SHUMBA ENERGYshumbaenergy.com/wp-content/uploads/2018/11/Shumba... · Mashale Phumaphi 28 August 2012 Thapelo Mokhathi 24 January 2013 Sipho Alec Ziga 02 August 2013 ... collectively

SHUMBA ENERGYANNUAL REPORT2018

GE

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FOR

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Country of incorporation and domicile

Nature of business and principal

activities

Directors

Registered Office

Administrator and Secretary

Bankers (In Mauritius)

Auditors

Transfer Secretary

Republic of Mauritius

The acquisition and development of highly prospective coal

exploration licences in Republic of Botswana, trade and solar

energy.

Alan Mitchell Clegg (Chairman) 24 January 2013

Mashale Phumaphi 28 August 2012

Thapelo Mokhathi 24 January 2013

Sipho Alec Ziga 02 August 2013

Boikobo Bashi Paya 01 July 2015

Munesh Sharma (Grant) Ramnauth 28 August 2012

Kapildeo Joory 28 August 2012

SANNE Mauritius

(formerly International Financial Services Limited)

IFS Court

TwentyEight

Cybercity

Ebene 72201


SANNE Mauritius


IFS Court

TwentyEight

Cybercity

Ebene 72201


Standard Bank (Mauritius) Limited

AfrAsia Bank Limited

Grant Thornton

Ebene Tower

52 Cybercity

Ebene 72201


Transaction Management Services (Proprietary) Limited

C/o Corpserve Botswana

Unit 206 Second Floor

Plot 64516

Showgrounds Close, Fairgrounds

Gaborone

Republic of Botswana

Legal Advisor

Sponsoring Broker (Botswana)

Reporting Accountants

Armstrong Attorneys

Second Floor, Acacia House

Plot 74358

Corner of Khama Cresent Ext and PG Matante Road

New CBD

Gaborone


Imara Botswana Limited

2nd Floor, Morojwa Mews

Unit 6, Plot 74769

Western Commercial Road, CBD

Gaborone


BEJA Attorneys Inc

First Floor, Curlross Court,

16 Curlross Road

Bryanston, Johannesburg, 2021

Republic of South Africa

Grant Thornton

Chartered Accountants

Acumen Park

Plot 50370

Fairgrounds

Gaborone


Grant Thornton

Chartered Accountants

2nd Floor, 4 Pencarrow Crescent,

Pencarrow Park, La Lucia Ridge Office

Estate, 4019

Durban

Republic of South Africa

COMMENTARY OF THE DIRECTORS

CHAIRMAN’S REPORT

CERTIFICATE FROM THE SECRETARY

INDEPENDENT AUDITORS’ REPORT

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED STATEMENT OF CASH FLOWS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

5 – 20

21 – 27

28

29 - 33

34 - 36

37 - 38

39 - 40

41 - 42

43 - 85

TABLE OFCONTENTS

2018

The reports and statements set out below comprise the consolidated financial statements

presented to the shareholders:


PAGE 5

FOU

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ALAN MITCHELL CLEGGChairman

The directors are pleased to present their report together with the consolidated

financial statements of Shumba Energy Ltd, the “Company”, and its subsidiaries,

collectively referred to as the “Group”, for the year ended 30 June 2018.

INCORPORATIONThe Company was incorporated in the Republic of Mauritius on 28 August 2012

as a public company with liability limited by shares.

Review Of Activities

MAIN BUSINESS AND OPERATIONSShumba Energy aims to satisfy the growing coal and energy demand in the SADC region as a result of chronic power

shortages. This is our long-term mission as Shumba Energy, “Powering the Future” means addressing chronic shortages

head-on and supplying energy to affected Southern African countries in a sustainable and cost-effective manner.

The Company is currently listed solely on the Botswana Stock Exchange. The Company has cancelled its admission

from the Development & Enterprise Market (“DEM”) on 28 August 2017, a market operated by The Stock Exchange of

Mauritius Ltd, on which the Company had a secondary listing of its shares.

RESULTSThe results for the year are shown in the consolidated statement of profit or loss and other comprehensive income and

related notes.

The directors do not recommend the payment of any dividend for the year under review (2017: Nil).

DIRECTORSThe directors of the Company during the year ended 30 June 2018 and at the date of this report are as follows:

MASHALE PHUMAPHIManaging Director

COMMENTRY OF

THE DIRECTORS

THAPELO MOKHATHIFinance Director

SIPHO ALEC ZIGANon–Executive Director

KAPILDEO JOORYNon–Independent andNon–Executive Director

MUNESH SHARMA (GRANT) RAMNAUTHNon–Independent andNon–Executive Director

BOIKOBO BASHI PAYANon–Executive Director

SHUMBA ENERGY LTD ANNUAL REPORT 2018PAGE 6

DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE CONSOLIDATED FINANCIAL STATEMENTSCompany law requires the directors to prepare consolidated financial statements for each financial year which present

fairly the financial position, financial performance and cash flows of the Group and the Company.

Select suitable accounting policies and then apply them consistently

State whether International Financial Reporting Standards have been followed, subject to any material departures disclosed and explained in the consolidated financial statements; and

Make judgements and estimates that are reasonable and prudent

Prepare the consolidated financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.

The directors have confirmed that they have complied with the above requirements in preparing the consolidated

financial statements.

The directors are responsible for keeping accounting records which disclose with reasonable accuracy at any time the

financial position of the Group and the Company and to enable them to ensure that the consolidated financial statements

comply with the Mauritius Companies Act 2001 and International Financial Reporting Standards (“IFRS”). They are

also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and

detection of fraud and other irregularities.

IN PREPARING THOSE CONSOLIDATED FINANCIAL STATEMENTS, THE DIRECTORS ARE REQUIRED TO:

AUDITORSThe auditors, Grant Thornton, have indicated their willingness to continue in office and and a

resolution concerning their re-appointment will be proposed at the Annual Meeting.


PAGE 7

FOU

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cORpORAte gOveRnAnce

COMPANY PROFILE Shumba Energy Limited (the “Company”) was incorporated on 28 August 2012 as a public company limited by shares

and is primarily listed on the Botswana Stock Exchange (“BSE”) .

THE PRINCIPAL ACTIVITIES OF SHUMBA ENERGY LTD, SHUMBA RESOURCES LIMITED, SECHABA NATURAL RESOURCES (PTY) LIMITED AND SHUMBA COAL TRADING LTD, COLLECTIVELY (THE “GROUP”), ARE:

COMMENTRY OF

THE DIRECTORS

i. To acquire and develop highly prospective coal exploration licences in Botswana for the exploration, mining, production and sustainable supply of thermal energy; and

ii. To invest in sustainable energy, including solar energy in Botswana, and coal/energy trading.

HOlding stRuctuRe

INSTITUTIONAL AND INDIVIDUAL INVESTORS

SHUMBA ENERGY LTD 100%

SHUMBA COAL TRADING LTD 100%

SHUMBA COAL TRADING LTD 100%

SHUMBA RESOURCES LIMITED 100%

SECHABA NATURALRESOURCES (PTY) LTD 90%

HODGES RESOURCES (MORUPULE) (PROPRIETARY) LIMITED 100%

MORUPULE SOUTH RESOURCES LIMITED 75%

SHUMBA ENERGY SOUTH AFRICA (PROPRIETARY) LIMITED 74%


Name of DirectorShumba Energy

LimitedShumba Resources

LimitedSechaba Natural

Resources (Pty) LtdShumba Coal

Trading Ltd

Alan Mitchell Clegg √ √ - √

Mashale Phumaphi √ √ √ -

Thapelo Mokhathi √ √ √ -

Munesh Sharma (Grant) Ramnauth √ √ √ √

Kapildeo Joory √ √ - -

Sipho Alec Ziga √ - - -

Boikobo Paya √ - - -

Arunagirinatha Runghien - - - √

Shareholder Number Shareholder Name Shareholding Percentage holding

164640 BLACK PHOENIX LIMITED 73,238,713 26.59 %

209287 FNB BOTSWANA NOMINEES (PTY) LTD RE:AA BPOPF EQUITY 68,077,750 24.71 %

244392 HE LIESEN 24,867,437 9.03 %

36918 BAI CO (MTIUS) LTD 16,666,666 6.05 %

164666 RAMNAUTH MUNESH SHARMA 14,414,894 5.23 %

cOmmOn diRectORsHip As At 30 June 2018

detAils Of sHAReHOldeRs witH mORe tHAn 5% HOlding As At 30 June 2018

The next financial year will run for the period 1 July 2018

to 30 June 2019.

The next Annual Meeting will be held in December 2018.

CALENDAR OF IMPORTANT EVENTS

The Company has not adopted any dividend policy as

it is still at its development stage and reinvesting all

income generated.

DIVIDEND INCOME


PAGE 9

The Board of directors is the link between the Company and its stakeholders and board members are collectively

responsible to lead and control the Company to enable it to attain its strategic objectives. The Board of directors also

plays a vital role to ensure that the Company’s business is conducted with the highest ethical standards and in conformity

with applicable laws and regulations.

Pursuant to the Constitution of the Company, the number of the directors shall be not less than four and more than ten.

At least two directors shall be residents of Mauritius at all times. Where the number of directors falls below the minimum,

the remaining directors shall only be permitted to act for the purpose of filling vacancies or calling meeting of shareholders.

ALAN MITCHELL CLEGGChairman

Non-Independent and Non-Executive Director

MASHALE PHUMAPHIManaging Director

Executive Director

THAPELO MOKHATHIFinance Director

Executive Director

BOARD OF DIRECTORS

Pursuant to the Constitution of the Company, all directors shall retire at each annual meeting. Directors who are required

to retire at the annual meeting are however eligible to be re-elected at the annual meeting.

SIPHO ALEC ZIGA

Independent and Non–Executive Director

MUNESH SHARMA (GRANT) RAMNAUTH

Non–Independent andNon–Executive Director

BOIKOBO BASHI PAYA

Independent and Non–Executive Director

KAPILDEO JOORY

Non–Independent andNon–Executive Director


THE EIGHT PRINCIPLES OF THE CODE HAVE BEEN IMPLEMENTED AS DETAILED BELOW:

The Company has obtained a Category 1 Global Business Licence (“GBL1”) and a Financial Services

Licence / Authorisation letter (“FSL/Authorisation letter”) from the FSC on 11 April 2014. As part of

the Corporate Governance Framework which the Board has adopted, the Company has also adopted

a Board Charter, which clearly defines the role, function and objectives of the Board of Directors, the

various committees in place, as well as that of the Secretary/Administrator, SANNE Mauritius.

The Company has in place a Constitution and Admission document which sets out the rules and

regulations which it needs to abide along with other local laws and regulations.

In addition, in line with the Securities Act 05 (“SA 05”), the Company has adopted a Code of ethics

on 27 September 2018. As part of the Corporate Governance Framework, the Company has

adopted a Code of ethics which sets out general statements on principles of ethical conduct towards

stakeholders and will review the suitability and effectiveness of the Code of ethics at least once per

year.

GOVERNANCE STRUCTURE

01

DIRECTORSHIP OF DIRECTORS ON OTHER COMPANIES LISTED ON THE BSE - NONE

The Board ensures that the Company is in compliance with the rules of the National Code of Corporate

Governance (the “Code”) as issued by National Committee on Corporate Governance on 13 February 2017

and which is effective as from reporting year ending 30 June 2018. The Board has on 28 September 2018

adopted a Corporate Governance Framework which is based on the eight principles of the Code. The Board

considers that it has maintained appropriate policies and procedures during the year ended 30 June 2018 to

ensure compliance with the Corporate Governance Framework of the Company.

Throughout the year ended 30 June 2018, to the best of the Board’s knowledge, the Company has complied

with the Code. The Company has applied all of the principles set out in the Code and explained how these

principles have been applied.


PAGE 11

Meetings and written resolution of directors

Directors Held Present

Alan Mitchell Clegg 12 11

Mashale Phumaphi 12 8

Thapelo Mokhathi 12 10

Sipho Alec Ziga 12 4

Boikobo Bashi Paya 12 5

Munesh Sharma (Grant) Ramnauth 12 10

Kapildeo Joory 12 11

The Board currently comprises of Messrs Alan Mitchell Clegg, Mashale Phumaphi, Thapelo Mokhathi,

Sipho Alec Ziga, Boikobo Bashi Paya, Munesh Sharma (Grant) Ramnauth and Kapildeo Joory. The

Board meets as and when required to discuss routine and other significant matters so as to ensure

that the directors maintain overall control and supervision of the Company’s affairs. In line with the

requirement of the Financial Services Act 2007, all the meetings of the Board have been attended

by the 2 resident directors or alternates and in line with the Constitution of the Company, all Board

meetings were quorate and have been held, chaired and minuted in Mauritius.

To further assist the Board in its functions, the undermentioned committee have been set up and

delegated with specific tasks:

>> Audit and Risk Committee comprising of Messrs Kapildeo Joory (Chairman),

Thapelo Mokhathi, Sipho Alec Ziga and Grant Thornton Mauritius (auditors); and

>> Remuneration and assessment committee comprising of Messrs Alan Mitchell

Clegg (Chairman), Munesh Sharma (Grant) Ramnauth and Kapildeo Joory.

The minutes of the Committee meetings and decisions taken therein for the period under review

have been duly reviewed and ratified by the Board on 12 September 2018.

STRUCTURE OF THE BOARD AND ITS COMMITTEES

02


During the period under review, the following directors have been re-appointed on the Board

at the Annual meeting of the Company held on 29 December 2017: Messrs Alan Mitchell Clegg,

Mashale Phumaphi, Thapelo Mokhathi, Sipho Alec Ziga, Boikobo Bashi Paya, Munesh Sharma (Grant)

Ramnauth and Kapildeo Joory. Such re-appoitnment is valid up to the next Annual meeting whereby

shareholders can vote for the re-appointment pf the directors for one additional year. The appointment

of director has been effected in accordance with the Constitution of the Company subject to receipt

of customer due diligence documents on the latter, in line with the Code of prevention of Money

Laundering and Terrorist Financing. During the period under review no additional director has been

appointed and all prior appointment of directors been effected in accordance with the Constitution

of the Company subject to receipt of customer due diligence documents on the latter, in line with the

Code of prevention of Money Laundering and Terrorist Financing.

DIRECTOR APPOINTMENT PROCEDURES

03

The directors of the Company are aware of their duties under the Mauritius Companies Act 2001

and the Constitution of the Company and exercise sufficient care, diligence and skills for the good

conduct of the business.

The Board meets to discuss and approve the Company’s operational, regulatory and compliance

matters. Some decisions are also taken by way of written resolution of directors depending on the

nature of business and operations. The directors are provided appropriate notice and materials to

help them in their decision-making.

The Company maintains an interest register which was last tabled to the Board on 12 September

2018 for members of the Board to confirm its accuracy and completeness.

Directors declare their interest and gauge in the best interest of the Company whether to abstain

themselves from any discussion and decision on matters in which they have material financing

interests.

Messrs Alan Mitchell Clegg, Mashale Phumaphi, Thapelo Mokhathi, Munesh Sharma (Grant)

Ramnauth and Kapildeo Joory, are also shareholders of the Company.

All remuneration of the members have been duly reviewed / recommended by the Remuneration and

Risk Committee and approved by the Board before any disbursement have been done.

DIRECTORS DUTIES, REMUNERATION AND PERFORMANCE

04


PAGE 13

ALAN MITCHELL CLEGG

(PR.Eng, PMP, FSAIMM)

Chairman

THAPELO MOKHATHI (BComm)

Finance Director

MASHALE PHUMAPHI (MEng, IMC)

Managing Director

Mr Alan Mitchell Clegg, a British and South African

citizen, is a mining industry professional with over 37

years experienced in mining and minerals projects in

over 150 countries worldwide.

