presented in United States
dollars (US$) and values are rounded to the nearest thousand
dollars (US$'000).
Loss from operations is stated after charging and crediting all
operating items excluding finance income and expenses.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision only
affects that period or in the period of revision and future periods
if the revision affects both current and future periods.
Standards in issue but not yet effective
The following standards, amendments and interpretations which
have been recently issued or revised and are mandatory for the
Group's accounting periods beginning on or after 1 January 2018 or
later periods have not been adopted early:
Standard Description Effective
date
--------- ---------------------------- -----------
IFRS 9 Financial Instruments 1 Jan 2018
IFRS 15 Revenue from Contracts with 1 Jan 2018
Customers
IFRS 16 Leases 1 Jan 2019
IFRS 2 Amendment - Classification 1 Jan 2018
and measurement of share
based payment transactions
The only standard which is anticipated to be significant or
relevant to the Group is IFRS 9 "Financial Instruments". Both IFRS
15 and IFRS 16 are not expected to have a material impact on the
Group based on its current operations.
IFRS 9 "Financial instruments" addresses the classification and
measurement of financial assets and financial liabilities. The
complete version of IFRS 9 was issued in July 2014. It replaces the
guidance in IAS 39 that relates to the classification and
measurement of financial instruments. IFRS 9 retains but simplifies
the mixed measurement model and establishes three primary
measurement categories for financial assets: amortised cost, fair
value through other comprehensive income (OCI) and fair value
through profit or loss. The basis of classification depends on the
entity's business model and the contractual cash flow
characteristics of the financial asset. Investments in equity
instruments are required to be measured at fair value through
profit or loss with the irrevocable option at inception to present
changes in fair value in OCI. There is now a new expected credit
loss model that replaces the incurred loss impairment model used in
IAS 39. For financial liabilities there were no changes to
classification and measurement except for the recognition of
changes in credit risk in other comprehensive income, for
liabilities designated at fair value through profit or loss. The
level of credit risk that the Group is exposed to is not expected
to give rise to material allowances within this new model. The
Group is in the process of completing their assessment of the
classification and measurement of the Group's existing financial
assets and liabilities under the requirements of IFRS 9 and do not
anticipate any material impact to the financial statements upon
adoption of this standard.
Basis of consolidation
Subsidiaries
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. Where necessary, adjustments are
made to the financial statements of subsidiaries to bring their
accounting policies into line with those used by other members of
the Group. All intra-Group transactions, balances, income and
expenses are eliminated on consolidation.
Business combinations
The acquisition method of accounting is used to account for
business combinations by the Group. The consideration transferred
for the acquisition of a business is the fair value of the assets
transferred, liabilities incurred and the equity interests issued
by the Group. The consideration transferred includes the fair value
of any asset or liability resulting from a contingent consideration
arrangement. Acquisition related costs are expensed as incurred.
Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date.
Segmental reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker has been identified as the Board
of Directors.
Share-based payments
Equity-settled share-based payments to employees and Directors
are measured at the fair value of the equity instrument. The fair
value of the equity-settled transactions with employees and
Directors is recognised as an expense over the vesting period. The
fair value of the equity instrument is determined at the date of
grant, taking into account market based vesting conditions.
The fair value of the equity instrument is measured using the
Black-Scholes model. The expected life used in the model is
adjusted, based on management's best estimate, for the effects of
non-transferability, exercise restrictions and behavioural
considerations.
When grant of equity instruments is cancelled or settled during
the vesting period the cancellation is accounted for as an
acceleration of vesting and the amount that otherwise would have
been recognised for services received over the remainder of the
vesting period is immediately expensed.
If, after the vesting date, fully vested options lapse or are
not exercised the previously recognised share based payment charge
is not reversed.
Property, plant and equipment
Property, plant and equipment are stated at cost on acquisition
less depreciation. Depreciation is provided on a straight-line
basis at rates calculated to write off the cost less the estimated
residual value of each asset over its expected useful economic
life. The residual value is the estimated amount that would
currently be obtained from disposal of the asset if the asset were
already of the age and in the condition expected at the end of its
useful life.
The annual rate of depreciation for each class of depreciable
asset is:
Plant and equipment 25%
Other 20%-33%
Buildings 10%
The carrying value of property plant and equipment is assessed
annually and any impairment is charged to the profit or loss.
Power project costs
Power project expenditure is expensed until it is probable that
future economic benefits associated with the project will flow to
the Group and the cost of the project can be measured reliably.
When it is probable that future economic benefits will flow to the
Group, all costs associated with developing the 300MW power project
are capitalised as power project expenditure within property, plant
and equipment category of tangible non-current assets. The
capitalised expenditure includes appropriate technical an
administrative expenses but not general overheads. Power project
assets are not depreciated until the asset is ready and available
for use.
Exploration and evaluation assets
Exploration and evaluation assets include all costs associated
with exploring and evaluating prospects within licence areas,
including the initial acquisition of the licence are capitalised on
a project-by-project basis. Costs incurred include appropriate
technical and administrative expenses but not general overheads.
Where a licence is relinquished, a project is abandoned, or is
considered to be of no further commercial value to the Group, the
related costs will be written off.
The recoverability of exploration and evaluation assets is
dependent upon the discovery of economically recoverable reserves,
the ability of the Group to obtain necessary financing to complete
the development of reserves and future profitable production or
proceeds from the disposition of recoverable reserves.
Mining assets
When the technical feasibility of the exploration project is
determined, mining licence concession is obtained and a decision is
made to proceed to development stage the related exploration and
evaluation assets are assessed for potential impairment and then
transferred to non-current mining assets and included within
property, plant and equipment.
Mining properties are depleted over the estimated life of the
reserves on a 'unit of production' basis.
Commercial reserves are proven and probable reserves. Changes in
commercial reserves affecting unit of production calculations are
dealt with prospectively over the revised remaining reserves.
Impairment
The carrying amounts of non-current assets are reviewed for
impairment if events or changes in circumstances indicate the
carrying value may not be recoverable. If there are indicators of
impairment, an exercise is undertaken to determine whether the
carrying values are in excess of their recoverable amount. Such
review is undertaken on an asset by asset basis, except where such
assets do not generate cash flows independent of other assets, in
which case the review is undertaken at the cash generating unit
level.
A previously recognised impairment loss is reversed if the
recoverable amount increases as a result of a reversal of the
conditions that originally resulted in the impairment. This
reversal is recognised in the statement of profit or loss and is
limited to the carrying amount that would have been determined, net
of depreciation, had no impairment loss been recognised in the
prior years.