He is a recognised mining technical assessment,

reporting and project valuation expert with experience

in stock exchange listings and capital raising.

Mr Clegg has been involved with feasibility studies and

the construction of over 60 mining and mineral projects

with a combined value in excess of US$8 billion over the

last 30 years.

He currently holds 6 directorships in the mining and

energy related sector.

Mr Thapelo Mokhathi holds a degree in Management

Accounting and Executive Program in Mining and

Minerals (Wits). He started his career in the mining

industry at Impala Platinum where he is spent 5 years in

various financial positions. In 2004 he co-founded BSC

Resources Ltd a Junior Exploration company that grew

to have significant assets in Nickel, Copper and Coal

across South Africa, he was the Financial Director until

2011.

Mr Mashale Phumaphi is a Botswana national who has

been focused on sourcing, financing and structuring

mineral projects in Africa. He was formerly part of the

corporate finance team of a London-based natural

resources corporate finance and issuing house. In

addition to conducting investment analysis and research

he has raised debt and equity finance for mining projects

in both Europe and Africa. He began his career as an

engineer with Debswana Diamond Company based on

Jwaneng Mine in Botswana. Mashale holds a Masters of

Engineering degree from the University of Sheffield, is a

member of the United Kingdom Society of Investment

Professionals (UKSIP) and is a member of the London

based Association of Mining Analysts (AMA). Recently

he held the position of Director of a London based Coal

Bed Methane Exploration company with projects in

Botswana.

SIPHO ALEC ZIGA (LLB)

Non–Executive Director

Mr Sipho Alec Ziga graduated from the University of

Botswana with an LLB in 1997 and immediately joined

Armstrongs Attorneys, as an Attorney in the Commercial

Department. He became a Partner in 2004. Currently

as a partner, Sipho specialises in all disciplines of

business law; corporate commercial law, securities and

financial services regulations; mining and resources law;

privatisation and public private partnerships. He has acted as legal

advisor to a large number of pre-imminent Botswana Stock

Exchange listed companies and parastatals, and many

of the multinationals doing business in Botswana on a

wide range of corporate issues ranging from regulatory

compliance; corporate governance; company formations;

acquisition; take overs; due diligence reviews; capital

raising corporate and trade finance; listings and rights

issues; schemes of arrangement; banking law; loan

finance agreements; negotiable instruments and capital

market instruments.


KAPILDEO JOORY (Chartered Accountant)

Non–Independent and


Mr Kapildeo Joory is a former co-founder and Executive

Director of SANNE Mauritius (SM), wholly owned

subsidiary of SANNE GROUP PLC (a London Stock

Exchange listed company) specializing in international

tax, business and corporate advisory services. He is

a Fellow of the Institute of Chartered Accountants in

England and Wales and has previously served with three

of the Big Four accounting firms in the UK.

MUNESH SHARMA (GRANT)

RAMNAUTH (Dip. PFS, BSc, MBA)

Non–Independent and


Mr Munesh Sharma (Grant) Ramnauth holds a B.Sc.

(Hons) from London University and a Joint M.B.A.

from Hartford University (USA and France) where he

specialised in investments. He holds an Investment

Advisor license in the offshore financial sector in

Mauritius. He formally was based in Jersey at HSBC

Bank where he conducted business development for

international high net worth investment advisory

and distribution. Currently, as a Senior Partner of St.

James’s Place Wealth Management, Grant specialises in

advising high-net-worth Private Clients and Institutional

Investors on offshore investment management. He is a

Fellow of the Mauritius Institute of Directors.

BOIKOBO BASHI PAYA (BSc, Mphil Geology)


Mr Boikobo Bashi Paya is former Permanent Secretary

of the Ministry of Minerals Energy and Water Affairs and

is currently Deputy Vice Chancellor at the the Botswana

International University of Science and Technology. Mr

Paya’s prior experience in government positions included

Project Manager, Mmamabula Coordinating Unit, under

the Ministry of Minerals, Energy and Water Resources

and Director of the Department of Water Affairs, which

included responsibility for two major wetlands: the

Okavango Delta and the Kwando-Linyanti Delta. He

holds a BSc and an MPhil in geology and has extensive

research experience. He is also a Non-Executive Director

of Debswana, Chairman of Diamond Trading Company

Botswana (both joint ventures between De Beers and the

Botswanan Government), a Non-Executive Director of

De Beers and a Director of BBKR Productions (Pty) Ltd.

In addition, Mr. Paya is a member of the administrative

boards of DB Investments SA, Debswana Investments

SA and De Beers SA.


PAGE 15

The directors are responsible for preparing the audited financial statements of the Company on a

yearly basis in accordance with applicable law and regulations. The financial statements have been

prepared under the IFRS, which is an accepted GAAP as per FSC circular dated 2 December 2014.

The financial statements of the Company for the year ended 30 June 2018 will be filed with the FSC

within the statutory deadline, after the Board’s approval.

In addition to the yearly audited financial statements, in line with the SA 05, the Company has to file

quarterly management accounts with the FSC within 45 days from the closing date of each quarter.

REPORTING WITH INTEGRITY

06

The directors are responsible for maintaining an effective system of internal control and risk

management.

The Company has also contracted an insurance cover for its directors and officers from SWAN

GENERAL LTD which is renewable every year. The current insurance policy is valid up to 17

November 2018.

RISK MANAGEMENT AND INTERNAL CONTROL

05


In line with the FSA 07, the financial statements of the Company is audited by Grant Thornton,

appointed after prior approval of the FSC, in Mauritius. The re-appointment of Grant Thornton will

be done at the next Annual Meeting of the Company.

In addition to the external auditor, the Company is also proposing to appoint an independent firm for

internal audit as well as corporate, legal and compliance audit of the Company.

The Annual Meeting of the shareholders of the Company will be held by 31 December 2018 to adopt

the audited financial statements of the Company for the year ended 30 June 2018. Notice of this

meeting will be sent within the deadline stipulated by the Constitution of the Company.

AUDIT

STRUCTURE OF THE BOARD AND ITS COMMITTEES

07

08


PAGE 17

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COMPANY SECRETARY

Name Shares in the Company Direct Interest % Indirect Interest %

Alan Mitchell Clegg 6,769,389 Nil 2.46

Mashale Phumaphi 73,238,713 Nil 26.59

Munesh Sharma (Grant) Ramnauth 14,414,894 5.23 Nil

Thapelo Mokhathi 6,658,904 Nil 2.42

Kapildeo Joory 2,000,000 0.73 Nil

Total 103,081,900

The Board considered the competence, qualifications

and experience of the Company Secretary, SANNE

Mauritius (“SM”), and is deemed fit to continue in the role

as Company Secretary for the Company.

The relationship with the Board has been assessed and is

considered to be at arm’s length.

COMPANY SECRETARY IN MAURITIUS

The Board considered the competence, qualifications

and experience of the Transfer Secretary in Botswana,

Transaction Management Services (Pty) Limited, c/o

Corpserve Botswana and is deemed fit to continue in

the role as Transfer Secretary for the Company. The

relationship with the Board has been assessed and is

considered to be at arm’s length.

TRANSFER SECRETARY IN BOTSWANA

As at 30 June 2018, the directors had a direct or indirect interest in the Company as tabled below:

A full list of directors’ interests is maintained in the interest register of the Company and the directors certify that the list is

correct at Board meetings carried out on regular basis.

Directors abstain themselves from any discussion and decision on matters in which they have a material financial interest.

Messrs Alan Mitchell Clegg, Mashale Phumaphi, Munesh Sharma (Grant) Ramnauth, Thapelo Mokhathi and Kapildeo Joory

are also shareholders in the Company.

DIRECTORS’ INTERESTS

SHAREHOLDING:


Name USD

Alan Mitchell Clegg 43,714

Mashale Phumaphi 182,144

Munesh Sharma (Grant) Ramnauth 43,714

Thapelo Mokhathi 112,694

Kapildeo Joory 20,000

Sipho Alec Ziga 20,000

Boikobo Paya 20,000

Total 442,266

Name Warrants

Mashale Phumaphi 7,979,791

Thapelo Mokhathi 6,455,862

Alan Clegg 5,155,445

Grant Ramnauth 5,155445

Total 24,746,543

Incentive warrants issued as detailed below to the directors to subscribe for ordinary shares of the Company at any time

during the exercise period at the exercise price of BWP 1.06 each, as tabled below:

REMUNERATION

INCENTIVE WARRANTS

Dealing in the Company’s securities by directors and Company’s officials is regulated and monitored as required by the BSE

Listing Rules. All directors’ trading must take place exclusively outside the closed periods prescribed by the Stock Exchange

Regulations and require written authorisation from the Board of directors. The Company maintains a closed period from the

end of a financial period to the date of publication of the financial results.

DEALING IN SECURITIES BY THE DIRECTORS


PAGE 19

Special Meetings:

i) 24 November 2017 – Acquisition of Morupule

South project; and

ii) 28 March 2018 – Partnership with Kibo Mining Plc.

Annual Meeting 29 December 2017

(i) Waiver of pre-emptive rights on new issue of shares.

SPECIAL RESOLUTIONS PASSED

The Company is committed to ensuring timely, effective and transparent communication with shareholders and other

stakeholders through annual integrated and quarterly financial reports, presentations to analysts and press releases. The

Company has appointed a Public Relation firm in Mauritius to monitor all communications made to the public.

COMMUNICATIONS WITH STAKEHOLDERS

The Company demonstrates a commitment to operate

in a sustainable global economy. The Company strives

as well to make decisions that combine long term

profitability with ethical behavior, social justice and

environmental care at all times.

SUSTAINABILITY

The Board of Directors is responsible for ensuring that

policies, procedures and controls are in place so that

business is conducted honestly, fairly and ethically. Thus,

there is the practical application of its corporate values

and the concepts of honesty and integrity.

ETHICS

The Company takes into account the best practices in

line with the Company’s corporate values and long term

objectives as far as Social, Environmental and Health and

Safety practices are concerned and aims to comply with

existing legislative and regulatory framework.

ENVIRONMENTAL AND HEALTH AND SAFETY PRACTICES

The Company supported various community projects

and events in Botswana, namely:

• Sponsored a kit for Botswana National Women

Basketball team

• Donated to Kalahari Conservation Society, a NGO

focused on environmental education and

conversation research

CORPORATE SOCIAL RESPONSIBILITIES (“CSR”)

The Company did not pay out any amount with regard

to political contributions during the financial year ended

30 June 2018.

POLITICAL CONTRIBUTIONS

Related parties transactions have been disclosed in Note

3.17 to the audited financial statements

RELATED PARTIES TRANSACTIONS


CHAIRMAN'SREPORT

PAGE 21

Dear Shareholders and Investors, herewith I take pleasure on behalf of your Board of Directors in presenting for

your consideration the audited results of Shumba Energy Limited “Shumba” or the “Company” and its subsidiaries,

collectively referred to as the “Group”, for the 12 months operating year ended 30 June 2018, along with commentary

on the operating environment and related outlook.

mAcRO enviROnment Of investment

Once again, the year under review was filled with

sectoral performance driven with ignorance of basic

fundamentals in the global mining sector, while resource

nationalism continues but tempered in some countries

by government or regime changes. In general, though

the mining and natural resources investment sector

remained positive, even within some commodities

exhibiting flattening demand curves, we are clearly

seeing for the first time, that sentiment is dominant to

the extent it is driving fundamentals. However, in the

continuing volatile economic and political environment,

resource commodity prices and especially precious

metals, continued to support the demand for risk hedging

against rising government and public debt levels, US

dollar uncertainty and fear of Fiat currency failure.

CHAIRMAN’S REPORT

ALAN M. CLEGGPr.Eng Pr.CPM PMP

FSAIMM MIOD

The world’s leading economy, the USA, is reasserting

itself as a primary producer of much of what it needs

to support the ‘Buy USA’ and industrial development

policy driven by the Trump government. This is

being reflected notably on the changed economics of

the natural resources production value chain in the

Americas and within a long dormant now massively

resurgent brownfield re-establishment of old mines,

plants & refineries across the country, even from as far

back as the late 1800s in some cases. New district size

plays, primarily in precious & base metals but also in coal,

uranium, lithium, etc. are being established with modern

exploration techniques and step out drilling.


Markedly, another realisation that is impacting seriously

is that the days of drill, find, dig and produce within 3 to

5 years are long gone. Increased regulation and ESIA

(Environmental & Social Impact Assessment) processes

for exploring for, proving-up, exploitation permitting,

then financing & construction a producing mine can take

well in excess of ten years and on average in many of the

common mining jurisdictions at least 15 years, and if

it is uranium, it can take 20+ years. During that period

some or all of the following will probably have occurred,

government changes that alter the rules of engagement,

demand for the metals/minerals/commodities change,

and/or operating currency changes markedly against the

US dollar market price.

The bulk commodities like the thermal coal and energy

fuels markets where Shumba’s assets and activities are

focussed to date, continues to show resilience with global

thermal coal price strength being driven by Trump -economics,

while Asian markets continue to develop due to base

load power demand growth, and China remaining

committed to removing pollution from old Coal mines

and power plants. (NB: Note here that I say pollution

and not carbon emissions, which remains a political

ruse to drive regulatory control and taxation). Coking

coal for reductants in steel and other pyrometallurgical

processes has seen more recent volatility but generally

remains in demand and at profitable price levels.

The price of coal, Shumba’s main area of activity, and

related coal equities continued to experience corrections

and expected volatility but moving in opposite directions

and range bound and in a rising or falling general trend

respectively, i.e. prices up and equities down. Major

utility and industrial consumers though continue

to experience stock depletion, even with observed

flattening economic demand and global trade threats.

There was continued significant capital inflow for exploration

and the crypto-currencies investment bubble has deflated

for now and we see a switch back to providing significant

funding for the usual junior resource investment market.

pOliticAl impActs

On sentiment

Regional mineral economy politics is still largely led by

resource nationalism in Tanzania and South Africa

in particular and which has brought continued

negative arbitrage on prospective risk investment

in the sector. However, regime changes in South

Africa and Zimbabwe offers something of a hopeful

light for future re-opening of that sentiment within

the next year or two. While even in Botswana

the government change has brought recognition

of the one China policy and opening of further

investment opportunity for the Chinese Dragon

that was closed before.

If you are a politico in say, the UK, France or selected

more obscure jurisdictions, you continue to vociferously

support the anti-coal lobby, on the ‘green’ argument. If

you are a Trump supporter, an Australian or even of the

Chinese persuasion, you are all for coal because it means jobs.

Then, taking others like RSA, Botswana, Zimbabwe, Tanzania,

India and Pakistan, wishing to build an energy-dependent

economic base but are lacking oil, you have little choice.

Coal it is, and which still currently provides almost 30%

of the world’s energy mix and only exceeded by oil. Not

only is this not going to change radically in even 20 or

30 years, it may, through geographic and economic

necessity, swing further towards coal.

In the recent decade, China and India have achieved a

majority in coal consumption of 62% in total with South

Korea and Japan also advancing markedly. The position

of the USA and the EU is diluted. The USA has backed-

out of the Paris Climate Change Accord, which seriously

weakens it. So, in the coal argument RSA is critical, it is

a serious coal burner and according to the World Bank

throws out more ‘carbon’ emissions than Britain despite

having 10 million fewer people and only one eighth of

its GDP. RSA has negligible oil so cannot afford to care.

Botswana is a well-favoured economy, but both wishes

and needs to diversify its GDP reliance away from

diamonds.

CHAIRMAN’S REPORT

PAGE 23

It has coal a-plenty and upon which your Company has

been built, while is probing in-situ gasification as well as

other coal cased CTL processes all of which are value

accretive for the Shumba asset base.

To put things beyond a doubt, the Royal Bank of Scotland,

one of Britain’s top funders has announced it is to stop

financing coal-fired plants or coal mines worldwide

under a sustainability policy to tackle climate change. For

good measure, it will also bar finance for drilling for oil in

the Arctic and oil sands, so at least coal is not getting all

the blame. But other major funders like Barclays, BNP

Paribas and HSBC have also made similar noises where

coal is used for thermal power generation.

So, to reiterate my comments last year, gross domestic

product in all modern and developing countries

correlates directly with consumption of energy as does

life expectancy. Until a reliable, new, and reasonably

priced base-load source of energy is found, fossil fuels

are required and in Botswana case specifically Coal

Resources Development (“CRD”) is the next leg for its

industrialisation and future sustainability in economic

growth for the next 50 to 80 years, a position that your

Company is well placed to leverage.

We still need to develop a well-planned economic,

environmental and social introduction of viable and

affordable new energy sources and related storage

technologies in Southern Africa under the policy of

the “4IR” or Fourth Industrial Revolution. This is why

Shumba has embarked in Q4/2018 on development of

a revised business strategy to unlock shareholder value

and crate sustainable energy businesses with clear focus

on operational activities to facilitate appropriate funding

ability in the face of the ‘Green Lobby’ for better or worse

and for potential future diversification and sustainability

of your Company.

Shumba will continue to benefit from its geographical

and market positioning as we move in to 2019 and is

actively seeking to lever via deal making, monetisation

of assets and structuring the investment trend in energy

related commodities, like Thermal Coal & Battery metals

(Copper, Nickel, Cobalt) in so far as it strategically

matters and refers to energy storage in important areas

in the SADC. This therefore continues to offer you,

our shareholders and investors strong fundamentals

in the Shumba business and in progressive project

developments.

Some of the company key financial results and

features reported are:

• In 2018 raised BWP25m for investment in Coal

Washing Plant establishment

• JV Partnership with Kibo Plc on Mabesekwa for

equivalent GBP 10m in Kibo shares

• Signed a 3-year coal sales agreement with Lonmin

• Total expenditures on projects and asset development

during the year was around USD 500,000.

• The Group’s net assets at the end of the year were

USD 10.4m, an increase year on year of 18% reflecting

the acquisition and development expenditures.

• Cash and Cash Equivalents of the Group as at the

reporting date were USD 1.35m a decrease year on

year of 45% resulting from the acquisitions made

during year.

• Management’s ongoing commitment and competence

in the disciplined maintenance of a low-cost structure

within the Group shown clearly in the Company’s

continued advancement and maintenance of cash

position relative to its peers.

• The Group remains adequately funded to meet its

immediate expenditure requirements in the coming

financial year while future funding requirements

through continued asset monetisation are actively

being pursued.


cOAl mining & eneRgy enviROnment

While the ‘Green Energy’ revolution is upon us, until a

reliable, new, and reasonably priced base-load source of

energy is found, fossil fuels are required and in Botswana

case specifically Coal Resources Development (CRD)

is the next leg for its industrialisation and future

sustainability in economic growth. At Shumba Energy

we continue to take the lead in CRD and with 3 assets

in the development phase and an active coal trading

business for Botswana Coal we are advancing rapidly.

But, Shumba’s business remains a long-term business

and runs with high focus and prudent expense

management for project value creation continuing to

provide protection of our shareholders’ investment and

create the opportunity for growth and superior return

on investment. Once again, this year we have, as you

can see in the results and achievements in the 2018FYR

continued to make all efforts to ensure that Shumba

retains the first ranking position for success.

The Shumba Asset Portfolio (SAP) of today represents

a result of much hard work in its creation and collation

in the interests of our shareholders. This asset base has

been independently valued, further, also valued clearly

by the open market transaction our management has

successfully completed this year, i.e. the Kibo Mining

deal on a portion of Mabesekwa; this value is now at

Circa USD 300m (Three Hundred Million United States

Dollars) for the Company’s assets.

However, it appears and the perception prevails that we

reached the pinnacle of the Company’s likely valuation in

the Botswana listed market at a market capitalisation of

circa USD 32m almost 2 years ago, pre-dating the Kibo

deal, and nothing has moved the listed market value.

Why?

estAblisHed tHeRmAl

cOAl mARkets Analysis of established coal markets has again shown

consolidation throughout the year with prices sustained

above USD 100 per tonne, while markets like South East

Asia and China which continue to be supplied mainly by

Australia, have export price sustaining levels of between

USD 95 and USD 100 per tonne and they are now

making return on capital of +USD 25 to USD 30 per

tonne after more cost optimisation and rescheduling of

capital expenditures and managing down SIB (Stay in

Business) Capex.

For Shumba closer to home, Africa remains more

important as it is still unlikely in the immediate future

but more probable that we will enter the sea-borne

Coal market to SEA within 5 years. The SADC market

is still heading for significant deficit growth in next 3 to

5 years which will force upward price pressure. And

the development picture described in our new strategy

above mirrors what is required in the SADC region

and Shumba has created the foundation to create a

meaningful response to these market needs.

The Shumba Energy Board and Management continue to

drive and sustain the strategy and with all indicators and

assumptions are continually reviewed which underscore

it. We continue to focus on tactical execution for

cashflow growth from our coal trading business and in

line with this, low cost coal production for supply to the

regional industrial market as with our Lonrho contract,

directly through offtake agreements. This remains a

point of focus. Our IPP projects are now embedded in the

JV portfolio with Kibo at Mabesekwa and prospectively

at Sechaba respectively.

We retain our intent to future export onto world seaborne

spot markets in the medium term, but this continues

to depend largely on the logistical infrastructure

establishment and transport costs. Positive signs for

this have further emerged in the reporting period from

regional governments and parastatals like Transnet in

South Africa and international development investment

from the Chinese.

CHAIRMAN’S REPORT

PAGE 25

OveRview Of OpeRAtiOns

SECHABA MINE AND SCIPP PROJECTManagement remains focused on fast track development

of the open pit resources at Sechaba and to this end is

aggressively pursuing a new JV with another market

player from RSA and hopes to report more on this

by Q2/2019F in October 2018. The intent remains

to drive increased coal trading volumes to the SADC

industrial markets then follow with development of

a substantial underground mine for the long-term

supply consideration for a 300MWe IPP. A deeper

underground mine project is envisaged in 5 to 8 years’

time for the extraction of the TBS seam purely for export

and dependant on the available logistical infrastructure

and costs to FOB at a port on the West or East Coast of

Southern Africa.

The project was independently valued by KPMG at USD

50m at current stage of development.

MABESEKWA MINE AND MEIPP

DEVELOPMENT AND STUDIESIn the 2018 financial year the Company concluded its JV

with Kibo Mining Plc for a 300Mt portion of the project

resource base and the initial planned 300MWe MEIPP,

ultimately planned to be scaled to at least 600MWe.

The Company retains a 15% equity in the JV and earned

27% of the Kibo Company listed shares on the LSE – AIM

exchange for GBP 10m at the time of the transaction.

Further, Shumba will earn a gross revenue royalty on

production from the MEIPP and Kibo have announced

strategic development partnership with USAs’ General

Electric for this.

The Project Valued independently by KPMG at median

of USD 70m at pre-Kibo deal stage which equated to

approximately USD 0.07c/t coal resource in-situ and

the deal was closed at USD 0.06c/t, i.e. 14% discount to

median, which given the market conditions was deemed

as a successful achievement in the asset monetisation

strategy being pursued.

The market strategy for the balance of the Mabesekwa

asset is based on vending out to a NewCo Plc as feedstock

for Coal to Liquids (CTL) to be situated in the nearby

SPEDU (Selebe Phikwe Economic Development Unit)

SEZ (Special Economic Zone). We expect this could be

especially value accretive for Shumba plans given this fall

under protection of several key trade agreements SADC,

AGOA, EU-SADC EPA, and SACU.

MORUPULE SOUTH MINE PROJECTThe Morupule South Coal Project is located directly

to the south of the Morupule Colliery. The project has

a resource of 2.45 billion tonnes of JORC compliant

resources of which 380 million tonnes are in the

measured and indicated categories.

The Morupule Main seam represents 83% of the

resources and 1.2 billion tonnes are amenable to open

cut mining with initial waste to coal strip ratios of under

2 to1. Morupule South is 5km from an operational rail

siding for coal exports. No need for investment in a new

siding. Logistics is key to the regional market and the

project is closer than both the Waterberg Coalfield and

the Central Basin Coalfield in South Africa to its target

market. Shumba now aims this 2019 financial year to

fast track a portion (Open Pit West) of the project into

production to target the regional thermal coal market, in

particular to supply ESKOM in RSA.

LETHLAKENG PROSPECTING

LICENCE NO. 308/2014The Lethlakeng project has significant in-situ resources

of carbonaceous material (Estimated 500Mt) identified

in the area and our initial efforts were focussed on

confirming the presence and structure of such resources

which, indicated strong possibility for the application

of UCG (Underground Coal Gasification) technology

application at this prospect.

As a result, despite management’s belief from 2017

drilling results that there is potential for an underground

mine from Seam 2 averages 3.3m thick with a calorific

value of approximately 18MJ/kg while Seam 4 averages

5.5m thick and has a calorific value approximating

to 14.5MJ/kg, given the market perception for Cola

investment conditions now prevalent these seams are

clearly the most interesting as an energy fuel target

exploited using CTL technologies.


Further works will now be planned for execution subject to

future development funding post the vending out of this asset

in to the earlier mentioned NewCo Plc as part of the Energy

Fuels subsidiary asset base for CTL Production in the SPEDU

SEZ.

On behalf of the Board and Management I offer our

continuous appreciation and sincere regard for the ongoing

support shown by you, our shareholders and investors new

and old alike in the ever changing, challenging world and

environment we find ourselves continuing in.

We look forward to another year of real value growth and

realisation of a share value and share price improvement as

the delivery of post year end operational revenue growth

projects are realised and the new strategy is executed and

communicated broadly to investors.

Once again, the Shumba team has delivered for you our

value shareholders and stakeholders alike through the solid

and continued execution within our sustained philosophy of

“Saying what we will do and doing what we have said we will

do!”

Take care.

ALAN M. CLEGGNon-Executive ChairmanPr.Eng Pr.CPM PMPFSAIMM F.Inst.D

PAGE 27

SH

UM

BA

EN

ER

GY

LTD

C

ER

TIFI

CA

TE

Shumba Energy Ltd

Certificate from the Secretary to the Members of Shumba Energy Ltd

We certify, to the best of our knowledge and belief, that we have filed with the

Registrar of Companies all such returns as are required of SHUMBA ENERGY

LTD under the Mauritius Companies Act 2001 during the financial year ended

30 June 2018.

______________________________________

for SANNE Mauritius


Secretary

Registered Office:

IFS Court

TwentyEight

Cybercity

Ebene 72201


Date: 28 September 2018



TO THE MEMBERS OF SHUMBA ENERGY LTD

PAGE 29

INDEPENDENT

AUDITORS’ REPORT

RepORt On tHe Audit Of tHe cOnsOlidAted finAnciAl stAtements

We have audited the consolidated financial statements of

Shumba Energy Ltd, the “Company”, and its subsidiaries,

collectively referred to as the “Group”, which comprise

the consolidated statement of financial position as at

30 June 2018, and the consolidated statement of profit

or loss and other comprehensive income, consolidated

statement of changes in equity and consolidated

statement of cash flows for the year then ended, and

notes to the consolidated financial statements, including

a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial

statements on pages 23 to 62 give a true and fair view of

the financial position of the Group and the Company as

at 30 June 2018, and of their financial performance and

their cash flows for the year then ended in accordance

with International Financial Reporting Standards and

the requirements of the Mauritius Companies Act 2001.

OPINION

Key audit matters are those matters that, in our

professional judgement, were of most significance in

our audit of the consolidated financial statements for

the year ended 30 June 2018. These matters were

addressed in the context of our audit of the consolidated

financial statements as a whole, and in forming our

opinion thereon, and we do not provide a separate

opinion on these matters.

The key audit matter identified in relation to the audit

of the consolidated financial statements is as described

below.

KEY AUDIT MATTERS

Exploration assets

We focussed on the exploration assets due to the size of

the balance on the consolidated statement of financial

position and the key judgements, assumptions and

estimates used by the Group to assess the recoverability

of the costs incurred so far. These include reserves and

resources estimates, production estimates, economic

factors like coal prices on the market, the movement in

exchange rates, exploration costs to be incurred and the

renewability of the tenement rights.

RISK DESCRIPTION

We conducted our audit in accordance with International

Standards on Auditing. Our responsibilities under

those standards are further described in the Auditors’

Responsibilities for the Audit of the Consolidated

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

consolidated financial statements, 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.

BASIS FOR OPINION


Our audit procedures included among others:

• confirmed that tenement rights are still valid and adherence to tenement requirements.

• performed walkthrough and tests of control to gain an understanding of how and when costs are recognised

and capitalised in compliance with IFRS 6, Exploration for and Evaluation of Mineral Resources.

• confirmed that management is closely monitoring the progress of the exploration presently undertaken and

all deviations are addressed.

• ensured that external analyst reports are available in support for all assumptions and estimates used in

financial forecasts.

HOW AUDIT RESPONDED TO THIS MATTER

INFORMATION OTHER THAN THE CONSOLIDATED FINANCIAL STATEMENTS AND AUDITORS’ REPORT THEREON

(“OTHER INFORMATION”)

Management is responsible for the Other Information.

The Other Information comprises mainly of information

included under the General Information, Commentary

of the Directors and, Chairman’s Report, but does not

include the consolidated financial statements and our

auditors’ report thereon.

Our opinion on the consolidated 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 consolidated

financial statements, our responsibility is to read the

Other Information and, in doing so, consider whether

the Other Information is materially inconsistent

with the consolidated financial statements or our

knowledge obtained in the audit or otherwise appears

to be materially misstated. If, based on the work we

have performed, we conclude that there is a material

misstatement of this Other Information, we are required

to report that fact. We have nothing to report in this

regard.

RESPONSIBILITIES OF MANAGEMENT AND THOSE CHARGED WITH GOVERNANCE FOR THE CONSOLIDATED FINANCIAL

STATEMENTS

Management is responsible for the preparation of the

consolidated financial statements in accordance with

International Financial Reporting Standards, and in

compliance with the requirements of the Mauritius

Companies Act 2001 and for such internal control as

management determines is necessary to enable the

preparation of the consolidated financial statements

that are free from material misstatement, whether due

to fraud or error.

In preparing the consolidated financial statements,

management is responsible for assessing the Group’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

management either intends to liquidate the Group or to

cease operations, or has no realistic alternative but to do

so.

Those charged with governance are responsible for

overseeing the Group’s financial reporting process.


PAGE 31

AUDITORS’ RESPONSIBILITIES FOR THE AUDIT OF

THE CONSOLIDATED FINANCIAL STATEMENTSOur objectives are to obtain reasonable assurance

about whether the consolidated financial statements as

a whole are free from material misstatement, whether

due to fraud or error, and to issue an auditors’ 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 International Standards

on Auditing 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 consolidated financial statements.

As part of an audit in accordance with International

Standards on Auditing, we exercise professional

judgment and maintain professional skepticism

throughout the audit.