The recoverable amount of assets is the greater of their value
in use and fair value less costs to sell. In assessing value in
use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks
specific to the asset. For an asset that does not generate cash
inflows largely independent of those from other assets, the
recoverable amount is determined for the cash-generating unit to
which the asset belongs. The Group's cash-generating units are the
smallest identifiable groups of assets that generate cash inflows
that are largely independent of the cash inflows from other assets
or groups of assets.
Impairments are recognised in the statement of profit or loss to
the extent that the carrying amount exceeds the assets recoverable
amount. The revised carrying amounts are amortised in line with the
Group's accounting policies.
The Group has two cash generating units being the coal mining
asset and the power plant project.
Operating leases
Where substantially all of the risks and rewards incidental to
ownership are not transferred to the Group (an 'operating lease')
amounts payable under the lease are charged to the profit or loss
on a straight-line basis over the lease term.
Foreign currency
The individual financial statements of each Group entity are
presented in the currency of the primary economic environment in
which the entity operates (its functional currency). For the
purpose of the consolidated financial statements, the results of
overseas Group entities are translated into US$, which is the
functional currency of the Company and its primary operating
subsidiaries and presentation currency for the consolidated
financial statements, at rates approximating to those ruling when
the transactions took place, all assets and liabilities of overseas
Group entities are translated at the rate ruling at the reporting
date. Exchange differences arising on translating the opening net
assets at opening rate and the results of overseas operations with
a non US$ functional currency at actual rate are recognised in
other comprehensive income and accumulated in the foreign exchange
translation reserve.
In preparing the financial statements of the individual
entities, transactions 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
reporting date, monetary items denominated in foreign currencies
are retranslated at the rates prevailing on the reporting date.
Exchange differences arising on the settlement of monetary items
and on the retranslation of monetary items are included in the
statement of profit or loss.
Provisions
Provisions are recognised when the Group has a legal or
constructive obligation, as a result of past events, for which it
is probable that an outflow of economic resources will result and
that outflow can be reliably measured.
Taxation
Income tax expense represents the sum of the tax currently
payable and deferred tax.
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from profit as reported in the profit
or loss 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. The Group's liability for
current tax is calculated using tax rates that have been enacted or
substantively enacted by the reporting date.
Deferred tax is recognised on differences between the carrying
amounts of assets and liabilities in the financial statements and
the corresponding tax bases used in the computation of taxable
profit. Deferred tax liabilities are recognised for all taxable
temporary differences and deferred tax assets are recognised to the
extent that it is probable that taxable profits will be available
against which deductible temporary differences can be utilised. The
carrying amount of deferred tax assets is reviewed at each
reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered. Deferred tax is
calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset realised.
Deferred tax is charged or credited to the statement of profit or
loss, except when it relates to items charged or credited directly
to equity, in which case the deferred tax is also dealt with in
equity. Deferred tax assets and liabilities are offset when there
is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to income
taxes levied by the same taxation authority and the Group intends
to settle its current tax assets and liabilities on a net
basis.
Financial instruments
Financial assets and liabilities are recognised when the Group
becomes party to the contractual provisions of the instrument.
Financial assets
The Group classifies its financial assets into one of the
categories discussed below, depending on the
purpose for which the asset was acquired. The Group did not have
any financial assets designated at fair value through profit or
loss and as held to maturity or held for trading. Unless otherwise
indicated, the carrying amounts of the Group's financial assets are
a reasonable approximation of their fair values.
The Group's accounting policy for each category is as
follows:
Loans and receivables
Loans and receivables (including trade receivables) are measured
on initial recognition at fair value and subsequently measured at
amortised cost using the effective interest rate method.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand,
deposits and other short-term highly liquid investments that are
readily convertible to a known amount of cash and are subject to an
insignificant risk of changes in value. The Group assesses at each
reporting date whether there is objective evidence that a financial
asset or a group of financial assets is impaired.
Financial liabilities
Financial liabilities held at amortised cost
Financial liabilities refer to trade and other payables and
loans and borrowings and are initially recognised at fair value net
of any transaction costs directly attributable to the issue of the
instrument. Such liabilities are subsequently measured at amortised
cost using the effective interest rate method, which ensures that
any interest expense over the period to repayment is at a constant
rate on the balance of the liability carried in the statement of
financial position. Where loans and borrowings include a redemption
premium, the estimated premium is included in the calculation of
the effective interest rate.
Where there is a significant modification to a financial
liability, the financial original liability is de-recognised and a
new financial liability is recognised at fair value in accordance
with the Group's policy.
Financial liabilities at fair value through profit or loss
This category comprises only warrants instruments classified as
derivative financial liability due to the warrant resulting in the
issue of a variable number of shares. They are carried in the
consolidated statement of financial position at fair value with
changes in fair value recognised in the consolidated statement of
comprehensive income. Other than these derivative financial
instruments, the Group does not have any liabilities held for
trading nor has it designated any other financial liabilities as
being at fair value through profit or loss.
Fair value measurement hierarchy
The Group classifies its financial liabilities measured at fair
value using a fair value hierarchy that reflects the significance
of the inputs used in making the fair value measurement (note 17).
The fair value hierarchy has the following levels:
a) Quoted prices (unadjusted) in active markets for identical
assets or liabilities (Level 1);
b) Inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices) (Level 2);
c) Inputs for the asset or liability that are not based on
observable market data (unobservable inputs) (Level 3).
The level in the fair value hierarchy within the financial
liability is determined on the basis of the lowest level input that
is significant to the fair value measurement.
Share capital
Financial instruments issued by the Group are treated as equity
only to the extent that they do not meet the definition of a
financial liability. The Company's ordinary shares are classified
as equity instruments. The Company considers its capital to be
total equity. The Company is not subject to any externally imposed
capital requirements.
Non-current assets held for sale and disposal groups
Non-current assets and disposal groups are classified as held
for sale when: they are available for immediate sale subject only
to customer conditions; management is committed to a plan to sell;
it is unlikely that significant changes to the plan will be made or
that the plan will be withdrawn; an active programme to locate a
buyer has been initiated; the asset or disposal group is being
marketed at a reasonable price in relation to its fair value; and a
sale is expected to complete within 12 months from the date of
classification.