We also:

• Identify and assess the risks of material misstatement

of the consolidated financial statements, whether

due to fraud or error, design and perform audit pro-

cedures responsive to those risks, and obtain audit

evidence that is sufficient and appropriate to provide

a basis for our opinion. The risk of not detecting a

material misstatement resulting from fraud is higher

than for one resulting from error, as fraud may involve

collusion, forgery, intentional omissions,

misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant

to the audit in order to design audit procedures that

are appropriate in the circumstances, but not for the

purpose of expressing an opinion on the effectiveness

of the Company’s internal control.

• Evaluate the appropriateness of accounting policies

used and the reasonableness of accounting estimates

and related disclosures made by management.

• Conclude on the appropriateness of management’s use

of the going concern basis of accounting and, based

on the audit evidence obtained, whether a material

uncertainty exists related to events or conditions that

may cast significant doubt on the Group’s ability

to continue as a going concern. If we conclude that

a material uncertainty exists, we are required to

draw attention in our auditors’ report to the related

disclosures in the consolidated financial statements

or, if such disclosures are inadequate, to modify our

opinion.

Our conclusions are based on the audit evidence

obtained up to the date of our auditors’ report.

However, future events or conditions may cause the

Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and

content of the consolidated financial statements,

including the disclosures, and whether the

consolidated financial statements represent the

underlying transactions and events in a manner that

achieves fair presentation.

• Obtain sufficient appropriate audit evidence

regarding the financial information of the entities or

business activities within the Group to express an

opinion on the consolidated financial statements. We

are responsible for the direction, supervision and

performance of the group audit. We remain solely

responsible for our audit opinion.

We communicate with those charged with governance

regarding, among other matters, the planned scope

and timing of the audit and significant audit findings,

including any significant deficiencies in internal control

that we identify during our audit.

REPORT ON OTHER LEGAL AND REGULATORY

REQUIREMENTSIn accordance with the requirements of the Mauritius

Companies Act 2001, we report as follows:

• we have no relationship with, or any interests in, the

Company and its subsidiaries other than in our capacity

as auditors;

• we have obtained all the information and explanations

we have required; and

• in our opinion, proper accounting records have been

kept by the Company as far as it appears from our

examination of those records.

OTHER MATTEROur report is made solely to the members of the

Company as a body in accordance with Section 205 of

the Mauritius Companies Act 2001. 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 auditors’ 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 opinion we have

formed.


______________________________________

GRANT THORNTONChartered Accountants

______________________________________Y NUBEE, FCCA

Licensed by FRC

Date: 28 September 2018

Ebene 72201, Republic of Mauritius

PAGE 33

SHUMBA ENERGY

FINANCIAL STATMENTS

2017 - 2018


The Group The Company

Note 25 Restated

Name Notes 2018 USD 2017 USD 2018 USD 2017 USD

Non-Current Assets

Investment in subsidiaries 7 - - 2,036,706 1,890,724

Goodwil 8 2,745,662 - - -

Loans 9 - - 18,300,584 12,844,246

Plant and equipment 10 23,083 30 278 - -

Exploration assets 11 4,635,464 9 949 583 - -

Available-for-sale financial assets 12 9,051,762 - - -

Total Non-Current Assets 16,455,971 9,979,861 20,337,290 14,734,970


CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2018

Equity

Stated capital 17 15,918,178 14,497,244 15,918,178 14,497,244

Translation reserves (331,954) 518,355 - -

Fair value reserves (4,004,750) - - -

Accumulated losses (1,112,288) (5,807,562) (2,104,013) (1,363,886)

Equity attributable to owners of the parent 10,469,186 9,208,037 13,814,165 13,133,358

Non-controlling interest 18 (258,491) (357,091) - -

Total Equity 10,210,695 8,850,946 13,814,165 13,133,358

Current Assets

Investories 14 - 19,856 - -

Receivables and prepayments 15 575,384 261,871 1,838,140 855,639

Cash and cash equivalents 16 1,352,602 2,473,623 21,471 2,024,170

Total Current Assets 1,927,986 2,755,350 1,859,611 2,879,809

Total Assets 18,383,957 12,735,211 22,196,901 17,614,779


PAGE 35


(Note 25) Restated


Non-current Liabilities

Convertible loan notes 19 4,272,334 1,427,364 4,272,334 1,427,364

Contingent consideration 20 1,500,000 - 1,500,000 -

Total Non-Current Liabilities 5,772,334 1,427,364 5,772,334 1,427,364


CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2018 (CONTINUED)

Current Liabilities

Payables and accruals 21 2,399,598 2,456,901 2,610,402 3,054,057

Current tax liabilities 22 1,330 - - -

Total Current Liabilities 2,400,928 2,456,901 2,610,402 3,054,057

Total Liabilities 8,173,262 3,884,265 8,382,736 4,481,421

Total Equity & Liabilities 18,383,957 12,735,211 22,196,901 17,614,779

Approved by the Board of Directors and authorised for issue on ____________________________and signed on its behalf by:

DIRECTOR DIRECTOR

The notes on pages 43 to 85 form an integral part of these consolidated financial statements.

28 September 2018



Note 25 Restated


Revenue 544,218 2,687 - -

Cost of Sales (480,303) (2,687) - -

Gross Profit 63,915 - - -

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHERCOMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2018

Expenditure

Professional fees 70,513 132,711 31,400 102,770

Listing fees 40,642 40,723 40,642 40,723

Licence fees 4,185 1,750 1,750 1,750

Directors’ fees 106,216 114,730 103,716 113,480

Audit fees 25,585 26,450 16,500 15,950

Bank charges 5,350 8,465 5,264 8,465

Annual fee to SEM - 3,385 - 3,385

Operating expenses 1,053,408 1,003,706 178,096 188,502

Depreciation 10 9,893 9,244 - -

Operating loss (1,251,877) (1,341,164) (377,368) (475,025)

Finance costs (284,000) (99,653) (291,688) (99,584)

Finance income - 35,356 493,168 282,674

Share issue costs (574,953) - (574,953) -

Foreign exchange gains 804 1,155,868 10,714 144

Investment income 22,213 - - -

Other gains (457,256) - - -

Other financial gains 13 7,950,099 - - -

Profit/(loss) before tax 5,405,030 (249,593) (740,127) (291,791)

Tax Expense 22 (1,330) - - -

5,403,700 (249,593) (740,127) (291,791)

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

PAGE 37

Loss on remeasurement of available-for-sale adjustments 12 (4,449,722) - - -

Exchange differences on retranslation of foreign operations (869,208) (383,612) - -

Total comprehensive income for the year 84,770 (633,205) (740,127) (291,791)

Other comprehensive income, net of tax:Items that will not be reclassified subsequently to profit or lossItems that will be reclassified subsequently to profit or loss:

Owners of the parent 4,792,967 (273,595) - -

Non-controlling interest 18 610,733 24,002 - -

Total comprehensive income for the year 5,403,700 (249,593) - -

Owners of the parent (65,965) (618,286) - -

Non-controlling interest 150,735 (14,919) - -

Total comprehensive income for the year 84,770 (633,205) - -

Profit/(loss) for the year attributable to:

Earnings/(loss) per share

Basic earnings/(loss) per share 23 0.01763 (0.00105) - -

Diluted earnings/(loss) per share 23 0.01609 (0.00096) - -

Total comprehensive income attributable to:


CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHERCOMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED)


CONSOLIDATED STATEMENT CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2018

The Group

Stated capitalUSD

Translation reservesUSD

Fair value deficit USD

Accumulatedlosses USD

Equity attributable to owners of the parentUSD

Non-controlling interestUSD

TotalUSD

At 01 July 2017 14,497,244 518,355 - (5,807,562) 9,208,037 (357,091) 8,850,946

On derecognition of NCI - 3,873 - (97,693) (93,820) (52,162) (145,982)

On acquisition of subsidiary - - - - - 27 27

Issue of shares 1,420,934 - - - 1,420,934 - 1,420,934

Transactions with the shareholders 1,420,934 - - - 1,420,934 - 1,420,934

Loss for the year - - - 4,792,967 4,792,967 610,733 5,403,700

Other comprehensive income - (854,182) (4,004,750) - (4,858,932) (459,998) (5,318,930)

Total comprehensive income for the year - (854,182) (4,004,750) 4,792,967 (65,965) 150,735 84,770

At 30 June 2018 15,918,178 (331,954) (4,004,750) (1,112,288) 10,469,186 (258,491) 10,210,695

At 01 July 2016 12,745,002 867,681 (5,525,942) 8,086,741 (394,705) 7,692,036

On dilution of ownership - (7,232) - 48,994 41,762 48,951 90,713

On derecognition of non-controlling interest

- 2,597 - (57,019) (54,422) 3,582 (50,840)

Issue of shares 1,752,242 - - - 1,752,242 - 1,752,242

Transactions with the shareholders 1,752,242 - - - 1,752,242 - 1,752,242

Loss for the year - - - (273,595) (273,595) 24,002 (249,593)

Other comprehensive income - (344,691) - - (344,691) (38,921) (383,612)

Total comprehensive income for the year - (344,691) - (273,595) (618,286) (14,919) (633,205)

As previously reported at 30 June 2017 14,497,244 518,355 - (5,807,562) 9,208,037 (357,091) 8,850,946


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

PAGE 39

THE COMPANY Stated capital Accumulated losses Total

USD USD USD

As previously reported at 30 June 2017 14,497,244 (1,622,868) 12,874,376

Prior year adjustments (Note 25) - 258,982 258,982

As restated at 01 July 2017 14,497,244 (1,363,886) 13,133,358

CONSOLIDATED STATEMENT CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2018(CONTINUED)

Issue of shares 1,420,934 - 1,420,934

Transactions with the shareholders 1,420,934 - 1,420,934

Loss for the year - (740,127) (740,127)

Other comprehensive income - - -

Total comprehensive income for the year - (740,127) (740,127)

At 30 June 2018 15,918,178 (2,104,013) 13,814,165

At 01 July 2016 12,745,002 (1,072,095) 11,672,907

Issue of sharesholders 1,752,242 - 1,752,242

Transactions with the shareholders 1,752,242 - 1,752,242

Loss for the year (Note 25) - (550,773) (550,773)

Other comprehensive incomefor the year - - -

Total comprehensive income for the year - (550,773) (550,773)

As previously reported at 30 June 2017 14,497,244 (1,622,868) 12,874,376




2018 2017 2018 2017

(Note 25) Restated

USD USD USD USD

Cash flows from operating activities

Profit/(loss) before tax 5,403,700 (249,593) (740,127) (291,791)

Adjustments for:

Interest expense 284,000 99,653 291,688 99,584

Interest income - (35,356) (493,168) (282,674)

Other operating gains 457,256 - - -

Investment income (22,213) - - -

Share issue costs 574,953 - 574,953 -

Other financial gains (7,950,099) - - -

Foreign exchange gains (804) (1,155,868) (10,714) (144)

Depreciation 9,893 9,244 - -

Cash flows from investing activities

Interest received - 35,356 - 282,674

Purchase of plant and equipment (3,253) (3,130) - -

Expenditure on exploration assets (671,485) (662,485) - -

Acquisition of investments - - - (1,458,982)

Exchange of other financial assets (9,051,762) - - -

Proceeds from disposal of exploration assets 5,958,940 - - -

Loans advanced - - (1,900,000) -

Net cash used in investing activities (3,767,560) (630,259) (1,900,000) (1,176,308)

Operating loss before working capital changes (1,243,314) (1,331,920) (377,365) (475,025)

Change in inventories 19,856 (19,856) - -

Change in receivables and prepayments 313,513 (562,743) 17,496 (26,864)

Change in payables and accruals 641,367 (1,202,992) 257,170 (1,088,080)

Net cash used in operations (268,578) (3,117,511) (102,699) (1,589,969)

Tax paid - (671) - -

Net cash used in operating activities (268,578) (3,118,182) (102,699) (1,589,969)


FOR THE YEAR ENDED 30 JUNE 2018


PAGE 41


2018 2017 2018 2017

(Note 25) Restated

USD USD USD USD

Cash flows from financing activities

Proceeds from issue of shares - 1,701,402 - 1,701,402

Proceeds from issue of convertible loan notes 2,844,970 1,327,780 - 1,327,780

Net cash from financing activities 2,844,970 3,029,182 - 3,029,182

Net change in cash and cash equivalents (1,191,168) (719,259) (2002,699) 262,905

Cash and cash equivalents, beginning of the year 2,473,623 3,018,829 2,024,170 1,761,265

Exchange differences on cash and cash equivalents 70,147 174,053 - -

Cash and cash equivalents, end of the year 1,352,602 2,473,623 21,471 2,024,170

Issue of shares in exchange of investment in subsidiary 145,982 - - 50,840

Issue of shares in exchange of loan repayment 1,420,934 - 1,420,934 --

Cash at bank (Note 16) 1,352,602 2,473,623 21,471 2,024,170

Cash and cash equivalents made up of:

Non-cash transactions:



FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED)



FOR THE YEAR ENDED 30 JUNE 2018

PAGE 43

geneRAl infORmAtiOn And stAtement Of cOmpliAnce witH inteRnAtiOnAl finAnciAl RepORting stAndARds

ApplicAtiOn Of new And Revised inteRnAtiOnAl finAnciAl RepORting stAndARds

Shumba Energy Ltd, the “Company”, was incorporated on 28 August 2012 in the Republic of Mauritius under the

Mauritius Companies Act 2001 as a public company with liability limited by shares. The Company registered office is IFS

Court, Bank Street, TwentyEight, Cybercity, Ebene 72201, Republic of Mauritius. The Company was been listed on the

Botswana Stock Exchange on 8 April 2013 and on the Development & Enterprise Market in Mauritius on 04 April 2014.

On 28 August 2017, the Company cancelled its listing on the Development & Enterprise Market in Mauritius.

The Company was previously known as Shumba Coal Limited and it changed name to “Shumba Energy Ltd “ on 22 October

2015 as evidenced by a Certificate of Incorporation on Change of Name issued by the Registrar of Companies.

The Company holds a Category 1 Global Business Licence issued by the Financial Services Commission of Mauritius.

The Company and its subsidiaries are collectively referred to as the “Group”.

The principal activity of the Group is the acquisition and development of highly prospective coal exploration licences in

the Republic of Botswana. During the year, the Group extended its business activity to include the trading of solar energy.

The consolidated financial statements of the Company have been prepared in accordance with International Financial

Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018

In the current year, the following new and revised standards issued by IASB became mandatory for the first time for

the financial year beginning on 01 July 2017:

2.1 NEW AND REVISED STANDARDS AND INTERPRETATIONS THAT ARE EFFECTIVE FOR ANNUAL YEAR BEGINNING ON 01 JULY 2017

IAS 7, Disclosure Initiative (Amendments to IAS 7)

The amendments are designed to improve the quality of information provided to users of financial statements

about changes in an entity’s debt and related cash flows (and non-cash changes).

The amendments respond to requests from investors for improved disclosures about an entity’s financing

activities. The Disclosure Initiative itself is in part a reaction to the growing clamour over disclosure overload

in financial statements. It consists of a number of projects, both short- and medium-term, and ongoing

activities that explore how presentation and disclosure principles and requirements in existing standards can

be improved.

1

2


IAS 12, Recognition of Deferred Tax Assets for Unrealised Losses

The focus of the amendments to IAS 12 is to clarify how to account for deferred tax assets related to debt

instruments measured at fair value, particularly where changes in the market interest rate decrease the fair

value of a debt instrument below cost.

Annual Improvements to IFRSs 2014-2016

These improvements include amendments to IFRS 1: First-time Adoption of International Financial Report-

ing Standards, IFRS 12: Disclosure of Interests in Other Entities and IAS 28: Investments in Associates and

Joint Ventures which are effective from 01 January 2018 except for amendments to IFRS 12: Disclosure of

Interests in Other Entities which are effective as from 01 January 2017.

The amendments to IFRS 12 clarify the scope of the standard by specifying that the disclosure requirements

in the standard, except for those in paragraphs B10–B16, apply to an entity’s interests listed in paragraph 5

that are classified as held for sale, as held for distribution or as discontinued operations in accordance with

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.

Management has assessed the impact of these revised standards and concluded that none of these revised

standards have a significant impact on the disclosures of these consolidated financial statements.

At the date of authorisation of these financial statements, certain new standards and amendments to existing

standards and interpretations have been published by the IASB but are not yet effective and have not been adopted

early by the Group.

Management anticipates that all of the relevant pronouncements, as relevant to the Group’s activities, will be

adopted in the Group’s accounting policies for the first year beginning after the effective date of the pronouncements.

Information on new standards, amendments to existing standards and interpretations is provided below:

2.2 STANDARDS, AMENDMENTS TO EXISTING STANDARDS AND INTERPRETATIONS THAT ARE NOT YET EFFECTIVE AND HAVE NOT BEEN ADOPTED EARLY BY THE GROUP

IAS 28, Long-term interest in Associates and Joint

Ventures (Amendments to IAS 28)

These amendments provide clarification in the

case where an entity applies IFRS 9 ‘Financial

Instruments’ to long-term interests in an associate

or joint venture that form part of the net investment

in the associate or joint venture but to which the

equity method is not applied.

IFRS 1, IAS 28 Annual Improvements to IFRS

Standards 2014-2016 Cycle

The amendment to IFRS 1 deletes the short-term

exemptions in paragraphs E3–E7, because they

have now served their intended purpose.

IAS 28 amendments clarify that the election to

measure at fair value through profit or loss an

investment in an associate or a joint venture

that is held by an entity that is a venture capital

organisation, or other qualifying entity, is available

for each investment in an associate or joint venture

on an investment-by-investment basis, upon initial

recognition.


PAGE 45

IFRS 3, IFRS 11, IAS 12, IAS 23 Annual Improvements

to IFRS Standards 2015–2017 Cycle

The amendments to IFRS 3 clarify that when an

entity obtains control of a business that is a joint

operation, it remeasures previously held interests

in that business. The amendments to IFRS 11

clarify that when an entity obtains joint control of

a business that is a joint operation, the entity does

not remeasure previously held interests in that

business.

The amendments to IAS 12 clarify that the

requirements in the former paragraph 52B

(to recognise the income tax consequences of

dividends where the transactions or events that

generated distributable profits are recognised)

apply to all income tax consequences of dividends

by moving the paragraph away from paragraph

52A that only deals with situations where there are

different tax rates for distributed and undistributed

profits.

The amendments to IAS 23 clarify that if any

specific borrowing remains outstanding after the

related asset is ready for its intended use or sale,

that borrowing becomes part of the funds that

an entity borrows generally when calculating the

capitalisation rate on general borrowings.

IAS 40, Transfer of Investment Property

(Amendments to IAS 40)

Under these amendments an entity shall transfer

a property to, or from, investment property when,

and only when, there is evidence of a change in use.

A change of use occurs if property meets, or ceases

to meet, the definition of investment property. A

change in management’s intentions for the use of

a property by itself does not constitute evidence of

a change in use.

IFRS 15, Revenue from Contracts with Customers

This is the converged standard on revenue

recognition. It replaces IAS 11, ‘Construction

contracts’, IAS 18, ‘Revenue’ and related

interpretations.

IFRS 9 Financial instruments (2014)

The complete version of IFRS 9 replaces most of the

guidance in IAS 39. 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 and fair value through

profit and loss.

IFRS 4, Applying IFRS 9 Financial Instruments with

IFRS 4 Insurance Contracts (Amendments to IFRS 4)

The amendments in Applying IFRS 9 ‘Financial

Instruments’ with IFRS 4 ‘Insurance Contracts’

(Amendments to IFRS 4) provide two options for

entities that issue insurance contracts within the

scope of IFRS 4.

IFRS 2, Classification and Measurement of Share-based

Payment Transactions (Amendments to IFRS 2)The amendments bring clarification on the following

matters:

• the accounting for cash-settled share-based

payment transactions that include a

performance condition;

• the classification of share-based payment

transactions with net settlement features; and

• the accounting for modifications of share-based

payment transactions from cash-settled to

equity-settled.

IFRS 16, Leases

The new standard requires lessees to account for

leases ‘on-balance sheet’ by recognising a ‘right of

use’ asset and a lease liability. It will affect most

companies that report under IFRS and are involved

in leasing, and will have a substantial impact on the

financial statements of lessees of property with

high value equipment.


IFRS 17, Insurance Contracts

IFRS 17 requires insurance liabilities to be

measured at a current fulfilment value and

provides a more uniform measurement and

presentation approach for all insurance contracts.

These requirements are designed to achieve the

goal of a consistent, principle-based accounting for

insurance contracts. IFRS 17 supersedes IFRS 4,

Insurance Contracts as of 1 January 2021.

IFRIC 22, Foreign Currency Transactions and

Advance Consideration

IFRIC 22 clarifies the accounting for transactions

that include the receipt or payment of advance

consideration in a foreign currency.

IFRIC 23, Uncertainty over Income Tax Treatments

The interpretation addresses the determination

of taxable profit (tax loss), tax bases, unused tax

losses, unused tax credits and tax rates, when there

is uncertainty over income tax treatments under

IAS 12.

IAS 19, Plan Amendment, Curtailment or Settlement

(Amendments to IAS 19)

The following amendments were made to IAS 19 :

If a plan amendment, curtailment or settlement

occurs, it is now mandatory that the current

service cost and the net interest for the period

after the remeasurement are determined using the

assumptions used for the remeasurement.

In addition, amendments have been included to

clarify the effect of a plan amendment, curtailment

or settlement on the requirements regarding the

asset ceiling.

Management has yet to assess the impact of the

above standards, amendments and interpretations

on the consolidated financial statements.


PAGE 47

The consolidated financial statements have been prepared using the significant accounting policies and

measurement bases summarised below.

3.1 OVERALL CONSIDERATIONS

3.2 BASIS OF CONSOLIDATION 3.3 BUSINESS COMBINATIONS

The Group financial statements consolidate those

of the parent company and of its subsidiaries as at

30 June 2018. The parent controls a subsidiary if it

is exposed, or has rights, to variable returns from its

involvement with the subsidiary and has the ability

to affect those returns through its power over the

subsidiary. The subsidiaries have a reporting date

of 30 June.

All transactions and balances between Group

companies are eliminated on consolidation,

including unrealised gains and losses on

transactions between Group companies. Where

unrealised losses on intra-group asset sales

are reversed on consolidation, the underlying

asset is also tested for impairment from a group

perspective. Amounts reported in the financial

statements of the subsidiaries have been adjusted

where necessary to ensure consistency with the

accounting policies adopted by the Group.

Profit or loss and other comprehensive income of

subsidiaries acquired or disposed of during the

year are recognised from the effective date of

acquisition, or up to the effective date of disposal,

as applicable.

Non-controlling interest, presented as part of

equity, represents the portion of subsidiaries’ profit

or loss and net assets that is not held by the Group.

The Group attributes total comprehensive income

or loss of subsidiaries between the owners of the

parent and the non-controlling interests based on

their respective ownership interests.

The Group applies the acquisition method in

accounting for business combinations. The

consideration transferred by the Group to obtain

control of a subsidiary is calculated as the sum of the

acquisition-date fair values of assets transferred,

liabilities incurred and the equity interests issued

by the Group, which includes the fair value of

any asset or liability arising from a contingent

consideration arrangement. Acquisition costs are

expensed as incurred. Consideration in respect

of business combinations comprises of actual cash

paid, shares issued or contingent consideration.

The Group recognises identifiable assets acquired

and liabilities assumed in a business combination

regardless of whether they have been previously

recognised in the acquiree’s financial statements

prior to the acquisition. Assets acquired and

liabilities assumed are generally measured at their

acquisition-date fair values.

Goodwill is stated after separate recognition of

identifiable intangible assets. It is calculated as the

excess of the sum of (a) fair value of consideration

transferred, (b) the recognised amount of any

non-controlling interest in the acquiree and (c)

acquisition-date fair value of any existing equity

interest in the acquiree, over the acquisition-date

fair values of identifiable net assets. If the fair

values of identifiable net assets exceed the sum

calculated above, the excess amount (i.e. gain on

a bargain purchase) is recognised in profit or loss

immediately.

summARy Of AccOunting pOlicies3


3.4 FINANCIAL INSTRUMENTS

Recognition, initial measurement and derecognition

Financial assets and financial liabilities are

recognised when the Group becomes a party to the

contractual provisions of the financial instrument

and are measured initially at fair value adjusted for

transaction costs, except for those carried at fair

value through profit or loss which are measured

initially at fair value. Subsequent measurement of

financial assets and financial liabilities is described

below.

Financial assets are derecognised when the

contractual rights to the cash flows from the

financial asset expire, or when the financial

asset and all substantial risks and rewards are

transferred.

A financial liability is derecognised when it is

extinguished, discharged, cancelled or expires.

Classification and subsequent measurement of

financial assets

For the purpose of subsequent measurement,

financial assets other than those designated and

effective as hedging instruments, are classified as

available-for-sale financial assets and loans and

receivables.

All financial assets of the Group except those at fair

value through profit or loss are subject to review

for impairment at least at each reporting date to

identify whether there is any objective evidence

that a financial asset or a group of financial assets is

impaired. Different criteria to determine impairment

are applied for each category of financial assets.

The category determines subsequent measurement

and whether any resulting income and expense is

recognised in profit or loss or in other comprehensive

income.

All income and expenses relating to financial assets

are recognised in consolidated statement of profit

or loss and other comprehensive income.

Available-for-sale financial assetsAvailable-for-sale financial assets are non-derivative

financial assets that are either designated to this

category or do not qualify for inclusion in any of the

other categories of financial assets. The Company’s

available-for-sale financial assets comprise of both

quoted and unquoted shares.

Listed investment is initially recognised at fair value

on the date on which the instrument is purchased

and is subsequently re-measured at fair value. Fair

value is obtained from quoted price on the London

Stock Exchange.

Unquoted investment is stated at cost less

impairment charges.

Gains and losses on remeasurement are recognised

in other comprehensive income and reported

within the ‘fair value reserves’ within equity.

When the asset is disposed of or is determined to

be impaired, the cumulative gain or loss recognised

in other comprehensive income is reclassified from

the equity reserve to profit or loss.

For available-for-sale financial assets, impairment

reversals are not recognised in profit loss and any

subsequent increase in fair value is recognised in

other comprehensive income.


PAGE 49

3.5 INVESTMENTS IN SUBSIDIARIES

Loans and receivablesLoans and receivables are non-derivative financial

assets with fixed or determinable payments that

are not quoted in an active market. After initial

recognition, these are measured at amortised cost

using the effective interest method, less provision

for impairment. Discounting is omitted where the

effect of discounting is immaterial. The Group’s

cash and cash equivalents and other receivables

fall into this category of financial instruments.

Individually significant receivables are considered

for impairment when they are past due or when

other objective evidence is received that a specific

counterparty will default. Receivables that are

not considered to be individually impaired are

reviewed for impairment in groups, which are

determined by reference to the industry and

region of a counterparty and other shared credit

risk characteristics. The impairment loss estimate

is then based on recent historical counterparty

default rates for each identified group.

Classification and subsequent measurement of

financial liabilities

The Group’s financial liabilities include convertible

loan notes and payables.

Financial liabilities are measured subsequently at

amortised cost using the effective interest method.

All interest-related charges on financial liabilities

are reported in the consolidated statement of

profit or loss and other comprehensive income and

included within finance costs.

Debt and equity instruments issued by the

Company are classified as either financial liabilities

or as equity in accordance with the substance of

the contractual arrangements and the definitions

of a financial liability and an equity instrument.

A subsidiary is an entity over which the Company

has control. The Company controls an entity

when the Company is exposed to, or has rights

to, variable returns from its involvement with the

investee and has the ability to affect those returns

through its power over the investee.

Investments in subsidiaries are stated at

cost less impairment charges in the separate

financial statements. Where the carrying

amount of the investment is greater than its

estimated recoverable amount, it is written down

immediately to its recoverable amount and the

difference is charged to statement of profit or loss

and other comprehensive income. On disposal

of the investment, the difference between the

net disposal proceeds and the carrying amount is

charged or credited in the consolidated statement

of profit or loss and other comprehensive income.

Offsetting financial instruments

Financial assets and liabilities are offset and the net

amount reported in the consolidated statement of

financial position when there is a legally enforceable

right to offset the recognised amounts and there is

an intention to settle on a net basis or realise the

asset and settle the liability simultaneously.


3.6 GOODWILL

Goodwill represents the future economic benefits

arising from a business combination that are not

individually identified and separately recognised.

See Note 3.3 for information on how goodwill is

initially determined. Goodwill is carried at cost less

accumulated impairment losses, if any.

Negative goodwill is recognised in the consolidated

statement of comprehensive income.

3.7 PLANT AND EQUIPMENT

The cost of an item of plant and equipment is recognised as an asset when:

• it is probable that future economic benefits associated with the item will flow to the Group; and

• the cost of the item can be measured reliably.

Plant and equipment are initially measured at cost.

Costs include any costs directly attributable to bringing the assets to the location and condition necessary for

it to be capable of operating in the manner intended by management.

Plant and equipment are depreciated on the straight line basis over their expected useful lives to their

estimated residual value.

Plant and equipment are carried at cost less accumulated depreciation and any impairment losses.

The useful lives of items of plant and equipment have been assessed as follows:

Item Average useful life

Furniture and fittings 10 years

Office equipment 10 years

IT equipment 4 years

The residual value, useful life and depreciation method of each asset are reviewed at the end of each reporting

date. If the expectations differ from previous estimates, the change is accounted for as a change in accounting

estimate.

The gain or loss arising from the de recognition of an item of plant and equipment is included in profit or loss.

The gain or loss arising from the de recognition is determined as the difference between the net disposal

proceeds, if any, and the carrying amount of the item.


PAGE 51

3.7 EXPLORATION ASSETS

Exploration and evaluation expenditure include costs associated with exploration and evaluation activity as

well as cost of procurement of tenement rights for prospecting mineral resources.

Exploration and evaluation expenditure is capitalised on an area of interest basis. An intangible asset in the form of

exploration asset is recognised when:

• it is probable that the expected future economic benefits that are attributable to the asset will

flow to the entity; and

• the cost of the asset can be measured reliably.

Exploration assets are initially recognised at cost.

Expenditure on exploration on the prospecting stage on tenements are capitalised. Expenditure, evaluation

and development expenditure incurred are accumulated in respect of each identifiable area of interest. These

costs are only carried forward to the extent that they are expected to be recouped through the production

of mineral resources from each respective area. The costs are also carried forward, where activities in the

area have not yet reached a stage that permits reasonable assessment of the existence of economically

recoverable reserves.

Accumulated costs in relation to an abandoned area are written off in full in the consolidated statement of

profit or loss and other comprehensive income for the year in which the decision to abandon the area is made.

Exploration assets are also derecognised upon disposal in the normal course of business.

When production commences, the accumulated costs for the relevant area of interest is amortised over the

life of the area according to the rate of depreciation of the economically recoverable reserves.

A regular review is undertaken of each area of interest to determine the appropriateness of continuing to

carry forward costs in relation to the area of interest.

The exploration and evaluation expenditure capitalisation ceases when the Board of Directors concludes that

the project is capable of commercial production whereupon accumulated costs are amortised on a unit of

production basis.