Non-current assets and disposal groups classified as held for
sale are measured at the lower of: their carrying amount
immediately prior to being classified as held for sale in
accordance with the group's accounting policy; and fair value less
costs to sell. Following their classification as held for sale,
non-current assets (including those in a disposal group) are not
depreciated.
2. Critical accounting estimates and judgements
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
discussed below.
Accounting judgements and estimates
(i) Impairment of mining assets
The Group's mining assets were impaired to US$7.7 million in
2014 and are held at its estimated value in use which is below
cost. Assessment of the carrying value, potential additional
impairment or reversal of impairment involves management estimates
on highly uncertain matters such as future commodity prices which
are in turn linked to the Power Project tariff, IRR and commercial
development, estimates of future operating expenses, discount
rates, production profiles and the outlook for regional market
power demand in Mozambique. Management have performed an impairment
test using the current economic model for the mine as at year end.
The expected future cash flows were estimated using management's
best estimates which are based on currently available information
such as reserves reports and proposed coal prices for supply to the
Power Project. Refer to (ii) for details of key judgments and
estimates associated with the Power Project which impact the
carrying value of the mining asset.
As disclosed in note 1, the value of the Group's coal mining
asset and power project is dependent on the Group's ability to
raise the required finance for the construction of the coal
processing facilities and the power plant.
The key estimates and assumptions are further disclosed in note
6.
(ii) Power Project development
The carrying value of the power plant costs in note 6 is
dependent on the success of the power plant project. Management
have considered key milestones, signing of NBO, risks and
de-risking events and determined that it is more likely than not
that the power plant will be developed given the progress to date.
The carrying value of the assets and feasibility of the project is
supported by the current financial models. However, the Government
have indicated that a more competitive tariff is required compared
to the previous tariff envelope agreed in principle under the SEP
transaction. The financial model is based on an approximate 10%
reduction in the previous tariff which management anticipate being
acceptable to the Government following benchmarking and discussions
with EDM to date. However, negotiations are continuing and should
an acceptable tariff not be agreed or other cost efficiencies
realised the project may not proceed and the power assets may not
be recoverable.
(iii) Asset classified as held for sale
Subsequent to suspension of exclusivity discussion with SEP on
the 26 May 2017 the Group has reclassified the 'Non-current asset
held for sale' to Property, plant and equipment. The assets
reclassified total US$9.4m from PPE held at net book value which is
below fair value less cost to sell (note 6).
Management have considered whether the NBO with CMEC was such
that the power and mining assets met the criteria of IFRS 5. Having
considered the status of the proposals at 31 December 2017, the
significance and nature of conditions required for a JDA and
subsequent financial closure and the period of time to final
completion of a transaction and concluded that the criteria were
not met.
(v) Amendments to shareholder loans
Judgement and estimate was required in accounting for the
Group's shareholder loans which were extended during the year. The
extensions were considered to represent significant modifications
with the maturity extended without additional redemption premiums.
Judgement was required in assessing whether the holders were acting
principally in their capacity as debt holders or shareholders with
gains on modification recorded in the income statement under the
former or equity under the latter. Management concluded that the
holders were acting principally in their capacity as debt holders
based on assessment of the size of their shareholdings, the
financial position of the Group at the time which was considered to
be such that the holders accepted the terms to maximise their
potential for eventual recovery of the loans (including premium)
and other facts and circumstances.
Judgement and estimation was required in determining the market
rate of return to apply in calculating the fair value of the loan
instruments on extension in May 2017 and September 2017. Management
estimated the market rate of return and this was applied to arrive
at the fair value of the loan instruments.
3. Administrative expenses
2017 2016
US$'000 US$'000
------------------------------- --------- ---------
Staff costs 167 581
Professional and consultancy 763 1,201
Office expenses 75 128
Travel and accommodation 12 253
Other expenses 57 60
Gain on disposal of PPE (89) (10)
Depreciation 78 126
Foreign exchange (12) 16
--------------------------------- --------- ---------
Total administrative expenses 1,051 2,356
--------------------------------- --------- ---------
Auditors' remuneration
2017 2016
US$'000 US$'000
Group auditors' remuneration
- audit of the Group's accounts 48 40
- audit of the Group's subsidiaries - 15
Other services
- interim review 3 12
51 67
----------------------------------------- --------- ---------
Auditors' remuneration is included within professional and
consultancy costs.
Staff costs (including Directors)
2017 2016
US$'000 US$'000
Wages and salaries 188 694
Social security costs 1 6
189 700
----------------------- --------- ---------
US$21,561 (2016: US$119,000) included within wages and salaries
have been capitalised to the power project asset.
The average monthly number of employees (including executive
Directors) of the Group were:
2017 2016
Number Number
Operational 1 8
Administration 3 5
4 13
---------------- -------- --------
Key management compensation:
2017 2016
US$'000 US$'000
Salary 72 385
Fees 23 121
Social security costs - 6
95 512
----------------------- --------- ---------
Key management personnel are considered to be Directors and
senior management of the Group.
The average monthly number of employees (including executive
Directors) of the Group were:
2017 2016
Number Number
Operational 8 11
Administration 5 9
13 20
---------------- -------- --------
4. Taxation
The Group entities subject to corporate income tax are Ncondezi
Coal Company Mozambique Limitada and Ncondezi Power Company S.A.
which are subject to tax at the rate of 32% (2016: 32%) on their
profits in Mozambique. No tax charge/ (credit) arose in the current
or prior year for Ncondezi Coal Company Mozambique Limitada and
Ncondezi Power Company S.A.
2017 2016
US$'000 US$'000
------------------------------------------------ -------------- -----------
Current tax - UK corporation tax - (58)
------------------------------------------------ -------------- -----------
Group loss on ordinary activities before
tax (1,695) (3,004)
------------------------------------------------ -------------- -----------
Effects of:
Reconcile to Mozambique corporation
tax rate of 32% (2016: 32%) (542) (962)
Differences arising from different
tax rates 499 862
Taxable losses utilised not previously (77) -
recognised
Under/over provision from previous period - (58)
Foreign exchange effect originating
in overseas companies 95 (229)
Unrecognised taxable losses in subsidiaries 25 329
Total tax for the year - (58)
----------------------------------------------- -------------- -----------
During the exploration and development stages, the Group will
accumulate tax losses which may be carried forward. As at 31
December 2017, no deferred tax asset has been recognised for tax
losses of US$7,978,000 (2016: USD$7,867,000) carried forward within
the Group's overseas subsidiaries, as the recovery of this benefit
is dependent on the future profitability, the timing and certainty
of which cannot be reasonably foreseen.