3.9 INVENTORIES 3.10 CASH AND CASH EQUIVALENTS

Inventories are stated at the lower of cost and net

realisable value. Cost is determined by the First

In First Out method. Net realisable value is the

estimated selling price in the ordinary course of

the business less any applicable selling expenses.

Cash and cash equivalents comprise of cash at

bank, fixed deposits and demand deposit, together

with other short-term, highly liquid investments

maturing within 90 days from the date of acquisition

that are readily convertible into known amounts of

cash and which are subject to an insignificant risk

of change in value.


3.11 EQUITY AND RESERVES AND DIVIDEND PAYMENTS

Stated capital represents the nominal value of shares that have been issued.

Translation reserves comprise of foreign currency translation differences arising from the translation of

financial statements of the Group’s foreign entity.

Fair value reserves comprise of gains and losses on remeasurement of available-for-sale financial assets.

Accumulated losses include all current and prior years’ results as disclosed in the consolidated statement of

profit or loss and other comprehensive income.

All transactions with owners of the parent are recorded separately within equity.

Dividend distributions payable to equity shareholders are included in liabilities when the dividends have been

approved by the Board prior to the reporting date.

3.12 PROVISIONS 3.13 OPERATING EXPENSES

Provisions are recognised when the Group has a

present legal or constructive obligation as a result

of past events, it is probable that an outflow of

resources embodying economic benefits will be

required to settle the obligation and a reliable

estimate of the amount of the obligation has been

made. At the time of the effective payment, the

provision is deducted from the corresponding

expenses.

All known risks at reporting date are reviewed in

detail and provision is made when necessary.

Operating expenses are recognised in the

consolidated statement of profit or loss and other

comprehensive income upon utilisation of the

service or at the date of their origin.


PAGE 53

3.14 BORROWING COSTS

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying

asset are capitalised as part of the cost of that asset until such time as the asset is ready for its intended use.

The amount of borrowing costs eligible for capitalisation is determined as follows:

• actual borrowing costs on funds specifically borrowed for the purpose of obtaining a qualifying

asset less any temporary investment of those borrowings.

• weighted average of the borrowing costs applicable to the entity on funds generally borrowed

for the purpose of obtaining a qualifying asset. The borrowing costs capitalised do not exceed

the total borrowings costs incurred.

The capitalisation of borrowing costs commences when:

• expenditures for the asset have occurred;

• borrowing costs have been incurred, and

• activities that are necessary to prepare the asset for its intended use or sale are in progress.

Capitalisation is suspended during extended periods in which active development is interrupted.

Capitalisation ceases when substantially all the activities necessary to prepare the qualifying asset for its

intended use or sale are complete.

All other borrowing costs are recognised as an expense in the period in which they are incurred.


3.15 TAXATION

Tax expense recognised in profit or loss comprises the sum of deferred tax and current tax not recognised in

other comprehensive income or directly in equity.

Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities

relating to the current or prior reporting years, that are unpaid at the reporting date. Current tax is payable

on taxable profit, which differs from profit or loss in the consolidated financial statements. Calculation of

current tax is based on tax rates and tax laws that have been enacted or substantively enacted by the end of

the reporting date in the respective jurisdiction where each entity is incorporated.

Deferred income taxes are calculated using the liability method on temporary differences between the

carrying amounts of assets and liabilities and their tax bases.

Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply

to their respective period of realisation, provided those rates are enacted or substantively enacted by the end

of the reporting date.

Deferred tax assets are recognised to the extent that it is probable that the underlying tax loss or deductible

temporary difference will be utilised against future taxable income, based on the Group’s forecast of future

operating results which is adjusted for significant non-taxable income and expenses and specific limits to the

use of any unused tax loss or credit. Deferred tax liabilities are always provided in full.

Deferred tax assets and liabilities are offset only when the Group has a right and intention to set off current

tax assets and liabilities from the same taxation authority.

Changes in deferred tax assets or liabilities are recognised as a component of tax income or expense in profit

or loss, except where they relate to items that are recognised in other comprehensive income or directly in

equity, in which case the related deferred tax is also recognised in other comprehensive income or equity,

respectively.


PAGE 55

3.16 FOREIGN CURRENCY

Functional and presentation currency

The consolidated financial statements are presented in United States Dollars (USD), which is also the

functional currency of the parent company.

Foreign currency transactions and balances

Foreign currency transactions are translated into the functional currency of the Group, using the exchange

rates prevailing at the dates of the transactions (spot exchange rate). Foreign exchange gains and losses

resulting from the settlement of such transactions and from the remeasurement of monetary items

denominated in foreign currency at year-end exchange rates are recognised in profit or loss.

Non-monetary items are not retranslated at year-end and are measured at historical cost (translated using

the exchange rates at the transaction date), except for non-monetary items measured at fair value which are

translated using the exchange rates at the date when fair value was determined.

Foreign operations

In the Group’s consolidated financial statements, all assets, liabilities and transactions of the Group entities

with a functional currency other than the USD are translated into USD upon consolidation. The functional

currency of the overseas subsidiary has remained unchanged during the reporting year.

On consolidation, assets and liabilities have been translated into USD at the closing rate at the reporting date.

Income and expenditure have been translated into USD at the average rate over the reporting year.

Exchange differences are charged/credited to other comprehensive income and recognised in the currency

translation reserves in equity. On disposal of a foreign operation, the related cumulative translation differences

recognised in equity are reclassified to profit or loss and are recognised as part of the gain or loss on disposal.

The closing and average exchange rates for the year ended 30 June 2018 were as follows:

USD

BWP/USD (Closing) 0.09686

BWP/USD (Average) 0.09363

ZAR/USD (Closing) 0.07272

ZAR/USD (Average) 0.0749

3.17 RELATED PARTIES

A related party is a person or company where that

person or company has control or joint control of

the reporting company; has significant influence

over the reporting company; or is a member of

the key management personnel of the reporting

company or of a parent of the reporting company.

3.18 IMPAIRMENT OF ASSETS

At each reporting date, the Group reviews the

carrying amounts of its assets to determine

whether there is any indication that those

assets have suffered an impairment loss. When

an indication of an impairment loss exists, the

carrying amount of the asset is assessed and is

written down to its recoverable amount.

The impairment loss is recognised in the

consolidated statement of profit or loss and

other comprehensive income.


3.19 EMPLOYEE BENEFITS

3.21 COMPARATIVES

3.20 REVENUE RECOGNITION

Short-term employee benefits

The cost of short-term employee benefits, (those

payable within 12 months after the service is

rendered, such as paid vacation leave and sick

leave, bonuses, and non-monetary benefits such as

medical care), are recognised in the year in which

the service is rendered and are not discounted.

The expected cost of compensated absences is

recognised as an expense as the employees render

services that increase their entitlement or, in the

case of non-accumulating absences, when the

absence occurs.

Where necessary, comparative figures have been

adjusted to conform with changes in presentation

in the current year.

As fully explained in Note 25 to the consolidated

financial statements, the loan to the subsidiary

which was treated as capital contribution is now

classified as loan and consequently the relevant

comparative figures have been adjusted.

Revenue is recognised at the fair value of

consideration received or receivable, excluding

taxes, rebates and discounts.

Revenue is recognised when the amount of

revenue can be measured reliably, it is probable

that the economic benefits associated with

the transaction will flow to the Company, the

costs incurred can be measured reliably and

the Company has transferred to the buyer the

significant risks and rewards of ownership.

Interest income is recognised on an accrual

basis unless ollectability is in doubt.

Dividend income is recognised when the right

to receive payment is established.


PAGE 57

3.22 SIGNIFICANT MANAGEMENT JUDGEMENT IN APPLYING ACCOUNTING POLICIES AND ESTIMATION UNCERTAINTY

When preparing the consolidated financial statements, management undertakes a number of judgements,

estimates and assumptions about the recognition and measurement of assets, liabilities, income and expenses.

Significant management judgement

The following are significant management judgements in applying the accounting policies of the Group that

have the most significant effect on the consolidated financial statement.

Determination of functional currencyThe determination of the functional currency of the Group is critical since recording of transactions and

exchange differences arising therefrom are dependent on the functional currency selected. The directors

have considered those factors and have determined that the functional currency of the Group is the USD.

Income taxes The Company and its subsidiaries are subject to income taxes in jurisdictions where each companyis

incorporated. Significant judgment is required in determining the worldwide provision for income taxes.

There are many transactions and calculations for which the ultimate tax determinations is uncertain. The

Group recognises liabilities for anticipated tax issues based on estimates of whether additional taxes will be

due. Where the final tax outcome of these matters is different from the amounts that were initially recorded,

such differences will impact the current and deferred income tax assets and liabilities in the year in which

such determination is made.

Contingent liabilitiesManagement applies its judgement to facts and advice it receives from its attorneys, advocates and other

advisors in assessing if an obligation is probable, more likely than not, or remote. This judgement application

is used to determine if the obligation is recognised as a liability or disclosed as a contingent liability.

Coal reserve and resource estimatesCoal reserves are estimates of the amount of coal that can be economically and legally extracted from the

Group’s mining properties. The Group estimates its coal reserves and mineral resources based on information

compiled by appropriately qualified persons relating to the geological data on the size, depth and shape of

the coal body. Such analysis requires complex geological judgments to interpret the data. The estimation of

recoverable reserves is based upon factors such as estimates of foreign exchange rates, commodity prices,

future capital requirements, and production costs along with geological assumptions and judgments made

in estimating the size and grade of the coal body. Changes in the reserves or resource estimates may impact

upon the carrying value of exploration assets, mine properties, plant and equipment, recognition of deferred

tax assets, and depreciation and amortisation charges. Depreciation and amortisation charges in profit or loss

may change where the useful life of the related assets change. The recognition and carrying value of deferred

income tax assets may change due to changes in the judgements regarding the existence of such assets and in

estimates of the likely recovery of such assets.


Production start dateThe Group assesses the stage of each mine under construction to determine when a mine moves into the

production stage being when the mine is substantially complete and ready for its intended use. The criteria

used to assess the start date are determined based on the unique nature of each mine development project,

such as the complexity of a plant and its location. The Group considers various relevant criteria to assess

when the production phases is considered to commence and all related amounts are reclassified from ‘Mines

under construction’ to ‘Exploration assets’ and ‘plant and equipment’.

Some of the criteria used will include, but are not limited to, the following:

• Level of capital expenditure incurred compared to the original construction cost estimates

• Completion of a reasonable period of testing of the mine plant and equipment

• Ability to produce in saleable form (within specifications)

• Ability to sustain ongoing production

When a mine development project moves into the production stage, the capitalisation of certain mine

development costs ceases and costs are either regarded as forming part of the cost of inventory or expensed,

except for costs that qualify for capitalisation relating to mining asset additions or improvements, underground

mine development or mineable reserve development. It is also at this point that depreciation / amortisation

commences.

Recognition of deferred tax assetThe extent to which deferred tax assets can be recognised is based on an assessment of the probability of the

Group’s future taxable income against which the deductible temporary differences can be utilised.

Going concernThe directors have exercised significant judgement in assessing that the preparation of these consolidated

financial statements on a going concern basis is appropriate. In making this assessment, factors like current

financial position and financial performance of the Group as well as future business prospects, future profits

and cash flows have been considered.

Estimation uncertainty

Information about estimates and assumptions that have the most significant effect on recognition and

measurement of assets, liabilities, income and expenses is provided below. Actual results may be substantially

different.

InventoriesThe directors estimate the net realisable values of inventories, taking into account the most reliable evidence

available at each reporting date. The future realisation of these inventories may be affected by future

technology or other market-driven changes that may reduce future selling prices.


PAGE 59

Business combinationsOn initial recognition, the assets and liabilities of the acquired business and the consideration paid for them

are included in the consolidated financial statements at their fair values. In measuring fair value, the directors

use estimates of future cash flows and discount rates.

Any subsequent change in these estimates would affect the amount of goodwill if the change qualifies as a

measurement period adjustment. Any other change would be recognised in profit or loss in the subsequent

period.

Exploration and evaluation expenditureThe application of the Group’s accounting policy for exploration and evaluation expenditure requires judgment

in determining whether it is likely that future economic benefits are likely either from future exploitation or

sale or where activities have not reached a stage which permits a reasonable assessment of the existence of

reserves. These estimates directly impact the point of deferral of exploration and evaluation expenditure.

The deferral policy requires management to make certain estimates and assumptions about future events

or circumstances, in particular whether an economically viable extraction operation can be established.

Estimates and assumptions made may change if new information becomes available. If, after expenditure is

capitalised, information becomes available suggesting that the recovery of expenditure is unlikely, the amount

capitalised is written off in profit or loss in the period when the new information becomes available.

Useful lives of depreciable assetsThe estimates of useful lives as translated into depreciation rates are detailed in

plant and equipment policy in the consolidated financial statements. These rates

and residual lives of the assets are reviewed annually taking cognisance of the

forecasted commercial and economic realities and through benchmarking of

accounting treatments in the industry.

Impairment testing (including goodwill)The recoverable amounts of cash-generating units and individual assets have been

determined based on the higher of value-in-use calculations and fair values less

costs to sell. These calculations require the use of estimates and assumptions. It is

reasonably possible that the assumption by management may change which may

then impact these estimations and may then require a material adjustment to the

carrying value of assets.

The Group reviews and tests the carrying value of assets when events or changes in

circumstances suggest that the carrying amount may not be recoverable. Assets are

grouped at the lowest level for which identifiable cash flows are largely independent

of cash flows of other assets and liabilities. If there are indications that impairment

may have occurred, estimates are prepared of expected future cash flows for each

group of assets. Expected future cash flows used to determine the value in use of

assets are inherently uncertain and could materially change over time. They are

significantly affected by a number of factors including supply demand, together

with economic factors such as exchange rates, inflation and interest.


Loans and receivablesThe Group assesses its loans and receivables for impairment at the end of each reporting date. In determining

whether an impairment loss should be recorded in profit or loss, the Group makes judgements as to whether

there is observable data indicating a measurable decrease in the estimated future cash flows from a financial

asset.

The impairment for loans and receivables is calculated on a portfolio basis, based on historical loss ratios,

adjusted for national and industry-specific economic conditions and other indicators present at the reporting

date that correlate with defaults on the portfolio.

Available-for-sale investmentThe Group follows the guidance of IAS 39 on determining when an investment is other than temporarily

impaired. This determination requires significant judgement. In making this judgement, the Group evaluates,

among other factors, the duration and extent to which the fair value of an investment is less than its cost and

the financial health and near-term business outlook for the investee, including factors such as industry and

sector performance, changes in technology and operational and financing cash flow.


PAGE 61


Restated Restated


Financial assets

Loans and receivables:

Non-current

Loans - - 18,300,584 12,844,246

Financial liabilities

Financial liabilities measured at amortised cost:

Non-current

Convertible loan notes 4,272,334 1,427,364 4,272,334 1,427,364

Contingent consideration 1,500,000 - 1,500,000 -

5,772,334 1,427,364 5,772,334 1,427,364

Current

Receivables 150,695 222,520 1,833,079 833,432

Cash and cash equivalents 1,352,602 2,473,623 21,471 2,024,170

1,503,297 2,696,143 1,854,550 2,857,602

Total financial assets 1,503,297 2,696,143 20,155,134 15,701,848

Current

Payables and accruals 2,339,598 2,456,901 2,610,402 3,054,057

Total financial liabilities 8,171,932 3,884,265 8,332,736 4,481,421

finAnciAl instRument Risk

The Group is exposed to various risks in relation to financial instruments. The main types of risks are market risk,

credit risk and liquidity risk. The Group’s financial assets and liabilities by category are summarised below:

RISK MANAGEMENT OBJECTIVES AND POLICIES

4


The Group’s risk management is carried out under policies approved by the Board of Directors and focuses

on actively securing the Group’s short to medium term cash flows by minimising the exposure to financial

markets.