Tax losses in Mozambique are available for use over a five year
period. Of the total available Mozambican subsidiary tax credits,
US$52,000 will be available until 31 December 2022, US$1,129,000
will be available until 31 December 2021, US$760,000 will be
available until 31 December 2020, US$1,269,000 will be available
until 31 December 2019, and US$1,834,000 will be available until 31
December 2018.
5. Loss per share
Basic loss per share is calculated by dividing the loss
attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the year.
Due to the losses incurred during the year a diluted loss per
share has not been calculated as this would serve to reduce the
basic loss per share. Out of 7,525,000 (2016: 13,550,000) share
incentives outstanding at the end of the year 6,775,000 (2016:
11,225,000) had already vested, which if exercised could
potentially dilute basic earnings per share in the future.
2017 2016
---------------------------------------- --------- ------------------------------------
Weighted Weighted
average Per average Per
number share number share
Loss of shares amount Loss of shares amount
US$'000 (thousands) (cents) US$'000 (thousands) (cents)
-------------- --------- ------------- --------- ---------- ------------- ---------
Basic and
diluted EPS (1,695) 253,349 (0.7) (2,946) 250,075 (1.2)
--------------- --------- ------------- --------- ---------- ------------- ---------
6. Property, plant and equipment
Power Mining Plant
assets assets Buildings and equipment Other Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
------------------------------- --------- --------- ---------- --------------- --------- ---------
Cost (less impairment)
At 1 January 2016 9,140 7,638 1,736 447 718 19,679
Additions 249 13 - - - 262
Disposals - - - (1) - (1)
Transfer to held for
sale (9,389) - - - - (9,389)
At 1 January 2017 - 7,651 1,736 446 718 10,551
Additions 48 3 - - - 51
Disposals - - (337) (404) - (741)
Reclassified from non-current
assets held for sale 9,389 - - - - 9,389
------------------------------- --------- --------- ---------- --------------- --------- ---------
At 31 December 2017 9,437 7,654 1,399 42 718 19,250
------------------------------- --------- --------- ---------- --------------- --------- ---------
Depreciation
At 1 January 2016 - - 359 353 718 1,430
Depreciation charge - - 73 53 - 126
At 1 January 2017 - - 432 406 718 1,556
Depreciation charge - - 70 8 - 78
Disposals - - (312) (385) - (697)
At 31 December 2017 - - 190 29 718 937
------------------------------- --------- --------- ---------- --------------- --------- ---------
Net Book value 2017 9,437 7,654 1,209 13 - 18,313
------------------------------- --------- --------- ---------- --------------- --------- ---------
Net Book value 2016 - 7,651 1,304 40 - 8,995
------------------------------- --------- --------- ---------- --------------- --------- ---------
Power assets relate to the development of a 300MW power plant.
In 2017, the Power assets were reclassified from 'Non-current asset
held for sale to Property, plant and equipment as detailed in note
2.
Mine assets relate to the initial acquisition of the licences
and subsequent expenditure incurred in evaluating the Ncondezi mine
project. These were transferred from intangible assets on receipt
of the mining concession in 2013.
The mine assets are stated net of an impairment of US$32 million
recorded in 2014 which is considered to remain appropriate based on
the impairment test at 31 December 2017. The carrying value for the
coal mining asset has been assessed based on a value in use
calculation using the economic model for the mine. The key
estimates used in the value in use calculation are as follows:
- Coal price of US$1.23/Gj being the transfer price at 31(st)
December 2017 escalated thereafter.
- Capital costs of US$104.5m based on contractor quotations
- Discount rate - 12% including allowances for project risk
- Coal production of 1.4mt to meet the power assets
requirements. The resource is supported by a JORC compliant
resource estimate.
- Life of the coal asset (based on the anticipated conditional EDM deal) - 25 years
- Inflation rates have been calculated based on a mixed basket
of inflation rates in order to determine appropriate escalation
factors. The baskets includes Mozambique CPIX, US CPIX, RSA
producer purchase index, Coal CPI Index, Fuel Supply Index, Mining
Contractor Index and CHPP Index.
The impairment is highly sensitive to changes in the discount
rate with a 1% increase in the discount rate increasing impairment
by US$7.0 million. The coal price payable by the power station to
the mine is consistent with the power project financial model which
itself includes a critical estimate regarding the electricity
tariff. The electricity tariff in the power project model is
subject to ongoing negotiations with EDM as detailed in note 2. In
the event of changes to operating inputs the pricing mechanism is
revised to maintain the return on equity of the asset, subject to
the economic viability of the power project and its return on
equity.
7. Subsidiaries
The Group has the following subsidiary undertakings:
% interest % interest Country of
2017 2016 incorporation Activity
---------------------------- --------- ----------- ----------- --------------- -------------------
Zambezi Energy Corporation
Holdings 1 Limited 'ZECH1' 100 100 Mauritius Holding company
Zambezi Energy Corporation
Holdings 2 Limited 'ZECH2' 100 100 Mauritius Holding company
Ncondezi Coal Company Mining exploration
Mozambique Limitada 'NCCML' 100 100 Mozambique and development
Ncondezi Power Holdings 'NPHL' - 100 Mauritius Holding company
Limited
Ncondezi Power Holdings
2 Limited 'NPH2L' 100 100 UAE Holding company
Ncondezi Power Company
SA 'NPCSA' 100 100 Mozambique Energy company
Ncondezi Power Mozambique
Limitada 'NPML' 100 100 Mozambique Energy company
Ncondezi Coal Company Mozambique Limitada is owned by Zambezi
Energy Corporation Holdings 1 Limited and Zambezi Energy
Corporation Holdings 2 Limited. Ncondezi Power Holdings 2 Limited
is owned by Ncondezi Energy Limited. Ncondezi Power Company SA is
owned by Ncondezi Energy Limited, Zambezi Energy Corporation
Holdings 1 Limited and Ncondezi Power Holdings 2 Limited. Ncondezi
Power Mozambique Limitada is owned by Zambezi Energy Corporation
Holdings 2 Limited.
Ncondezi Power Holdings Limited was dissolved during the
year.
8. Trade and other receivables
2017 2016
US$'000 US$'000
----------------------------------- --------- ---------
Current assets:
Other receivables 83 88
Total trade and other receivables 83 88
----------------------------------- --------- ---------
The fair value of receivables is not significantly different
from their carrying value.
There are no receivables that are past due or impaired at year
end.
9. Cash and cash equivalents
2017 2016
US$'000 US$'000
-------------------------- --------- ---------
Cash at bank and in hand 614 152
-------------------------- --------- ---------
614 152
-------------------------- --------- ---------
The Group's cash and cash equivalents balances may be analysed
by currency as follows:
2017 2016
US$'000 US$'000
---------------------- --------- ---------
US Dollars 77 104
Great British Pounds 535 25
Mozambique Meticais 2 23
---------------------- --------- ---------
614 152
---------------------- --------- ---------
Where possible cash is deposited in floating rate deposit
accounts at reputable financial institutions with high credit
ratings.
10. Trade and other payables
2017 2016
US$'000 US$'000
------------------------------------ --------- ---------
Other payables 213 220
Other taxation and social security - 2
Accruals 805 983
------------------------------------ --------- ---------
1,018 1,205
------------------------------------ --------- ---------
Accruals includes US$0.5 million (2016: US$0.6 million) of
interest in respect of the loans in note 11. The fair value of
payables is not significantly different from their carrying
value.
11. Short term loan
31 December 31 December
2017 2016
Audited Audited
US$'000 US$'000
----------------------------- ------------ ------------
Short term loan (unsecured) 3,495 2,193
Unamortised related costs - (24)
Total Short term loan 3,495 2,169
------------------------------- ------------ ------------
On 11 May 2016, the Group entered into a US$1.32 million loan
facility ("Shareholder Loan") with certain of Ncondezi's Directors,
Management and long term shareholders. On 31 August 2016, AFC
acceded to the existing loan facility agreement, providing a
facility of US$3.0 million, with an initial tranche of US$1.0
million ("Tranche A") and a further tranche of US$2.0 million
("Tranche B") which was conditional amongst other things upon the
fulfilment of certain conditions precedent, the completion of the
JDA and Ncondezi providing an appropriate security package. Tranche
B was never drawn and lapsed.
The repayment terms of the Shareholder Loan were as follows:
o if the SEP JDA became effective before December 2016 the full
drawn down amount was repayable on 10 May 2017 and a 0.5 times
return on the drawn down amount was repayable 6 months from 10 May
2017
o if the SEP JDA became effective after December 2016 the full
drawn down amount and the 0.5 times return was repayable on 10 May
2017
o if the repayment occurred after 10 May 2017, then an
additional return of 0.5 times the total drawings is repayable in
addition to the 1.5 times of the full drawn down amount
The Shareholder Loan was initially recorded at fair value, being
the proceeds received, and subsequently at amortised cost. The
estimated repayment premium of 0.5x capital was recognised over the
period of the loan through the effective interest rate.
Repayment of the Shareholder Loan (comprising the existing
Shareholder Loan and initial US$1.0 million Tranche A from AFC) was
initially payable by no later than 10 May 2017. On 11 May 2017, the
Company agreed an amendment to the repayment terms, with repayment
of the principal and redemption premium on 2 September 2017.
Subsequently on 2 September 2017 the Company was able to agree an
amendment to the repayment terms of the Shareholder Loan, with
repayment now due on 2 September 2018.
On 23 of June 2017 the Company entered into an amendment ("New
Loan") to the original Shareholder Loan with an additional funding
of US$350,000. The financing has been committed by the Chairman
Michael Haworth (US$200,000) and other existing long term
shareholders (US$150,000). The New Loan will receive a 1.25x return
and was due to mature on 2 September 2017. The loan has
subsequently been extended to 2 September 2018 with no additional
return.
As part of this same amendment the senior management team of the
Company have agreed to convert their deferred 50% salary between
November 2016 and January 2017, and a percentage of their salary
since February 2017 into the existing Shareholder Loan. The total
amount of US$232,000 was initially due to mature 2 September
2017without interest. The maturity date was subsequently extended
to 2 September 2018 with no additional return.
At the date of the extensions the loans, held at principal plus
redemption premiums, were extinguished and replaced with the
amended loans discounted at market rates of return (see note 2).
The difference between the carrying value of the previous loan and
the fair value of the amended loan was taken to finance costs as a
gain. The discount is then accreted to the date of maturity with
charges recorded in finance costs.
Finance costs of US$0.6 million comprise US$2.7 million of
finance charges and US$2.1 million of gains on significant
modification of the loans. The finance charges include the
redemption premiums amortised to original maturity together with
the additional redemption premium on the 2016 loan for non-payment,
amortisation of the amended Shareholder Loan discount between 11
May 2017 and 2 September 2017 and amortisation of the discount of
each loan from 3 September 2017 to 31 December 2017.
As at 31 December 2017, a total of US$2,774,545 has been drawn
down under the total Shareholder Loan, this includes US$232,000
deferred salaries, and the repayment amount will be US$5,054,591 on
2 September 2018.
Net financial cost for the year totalled in relation to short
term loan was US$644,000 (2016: US$648,000).
Accrued interest is recorded in other payables.
12. Share capital
Number of shares 2017 2016
Allotted, called up and fully
paid
Ordinary shares of no par value 265,299,844 250,299,844
---------------------------------- ------------ ------------
Shares Share
Issued capital
Number US$'000
--------------------------------- ---------------- --------------
At 1 January 2017 250,299,844 86,557
Issue of shares 15,000,000 987
Issue costs - (160)
At 31 December 2017 265,299,844 87,384
---------------------------------- ---------------- --------------
Shares Share
Issued capital
Number US$'000
--------------------------------- --- ------------ ------------
At 1 January 2016 249,849,844 86,557
Issue of shares 450,000 -
At 31 December 2016 250,299,844 86,557
---------------------------------- ------------ ------------
13. Reserves
The following describes the nature and purpose of each reserve
within owners' equity.
Share capital Amount subscribed for share capital, net
of costs of issue
Foreign currency translation Gains/losses arising on retranslating the
reserve net assets of overseas operations into US
Dollars
Retained earnings Cumulative net gains and losses less distributions
made, together with share based payment
equity increases
----------------------------- ---------------------------------------------------
14. Share-based payments
Share awards are granted to employees and Directors on a
discretionary basis and the Remuneration Committee will decide
whether to make share awards under the LTIP or unapproved share
option scheme at any time.