The Group does not actively engage in the trading of financial assets and derivatives for speculative purposes

nor does it write options.

The most significant financial risk to which the Group and the Company are exposed are described below.

4.1 MARKET RISK ANALYSIS

Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will

affect the Group’s income or value of its holdings of financial instruments. The objective of market risk

management is to manage and control market risk exposures within acceptable parameters, while optimising

the return.

Foreign currency sensitivity

The Group is exposed to foreign exchange risk arising from its currency exposures, primarily with respect to

the Botswana Pula (BWP). Consequently, the Group is exposed to the risk that the exchange rates of the USD

relative the BWP may change in a manner which has material effect on the reported value of the Group’s

assets and liabilities which are in BWP. The Group does not use any financial instruments to hedge its foreign

exchange risk.

The foreign currency profile of the Group’s and the Company’s financial instruments is as follows:

Financial assets


2018 USD 2017 USD 2018 USD 2017 USD

USD 104,093 2,148,493 21,471 2,857,602

BWP 1,399,204 547,650 20,133,663 12,844,246

1,503,297 2,696,143 20,155,134 15,701,848

Financial liabilities


2018 USD 2017 USD 2018 USD 2017 USD

USD 1,695,857 2,249,904 2,033,300 2,723,366

BWP 6,476,075 1,634,361 8,349,436 1,758,055

8,111,932 3,884,265 8,332,736 4,481,421


PAGE 63

The following table illustrates the sensitivity of profit/loss and equity in regards to the Company’s and the

Group’s financial assets and liabilities and the USD/BWP exchange rate “all other things being equal”.

It assumes a 3% change of the USD/BWP exchange rate for the year ended 30 June 2018 (2017:9%).

This percentage has been determined based on the average market volatility in exchange rates in the previous

12 months. The sensitivity analysis is based on the Company’s and the Group’s foreign currency financial

instruments held at the reporting date.

If the BWP had weakened against the USD by 3% (2017: 9%), then this would have the following impact:

Interest rate sensitivity

The Group’s interest bearing financial liabilities consist of convertible loan notes which carry interest at a

fixed rate and are therefore not exposed to any interest rate risk.

The Group’s interest bearing financial assets include its bank balances. Interest on the bank balances is based

on market interest rates. At 30 June 2018, the bank balance stood at USD 1,352,602 (2017: USD 2,024,170)

and interest earned during the year was insignificant. Therefore any change in the market interest rate would

impact marginally on the Group’s operating cash flows.

If the BWP had strengthened against the USD by 3% (2017: 9%), then this would have the following im-

pact:


Profit/loss and equity Loss and equity

Name 2018 USD 2017 USD 2018 USD 2017 USD


Profit/loss and equity Loss and equity


At 30 June 152,306 97,804 (604,010) (1,106,694)

At 30 June (152,306) (97,804) 604,010 1,106,694


4.3 LIQUIDITY RISK ANALYSIS

Liquidity risk is the risk arising from the Group not being able to meet its financial obligations as and when

they fall due.

The Group manages liquidity risk by carefully monitoring scheduled debt servicing payments for long-term

financial liabilities as well as forecast cash inflows and outflows due in day-to-day business.

The Group maintains sufficient cash at the bank to meet short term liquidity requirements. Funding for long

term liquidity needs is secured by loans from related parties and raising funds on the relevant stock exchanges.

4.2 CREDIT RISK ANALYSIS

Credit risk is the risk that a counterparty fails to discharge an obligation resulting in financial loss to the Group.

The Group’s and the Company’s exposures to credit risk are limited to the carrying amount of financial

assets recognised at the reporting date, as summarised below:


Restated Restated


Assets

Non-current

Loans - - 18,300,584 12,844,246

Current

Receivables 150,695 222,520 1,833,079 833,432

Cash and cash equivalents 1,352,602 2,473,623 21,471 2,024,170

1,503,297 2,696,143 1,854,550 2,857,602

Total 2,696,143 20,155,134 15,701,848

The Group transacts with reputable banks in order to minimise its credit risk on its bank balances.


PAGE 65

4.3 LIQUIDITY RISK ANALYSIS

Liquidity risk is the risk arising from the Group not being able to meet its financial obligations as and when

they fall due.

The Group manages liquidity risk by carefully monitoring scheduled debt servicing payments for long-term

financial liabilities as well as forecast cash inflows and outflows due in day-to-day business.

The Group maintains sufficient cash at the bank to meet short term liquidity requirements. Funding for long

term liquidity needs is secured by loans from related parties and raising funds on the relevant stock exchanges.

The following are the contractual maturities of the financial liabilities:

The Group Within 1 year More than 1 year

2018 USD 2017 USD 2018 USD 2017 USD

Convertible loan notes - - 4,272,334 1,427,364

Contingent consideration - - 1,500,000 -

Payables and accruals 2,339,598 2,456,901 - -

2,339,598 2,456,901 5,772,334 1,427,364

The Company Within 1 year More than 1 year

2018 USD 2017 USD 2018 USD 2017 USD

Convertible loan notes - - 4,272,334 1,427,364

Contingent consideration - - 1,500,000 -

Payables and accruals 2,610,402 3,054,057 - -

2,610,402 3,054,057 5,772,334 1,427,364


cApitAl Risk mAnAgement pOlicies And pROceduRes

The Group’s capital management objectives when managing capital are to safeguard its ability to continue as a going

concern in order to provide returns to shareholders and other stakeholders.

The Group aims to maintain a reasonable gearing ratio, which would allow it to achieve its investment objectives.

The Group monitors capital on the basis of the carrying amount of equity less cash and cash equivalents as presented on

the face of the consolidated statement of financial position.

The Group sets the amount of capital in proportion to its overall financing structure, that is, equity and financial liabilities.

The Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions and

the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust

the amount of dividends paid, reduce capital, issue new shares, or sell assets to reduce debts.

The Group was not geared for the two years ended 30 June 2018.

5


PAGE 67

Financial assets and financial liabilities measured at fair value in the consolidated statement of financial

position are grouped into three levels of a fair value hierarchy.

The three levels are defined based on the observability of significant inputs to the measurement, as follows:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or

liability, either directly or indirectly; and

Level 3: unobservable inputs for the asset or liability.

The level within which the financial asset is classified is determined based on the lowest level of significant input to the

fair value measurement.

At 30 June 2018, the financial instruments at fair value in the consolidated statement of financial position is

grouped into the fair value hierarchy as follows:

6.1 FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS

fAiR vAlue meAsuRement

The Group Level 1 Level 2 Level 3 Total

USD USD USD USD

Financial assets - - - -

Available-for-sale financial assets:

Quoted investments 8,196,432 - - 8,196,432

Unquoted investments - - 855,330 855,330

At 30 June 2018 8,196,432 - 855,330 9,051,762

The Group Opening balanceTransfer into level 3 from investment in subsidiaries

Total

Kibo Energy (Proprietary) Limited - 855,330 855,330

Reconciliation:

Valuation methology

The quoted investment is fair valued with reference to its closing price quoted on the London Stock Exchange.

The unquoted investment is stated at cost which is a reflection of its fair value.

6


The Company’s non-financial assets consist of investment in subsidiaries and prepayments for which fair value

measurement is not applicable since these are not measured at fair value on a recurring and non-recurring basis

in the statement of financial position. At the reporting date, the Company did not have any non-financial

liabilities.

The Group’s non-financial assets consist of plant and equipment and exploration assets which are measured

using the cost model and, inventories and prepayments for which fair value measurement is not applicable.

At the reporting date, the Group’s non-financial liabilities include only current tax liabilities, for which the fair

value measurement is not applicable.

6.2 FAIR VALUE MEASUREMENT OF NON-FINANCIAL ASSETS AND NON-FINANCIAL LIABILITIES

The Company has a 100% shareholding in both Shumba Resources Ltd and Shumba Coal Trading Ltd and

these are considered as subsidiaries in accordance with IFRS 10, Consolidated Financial Statements.

The cost of the investments is regarded as a reflection of fair values.

The principal activity of Shumba Resources Ltd is to hold investment in Sechaba Natural Resources

(Proprietary) Limited.

The principal activity of Shumba Coal Trading Ltd is to trade in coal.

Unquoted and at cost 2018 2017

USD USD

At start of the year 1,890,724 1,839,884

Additions during the year 145,982 50,840

At end of the year 2,036,706 1,890,724

Investee company Country of incorporation Type of shares % held Cost 2018 USD Cost 2017 USD

Shumba Resources Ltd Republic of Mauritius Ordinary shares 100% 2,030,742 1,427,364

Shumba Coal Trading Ltd Republic of Mauritius Ordinary shares 100% 5,964 5,964

2,036,706 1,890,724

investment in subsidiARies 7


PAGE 69

Investee company Country of incorporation Type of shares % held Cost 2018 USD

Sechaba Natural Resources (Proprietary) Limited Botswana Ordinary shares 100% 359

INDIRECT HOLDING THROUGH SHUMBA RESOURCES LTD:


Shumba Energy South Africa (Pty) Ltd South Africa Ordinary shares 74% 6

Morupule South Resources Limited Botswana Ordinary shares 75% 2,700,946

2,700,952

INDIRECT HOLDING THROUGH SECHABA NATURAL RESOURCES (PROPRIETARY) LIMITED:


Hodges Morupule Mauritius Limited Republic of Mauritius Ordinary shares 100% 1

INDIRECT HOLDING THROUGH SHUMBA COAL TRADING LIMITED:


Hodges Resources (Morupule) (Proprietary) Limited

Botswana Ordinary shares 100% 1

INDIRECT HOLDING THROUGH HODGES MOURPULE MAURITIUS LIMITED:

The principal activity of Sechaba Natural Resources (Proprietary) Limited is the acquisition and development

of highly prospective coal exploration licences in the Republic of Botswana.


2018 USD

Fair value of consideration:

- Cash consideration 1,400,001

- Contingent consideration 1,500,000

Fair value of net assets acquired (154,339)

Goodwill on acquisition 2,745,662

gOOdwill

The above is on acquisition of subsidiary. The directors have assessed the goodwill for impairment and no

indication of impairment loss has been identified at the reporting date.

8

USD

As previously reported at 30 June 2017 -

Reclassified from capital contribution 12,585,264

12,585,264

Interest element on loan for 2017 258,982

As restated at 01 July 2017 12,844,246

Additions during the year 5,113,132

Interest element for the year under review 343,206

At 30 June 2018 18,300,584

lOAns

(i) The loans carry interest at the USD Libor rate +50 basis points.

(ii) Interest income for the year amounted to USD 343,206 (2017: USD 258,982).

The loan which were previously treated as capital contribution is now classified as interest bearing loans

9


PAGE 71

plAnt And equipment

The GroupFurniture & fittingsUSD

Motor vehiclesUSD

IT equipmentUSD

Office equip-mentUSD

TotalUSD

Cost

At 01 July 2017 12,526 33,041 10,388 1,430 57,385

Additions during the year - - 2,987 266 3,253

Exchange differences (348) (918) (417) (51) (1,734)

At 30 June 2018 12,178 32,123 12,958 1,645 58,904


Motor vehiclesUSD

IT equipmentUSD

Office equipmentUSD

TotalUSD

Depreciation

At 01 July 2017 6,372 13,217 6,603 915 27,107

Additions during the year 1,273 6,714 1,777 129 9,893

Exchange differences (232) (656) (260) (31) (1,179)

At 30 June 2018 7,413 19,275 8,120 1,013 35,821

Net book values

At 30 June 2018 4,765 12,848 4,838 632 23,083

10



Motor vehiclesUSD

IT equip-mentUSD


TotalUSD

Cost

At 01 July 2016 11,149 30,493 7,010 1,320 49,972

Additions during the year 431 - 2,699 - 3,130

Exchange differences 946 2,548 679 110 4,283

At 30 June 2017 12,526 33,041 10,388 1,430 57,385


Motor vehiclesUSD

IT equipmentUSD


TotalUSD

Depreciation

At 01 July 2016 4,731 6,099 4,629 732 16,191

Additions during the year 1,204 6,388 1,534 118 9,244

Exchange differences 437 730 440 65 1,672

At 30 June 2017 6,372 13,217 6,603 915 27,107

Net book values

At 30 June 2017 6,154 19,824 3,785 515 30,278

plAnt And equipment (cOntinued)10


PAGE 73

The Group 2018 USD 2017 USD

Cost

At 01 July 9,949,583 8,600,862

On consolidation of new subsidiaries 224,883 -


Disposals during the year (5,958,940) -

Exchange differences (26,664) 686,236

At 30 June 4,635,464 9,949,583

explORAtiOn Assets

(i) Exploration assets which relate to intangible assets under development represent:

• cost of procurement of tenement rights for prospecting certain mineral resources in specified

geographical area; and

• accumulated costs in connection with undertaking of various activities involving carrying out and

assessment of technical feasibility as well as commercial viability of the extraction of mineral resources,

available as mining reserves in the area of interests for which the Group has acquired the tenement rights.

(ii) The following table states the details of all tenements as at 30 June 2018:

Licence number Size (Km2) Expiry date

PL 428/2009 102.90 31 December 2018

PL 308/2014 477 31 September 2019

PL 053/2005 247.40 30 September 2020*

PL 218/2016 42.00 30 September 2018

Licence PL 053/2005 had an initial expiry date of 31 March 2017 and it has been renewed by the

Department of Mines of Botswana on 28 August 2017 for a period of 2 years commencing on 01 October

2017 and ending on 30 September 2020.

(iii) The directors have assessed whether the exploration assets and prospecting licences are still valid and

concluded that based on independent reports dated 09 September 2016 and 13 December 2016 from

KPMG South Africa on the Sechaba Independent Power Producer (SIPP) project and Mabesekwa Export

Independent Power Producer (MEIPP) project respectively, the explorations assets and prospecting

licences have not suffered any impairment in value since these projects are still commercially viable.

(iv) During the year, the Group effectively transferred the Mabesekwa project license (prospecting license

number 428/2009) to Kibo Energy Botswana (Proprietary) Limited which was a 100% owned subsidiary

of the Group as of the date of transferring the prospecting license.

Subsequently, Kibo Energy Botswana (Proprietary) Limited was sold to a third party on 04 April 2018 as

detailed in Note 13.

11

Unquoted and at cost 2018 USD 2017 USD

At 01 July 14,497,244 12,745,002

Issue of shares 1,420,934 1,752,242

At 30 June 15,918,178 14,497,244


The Group 2018 USD 2017 USD

Cost

At 01 July 9,949,583 8,600,862

On consolidation of new subsidiaries 224,883 -


Disposals during the year (5,958,940) -

Exchange differences (26,664) 686,236

At 30 June 4,635,464 9,949,583


At 01 July 14,497,244 12,745,002

Issue of shares 1,420,934 1,752,242

At 30 June 15,918,178 14,497,244

The Group 2018 USD

Kibo Mining PLC (at fair value) 8,196,432

Kibo Energy (Proprietary) Limited (at cost) 855,330

At 30 June 9,051,762

AvAilAble-fOR-sAle finAnciAl Assets

(i) Kibo Mining PLC

This holding represents 153,710,030 shares, which equates to 28% shareholding of Kibo Mining PLC,

a company listed on the London Stock Exchange. The Group has no significant influence and has no

representation on the Board of Kibo Mining PLC, and therefore, has no influence on the operational and

financial decision of Kibo Mining PLC.

As at 30 June 2018, the investment was fair valued with reference to its closing price on the London Stock

Exchange and which resulted in a fair value loss of USD 4,449,722.