Long term incentive plan and unapproved share option scheme
Lapsed/
Exercise Outstanding Granted cancelled Outstanding Final
price per Grant at start during during at year exercise
share date of year the year the year end date
--------------- --------- --------------- ----------- ------------ --------------- -----------
2017
Nil 27.05.10 2,400,000 - - 2,400,000 26.05.20
25c 27.05.10 800,000 - - 800,000 26.05.20
30.5p (47.8c) 19.06.12 500,000 - (500,000) - 18.06.22
17.25p (26.3c) 26.04.13 4,600,000 - (2,825,000) 1,775,000 25.04.23
Nil 31.01.14 1,800,000 - - 1,800,000 30.06.20
6.5p (10.8c) 31.01.14 3,450,000 - (2,700,000) 750,000 30.06.20
Total 13,550,000 - (6,025,000) 7,525,000
--------------- --------- ------------- ------------- ------------ --------------- -----------
WAEP (cents) 14.92 - 21.2 9.94
--------------- --------- ------------- ------------- ------------ --------------- -----------
Exercise Outstanding Granted Exercised Outstanding Final
price per Grant at start during during at year exercise
share date of year the year the year end date
--------------- --------- ------------- ------------- ------------ ------------- -------------
2016
Nil 27.05.10 2,400,000 - - 2,400,000 26.05.20
25c 27.05.10 800,000 - - 800,000 26.05.20
30.5p (47.8c) 19.06.12 500,000 - - 500,000 18.06.22
17.25p (26.3c) 26.04.13 4,600,000 - - 4,600,000 25.04.23
Nil 31.01.14 2,250,000 - (450,000) 1,800,000 30.06.20
6.5p (10.8c) 31.01.14 3,450,000 - - 3,450,000 30.06.20
--------------- --------- ------------- ------------- ------------ ------------- -------------
Total 14,000,000 - (450,000) 13,550,000
--------------- --------- ------------- ------------- ------------ ------------- -------------
WAEP (cents) 14.44 - - 14.92
--------------- --------- ------------- ------------- ------------ ------------- -------------
The Company's mid-market closing share price at 31 December 2017
was 3.63p (31 December 2016: 5.3p). The highest and lowest
mid-market closing share prices during the year were 9.87p (2016:
6.4p) and 1.75p (2016: 3.5p) respectively.
Of the total number of options outstanding at year end 6,775,000
(2016: 11,225,000) had vested and were exercisable. The weighted
average exercise price for the exercisable options at year end was
8.86p (2016: 13.96p).
The weighted average contractual life of the options outstanding
at the year-end was six years (2016: seven years).
The fair value of the share awards granted under the Group's
unapproved share option scheme has been calculated using the
Black-Scholes model and spread over the vesting period. The
following principal assumptions were used in the valuation:
Note Share price Exercise Volatility Period Risk-free Fair
Grant at date price per likely investment value
dated of grant share to exercise rate
date over
---------- ------- ------------- ------------ ------------ -------------- ------------- --------
19.01.12 90.67c 90.67c 50% 5 years 0.9% 39.63c
19.06.12 47.83c 47.83c 50% 5 years 0.7% 20.76c
26.04.13 26.32c 26.32c 37.65% 3-5 years 0.7% 8.10c
26.04.13 26.32c 26.32c 37.65% 3-5 years 0.7% 8.09c
26.04.13 26.32c 26.32c 37.65% 3-5 years 0.7% 8.08c
26.04.13 26.32c 26.32c 37.65% 3-5 years 0.7% 7.87c
26.04.13 26.32c 26.32c 37.65% 3-5 years 0.7% 8.23c
26.04.13 26.32c 26.32c 37.65% 4-5 years 0.7% 8.50c
31.01.14 10.77c - 34.17% 5 years 2.4% 10.77c
31.01.14 10.77c 10.77c 43.57% 2 years 2.4% 3.18c
31.01.14 10.77c 10.77c 34.17% 5 years 2.4% 3.66c
------------------- ------------- ------------ ------------ -------------- ------------- --------
The volatility rates have been calculated using the share price
of a similar company with coal assets in Mozambique and analysis of
historic Company share price volatility.
Based on the above fair values, the expense arising from
equity-settled share options made to employees and Directors was
nil for the year (2016: nil).
Warrants
During the year ended 31 December 2017, 1,500,000 warrants at
subscription price of 5 pence per share, were granted to Novum
Securities Limited as part of the placing agreement entered in
October 2017. The warrants have an exercise period of 2 years from
20 October 2017. The warrants are classified at fair value profit
and loss as the functional currency of the Company is US Dollars
and the exercise price is set in GBP.
The fair value on the grant date and reporting date were
determined using the Black Scholes Model.
The fair value was based on the following assumptions:
Share Price
(GBP) 0.06
Expected volatility 119%
------
Options life
(years) 2
------
Expected dividends 0
------
Risk free rate 0.74%
------
The fair value of the 1,500,000 warrants on the grant date was
US$110,229. On initial recognition the warrants' cost was deducted
from share capital balance as it represents the cost of issuing
shares. Subsequent changes in the fair value of the warrants are
recognised through profit or loss. The warrants were valued at
US$106,559 at the year end with the change of fair value of
US$3,670 recognised through profit or loss 3.63p). The highest and
lowest mid-market closing share prices during the year were 6.4p
(2016: 5.5p) and 3.5p (2016: 1.63p) respectively.
15. Segmental analysis
The Group has three reportable segments:
-- Mine project - this segment is involved in the exploration
for coal and development of coal mine within the Group's licence
areas in Mozambique
-- Power project - this segment relates to the development of a
300MW integrated power plant next to the Group's coal mine
concession areas in Mozambique
-- Corporate - this comprises head office operations and the
provision of services to Group companies
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker
and are based on differences in products from which each reportable
segment will derive its future revenues. The chief operating
decision-maker has been identified as the Board of Directors.
The operating results of each of these segments are regularly
reviewed by the Group's chief operating decision-maker in order to
make decisions about the allocation of resources and assess their
performance.
The segment results for the year ended 31 December 2017 are as
follows:
Power Mine Corporate
project project US$'000 Group
Income statement US$'000 US$'000 US$'000
--------------------------------- ---------- ---------- ----------- ----------
For the year ended 31 December
2017
--------------------------------- ---------- ---------- ----------- ----------
Segment result after allocation
of central costs (615) 44 (480) (1,051)
--------------------------------- ---------- ---------- ----------- ----------
Finance expense - - (644) (644)
Finance income - - - -
--------------------------------- ---------- ---------- ----------- ----------
Loss before taxation (615) 44 (1,124) (1,695)
Taxation - - - -
--------------------------------- ---------- ---------- ----------- ----------
Loss for the year (615) 44 (1,124) (1,695)
--------------------------------- ---------- ---------- ----------- ----------
The segment results for the year ended 31 December 2016 are as
follows:
Power Mine Corporate
project project US$'000 Group
Income statement US$'000 US$'000 US$'000
--------------------------------- ---------- ---------- ----------- ----------
For the year ended 31 December
2016
--------------------------------- ---------- ---------- ----------- ----------
Segment result after allocation
of central costs 168* (486) (2,038) (2,356)
--------------------------------- ---------- ---------- ----------- ----------
Finance expense (1) (2) (645) (648)
Finance income - - - -
--------------------------------- ---------- ---------- ----------- ----------
Loss before taxation 167 (488) (2,683) (3,004)
Taxation - - 58 58
--------------------------------- ---------- ---------- ----------- ----------
Loss for the year 167 (488) (2,625) (2,946)
--------------------------------- ---------- ---------- ----------- ----------
*The gain includes the effect of gains on intercompany
transactions with offsetting losses incurred in the corporate
segment.
Other segment items included in the Income statement are as
follows:
Power Mine Corporate
project project US$'000 Group
Income statement US$'000 US$'000 US$'000
-------------------------------- ------------ -------------- ----------- ----------
For the year ended 31 December
2017
Depreciation charged to the
income statement - (78) - (78)
-------------------------------- ------------ -------------- ----------- ----------
Power Mine project Corporate
project US$'000 US$'000 Group
Income statement US$'000 US$'000
--------------------------------- ----------- -------------- ----------- ------------
For the year ended 31 December
2016
Depreciation charged to the
income statement - (124) (2) (126)
Share based payments - - - -
Income tax credit - - 58 58
The segment assets and liabilities at 31 December 2017 and
capital expenditure for the year then ended are as follows:
Power Mine Corporate
project project US$'000 Group
Statement of financial position US$'000 US$'000 US$'000
--------------------------------- ---------- ---------- ----------- ---------
At 31 December 2017
--------------------------------- ---------- ---------- ----------- ---------
Segment assets 9,439 8,643 928 19,010
Segment liabilities (210) (11) (4,399) (4,620)
--------------------------------- ---------- ---------- ----------- ---------
Segment net assets 9,229 8,632 (3,471) 14,390
--------------------------------- ---------- ---------- ----------- ---------
Property plant and equipment
capital expenditure 48 3 - 51
--------------------------------- ---------- ---------- ----------- ---------
The segment assets and liabilities at 31 December 2016 and
capital expenditure for the year then ended are as follows:
Power Mine Corporate
project project US$'000 Group
Statement of financial position US$'000 US$'000 US$'000
--------------------------------- ---------- ---------- ----------- ----------
At 31 December 2016
--------------------------------- ---------- ---------- ----------- ----------
Segment assets 9,399 9,090 137 18,626
Segment liabilities (209) (36) (3,129) (3,374)
--------------------------------- ---------- ---------- ----------- ----------
Segment net assets 9,190 9,054 (2,992) 15,252
--------------------------------- ---------- ---------- ----------- ----------
Property plant and equipment
capital expenditure 249 13 - 262
--------------------------------- ---------- ---------- ----------- ----------
16. Reconciliation of liabilities arising from financing
activities
Accrued Short Derivative Total
interest term loan financial
liability
-------------------------- --------------------- ---------------------- ---------------------- -------------------
US$'000 US$'000 US$'000 US$'000
At 1 January
2017 610 2,169 - 2,779
Cash flows - 350 - 350
Deferred
payroll costs
capitalised
to
shareholder
loan - 232 - 232
Non cash
finance
charges net
of
modification
gains - 744 - 744
Non cash
change in
accruals (100) - - (100)
FV of warrants
issued - - 110 110
Change in fair
value - - (3) (3)
-------------------------- --------------------- ---------------------- ---------------------- -------------------
At 31 December
2017 510 3,495 107 4,112
-------------------------- --------------------- ---------------------- ---------------------- -------------------
17. Financial instruments
The Group is exposed to risks that arise from its use of
financial instruments. This note describes the Group's objectives,
policies and processes for managing those risks and the methods
used to measure them. Further quantitative information in respect
of these risks is presented throughout these financial
statements.
The significant accounting policies regarding financial
instruments are disclosed in note 1.
There have been no substantive changes in the Group's
objectives, policies and processes for managing those risks or the
methods used to measure them from previous periods unless otherwise
stated in this note.
Principal financial instruments
The principal financial instruments used by the Group from which
financial instrument risk arises, are as follows:
2017 2016
US$'000 US$'000
---------------------------------------------- --------- ---------
Loans and receivables at amortised cost
Trade and other receivables 44 33
Cash and cash equivalents 614 152
Financial liabilities held at amortised cost
Trade and other payables 1,018 1,203
Loans and borrowings 3,495 2,169
Financial liabilities at fair value through
profit or loss
Derivative financial liability 107 -
---------------------------------------------- --------- ---------
General objectives, policies and processes
The Board has overall responsibility for the determination of
the Group's risk management objectives and policies and retains
ultimate responsibility for them.
The overall objective of the Board is to set polices that seek
to reduce risk as far as possible without unduly affecting the
Group's competitiveness and flexibility. Further details regarding
these policies are set out below:
Liquidity risk
Liquidity risk arises from the Group's management of working
capital. It is the risk that the Group will encounter difficulty in
meeting its financial obligations as they fall due.
The Board receives cash flow projections on a monthly basis as
well as information on cash balances.
2017
Between Between Between
on demand in 1 1 and 6 and 1 and
Total month 6 months 12 months 3 years
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
-------------------------- -------- ------------ -------- ---------- ----------- ---------
Trade and other payables 1,018 - 228 265 525 -
Loans and borrowings 5,100 - - - 5,100 -
2016
on demand Between Between Between
in 1 1 and 6 and 12 1 and
Total month 6 months months 3 years
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
-------------------------- -------- ------------ -------- ---------- ---------- ---------
Trade and other payables 1,203 - 216 610 377 -
Loans and borrowings 2,678 - - 2,678 - -
-------------------------- -------- ------------ -------- ---------- ---------- ---------
Loans and borrowings represent the loan principal and premium
less interest accrued whilst accrued interest to 31 December 2017
is included in trade and other payables. Refer to note 11. The
Group endeavours to match the maturity of its current assets with
its current liabilities to mitigate liquidity risk. Refer to note 1
for the material uncertainty regards going concern.