(ii) Kibo Energy (Proprietary) Limited

This represents 15% of the equity shares of Kibo Energy Botswana (Proprietary) Limited a company

incorporated in the Republic of Botswana.

The cost of the investment is considered to be a reflection of the fair value.

12

OtHeR finAnciAl gAin

During the year, a decision was made by the board of directors to discontinue the operations and disposed of

85% of its shareholding in Kibo Energy Botswana (Proprietary) Limited to Kibo Mining PLC, a company listed

on the London Stock Exchange. The effective date of the transaction was 03 April 2018. The consideration

was in form of Kibo Mining plc shares and at the date of the transaction they were worth GBP 10,044,950

(equivalent to USD 14,111,700). As the reporting date, the Group still held the remaining 15% of the shares

in Kibo Energy Botswana (Proprietary) Limited.

Gain on this transaction amounted to USD 7,950,099.

13


PAGE 75

ReceivAbles And pRepAyments

The Group The Group The Company

2018 USD 2017 USD 2018 USD 2017 USD

Receivables 560,735 222,520 1,833,079 833,432

Prepayments 14,649 39,351 5,061 22,207

575,384 261,871 1,838,140 855,639

The carrying amounts of receivables and prepayments approximate their fair values.

15

cAsH And cAsH equivAlents

The Group The Group The Company

2018 USD 2017 USD 2018 USD 2017 USD

Cash on hand 418 - - -

Cash at bank in:

United Stated Dollar (USD) 83,362 2,098,788 17,764 2,015,719

Botswana Pula (BWP) 1,248,852 374,835 - -

Mauritian Rupees 3,707 - 3,707 8,451

South African Rand (ZAR) 16,263 - - -

1,352,602 2,473,623 21,471 2,024,170

The carrying amounts of receivables and prepayments approximate their fair values.

16

2018 2018

USD USD

Coal for resale (at cost) - 19,856

The cost of inventories expensed during the year amounted to USD 480,303 (2017: USD 2,687).

inventORies14


2018 2018

USD USD

Coal for resale (at cost) - 19,856

The cost of inventories expensed during the year amounted to USD 480,303 (2017: USD 2,687).

17.2 WARRANTS

During the previous reporting period and pursuant to a board meeting dated 29 September 2015, the Board

had resolved to issue 7,050,709 warrants to founding directors of the Company to subscribe for ordinary

shares of the Company at any time during the exercise period at an exercise price of BWP 1.18 each. Pursuant

to a Board meeting dated 31 December 2015, the board has resolved to issue 603,226 warrants to General

Research GMBH to subscribe for ordinary shares of the Company at any time during the exercise period at

the listed market price.

Pursuant to a board meeting dated 20 April 2017, the Board had resolved to issue 18,367,962 warrants to

the below holders to subscribe for ordinary shares of the Company at any time during the exercise period at

the exercise price of BWP 1.06 each.

As at the date of this report, the directors have not yet exercised their rights to the warrants.

Details of warrants: 2017 2016

NameWarrants (Number)

Warrants (Number)

Total (Number)

Mashale Phumaphi 4,423,958 3,555,833 7,979,791

Thapelo Mokhathi 4,423,958 2,031,904 6,455,862

Alan Clegg 4,423,959 731,486 5,155,445

Grant Ramnauth 4,423,959 731,486 5,155,445

General Research GMBH - 603,226 603,226

Thamang Thabolo 572,128 - 572,128

Priscillah Gaonyyadiwe Sengwatse 100,000 - 100,000

Total warrants 18,367,962 7,653,935 26,021,897

stAted cApitAl

2018 USD 2017 USD

275,452,343 shares at no par value (2017: 263,290,637 shares at no par value) 15,918,178 14,497,244


At 01 July 14,497,244 12,745,002

Issue of shares 1,420,934 1,752,242

At 30 June 15,918,178 14,497,244

17.1 ISSUED AND FULLY PAID:

The movement during the year is as follows:

17


PAGE 77

cOnveRtible lOAn nOtes

2018 USD 2017 USD

At 01 July 1,427,364 -

Issued during the year 2,563,170 1,327,780

Interest expense for the year 291,688 99,584

Foreign exchange gain (9,888) -

At 30 June 4,272,334 1,427,364

19

nOn-cOntROlling inteRest

2018 USD 2017 USD

At start of the year (357,091) (394,705)

On consolidation 27 -

On dilution of ownership - 48,951

On de-recognition of non-controlling interest (52,162) 3,582

Share of profit for the year 610,733 24,002

Share of other comprehensive income (444,972) -

Share of translation reserves for the year (15,026) (38,921)

At end of the year (258,291) (357,091)

18


During the year under review, the Group issued convertible loan notes for an amount of USD 2,553,282

(BWP 25,000,000) which carry interest at the rate of prime plus margin semi-annually and maturing by end

of 31 January 2024 (maturity date).

The Group has an option to settle the convertible loan notes by way of issuance of new shares of the Group. If

the conversion option is exercised, the new shares to be issued shall be priced at 10% discount to the weighted

average traded price of the Group’s shares over the 90 trading days prior to maturity date. In accordance with

IAS 32, Financial Instruments: Presentation, the convertible loan notes met the criteria of a financial liability.

cOntingent cOnsideRAtiOn

On 24 November 2016, an agreement was made with Hodges Resources Limited for the acquisition of all the shares held

by the latter in Hodges Morupule Mauritius Limited which has an effective interest of 75% in the Morupule South Project.

The transfer was done during the year under review and the salient terms of the acquisition are as follows:

• Payment of USD 1.4 million to Hodges Resources Limited;

• Payment of USD 1.5 million on the first year’s anniversary from the date on which mining commences; and

•Payment of a gross sales royalty of 1% of sales revenue generated from the sale of coal from the

Morupule South Project to Hodges Resources Limited.

At the reporting date, the amount of USD 1,500,000 has been recognised as a contingent consideration.

20

pAyAbles And AccRuAls

The carrying values of payables and accruals approximate their fair values at the reporting date. Included in other

payables is an amount of USD 2,000,000 (2017: USD 2,700,000) which is secured by the Daheng Licence


2018 USD 2017 USD 2018 USD 2017 USD

Other payables 2,230,232 2,408,191 2,577,102 3,030,691

Accruals 169,366 48,710 33,300 23,366

2,399,598 2,456,901 2,610,402 3,054,057

21


PAGE 79

(i) The Company

The income tax rate applicable to the subsidiaries depends upon the jurisdiction in which they are incorporated/

registered.

THE SUBSIDIARIES

tAxAtiOn

The Company is, under current laws and regulations, liable to pay income tax on its net income at a rate of 15%. The Company is,

however, entitled to a tax credit equivalent to the higher of actual foreign tax suffered and 80% of the Mauritius tax payable in

respect of its foreign source income thus reducing its maximum effective tax rate to 3%.

A reconciliation of the actual income tax expense based on accounting profit and the actual income tax expense is as follows:

2018 USD 2017 USD

Loss before tax (740,127) (550,773)

Tax @ 15% (111,019) (82,616)

Impact of:

Non-deductible expenses - -

Deferred tax asset not recognised 111,019 82,616

Tax expense - -

(ii) Subsidiaries incorporated in Republic of Mauritius

(a) Shumba Resources Ltd and Hodges Morupule Mauritius Limited are liable to income tax at the rate of

15% on its net income subject to a tax credit equivalent to the higher of actual foreign tax suffered and

80% of Mauritius tax payable in respect of its foreign source income, thus reducing its maximum effective

tax rate of 3%.

The subsidiaries’ income tax liabilities at 30 June 2018 are as follows:

Shumba Coal Trading Ltd holds a Category 2 Global Business Licence, and by virtue of this licence the

Company is exempt from income tax in Mauritius.

USD

Shumba Resources Ltd 1,330

Hodges Morupule Mauritius Limited -

1,330

22


2018 USD 2017 USD

Loss before tax (740,127) (550,773)

Tax @ 15% (111,019) (82,616)

Impact of:

Non-deductible expenses - -

Deferred tax asset not recognised 111,019 82,616

Tax expense - -

(iii) Subsidiaries incorporated in Botswana (Sechaba Natural Resources (Proprietary) Limited, Morupule South Resources Limited and Hodges Resources (Morupule)(Proprietary) Limited)

The above subsidiaries have no income tax liability due to tax losses carried forward. The estimated tax losses

available for set off against future taxable income amounted to USD 6,308,205 (2017: USD 10,140,834).

These losses can be carried forward without any limitation of time until there are taxable profits, as they do

not fall away. The subsidiaries have not recognised deferred tax assets as it is still proceeding with exploration

activities and has not begun to generate revenues.

Both the basic and diluted earnings/ (loss) per share have been calculated using the profit/ (loss) attributable

to shareholders of the parent company.

The reconciliation of the weighted average number of shares for the purposes of diluted earnings/ (loss) per share to

the weighted average number of ordinary shares used in the calculation of basic earnings/ (loss) per share is as follows:

eARnings/ (lOss) peR sHARe

Number of shares

2018 2017

Weighted average number of shares used in basic earnings/(loss) per share 271,836,312 259,215,960

Shares deemed to be issued for warrants and options 26,021,897 26,021,897

Weighted average number of shares used in diluted earnings/(loss) per share 297,858,209 285,237,957

23


PAGE 81

Details regarding the Company’s subsidiaries, their total assets and liabilities at 30 June 2018, and revenue and loss

for the year then ended are as follows:

Indirectly owned through Shumba Resources Ltd:

cOnsOlidAtiOn

Shumba Resources Ltd

Shumba Coal Trading Ltd

Country of incorporation Republic of Mauritius Republic of Mauritius

Proportion of ownership interest 100% 100%

Activity of subsidiary Investment holding Trading of coal

Total assets USD 10,672,300 USD 6,181

Total liabilities USD 533,213 USD 23,401

Revenues - -

Profit/(loss) for the year USD 194,301 USD (7,481)

Sechaba Natural Resources (Proprietary) Limited

Country of incorporation Republic of Botswana

Proportion of ownership interest 90%

Activity of subsidiary Exploration

Total assets USD 17,384,914

Total liabilities USD 21,127,446

Revenues USD 509,542

Profit for the year USD 6,162,526

24


Sechaba Natural Resources (Proprietary) Limited

Country of incorporation Republic of Botswana

Proportion of ownership interest 90%

Activity of subsidiary Exploration

Total assets USD 17,384,914

Total liabilities USD 21,127,446

Revenues USD 509,542

Profit for the year USD 6,162,526

Indirectly owned through Shumba Coal Trading Ltd:

Hodges Morupule Mauritius Limited

Hodges Resources (Morupule)(Proprietary) Limited

Country of incorporation Republic of Mauritius Republic of Botswana


Activity of subsidiary Investment holding Exploration

Total assets USD 1,751 USD 71

Total liabilities USD 86,365 USD Nil

Revenues USD Nil USD Nil

(Loss)/profit for the year USD (14,000) USD 2,303,486

Indirectly owned through Sechaba Natural Resources (Proprietary) Limited:

Shumba Energy South Africa Proprietary Limited

Morupule South Resources (Proprietary) Limited

Country of incorporation South Africa Republic of Botswana


Activity of subsidiary Wholesale of coal Exploration

Total assets USD 24,266 USD 582,673

Total liabilities USD 44,868 USD 364,035

Revenues USD 34,676 USD Nil

(Loss)/profit for the year USD (21,229) USD Nil


PAGE 83

RecOnciliAtiOn Of liAbilities ARising fROm finAncing Activities

On 01 July 2017 Cash flowsNon-cash changes/reclassification

30 June 2018

USD USD USD USD

Convertible loan notes 1,427,364 2,551,059 (293,911) 4,272,334

Stated capital 14,497,244 145,982 1,274,953 15,918,179

Total liabilities from financing activities 15,924,608 2,697,041 981,042 20,190,513

26

pRiOR AdJustments

In the previous reporting period, the Company had reclassified the interest bearing loan to Sechaba Natural Resources

(Proprietary) Limited as capital contribution. However, this reclassification is now considered as not being in accordance

with the Shareholders’ Agreement and warrants a restatement.

The prior year’s error does not have any impact on the Group and thus the Group’s comparative figures for the year ended

30 June 2017 have not been restated.

A third statement of financial position is not presented since the effects of the prior year’s error impacted only the

Company’s financial position as at 30 June 2017 and its financial performance for the year then ended.

The table below shows the changes following the restatement.

The effects of correcting the prior year’s error on the Company’s statement of financial position 30 June 2017 are:

Capital Contribution USD

Loan USD

Accumulated Losses USD

Balance as reported at 30 June 2017 12,585,264 - (1,622,868)

Effect of correcting prior year’s error (12,585,264) 12,844,246 258,982

As restated balance at 01 July 2017 - 12,844,246 (1,363,886)

USD

Loss as previously reported at 30 June 2017 (550,773)

Effects of prior year’s adjustments:

Increase in interest income 258,982

As restated balance at 01 July 2017 (291,791)

The effects of correcting the prior years’ error on the Company’s statement of comprehensive income for the year

ended 30 June 2017 are:

25

The effect of correcting the prior year’s error did not have a material impact on the company’s statement of cash flows

for the year ended 30 June 2017.


On 01 July 2017 Cash flowsNon-cash changes/reclassification

30 June 2018

USD USD USD USD

Convertible loan notes 1,427,364 2,551,059 (293,911) 4,272,334

Stated capital 14,497,244 145,982 1,274,953 15,918,179

Total liabilities from financing activities 15,924,608 2,697,041 981,042 20,190,513

Capital Contribution USD

Loan USD

Accumulated Losses USD

Balance as reported at 30 June 2017 12,585,264 - (1,622,868)

Effect of correcting prior year’s error (12,585,264) 12,844,246 258,982

As restated balance at 01 July 2017 - 12,844,246 (1,363,886)

USD

Loss as previously reported at 30 June 2017 (550,773)

Effects of prior year’s adjustments:

Increase in interest income 258,982

As restated balance at 01 July 2017 (291,791)

The nature, volume of transactions and balances with the related parties are as follows:

One director of the Company, Mr Sipho Alec Ziga, is deemed to have interests in the Company, through his

firm Armstrong Attorneys, which provide legal services to the Company.

RelAted pARty tRAnsActiOns

Nature of relationshipNature of transaction

Volume of transaction

Debit/(credit) balances at 30 June 2018

Debit/(credit) balances at 30 June 2017Restated

USD USD USD

Subsidiary Loans 802,431 13,646,679 12,844,246

Subsidiary Receivable (Note 12) 500,000 333,079 823,079

Subsidiary Payables (Note 17) 238,911 (577,102) (338,191)

Key management personnel

Director fees 103,716 18,000 20,000

27

cOntingent liAbilities

The Company entered into a joint development agreement for a coal project with Mulilo Thermal Project Developments

Proprietary Limited (Mulilo), a company based in South Africa. However, the project has not materialised due to certain

economic reasons. Mulilo considers that there is a breach of contract for failure to implement the project and has made

a claim of ZAR 255,978,280 (equivalent to USD 17,815,400) for costs incurred and other losses suffered. The directors,

on the advice of legal counsels, do not consider that the claim has merit and therefore no provision has been made in the

consolidated financial statements in that respect.

28


PAGE 85

COMPANY CONTACT DETAILS

[email protected]

Shumba Energy

Plot 2780

Manong Close, Extension 9

P O Box 70311

Gaborone

Botswana

+970 599 112 335

www.shumbaenergy.com

Documents

SHUMBA ENERGYshumbaenergy.com/wp-content/uploads/2018/11/Shumba... · Mashale Phumaphi 28 August 2012 Thapelo Mokhathi 24 January 2013 Sipho Alec Ziga 02 August 2013 ... collectively