Borrowing facilities
The Group had no undrawn and unconditional committed borrowing
facilities available at 31 December 2017 (2016: Nil).
Market risk
The Group does not currently sell any coal or electricity. As
such there is no specific market risk at the date of this report.
However, there is a risk that the Group is unable to secure a
credit worthy off-taker for the full output of the power plant,
with the plant operating at load factors in excess of 80%.
Currency risk
The Group is exposed to currency risk through its activities due
to certain costs arising in Mozambique Meticais and cash held in
GBP, whilst the functional currency is US dollars. The Group has no
formal policy in respect of foreign exchange risk, however, it
reviews its currency exposures on a monthly basis. Currency
exposures relating to monetary assets held by foreign operations
are included within the Group statement of profit or loss. The
Group also manages its currency exposure by retaining the majority
of its cash balances in US dollars, being a relatively stable
currency.
A 5% appreciation in the value of the US dollar against the
Meticais and GB pounds will decrease net assets by US$20,803 (2016:
decreased net assets by US$5,701).
Currency exposures
As at 31 December the Group's net exposure to foreign exchange
risk was as follows:
2017 2016
US$'000 US$'000
Assets/(liabilities) Assets/(liabilities)
held held
GBP MZN Total GBP MZN Total
US dollars 485 39 524 (73) 42 (31)
485 39 524 (73) 42 (31)
The Group is exposed to foreign exchange risk arising from
various currency exposures primarily with respect to the Mozambican
Meticais and Sterling, but these are not significant as most of the
transactions are in USD.
18. Related party transactions
Parties are considered to be related if one party has the
ability to control the other party, is under common control, or can
exercise significant influence over the other party in making
financial and operational decisions. In considering each possible
related party relationship, attention is directed to the substance
of the relationship, not merely the legal form.
In relation to the Shareholder Loan as at 31 December 2017
US$671,591 (2016: US$331,439) was drawn by a Trust of which
Non-Executive Chairman, Michael Haworth, is a potential
beneficiary. US$185,864 (2016: US$101,864) was drawn by Director,
Christiaan Schutte, US$55,011 (2016: US$33,011) from Director,
Estevão Pale. Refer to note 11 for details of the terms and
conditions.
Christiaan Schutte
During the year US$23,400 (2016: US$60,000) were paid to CPS
Consulting in respect of services provided by Christiaan Schutte.
There was no outstanding balance at 31 December 2017 (2016:
Nil).
Details of Key Management Remuneration are contained in Note
3.
There is no ultimate controlling party.
19. Commitments
Social development programme
In December 2012 a Memorandum of Understanding was signed with
the Mozambican Ministry of Mineral Resources and Energy in respect
of a Social Development Programme, with a committed spend of US$2m
following an agreed programme. By December 2016 half of this budget
has been successfully spent in various initiatives. During the year
there were no expenditure related to social development programmes
(2016: US$21,180). Further to an Addendum, the program was
postponed to be completed during the mining phase. In addition,
upon receiving the mining concession a further US$5m was committed.
The expenditure programme is still to be negotiated with the
Ministry of Mineral Resources and Energy.
Environmental licence fee
An environmental licence fee of 0.2% of the capital cost of
construction is payable before commencement of construction.
EMEM 5% investment in NCCML
Along with the issuance of the Mining Concession, Ncondezi's
local subsidiary NCCML also concluded
an Addendum to Mine Framework Agreement ("MFA") with Mozambican
Ministry of Mineral Resources and Energy. Under the terms of the
Addendum to the MFA, it has been agreed that the Government owned
Mozambican Mining Exploration Company ("EMEM") will be granted a 5%
free carry in the share capital of NCCML up to the start of the
Ncondezi mine's construction. However, from the commencement of
construction EMEM will be required to pay, through an agreed
funding mechanism, for its share of any future equity funding
obligations that may be required from the shareholders of NCCML
including its share of the construction and commissioning costs of
bringing the Ncondezi mine into commercial operation.
20. Events after the reporting date
Power project update
On 18 April 2018 Company announced in principle support received
from Electricity de Mozambique ("EDM") and the Ministry of Mineral
Resources and Energy ("MIREME") for proposed strategic partners,
CMEC and GE.
On 3 May the new integrated financial model ("FM") was updated
with proposals for engineering, procurement, and construction
("EPC") and operations and maintenance ("O&M") contracts.
On 11 June 2018, the Company announced that the FM and new
tariff proposal had been accepted by its potential partners for
submission to EDM and MIREME.
Placing
On 4(th) May 2018 Company raised a total of GBP950,000 before
expenses through a conditional placing of 15,200,000 ordinary
shares in the Company at a price of 6.25 pence per ordinary
share.
Share Options
On 25 May 2018, as part of the Company's management incentive
scheme, the Company granted share options in respect of 22,897,522
shares in the Company to its directors, executive senior management
team and contracted personnel representing 8.2 per cent of the
issued share capital of the Company.
This provides the Company with more time to progress the project
and new Strategic Partner search and better develop loan repayment
options.
Company Information
Directors Michael Haworth (Non-Executive
Chairman)
Christiaan Schutte (Executive
Director)
Estevão Pale (Non-Executive
Director)
Jacek Glowacki (Non-Executive
Director)
Aman Sachdeva (Non-Executive
Director)
Company Secretary Elysium Fund Management Limited
PO Box 650, 1(st) Floor, Royal
Chambers
St Julian's Avenue
St Peter Port
Guernsey
GY1 3JX
Registered Office Ground Floor, Coastal Building
Wickham's Cay II
PO Box 2136
VG1130
Road Town
Tortola
British Virgin Islands
Company number 1019077
Nominated Advisor and Corporate Liberum Capital Limited
Broker Ropemaker Place
Level 12
25 Ropemaker Street
London
EC2Y 9AR
Auditors BDO LLP
55 Baker Street
London
W1U 7EU
Registrar Computershare Investor Services
(BVI) Limited
Woodbourne Hall
PO Box 3162
Road Town
Tortola
British Virgin Islands
Legal advisor to the Company Ogier LLP
as to BVI law 41 Lothbury
London
EC2R 7HF
Legal advisor to the Company Bryan Cave Leighton Paisner
as to English law LLP
Adelaide House
London Bridge
London
EC4R 9HA
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR LFFVIREITFIT
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